“We’ve been needlessly irritating people, from our creaking old website to our interrogation of passengers over the size of their purses.”
Michael O’Leary, chief executive officer of Ryanair
Travel Industry Cost Savings Technique #1: Reducing Fuel Costs
To make planes lighter (fuel represents around 33% of operating costs) and thus save on fuel costs, airlines are finding creative ways to cut weight, including:
- Eliminating or reducing the weight of airline pillows and blankets.
- Charging or not even providing for earphones.
- Changing the weight of the paper of their in-flight magazine.
- Redesigning bathrooms.
- Discontinuing selling duty-free products in flight.
- Reducing the size and weight of the in-flight drink/snack carts.
- Installing lighter seatback entertainment systems (some budget airlines are eliminating the seatback entertainment systems or replacing the systems with tablets).
- Installing lighter, and thinner seats.
- Switching out glass bottles for cans.
- Replacing employee paper manual with tablets.
- Manufacturers are also designing new engines and lighter plans into their new planes to cut weight.
Some Ways Airlines Cut Costs that Negatively Effect Consumers
Most of these fuel reduction changes do not affect customers that much. However, we can expect that airlines will increasingly develop cost savings strategies that negatively affect consumers, including:
- Reducing the size of seats for economy customers while offering more options for customers to pay for more comfortable seats.
- Putting advertisements on seatbacks.
- Charging extra if you are overweight on a small plane to reduce fuel usage. (I was once charged extra on Nature Air in Costa Rica).
- Providing fewer gate seating areas and gates in far off corners of the airport. (Prime airport gates are both expensive and already taken by large, well-established airlines).
- Finding fewer airport personnel at the gate and check-in counter.
- Taking shuttles to get from airplanes to the airport. (Usually, these shuttles are stuffed to the gills and expose you to the weather at the destination. I was once, for example, forced to experience a cold London winter day while dressed for arrival in the tropics of southern India).
The Most Important Ways that Airlines Reduce Costs
Airlines have been trying to find cost savings forever. The following are the most widespread and effective cost savings techniques that airlines use. Many of these techniques negatively affect consumers, but they are not apparent to most passengers:
- Minimizing training and maintenance costs by only using one or two different models of an airplane. (Most of these aircraft are designed to reduce fuel costs).
- Reducing labor costs by hiring less expensive, more inexperienced employees, and not offering these new hires pensions and using less unionized labor. (Many legacy carriers have also reduced benefits for existing employees).
- Replacing employees with technology. This is particularly noticeable at passenger check-in and gates.
- Reducing the time between flights on the same airplane as much as possible. It used to be that airlines spent quite a bit more time cleaning and ensuring that planes were ready for take-off than now.
- Outsourcing aircraft maintenance to China, Mexico, and increasingly, El Salvador, where labor is cheaper and regulations and supervision laxer.
Non-Airline Travel Industry Cost Savings Techniques
It is not only airlines that are continually looking for other ways to save money.
The cruise industry provided midnight buffets and free, high-end dishes (like lobster and expensive cuts of steak). Besides, many experts maintain that cruise companies cancel ports to increase revenues and pay fewer port fees. (Customers buy more from the cruise line when the ship is at sea than in port)
Hotels and cruise lines often require customers to insert their key card into a slot to turn on lights to save electricity costs. Some hotels and cruise lines have eliminated bar soap and shampoo bottles and replaced them with bulk body soap dispensers. They have also redesigned bathrooms to use less water. I expect that soon, hotels will replace check-in counter personnel with computers and limit maid visits to every other day.
Want More Information About Travel Industry Cost Savings?
Check out this interesting article from Harvard Business Review about how airlines may start offering business passengers the option not to use certain services in exchange for incentives.
Travel Economics 101 Posts
Here are several posts designed to give Fifty-Plus Nomads a basic idea of how Travel Economics works. Being armed with a better economics education should make you a better travel consumer. (These can be read in any order)
- Travel Alliances are Essential: But Are They Worthwhile for Consumers?Travel industry alliances are essential to the business´s survival. However, alliances have both good and bad implications for consumers
- Ancillary Travel Fees: Why Are They Increasingly Becoming An Industry Lifeline?More and more the travel industry depends on the sale of other products to expand and maintain its profitability. Expect to be bombarded with hints to buy other things (ancillaries) on your next cruise, flight, etc.
- The Long and Complex History of the Travel Industry and the InternetThe internet has changed the travel industry probably more than another industry. This article discusses how these changes affect the consumer.
- 3 Travel Industry Cost Savings Techniques: The Good, the Bad, and the UglyThe travel industry has made several changes to save costs in recent times. Some like using more fuel-efficient planes do not affect consumers that much. Others like reducing staff have made the experience worse for consumers.
- Business Travelers Versus Leisure Travelers: The Ultimate Airline ShowdownThe travel industry gets most of its clients from leisure travelers. However, it makes more money from business than leisure passengers. The airlines put up with us leisure travelers because they couldn’t survive without us. However, they don’t hide their preference for business travelers.
- Why Are There So Many Connecting Flights? A Discussion of Why Airlines Love the Hub-Spoke Model More than ConsumersUnbeknownst to most consumers, the cause of most of our airline-related complaints is the hub-spoke model. Unfortunately, however, the hub-spoke model is also essential to the airline industry’s financial viability.
- Airline Schedule Changes: Why Don’t Airlines Keep their Promises?Learn why airlines change their schedules after you buy your tickets and what you can do about it.
- How Much Travel Taxes and Fees Do Consumers Pay For Airfare, Hotels, and Other Travel Services?The amount and number of travel taxes, fees, and other charges added to your bill will probably surprise you. Many are hidden and like everything else, taxes keep going up.
- Airline Consolidation: Consumer Disadvantages and AdvantagesThe airlines have consolidated so fast in the USA and Canada that only 5 players dominate the market. Learn what this means for consumers.
- 4 Travel Industry Consolidations (Non-Airlines): Consumer’s Nightmare or Benefactor?Probably the most significant change in the travel industry in the past couple of decades has been the industry’s rapid consolidation. Read this post to discover how few travel players really exist in the market today. and how this rapid consolidation has affected consumers.
- Why the Sharing Economy Has Become So Popular in the Travel Industry?The sharing economy like Uber and Airbnb has made a major influence on the travel industry and will continue to affect the industry far into the future.
- Third World and Chinese Travelers: The Biggest Future Travel TrendThe biggest change affecting the travel industry is the gigantic increase in emerging countries and Chinese travelers. These travelers will change the future face of tourism more than anything else.
- The 3 Reasons Travel Prices Are So Radically Different than Other Products: Perishability, Capital Costs, and Yield ManagementHave you ever wondered why travel products seem to be priced so crazily? Learn the three economic factors that contribute to the pricing of travel products: perishability, high capital costs, and yield management.
- Travel Economics 101: Learn How the Industry Works and Save Yourself Money and HeadachesPaul Heller, the Fifty-Plus Nomad founder, has developed a series of posts about travel economics. Reading these posts will help Fifty-Plus Nomads deal with some of the problems with the travel industry they are likely to encounter during their long-term, round-the-world journeys.