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Sundries on the Jet: The next threat

Rez O. Lewshun

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The next front to attack the profession.





A midair mall? Airlines seek new ways to make money
By Caroline Brothers

Wednesday, October 15, 2008
LONDON: The passenger beside you is playing poker on an online gambling site. His wife is chatting on her mobile phone while the children fire off text messages and tune in to pay-per-view satellite TV. Your overpriced drink sits on a tray table embellished with advertising, while the cabin crew, working on commission, moves up and down the aisles peddling theater tickets and DVDs along with traditional duty-free goods - for home delivery.
"It's an on-board mall," said Ramsey Nuwar, sales director for ARINC's Skybuy, speaking of a not-so-distant future, when airlines may become retailers with wings. His company sells the satellite-connected machines that would bill your credit card directly, from high in the sky.


The idea is part of a frantic quest by airlines for new ways to maximize earnings amid a financial crisis that is hurting demand after oil prices climbed dramatically over the past two years. With little control over most of their costs, the airlines are increasingly charging passengers for elements once covered by their tickets, while low-cost carriers are spearheading efforts to find new things to sell in the air.
"There is no low-cost airline that isn't being kept alive by ancillary revenue," Mike Rutter, chief commercial officer of the British low-cost airline, Flybe, said during a recent interview. "You may lose money flying from A to B but you can reduce your losses on ancillary."
Flybe, which introduced a baggage fee early, sees check-in as the next frontier for breaking out costs for the traveller.
"We can unbundle check-in more," he said, offering possible fee levels, "from not using check-in at all, with the Internet; to using kiosks in the airport for some help, which is Level 2; to full manual check-in, which is Level 3," he said. "Then different forms of baggage could be Level 4 - for fragile objects that need unusual handling on the ground."
Prices would increase from one level to the next.
Traditional airlines that have long used an all-inclusive fare system have been slower to "unbundle" costs to passengers, though some started charging for checked bags as the price of oil approached $150 a barrel during the summer. Now that the oil price has receded, few airlines are revoking those charges. United doubled the fee, to $50, for a second bag last month.


Willie Walsh, the chief executive of British Airways, said there were some things his flag carrier would never charge for.
"We won't unbundle seat assignment," he said during an interview last month. "We won't unbundle the checked-in bag allowance. We won't unbundle check-in at airports and we won't charge you for a glass of water on the aircraft."
But he did not rule out introducing fees for checking in golf bags and skis. "That debate is still going on," Walsh said.
Passengers' comfort is not expected to be the top priority for flight attendants in the midair shopping malls of the future.


"You need them to break away from Salvation Army service," said Joao Monteiro, an executive at LSG Sky Chefs, a Lufthansa-owned airline caterer and service provider. "You want retailers on board."
Sales commissions of 10 percent to 12 percent would work as powerful incentives for cabin crews to sell extra products, said Laura Duran, ancillary revenue manager at Vueling, a low-cost airline based in Barcelona that is merging with a rival, Clickair.
"From Vueling's perspective it's a very good idea," Duran said. Making cabin crew salaries entirely commission-based would, however, be a step too far, she said. "It's just a topper."
Passengers could be encouraged to spend with offers of discounts on attractions like Disneyland if they paid more than $50 on board, Nuwar said, while sales targets would drive cabin crews to ring up more in-flight sales. Train tickets, hotel rooms and rental-car reservations could all be offered.
Duty-free perfumes and alcohol, which are too heavy to stock aboard weight-sensitive aircraft like Vueling's, could be picked up at destinations or even delivered. "You scan and pay with your credit card and have them delivered to your home," Nuwar said.
No midair snack is too small to generate a profit, provided it can last through several flights before being sold.


"The basic needs are hunger and thirst - not the lifestyle of gourmet food," said Monteiro of Sky Chefs, whose experience in supplying gourmet sandwiches to one airline was not a happy one. "We had wastage of more than 30 percent - we had to throw them all out after the first flight."
Airlines, he said, should think like flying supermarkets instead.
"You have to think like a retailer who has space on board to get higher margins," Monteiro said. "When you are struggling to make a profit on a ticket, then selling for $3 to $5 that item of water on board that cost you 20 cents can make you a profit."
Meanwhile low-cost airlines, early adopters of all new methods to make the passenger spend, are impatient for new technology that will let them charge for access to live and satellite TV. But the prohibitive cost of retrofitting existing aircraft for broadband, Rutter said, means that cash source will be realized only when airlines renew their fleets.
At a time when planes are jettisoning ballast to reduce their fuel bills, the equipment alone will add 70 kilograms, or 154 pounds, to a plane's load.
But Asbjorn Christoffersen, chief regulatory officer at OnAir, an information technology company, said the system would allow airlines to offer passengers services like in-flight gambling.


"If you can make one passenger sign up for a gambling application on your aircraft, you will be paid $100 by the gambling application provider," he said.
Ryanair, the biggest low-cost operator in Europe, will roll out the mobile phone and Internet system on its whole fleet "in the next few weeks," Christoffersen said. Two other low-cost airlines - Air Asia and Shenzhen Airline of China - are set to follow, while Kingfisher of India and TAM of Brazil are interested.
"Low cost airlines are aggressively driving this," Christoffersen said. Mainstream carriers like Air France-KLM, TAP of Portugal and BMI of Britain are also starting to explore the service. "It's becoming something you have to have," he said.
Laws about gambling do not apply over water, and they apply only during descent into the national airspace of certain countries, said Rutter of Flybe. Like Ryanair, Flybe has long been interested in gambling as a form of entertainment on flights too short for watching films.
Vueling, meanwhile, hopes advertising will bolster its revenues. Duran sees tray tables as untapped ad space.
 

Abernathy

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Interesting article.

I'm of the belief that people like to eat on long flights, and that they (the airlines) need to figure out a method for offering actual meals for purchase on board. The current buy on board programs offer mere snacks for $5-8.00. A lot of people would be willing to pay $10.00 or slightly more for a decent hot meal on a typical transcon.

Pushing a cart with the aroma of hot meals permeating the cabin, with the typical fat a$$ american who can't put down the fork to save his/her arteries, and charging a reasonable price for them would surely bring in some extra cash.

I'll give credit to Delta for their buy-on-board set-up, but they can really do a lot more with it if they revisit the program.

Meals are a great way to pass time, too.
 

JoeMerchant

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Rez....you need help....How is this an "attack" on the profession?

What's wrong with airlines trying to increase revenue? I would rather they raise revenue than cut costs....
 

zman

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Interesting article.

I'm of the belief that people like to eat on long flights, and that they (the airlines) need to figure out a method for offering actual meals for purchase on board. The current buy on board programs offer mere snacks for $5-8.00. A lot of people would be willing to pay $10.00 or slightly more for a decent hot meal on a typical transcon.

Pushing a cart with the aroma of hot meals permeating the cabin, with the typical fat a$$ american who can't put down the fork to save his/her arteries, and charging a reasonable price for them would surely bring in some extra cash.

I'll give credit to Delta for their buy-on-board set-up, but they can really do a lot more with it if they revisit the program.

Meals are a great way to pass time, too.


Thats awsome!!!
 

CA1900

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...the airlines... need to figure out a method for offering actual meals for purchase on board... A lot of people would be willing to pay $10.00 or slightly more for a decent hot meal on a typical transcon.

Midwest Airlines does this, and does it very well. I love flying on them! Unfortunately, they haven't figure out how to make money doing it in this environment, where even a $5 fare difference means losing the sale. :(
 

Rez O. Lewshun

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Interesting..... pilots talking about the novelty of selling food etc on an airliner......


No threat detect yet?
 

jonjuan

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Interesting..... pilots talking about the novelty of selling food etc on an airliner......


No threat detect yet?

Sorry bud, but it's no longer a novelty. Where have you been the past 5 years?

Lloyd Christmas: "We landed on the moon!" (fist pump)
 

JoeMerchant

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Interesting..... pilots talking about the novelty of selling food etc on an airliner......


No threat detect yet?

What's wrong with it Rez? Sounds like a great idea to me....
 

Soverytired

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It's neither a threat nor particularly new. Ryanair has been charging for everything for years, and the rest of the world is following. International flights have long had "duty free" shopping on board, and the "home delivery option" has for years been known as "Skymall". Bring your own food and don't buy overpriced crap if you don't like it (always good advice anyway)

If you're so smart, why don't you come up with a "non-threatening" way airlines can make money? "Charge more" doesn't seem to be working, especially in competitive markets.

Oh yeah . . . I forgot. You want BO to stick it to the US taxpayer and have them subsidize politically connected and re-regulated airlines . . . and in exchange they'll get ticket prices so high that most of them won't be able to fly. Good plan . . since you're a pilot, I guess. Hope you're working for a powerfully connected legacy when the boom comes down though.
 

Rez O. Lewshun

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It's neither a threat nor particularly new. Ryanair has been charging for everything for years, and the rest of the world is following. International flights have long had "duty free" shopping on board, and the "home delivery option" has for years been known as "Skymall". Bring your own food and don't buy overpriced crap if you don't like it (always good advice anyway).


Nice.... but I maintain it is a threat.....

And you mentioned Ryan Air in Europe...

Now I've heard that some pilots think Ryan Air is a good place to work.. an opportunity perhaps for US pilots looking for work....


Ryan Air sells incredibly cheap tickets. O'leary makes his money selling ancillary services and products like wheelchair requests, food, products, baggage, etc...

Ryan Air is a transnational airline. It has operating certificates in one country and labor based in a different country. So it finds the country with cheapest laws for its certificate and labor.

Imagine as a US pilot flying for a Mexican airline that has an operating certificate from Trinidad/Tabago and a crew base in Aruba. What labor law do you fall under? As a US pilot can you image trying to enforce gov't law or a union contract in Aruba? Or is it Trinidad because that is where the certificate is.. or is it Mexico because that is where the corporate headquarters is....


Back to the main issue.....


First.... Ryan treats its pilots like Mesa does. The Ryan/Mesa model is what the global start ups are copying... not SWA...... Many pilots at Ryan air are "indentured Servants" because they are so deep in debt.. they can't afford to quit working and look for another 'career'.... Sound familiar Mr. Regional Jet Pilot?


But just as important... since Ryan Air and now other airlines are making money from ancillary sales... the airline ticket is not the primary revenue source....

If you think airline management doesn't give a damm about us now... wait till we are no longer the primary generator of revenue.... How will management view all the cost of safety, training, mx, etc when they realize that there is no money there... They will want to dump money into marketing schemes to sell stuff..

Of course one has to consider how management thinks... not how we think....
 
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JoeMerchant

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Rez....If you go to a concert....Is the food and drink free? How about a movie?

Car rental, hotels, and airlines are learning how to compete in the internet age.....Search engines list the cheapest tickets and that is what people buy....Once the person buys the ticket....you charge them for the "ala carte" items they want....bags, food, etc.....

Airline managements are learning to increase revenues and you complain about it.....amazing....
 

Abernathy

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I wonder if there's a way that tickets can be booked the normal way, with the option, after selecting the ticket, of adding a meal to your flight for an extra $10.00+ dollars. That way, the ticket has already been selected for its price (thereby staying competitive), and this is done before the ticket is actually purchased.

Order your meal in advance. Again, that way they don't have to add the cost to the actual ticket, but rather as an option later on. "Tickets must be booked 24 hours in advance for this option, bla bla bla," so as to not worry about waste but have enough time to get them on from catering.

I don't see why this would be a problem for our wages. Cruise liners have all sorts of paid services and shops, which dramatically increase revenue.

In addition, eating, ordering food, ordering merchandise off a menu are all ways of passing time. Americans are buy-crazy.
 
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Rez O. Lewshun

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I wonder if there's a way that tickets can be booked the normal way, with the option, after selecting the ticket, of adding a meal to your flight for an extra $10.00+ dollars. That way, the ticket has already been selected for its price (thereby staying competitive), and this is done before the ticket is actually purchased.

Order your meal in advance. Again, that way they don't have to add the cost to the actual ticket, but rather as an option later on. "Tickets must be booked 24 hours in advance for this option, bla bla bla," so as to not worry about waste but have enough time to get them on from catering.

I don't see why this would be a problem for our wages. Cruise liners have all sorts of paid services and shops, which dramatically increase revenue.

cruise lines are for pleasure... not vital to the US economy as is air transportation...

In addition, eating, ordering food, ordering merchandise off a menu are all ways of passing time. Americans are buy-crazy.


I am not arguing the innovation (need) of dealing with the evolving market....

I am talking about how we evolve with the market... If you don't understand your "place" in the market.... how can you stay in the market..??

If pilots and FA's safely moving people in the seat is no longer THE main revenue generator and selling additional goods and services is... then we lose value in the minds of management.

If we are no longer as valuable to management as before.. will it be harder or easier to negotiate fair and reasonable pay and benefits?
 

fischman

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Rez....If you go to a concert....Is the food and drink free? How about a movie?
You can leave in those examples. On an airplane in flight, you are stuck.

The airlines historically offered soft drinks and checked bags as part of the ticket price. It was part of "the service".

They have forgotten service, and made themselves into a commodity. I remember when I was a kid, my Dad would book on TWA, or we drove. That was it. Now America goes for the lowest bidder and complains about the crappy service.

Nickel and Dimeing your customers is NO WAY to gain customer loyalty.
 

Soverytired

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Nice.... but I maintain it is a threat.....



Back to the main issue.....

Sound familiar Mr. Regional Jet Pilot?

Of course one has to consider how management thinks... not how we think....

Rez.


1. The "MAIN ISSUE" is profitability. It is in fact, the ONLY issue, and the steps you cite as "threats" are in fact a piece of the puzzle that airlines are trying in the never ending search for profitability. I don't say this switch to emulate parts of RyanAir are smart, or good, or workable . . only that their is nothing particularly new about them.

Other than raising ticket prices (not a good idea during a downturn) or nationalization via re-regulation with the new administration coming (good for pilots in on the ground floor, bad for everyone else) . . what ideas do you have?

2. No one is so disproportionally obsessed with what aircraft or what company flightinfo posters fly for as you seem to be (except maybe TankerClown). You're happy to be at AirTran, so good for you, I guess. AirTran is not exactly a "major" or particularly profitable carrier: indeed, Airtran just tries to scrape some sort of profit in direct competition with Delta (UAL/Frontier/SWA - DEN anyone?); it must be a great place or you wouldn't be there . . .right?

I assure you, I am quite happy with my current carrier and their growth plan. But even when I was "Mr Regional Jet Pilot" at a crummy carrier like Mesa, I kept my head high. It was a voluntary decision, and when I'd had enough, I parlayed my experience earned at Mesa to a much, much better job. I hasten to add, I'd do it again in a heartbeat for an even better deal . . . welcome to the world of "professionals".
 
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IXLR8

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Rez....If you go to a concert....Is the food and drink free? How about a movie?
I sneak a pepsi or water in the movies...shhh..don't tell anyone!!!
 

Rez O. Lewshun

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Rez.


1. The "MAIN ISSUE" is profitability. It is in fact, the ONLY issue, and the steps you cite as "threats" are in fact a piece of the puzzle that airlines are trying in the never ending search for profitability. I don't say this switch to emulate parts of RyanAir are smart, or good, or workable . . only that their is nothing particularly new about them.

That is managements responsibility. Pilots have no say.. nor should they, in the business operation of their company.

This does place us pilots at the mercy of our managements.

Other than raising ticket prices (not a good idea during a downturn) or nationalization via re-regulation with the new administration coming (good for pilots in on the ground floor, bad for everyone else) . . what ideas do you have?

The way to profitability is productivity. I suggest SWA style management for Airtran and the majors.

2. No one is so disproportionally obsessed with what aircraft or what company flightinfo posters fly for as you seem to be (except maybe TankerClown). You're happy to be at AirTran, so good for you, I guess. AirTran is not exactly a "major" or particularly profitable carrier: indeed, Airtran just tries to scrape some sort of profit in direct competition with Delta (UAL/Frontier/SWA - DEN anyone?); it must be a great place or you wouldn't be there . . .right?

Whatever...

I assure you, I am quite happy with my current carrier and their growth plan. But even when I was "Mr Regional Jet Pilot" at a crummy carrier like Mesa, I kept my head high. It was a voluntary decision, and when I'd had enough, I parlayed my experience earned at Mesa to a much, much better job. I hasten to add, I'd do it again in a heartbeat for an even better deal . . . welcome to the world of "professionals".

So what happens when one gets to Airtran or DAL and doesn't want to go anywhere?

Can't they work to make their current profession better. We can't control our managements but we can understand that market forces that will negatively affect them and respond....

no?
 

JoeMerchant

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That is managements responsibility. Pilots have no say.. nor should they, in the business operation of their company.

Yet YOU are trying to have a say in the business operation.....You are contradicting your own message.....Take your own advice and let them charge for "extras"....More revenue is a good thing....except to you socialists.....
 

brainhurts

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What's wrong with it Rez? Sounds like a great idea to me....
I think he slipped a cog. He was ranting about how Rabbi's hate their brothers on another thread. Sleeping pills and alcohol? Were just not sure yet, but we're not ruling it out.
 
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