Why are drinks free on airplanes?

Why do most airlines still offer free drinks? Photo: Nick Ares, via Creative Commons.

Why do most airlines still offer free drinks? Photo: Nick Ares, via Creative Commons.

I’ve written a lot recently about how everything is for sale on an airplane. But I’ve been puzzled about one thing. Drinks remain free. But why?

I asked Henry Harteveldt, a travel industry expert at Hudson Crossing in San Francisco, and a general expert on all matters relating to the passenger experience. He said taking away away a decades-long freebie is difficult to do, though it has happened before. (See checked baggage.) What is more likely, Harteveldt said, is that airlines might continue to experiment with super cheap fares that have literally no amenities.

“You can go back into the history books in the late 1950 and 1960s,” Harteveldt said. “Between the Mainland and Hawaii some airlines offered what they called thrift class where meals and beverages were available for sale. Some airlines could again institute a fare where you don’t get anything. If you take a look at Frontier Airlines, they basically take a tact that is more like ‘the more you pay, the more you get.’”

Ultra low cost carriers in the United States, including Spirit and Allegiant, charge for drinks, as do many similar carriers abroad. Major legacy carriers here have been reluctant to do so, with one exception — US Airways, which in 2008 and 2009 briefly charged for drinks. But no airline copied and the charge was rescinded in March 2009.

Allegiant president and ancillary revenue guru Andrew Levy told me recently that charging for drinks is helpful in two respects. One, it takes what had been a loss for the airline and turns it into some revenue. And two, it allows the airline to stock a lot less product. When drinks are free, he said, people take cans even when they don’t want them.

Why do you think drinks are free on major airlines? And do you suspect this will ever change?

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How airlines could turn into flying casinos – without gambling

What fees are coming next for the airline travel? Photo: Allegiant.

What fees are coming next for the airline travel? Photo: Allegiant.

Last week, Andrew Levy, president and COO of Allegiant, told us that he predicts major airlines like United, Delta and American will at some point charge for carry-on bags, as his carrier does. So what else does he predict for the future?

Basically, Levy guesses airlines will continue to tweak ancillary offerings so they charge different prices to different people. At some level, carriers already do this with the extras they sell. And airlines certainly do it with the price of tickets — almost everyone on a plane is paying a different fare.

But perhaps it’s time to get ready for price discrimination 2.0 on board the airplane.

“With the technology on the plane flight attendants are going to be able to differentiate costumers,” Levy said. “It’s kind of like a casino here in Las Vegas. They treat you a certain way depending on how much you play. I think the airline industry is moving more in that direction. We’ll be a little more targeted on a customers by customer basis.

As for what airlines might be able to sell in the future? The restroom is off-limits as a money maker, but everything else? It’s all fair game, Levy said.

“You are limited by your imagination by some degree,” Levy said. “People will buy the things they value.”

Here’s an interesting fact about Allegiant. Its flight attendants earn a commission on whatever they sell. That includes food, drinks and even better seats that are empty. “They are getting a piece of the revenue,” he said.

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Paying for carry-on bags? It could happen on major airlines.

Might major airlines like United someday charge for carry-on bags? It could happen, an executive at another airline says. Photo: M. Spencer Green/Associated Press

Might major airlines like United someday charge for carry-on bags? It could happen, an executive at another airline says. Photo: M. Spencer Green/Associated Press

Could you someday have to pay for carry-on bags on United, American and Delta?

Andrew Levy, president and chief operating officer at Allegiant Air, says he thinks you will. His airline, known for selling deeply discounted coach tickets mainly to and from leisure destinations, has been charging for all but the smallest carry-on bags since 2012. So far, in the United States, only Allegiant and competitor Spirit are charging for cabin bags.

“I would be shocked if in three years we were still the only ones charging for carry-on bags,” Levy told me in an interview last month. “I think if you are platinum medallion on Delta you ‘ll never pay for those. But if I’m ‘Joe Blow’ who only flies twice a year, I’ll always pay.”

You probably don’t believe him. But keep in mind, Allegiant was among the first carriers to charge for checked baggage, making customers pay for bags well before American Airlines shocked passengers in 2008 with the new fee. A fee that was almost immediately copied by every major airline except Southwest.

That could happen again with carry-on bags.

“I personally believe it is inevitable that there will be a charge for carry on bags,” Levy said. “I think it will be a widely adopted fee. But we’ll see. I could be wrong. But the industry has been moving pretty consistently toward where we are and where Spirit is. I don’t think it will stop.”

Charging for carry-on bags is beneficial for airlines in a couple of ways, Levy said. The first one is obvious. The airlines make money off of something that used to be free. The second is a slightly harder to quantify. But if charging for bags means passengers bring less stuff, airplanes will presumably fly at lighter weights.  And over time, that lighter planes can bring some fuel savings.

For many passengers, the key is that an airline’s best customers will actually be rewarded by this move. First, they’ll end up getting a perk, since they almost certainly won’t have to pay to use the overhead bin. Second, the bins will have more space than they do now, since passengers will no longer have an incentive to avoid checking luggage.

What do you think? Do you agree with Levy’s prediction? And do you think airlines should charge for carry-on bags?

And check back next week for more of Levy’s thoughts on ancillary revenue products.

 

 

 

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Joining other airlines, Aer Lingus will now let you bid for upgrades

Aer Lingus will let passengers bid on upgrades. Photo: Aer Lingus

Aer Lingus will let passengers bid on upgrades. Photo: Aer Lingus

Irish airline Aer Lingus is the latest carrier to offer an auction system for business class seats.

It’s pretty simple. You buy an economy class ticket. Then you go the airline’s website and make them an offer for how much you would pay for an upgrade. You enter your payment information right there. Then you submit your bid and wait.

There are some caveats. You have to be invited to make a bid. And if you don’t book directly through the airline, you won’t be eligible to participate. The window for eligible passengers closes five days prior to departure. Also, if you have multiple passengers on the same itinerary, you must try to upgrade all of them.

The trick here is to try to guess the least amount of money Aer Lingus will accept. As the airline puts it, “Each flight has minimum and maximum assigned offer value and your offer must lie between these two values.” So you don’t want to bid too high. Of course, you only get one shot at this, so you don’t want to bid too low.

I love this idea, which is used by several airlines. A CNN story in September focused on a company called Plusgrade, which has developed the software used by many carriers.

“Everyone knows that if no one is sitting in seat 2A when the plane takes off from London to New York, it’s a loss for the airline. But everyone in economy wants that seat,”  Ken Harris, the founder and CEO of Plusgrade told CNN. “The idea was to help correct that, and do it intelligently.”

CNN asked an executive with Austrian whether her airline’s bidding system hurt its ability to sell full priced business class tickets. She said it does not.

“This product is for a completely different type of group,”  Stephanie Kunath, Austrian’s director of revenue management and business development, told CNN. “It’s not for the business traveler who really wants to fly Business Class and needs a 100% guarantee that he can. It’s for the passenger that just wants to treat himself for a little extra, and can live with the uncertainty.”

Want more info? CNBC also did an interesting story on bidding for upgrades recently.

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Quote of the weekend: On Allegiant Air’s seating plan

The Las Vegas Sun has a great interview this weekend with Allegiant Air President and COO Andrew Levy and senior VP of Planning Jude Bricker.

I recommend the whole thing, but this part is my favorite. Bricker is explaining the perfect airplane seat for Allegiant.

“You want it to be like a Herman Miller desk chair, just a diaphragm between you and the guy’s knees behind you.”

The Q & A talks a bit about seat selection. Bricker says selling advanced seats is worth $60 million to Allegiant each year. That’s a lot, considering seating assignments were essentially free for decades.

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