Andrew...oh guru of airline economics gurus...riddle me this:
US Airways is about to start charging a few dollars for soft drinks. In a normal economic environment this would spur those of us who still fly to buy a can or two of Diet Coke at Cosco at 50 cents per can and bring it on the plane. But this isn't a market in any sense of the word because TSA reguations prohibit anyone from bringing any container with more than a few ounces of liquid...including a sealed soda can...through security.
So doesn't that make any airline selling soda or juice for $2/can (at least I assume you get the whole can) a government sanctioned monopoly?
But wait, there's more.
If US Airways is charging $2/can, shouldn't we expect that the one alternative passengers have to buy water and soda --the concessionaires at the airport -- to compete by selling the same thing for, say, $1.75?
If that's the case, shouldn't we look at the stock of companies with airport concessions as a good buy right now?
Finally..and this is not just a totally sarcastic question...do some airlines that lease whole terminals (like United at O'Hare and Delta at Salt Lake City) sublease the space to the concessionaires they choose? If so, do those subleases include provisions that allow the airline to determine pricing? If that's the case, isn't this really and truly a government-sanctioned monopoly?
In other words, aren't passengers really being given the choice of going thirsty on a 5.5 hour trip from one coast to the next (and longer if the flight is delayed) or paying whatever the airline wants to charge for a Dew?
The European discount airline/Movie theater model
"US Airways is about to start charging a few dollars for soft drinks..."
Just for the record, with no judgment made, the industry seems to be moving to how the European discount airlines do it.
They are really cheap on the basic fare -- make Southwestern's fares seem exorbidant -- but charge for everything extra, they charge for a cracker, and more for one that's not soggy. It's up to you if you want a cracker or not.
If US Airways is charging $2/can, shouldn't we expect that the one alternative passengers have to buy water and soda --the concessionaires at the airport -- to compete by selling the same thing for, say, $1.75?
This is getting to sound like the economics of movie theaters, and why popcorn is so expensive in them.
Of course European airlines and movie theaters don't have TSA regulations messing with their pricing models.
Nickels and Dimes
Most people do seem to buy their food and drink before getting on the plane, more for variety than for price.
Even if the concessionaires leased from the airlines, they price competitively against each other, so there's still plenty of choice.
I did a nice roundtrip on Southwest this week. No complaints, none at all.
Airline Question
If that's the case, shouldn't we look at the stock of companies with airport concessions as a good buy right now?
Great idea, until Congress hits them with a windfall profits tax.
Anothe airline question
Lessee now, I took a nice trip from Anchorage to Fairbanks on the Alaska Railroad this week. Nice comfortable ride, and scenery was spectacular. I took a small cooler along with food and drink, no problems/hassle with TSA "security". Gee...
Post new comment