I’m not sure where this infographic originally came from, but it’s pretty good.
The main factors are cramming more seats on an airplane (148 to 128 for a conventional airline) using smaller and cheaper airports and being more efficient in both their staffing costs and their fleet.
Flying and airlines have almost become commoditized businesses. People want to get to wherever they’re going, with the least amount of hassle, at the cheapest price. An example:
I went with a buddy to Las Vegas last year for his bachelor party. It was a fun trip, and I also learned a lot. For instance, I learned that hanging around with a bunch of drunk guys will irritate you if you’re not really a big drinker. The other thing I learned is how people don’t want to spend money on airline tickets.
I locked in a return flight (direct both ways) from Calgary to Las Vegas for about $425, taxes and everything included, a few months before we left. It left early in the morning and returned later in the afternoon, the times I wanted. And most importantly for me, it was with my favorite airline- Westjet. And when it came time to fly, my experience was great. The flight attendants were hot as well, which sealed the deal for me. What’s up with just about every stewardess being hot? Discuss in the comments.
Anyway, my friend decided that he didn’t want to spend that much money on his flight. Even though we were driving to the airport together, he decided he was going to keep shopping around for a better deal. As time went by, he found flights on Air Canada’s website for $99 each way, so he decided to go with those. The first flight connected in Seattle, the returning flight connected in Minneapolis, meaning he’s have to pay additional airport taxes. The return flight was operated by Delta, meaning he had to pay $25 for the privilege of checking his bag.
His total cost by the time he paid all those additional fees: $395. He spent most of his first and last day of holidays stuck in airports. He was frustrated by his flying experience, especially having to pay for his luggage. I enjoyed my time on the plane.
Discount airlines know that traditional airlines are really bad at service. Airline food has been the punchline of a joke for about as long as they’ve served airplane food. I’ve had a meal on an airplane. It tasted just like microwaved pasta that you can buy at the grocery store for about $1.25. Nobody thinks this is worth a premium anymore.
When the bar is set so low, discounters can basically fall over it and still provide superior service than their entrenched counterparts. And since they don’t have all of these expensive unionized staffers, you never hear about massive layoffs from discounters. Their labor costs are lower and they can be much more flexible when it comes to HR.
These principles don’t just apply to airlines. An entrenched union and poor quality product helped kill the big 3 American car makers. Discount retailers like Wal-Mart and Target killed all sorts of traditional grocery stores, including A&P. While I’d argue that it was actually debt that killed both Blockbuster and Movie Gallery, no one can argue that Netflix was actually good for business.
If you’re in an industry that is so entrenched that it can’t be flexible, it could only be a matter of time before your very livelihood could be at risk. If you don’t believe me, just look back at the airline example.
Which airline do you prefer to fly?