Source: Bloomberg News Author: 06/06/2008
Subject Concerned: Opinion Airlines Aviation Fuel
Imagine two scales at the ticketing counter, one for your bags and one for you. The price of a ticket depends upon the weight of both.
That may not be so far-fetched. You listen to the airline CEOs, and nothing is beyond their imagination, says David Castelveter, a spokesman for the Air Transport Association, a Washington, DC-based trade group. They have already begun to think exotically.
With fuel costs almost tripling since 2000 accounting for as much as 40 percent of operating expenses at some carriers airlines are cutting costs and raising revenue in ways that once were unthinkable.
US Airways Group has eliminated snacks. Delta Air Lines is charging US$25 for telephone reservations. American Airlines last month started charging US$15 for the first checked bag.
Even a cold drink may be harder to come by. Singapore Airlines is trying to eliminate unnecessary quantities of extra water to save weight, says chief executive Chew Choon Seng.
US airlines reported combined first-quarter losses of US$1.7 billion while crude oil almost doubled in a year to a record US$133.17 a barrel on May 21.
With those challenges, fares based on passenger weight may be a logical step, says Robert Mann, head of aviation consultancy RW Mann. If you look at the air-freight business, that's the way they've always done it, he says. We're getting treated like freight when we travel by airlines, anyway.
David Swierenga, president of consulting firm Aeroecon, dismisses weight-based ticket sales and steep price increases as unrealistic.
Still, the airlines are just in a desperate situation, he says. Airlines may report combined losses of US$6.1 billion this year, the worst since 2003, the International Air Transport Association (IATA) warned this week.
Swierenga said the only meaningful way for them to reach profitability is to idle a portion of their fleets. The solution lies in capacity cuts.