How Incredibly Good Airline Choice Has Gotten

I expect this topic to get me a lot of flak. After all, everyone likes dumping on the airlines, including me. But hear me out.

I fly a lot of miles every year, mostly in coach, sometimes in business. Most of the time, the journey is tiring and uneventful, sometimes it is annoying, and sometimes downright offensive.

I regularly hear and read stories about the decline of comfort, service and value in air travel over the last 30 years. Most recently, a friend forwarded me an article about how airlines have a financial incentive to “make you suffer.” When you are unhappy with the narrow seats in regular coach, you will pay more for premium economy or business.

By that argument, housing builders have an incentive to make you suffer. When you see how little space the small apartment has, you will pay them more for the townhouse or ranch home! Perhaps Toyota has an incentive to make you suffer; when you see how small the interior space of that Corolla is, you will buy a nice big Sienna!

That isn’t a “financial incentive to make you suffer”; it is called “having choices.”

Nonetheless, the article did cause me to pause and consider the question: has airline service gotten worse? I decided to look at the data.

Airlines for America, the trade organization for America’s airline companies (a.k.a. their lobbying arm), compiles data from the airlines and the Department of Transportation. This page lists the average annual round trip fares paid and miles flown, domestically (a different page show international), for each of the last 34 years. Data is courtesy of the US Department of Transportation, so it is reasonably reliable. All prices exclude all taxes and government fees, but include carrier-imposed charges, like change fees and baggage fees. In other words, the prices here are what airlines get from you, no matter what they call it. What governments get from you is excluded.

Let’s look at a 30-year timespan.

  • 1983: average total paid for a round-trip domestic fare was $246.66. The average miles flown per domestic round-trip journey was 1,955, for $0.126 per mile flown.
  • 2013:average total paid for a round-trip domestic fare was $385.54. The average miles flown per domestic round-trip journey  was 2,368, for $0.163 per mile flown.

At first glance, it certainly seems like the flying public is paying more and getting less. However, we must take into account ever important inflation. According to the official CPI calculator, $1.00 in 1983 was worth $2.30 in 2013. So let’s redo our total cost and cost per mile using 2013 dollars:

  • 1983: Average total price $568.13 ; average per mile flown $0.291 per mile.
  • 2013: Average total price $385.54 ; average per mile flown $0.163 per mile.

The average real price of a ticket has dropped from $568.13 to $385.54, or 32.1%. Further, the average 2013 ticket is a longer ticket, at 2,368 miles, so the average price per mile flown in 2013 dollars has dropped from $0.291 to $0.163 or 44.00%!

In layman’s terms, our tickets today are costing us about half what they did 30 years ago.

Airline travel has gotten dramatically cheaper.

OK, but what about the service? Well, coach service is widely believed to be much worse, while business class is believed to be better, with lie-flat seats/beds on many routes, food choices, video screens, etc. So let us look at business class.

I looked at the price of business class tickets on 2 round-trip routes:  New York to Miami and New York to San Francisco. All of these are relatively expensive markets. In all cases, I took the best prices between 2 and 6 weeks out, which is a reasonable timeline to get a decent but not fabulous price. The search engine I used is ITA Software’s Matrix, now owned by Google. In all cases, to keep consistent with the data, I excluded government-imposed fees and charges but included carrier fees. In other words, the prices are what the carriers get and keep from you.

  1. JFK-MIA-JFK is 2,179 miles, or fairly close to the average length for 2013. The best nonstop prices were as follows:
    1. $383.23 on Delta, or $0.176 per mile
    2. $565.58 on American, or $0.26 per mile
  2. JFK-SFO-JFK, is 5,172 miles. The best nonstop prices were as follows:
    1. $1088.16 on JetBlue, or $0.21 per mile
    2. $1655.81 on American, with similar prices on Virgin America, Delta and United, or $0.32 per mile

What Does All of This Mean?

It means:

  • In 1983, we paid around $0.291 per mile to fly, all in. These prices include coach and business averaged, although few people other than titans of business and movie stars ever flew business, but that is what we paid.
  • In 2013, we paid a similar or lower amount to fly in business, ranging from $0.176-$0.26/mile (JFK-MIA-JFK) to $0.21-$0.32/mile (JFK-SFO-JFK).
  • In 2013, we have an option to pay about half what we used to, and get a much less luxurious product.

The intervening 30 years have not brought us miserable coach. They have brought us a nicer and better business class product for the same price, and a new option to fly get lower quality for lower cost. We have choices.

Sure, we want business class service at coach class prices; competition within the industry and across new types of transportation may help provide it. But airlines aren’t “making us more miserable” for coach; they are giving us new, lower-class options that we never had before, while making the new luxury class cost roughly the same as the old coach.

What are the Airlines Doing Wrong?

Airline profitably is all about efficient operations and crucial financial metrics, like revenue per passenger mile. American Airlines kindly puts a great glossary online.

But the airline business, like any other business, is about customers who pay. The metrics only show how well you are running the backside of the house. In other words, airlines are not about the metrics, the metrics help measure the operations.

Businesses that are closely attuned to their customers know how to package, price and market their products so that customers are satisfied. An airline run by risk-management lawyers or financial wizards can think only in metric terms, see the trees but lose the forest. Here is a great, or terrible, example.

Lessons for Your Business?

When looking at your business, have you asked these questions lately? Do you know the answers?

  1. Are our products – including their packaging and pricing – correctly suited for our customers today and the foreseeable future? Or are they for yesterday’s?
  2. Do our customers understand the values of different offerings, and what it means to them?
  3. Do we present everything in a way that makes our customers happy with the deal they have received?

If you have not asked these questions, are stuck asking them correctly or do not know the answers, ask us. Don’t be the next misunderstood airline.

About Avi Deitcher

Avi Deitcher is a technology business consultant who lives to dramatically improve fast-moving and fast-growing companies. He writes regularly on this blog, and can be reached via Facebook, Twitter and avi@atomicinc.com.
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