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British Mensa Travel Special Interest Group |
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Is
cheap air travel really possible? by Noel Evans Public air transport is a very high-tech and VERY expensive industry. It has all the potential to be hazardous so an enormous amount of effort goes into ensuring very high safety standards. As a result, costs pile up rapidly. It is also not one of the greatest money-making industries, to quote from a recent speech by a co-chairman of Northwest Airlines: "the industry (is) capital intensive with erratic and low returns..." An old joke goes: How do you make a small fortune in aviation? You start with a large fortune! It is definitely an industry that requires long-term business views in order to provide the stable product that is genuinely in the best interests of the customer, the travelling public. This does not mean that cheap travel is not possible. All airlines will be able to offer discounted tickets in the hopes of filling a few more seats during periods that are expected to be quiet. Naturally, these tickets will be inflexible with early payment dates, no cancellation options, certain days of travel only, etc. etc. The more flexible the ticket, the closer you get to the proper price! Good business sense also prevails - it should not surprise anyone to find that (s)he could not get a discounted ticket on a scheduled airline to a Five Nations Rugby match! That's just simple market forces common sense! The "no frills" idea sounds attractive at first, but what does it really mean? Firstly, you do away with all that expensive in-flight catering. The catering costs for a major British scheduled airline are around £8 per ticket per flight. If you totally eliminate this, you do not reduce your ticket prices to the levels that are quoted for "no frills" services. You will lose many passengers to other airlines that still provide catering, though. Swings and roundabouts? And what about all those cabin crew that don't need to serve the meals any more? You can't get rid of them, they're a legal minimum safety requirement and you have to have them on board. They also have to be properly trained to meet your legal requirements (which adds to costs) and you can't pay them much less, just because they don't have to serve food, because cabin staff aren't amongst the world's best paid people anyway! What about those overpaid pilots!! Well, market forces again play a large part. For quite a few years there have been many unemployed pilots, so low pay and more unstable employment conditions have been possible as many pilots have been delighted just to have a job. This is rapidly changing as airlines are all starting to expand and a pilot surplus is rapidly turning to a pilot shortage. Pilots will naturally move towards the more stable, established and better-paid airlines. In order to keep their pilots, the "no-frills" operators will have to pay them more, not less. There may be the popular image that pilots are overpaid, but let us look at some facts. To gain the licence for an airline job costs about £40,000 (at least!!) of the prospective pilot's hard-earned cash. Some in desperation for a job, pay for their own 'type rating' on an airline aircraft, e.g. a Boeing 737, adding another £10,000 or so to this bill! Then there is the annual (or, if (s)he's over 40, six-monthly) medical check-up where (s)he risks being told that a wiggly line on a graph isn't wiggling the right way and his / her flying career has come to an instant end! Given this effort and the risks of its not lasting, it is not unreasonable for a pilot to expect a decent income. (Despite all this, though, there are still pilots flying international British Airways services earning less than £14,000 p.a.!!) A fairly average scheduled flight-deck crew (i.e. Captain and First Officer) would earn a total of about £75,000 p.a. and assuming a reasonable number of flying hours per year on aircraft that have about two-thirds of the seats filled, their pay would add up to less than about £2 per passenger per flight. Tinkering around there is not going to bring down the price of a ticket much! Many other costs are the same for any airline, whether they are "no-frills" or not. For example, all Boeing 737s will pay the same en-route Air Traffic Control charges (through Brussels!!) and airport charges. Running a safe and efficient airport is very expensive and the Airport operators will pass this cost directly on to their customers - the Airlines - in airport charges. To give just one example of the scale of money involved, it costs about £40,000 to do a 30 minute snow-clearing and de-icing on an average runway, and on a bad winter's day this could need to be done several times. A runway is not just a bit of road in the middle of a field! Maintaining and monitoring it and all the expensive equipment related to it costs a lot. One area where "no-frills" operators could cut costs is in marketing and ticket sales. Travel agents could be avoided by using direct sales and cutting out the costs to the 'middle man'. However, Airlines gain more than 40% of their new customers from travel agents and less than 10% from newspaper advertisements. So to gain business without using travel agents you have to spend a fortune on advertising. As your ticket prices are low, these advertising costs then start to become quite a high percentage of your ticket price. Travel agencies' commission being normally less than 10% of the ticket price is probably not such a bad way of bringing in the business! So where can costs be cut by the significant levels that "no-frills" operators promise with low ticket prices? The aircraft that they lease could make a difference. Old aircraft are less popular with the established airlines so they could be cheap to lease. But their reliability and maintenance costs will probably counter this and their fuel costs will be higher than the more efficient modern aircraft. They are also more noisy than modern aircraft and several types are already banned from many airports with increasingly stringent noise regulations. Modern aircraft may have been available cheaply during the lean years that the aircraft industry has been experiencing but, as business picks up, owners will obviously want to go back to more sensible returns from these very expensive assets. The short-term benefits here will not be sustainable to provide a dependable long-term service to the travelling public. Training and refresher training of airline staff is expensive and established Airlines tend to "overdo" their training compared to the legal minimums required by the regulating authorities. The value here will be impossible to quantify in terms of costing, but a few minutes dealing with an emergency well, or better still, avoiding an emergency, could repay several months of the company's entire training bill. There is nothing fundamentally wrong with just sticking to the legal minimum requirements, but I know what I prefer... Of course maintenance is one area that always causes a lot of suspicion when it comes to cost cutting. The US Federal Aviation Administration findings on the ValuJet incidents (their Florida accident was the most publicised) definitely pointed a finger at the problems of maintenance cost cutting. Hopefully, all other low-cost airlines have got the message from ValuJet's difficulties. But it is easy to suspect that the fine line of legal minimums is used at least right up to the limits. Then, finally, there's the question of the availability of contingency reserve resources to allow for those almost everyday occurrences that do their best to trip up the smooth running of an airline. Weather deterioration causes extra airborne holding time or diversions (the extra costs of having equipped and trained to allow lower weather operating minimums could pay off here, in direct cost savings and greater passenger satisfaction). Technical problems could ground an aircraft - is another aircraft available or are there the resources to sub-charter another at short notice? If a flight is cancelled, delayed or diverted are there the resources to compensate passengers, put them up in a hotel or transfer them to another airline? Or are the passengers simply given a refund of their cheap ticket and just told that it's bad luck? If the aircraft is caught on the ground in a snowfall or in overnight frost, what commercial pressures are there on the crew with their decision to have the aircraft properly de-iced? It can cost £15 to £20 per passenger on a fully loaded aircraft to have it de-iced. Not doing so would not only be illegal but could also be fatal - remember the Potomac River crash? So don't be too pleased if your "no-frills" airline gets airborne ahead of the opposition after a snowfall! I hope that I have helped to show that airline travel is very complex and very expensive. It is also very fast, efficient and comfortable when compared with other forms of public transport, especially as distances increase or geography becomes unhelpful. It is also very safe. So next time you are considering cheap airline travel you need to ask yourself: is it a discounted special offer fare on a normally properly priced service, or where have costs been cut to offer you that fare? How safe do you feel, and is it worth it? This article appeared in VISA issue 28 (spring 1998). It first appeared in Flypaper, the newsletter of Aviation SIG, and is reproduced here by kind permission of the author and Aviation SIG. |