Air Travel Has Become Bad Enough Airlines are Losing 32 Million Ticket Sales a Year

The new American Airlines domestic aircraft configuration is the ‘densest’ it has ever been. I flew the inaugural Boeing 737 MAX flight which has the new interior and is the blueprint for retrofitting existing planes.

There’s less room between seats than ever before. The seats don’t recline as much. There’s no seat back video screens. And the lavatories are so small that I touched both sides of the wall while facing forward. There are fewer extra legroom coach seats, and those have less legroom than before. First class has less legroom too.

United’s plan is to ‘densify’ their aircraft as well. That means adding more seats into the same amount of space.

When United’s President Scott Kirby was President of American Airlines he laid out the theory that an airline makes money by giving customers less, and letting them spend more to buy back what they once had. This year at United he said that a less comfortable product is what customers want.

With new Basic Economy fares United won’t even let customers skip the long check-in lines with online check-in. Every step of the way travel becomes more of a hassle.

United lost about $100 million in their initial rollout of Basic Economy. That’s because customers were choosing other airlines that offered a better deal at the same price. United’s bet was that as soon as American fully rolled out their basic economy the bleeding would stop and they’d start making money from ‘segmentation’.

Of course Southwest and jetBlue and Alaska are still options, not perfect but offering more travel value at the same price.

But it’s not just a question of losing business to competitors. This monkey see, monkey do industry where everyone copies each other in a race to the bottom has executives believing that as long as competitors are just as bad they’ll never lose money. And there’s far less competition in the industry than there used to be, government protects incumbent carriers from new competition through limits on foreign ownership of airlines flying inside the United States and because government airport owner-operators enter into exclusive deals that limit access to gates by new entrants.

And yet airlines are leaving huge value on the table because the choice isn’t just do you fly American or United, it’s do you fly at all?

According to a survey Americans “skipped as many as 32 million air trips in the year 2016.” Factors cited by consumers about the hassle that makes travel not worth it including ‘unbundling’ (myriad fees) as well as airport hassles, long lines, and other inconveniences they attribute to the airlines.

When you make travel less comfortable you are leaving money on the table from those customers who choose to take fewer trips. According to AAA, that’s a tremendous number of passengers who opt not to fly.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. Gary, great for you to point this out. Biggest untold story in travel to this day is how many people are doing everything humanly possible to avoid getting on an airplane, particularly here in the United States with our “beloved” U.S. carriers and their garbage product/experience!

  2. Gary, do you ever feel like you are pissing into the wind with these critiques. That is, that the airlines do not give a damn, and are never going to reverse the trend of making the product worse and worse?

  3. I’m not sure how accurate the part is regarding no online check in.

    As a platinum status member, even when purchasing basic Econ, I still got mobile app check in, group 1 boarding, and economy plus (but system assigned instead of self selected). Other than no PQM, it was hardly noticeable in terms of actual travel experience.

  4. @Henry LAX – that’s because you’re an elite, so you can bring on a carry on bag. If you do not have status or the United credit card and are not checking a bag you cannot use mobile checkin. You must visit the checkin desk.

  5. This post is just leftist nonsense assertions that fly in the face of reality (pun intended). So you say that people hate air travel so much that they lost ticket sales, and your evidence is a survey? Back in the real world, passenger miles flown have continued to climb yr/yr. So much for the mythical lost sales.

    You say that there is less competition? Yet inflation adjusted ticket prices are at record lows. That wouldn’t happen in an oligopoly. In fact there is more competition than ever. New entrants have offset consolidation.

    You then complain about densification. However, most consumers are very price sensitive, which is why Frontier, Allegiant, Spirit, etc. have grown so much. Most would happily accept 2″ less legroom to save $100. It’s funny how elitist leftists like you rail against densification, which lowers prices for poor people you claim to care about.

    And if you’re touching both sides of the lavatory wall, maybe time to go on a diet?

  6. @WR

    What about this post was “leftist”?

    The post reads like this:
    1. United, and other airlines, are decreasing legroom in all cabins to put more people in planes.
    2. These airlines are assuming that this will increase revenue and, potentially, profits.
    3. A self-identified survey – which I’ll concede is not the best research method out there, but that may be the best available for this type of data at the moment – indicates that x number of trips were not taken last year due to airline-related inconveniences.
    4. Airlines may be losing money due to these inconveniences, and should reconsider whether this is the optimal business model.

    I didn’t see anything political in there. If anything, the lack of political commentary regarding an apparent market-failure would indicate something other than leftism…

    That said, there doesn’t appear to be enough evidence to say that the “basic economy” fares are good or bad for the bottom line, though this is something that the major airlines must be examining religiously right now; though they give the airline industry a terrible name, Allegiant and Spirit seem to roughing it just fine. It would have also been nice to know whether the ~1 forgone trip/10 Americans (“32 million”) in 2016 was an unusually high amount, or if that was typical.

  7. WR I won’t even waste my time explaining to you the points you missed in this post.

    Gary I hope more data comes out like this. I find this all the time with friends and family when I ask them to go somewhere they say like no uhg they hate being crammed in a plane- the whole experience is miserable. Airlines seem to be forgetting the record profits are due in large part to the strong economy. They could probably start charging for the bathroom and people would still buy a ticket in this economy. But how many sales could they be getting had they not turned so greedy is a great question. As soon as a recession hits they may be in some trouble.

  8. This is of course just nonsense. If you gave customers a better product, they would have to pay more. That is possible these days. It’s called first class. If that’s not good enough for you, you fly private. Most people prefer cheaper transport, and the legacy airlines have to compete for that preference against no-frills airlines that will steal their customers If they put in more perks and charge more. The people who run the major airlines are not fools, and they have shareholders who demand a return on their investment. It is infinitely easier to give advice than run a successful business.

  9. Every month I cancel another credit card and Bend over and give the airlines the moon………My Tesla 90D is a great ride by the way…………

  10. @Gary
    You are leaving out the service by the bitter old C@nts that act as flight attendants at the big US GARBAGGE 3….who are there primarily for your safety and secondarily for their time to polish their nails…
    I am currently in asia…..flew JAL economy to NRT and SGN….brilliant flight on the best economy seat in the world
    Yesterday flew singapore….2 hr flight and yet you get a meal…a brilliant entertainment system and to top it off, the guy at the airport tells me we have 30 kilos pp to check in for free regardless of each piece individual weight
    Of course IAHPHX claims his drunk boss parker is brilliant…the reality is that all 3 of them are copying
    Monkeys who should spend some time learning from airline executives in asia and even in south america where latam, avianca and others provide a better product, at better price and better service
    One day we will have foreign investment in airlines in the us and when that day comes parker will drink himself to death ( he already started slowly….) and his chronies will have their judgment day

  11. Just flew a connecting flight on Southwest today over a nonstop available on either United or American. It’s not always possible, but I do indeed go far out of my way to fly WN or AS if I have any choice at all.

  12. Whether airlines leave tickets unsold is secondary in the economic equation when they run at 90+% capacity, and much of the unused capacity is less than optimal city-pairs (SDF-MSP capacity doesn’t help MSP-DEN demand). As long as airlines sell almost everything they have, they won’t care how bad the product they are selling is.

  13. @Retired Lawyer

    exactly. There isn’t enough slack in the system to carry those “32 million air trips” which means the entire survey is bunk.

  14. The 500 pound know-nothing redneck doesn’t even know what “leftist” means, just that he heard it on Fox news and spews it about anyone who isnt’ trying to tear things down like him out of rage that he’s stupid. fat. old and no woman has ever looked at him including his wife.

  15. I tried to share this posting on Facebook, and was told that it was Spam and they would not allow me to share it….

  16. I wonder if the ridiculous complexity of ff programs might be (or become) a deterrent to flying or accumulating ff miles, which may be more important to airlines. When passengers don’t get the results they expect because they don’t understand the rules or because there are some gotchas in the rules, frustration may lead them to just ignore the ff game and not use their airline credit cards. The vast vast majority of passengers don’t have time or inclination to read blogs or attend “continuing education seminars” that are necessary to keep up with all of the changes and get value out of ff programs. .

  17. @Gary: 95% of the shortfall is due to TSA-failure – a government organization over which the airlines (and the taxpayer, for that matter) have no control.

    The airlines are actually causing more journeys to be taken, partly through their introduction of Basic Economy with its lower prices.

    Remember, Ryanair is the end-state for domestic air service.

  18. @WR: You make a very important point:
    “You say that there is less competition? Yet inflation adjusted ticket prices are at record lows. That wouldn’t happen in an oligopoly. In fact there is more competition than ever. New entrants have offset consolidation.”

    @Gary: Clear all your economic pronouncements with Tyler in future. To make an economic mistake once is human, to repeat it after someone has been kind enough to correct you is a serious problem.

  19. That ticket prices may be at record lows is not proof of increased competition especially when coupled with the fact that profits are at record highs. Ticket prices are low and profits are high in part because through bankruptcy restructuring airlines have lowered costs. If there was robust competition today, prices would be even lower and profits would be lower as well.

  20. P.S. Industry consolidation has also given airlines the chance to master the art of capacity control, which is a significant factor in their ability to earn high profits at the expense of consumers.

  21. @achalk – no, see, you completely either misunderstand or misrepresent me.

    1) I do not claim there is monopoly, declining prices certainly suggest there’s not.

    2) however there’s a declining space in which competition is occuring. that’s not just because of consolidation, but because there are barriers to enter the market such as prohibition on foreign ownership of airlines operating in the US but also significantly gate constraints at US owned airports.

    3) labor, air traffic, airports and security are either heavily regulated or directly government-provided and encompass much of the travel experience. outside of security that’s not an increase in government compared to past but these are areas generally not open to competitive pressure.

    so take away competitors in the market and you have a very limited window in which competition occurs. there are factors by the way besides purely the number of airlines. there’s groupthink. scott kirby went from president of us airways to president of american+us airways to president of united, and united’s strategies have shifted in the direction he had plotted out at american.

    in any case I’d point out that tyler has cited me on these matters and also that I don’t claim any kind of monopoly argument as the cause…

  22. @achalk – airlines absolutely have significant influence over government security procedures. and regardless of what you think the cause is, and if airlines can’t control it, it would still highlight the need for airlines to OFFSET it.

  23. the one part that rarely get mentioned is the fact that people are more badly behaved than ever before. people used to have at least some respect for their fellow man but now people don’t give a sh!t about anyone besides themselves. it’s me me me me me and me.
    i can sit in a tight seat for a few hours. i can’t sit in a tight seat when the person beside me is clipping their toenails.

  24. @Gary Leff: “@achalk – airlines absolutely have significant influence over government security procedures. ”

    The current security situation is the opposite of what they would want, so that is not plausible.

  25. @Gary Leff: “@achalk – no, see, you completely either misunderstand or misrepresent me.”

    The other way around I think. I pointed out (as I have before) your economically indefensible view that Basic Economy is more costly that standard coach.

    The rest of your post above is off topic. However, since you mention restrictions on foreign competition and gate capacity as anti-competitive I will point out that I agree regarding both, and add takeoff slots as another constraint. Like security, it is the government that has a monopoly on those and they are equally badly managed.

    The basic model for domestic economy is that Ryanair is the end-state. At least for flights of less than three hours. First will be small, and may look a lot like premium economy, but will just be a runt at the front. Trans-con will likely have more first and premium economy. Hard to tell how the upper classes wll shape out but 90+% of the seats sold will be like what we now call Basic Economy (i.e. Ryanair) because what 90% of passengers want is low prices. The Chapter 11 Three are currently trying to introduce it (albeit rather chaotically).

  26. @John: I think that most of the “record profits” of The Chapter 11 Three are actually the effect of the business cycle. We are currently high on it (maybe at the top) so the cyclical component of profits is at its peak (airlines are one of the most cyclical industries measured). Smooth the cyclical component and profits fall a lot. Add in that prices are still lower than in the past and should be getting their strongest cyclical lift and you have much narrower persistent margins than the quarter-to-quarter margins reported. Things are a lot more competitive than you suggest because you are focusing on short-term data.

    Also, you are right that bankruptcy lowered the costs of The Chapter 11 Three by shafting creditors and ending labor monopoly payments. Other measures, e.g. Basic Economy, are also reducing costs and will be more significant in the future.

  27. @achalk – no, the current security situation 100% absolves the us airlines of liability and disadvantages them largely equally, they have objected to certain efforts but have largely been complicit in the proliferation of security theater

  28. @Gary Leff: “@achalk – no, the current security situation 100% absolves the us airlines of liability and disadvantages them largely equally, they have objected to certain efforts but have largely been complicit in the proliferation of security theater”

    Long lines at security, longer than many people’s flights, are the exact opposite of what they would have planned. Maybe by “complicit” you meant “compliant” because they obviously are impotent to change it.

  29. Survey or anecdote, I do not know a single person these days who either: 1. does not hate flying, 2. does not avoid it as much as possible, 3. does not mistrust the legacy3 US airlines, 4. does not prefer foreign carriers.

    #iahphx, these observations apply equally to folks regularly flying domestic first class or ‘hoping’ for an upgrade. (Increases of flying rates usually come with increased populations and other factors unrelated to price, e.g. fewer available flights and alternatives.)

    PS My recent Ryanair flight was no worse than AA or DL. That in itself was shocking. (I never fly UA.)

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