Extra Fees Won't Save Airlines From High Fuel Prices

A blog about business and economics.
March 21 2012 11:00 AM

Extra Fees Won't Save Airlines From High Fuel Prices

137351467
A pigeon is viewed near the Delta baggage carousel at Terminal 3 at JFK Airport in New York City

Photograph by Spencer Platt/Getty Images.

Lori Ranson writes that airlines are looking to ancillary service fees to restore profit margins and help "withstand fuel price volatility."

The problem here is that airlines aren't so much suffering from "volatility" (which can be hedged away) as they are simply from high oil prices. Expensive oil means expensive jet fuel means sharply reduced operating margins unless you can fully pass the price of fuel on to consumers. If the market for air travel were totally uncompetitive you could try to make that work, but it's not totally uncompetitive. There are plenty of routes on which you have multiple carriers offering comparable services, and you have plenty of routes where driving (or, less frequently, a train) is a plausible alternative. So you're just squeezed. Realistically, the most promising business strategy is to do what American Airlines is trying to do and force your employees to eat the losses in order to remain in a competitive position, but the only way for them to implement their union-screwing strategy is to go bankrupt first and that has obvious limits as a business strategy. It's probably no coincidence that Southwest Airlines has both the only real track record of long-term success in passenger aviation and an unusually pleasant and cooperative relationship with its labor unions. The interests of labor and management in this industry aren't all that different, and if you have an atmosphere of trust it should be possible to work things out. But though that kind of arrangement is typical in, say, Germany it's very unusual in the United States and leaves airlines basically hoping that they can trick people into paying more for "everything from baggage allowances to extra legroom" without noticing.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

TODAY IN SLATE

War Stories

The Right Target

Why Obama’s airstrikes against ISIS may be more effective than people expect.

The One National Holiday Republicans Hope You Forget

It’s Legal for Obama to Bomb Syria Because He Says It Is

I Stand With Emma Watson on Women’s Rights

Even though I know I’m going to get flak for it.

Should You Recline Your Seat? Two Economists Weigh In.

Doublex

It Is Very, Very Stupid to Compare Hope Solo to Ray Rice

Or, why it is very, very stupid to compare Hope Solo to Ray Rice.

Building a Better Workplace

In Defense of HR

Startups and small businesses shouldn’t skip over a human resources department.

Why Is This Mother in Prison for Helping Her Daughter Get an Abortion?

The Only Good Thing That Happened at Today’s Soul-Crushing U.N. Climate Talks

  News & Politics
Foreigners
Sept. 23 2014 6:40 PM Coalition of the Presentable Don’t believe the official version. Meet America’s real allies in the fight against ISIS.
  Business
Moneybox
Sept. 23 2014 2:08 PM Home Depot’s Former Lead Security Engineer Had a Legacy of Sabotage
  Life
Outward
Sept. 23 2014 1:57 PM Would a Second Sarkozy Presidency End Marriage Equality in France?
  Double X
The XX Factor
Sept. 23 2014 2:32 PM Politico Asks: Why Is Gabby Giffords So “Ruthless” on Gun Control?
  Slate Plus
Political Gabfest
Sept. 23 2014 3:04 PM Chicago Gabfest How to get your tickets before anyone else.
  Arts
Brow Beat
Sept. 23 2014 4:45 PM Why Is Autumn the Only Season With Two Names?
  Technology
Future Tense
Sept. 23 2014 5:36 PM This Climate Change Poem Moved World Leaders to Tears Today
  Health & Science
Science
Sept. 23 2014 4:33 PM Who Deserves Those 4 Inches of Airplane Seat Space? An investigation into the economics of reclining.
  Sports
Sports Nut
Sept. 23 2014 7:27 PM You’re Fired, Roger Goodell If the commissioner gets the ax, the NFL would still need a better justice system. What would that look like?