Wednesday, December 30, 2009

Should airlines charge per passenger-pound?

Changing how we pay for airfare could improve the lives of everyone who travels by air. Let me propose one big improvement. Instead of the flat per-seat fare (plus extra fees for checked baggage), charge each passenger for the total weight he/she contributes to the weight of the plane. That's body weight plus luggage weight.

Charge by the pound. UPS and FedEx do it, and so do professional moving companies. Airlines should do it too. Charging by the pound is not a crazy idea. In fact, if you want to see something crazy, just watch chaos at the TSA screening for a couple of minutes. Aside from being what moving companies do, there are plenty of other reasons to charge per passenger-pound.

Why would this improve the way we fly?

Airlines started charging for bags to save on fuel costs. All those bags weigh a lot, and they cost quite a bit to move. Therefore, it makes sense that they should try to put a price on weighing the plane down. It's expensive! But, does charging for bags really put a price on the right thing?

Take an example. A 230-pound person with a 10-pound bag (240 pounds) burns more fuel than a 120-pound person with 60-pounds of luggage (180 pounds). By the fuel-saving logic, the airlines should charge the big person more, but if you have flown lately, you know that the second person pays more. In other words, if the airlines are trying to price the weight of the plane, they're doing it wrong.

That's not even the entire story, nor is it the most obvious problem. If the airlines raise the price of checked baggage, people readily substitute toward carry-on baggage. At $40 per trip, people may even devote a lot of energy to transferring checked-baggage weight to carry-on weight. But, from the airline's fuel-saving standpoint, there's no difference between a pound of carry-on and a pound of checked baggage.

If the goal is to save on fuel, this kind of weight-shifting is entirely unproductive. Yet, if you travel much (and don't travel light), you have probably spent some time moving heavy things from checked baggage to your carry-on luggage.

Another problem has come to light in the past decade or so. Airline security has become a big hassle. And, that hassle gets bigger as people carry more stuff onto the plane. Security officials have to check packages and backpacks and duffel bags and purses and laptops and baggy pants... et cetera. As recent events have demonstrated, something harmful is bound to slip through security. It is no surprise when everyone is in a hurry, and everyone is carrying as much as they can to avoid baggage fees.

So, it might be a security hazard if everyone loads up on carry-on luggage, it doesn't save on fuel, and it is definitely a hassle. Wouldn't it be easier and more effective if people had the incentive to check everything they didn't want on their person? That's what my plan (charging per passenger-pound) would do.

Here's how it would work

When you make your reservation. Type in a textbox (or tell the ticketing agent) how much you weigh plus how much you expect your luggage to weigh. In my case, I weigh 230 pounds and I expect to bring luggage of 40 pounds. The airline then quotes you a per pound price, and you pay an estimated price.

When you arrive at the airport. Just bring all of your bags and decide on what you want with you versus what you don't. Then, you can come to a similar station where you and all of your bags are weighed. Your actual passenger-weight will be compared with what you estimated, and you'll either pay a small fee or you'll get a refund. Upon payment or credit, you check your bags and go through security.

That's no more complicated than having to pay $20 upon arrival to check your bag. And, you might get a refund.

Going through security. Presumably, you will go through security with only the items you really want to carry through the airport. Because you have no incentive to squeeze all you can into your carry-on luggage, that's much less than the current status quo. The security officials will have to scan fewer bags, people will have to unpack fewer backpacks, people will wear only one layer of clothing (unless it is cold), and there should be less stress going through security.

It works for the airlines, skinny people and light packers

In my per-passenger-pound pricing scheme, the airline can still change the price over time to respond to demand and supply for flights. They could even incorporate the estimated weight of passengers who already booked their tickets on the flight. That's new and useful information that the airlines do not have under the current scheme.

Moreover, the airline that is first to adopt this strategy can push the pounds (and therefore, fuel costs) onto the other airlines. The 150-pound light packers are going to fly with the per-passenger-pound airline, but the 300-pound people with big bags will fly where their weight doesn't cost them. At least before the other airlines switch to per-passenger pound pricing, this means big cost savings for the first airline to switch. And, some of those savings can be passed onto the passengers in the form of lower fares.

Not everyone will benefit, but that's not all bad.

If you are overweight, I have little sympathy. A 300-pound person requires twice as much fuel to move from New York to Denver as a 150-pound person. On the basis of resources used, they should pay almost twice as much for the flight. Doesn't that make the status quo seem unfair?

Counterbalanced against having considerably less hassle pre-and-post flight, it's not hard to see that some heavier-than-average people will like the price per passenger-pound system better. I know I would.

9 comments:

  1. How would you price in in-flight services? Under your system, a 150 pound man with 50 pounds of luggage would pay less for a ticket than a 230 pound man with no luggage. But if both of these men are in economy, would they get the same service?

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  2. I thought this might come up, and I am open to modifying my proposed pricing scheme.

    In particular, I wouldn't rule out charging a fixed "base fee" for fixed in-flight services (like taking up a seat, drinking the complementary drink, etc.) and then charging per-passenger-pound for the fuel surcharge component.

    My main objection is that there's a lot of wasted effort in air travel (because of security, carry on bags cost approximately the same as checked bags). In my view, the airlines' current policy gives people a strong incentive to waste time packing and re-packing. That is a really inefficient way to save on fuel.

    I have done some thinking about why (despite the inefficiency of repacking and lugging) the airlines' current policy is a profitable one, but that might be the subject of a future post.

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  3. Charging based on personal characteristics is discriminatory; the impact of individual passenger weight on fuel usage is fairly minimum for airliners; cargo can be an order of magnitude more dense than humans, shipping is based on both weight and volume, and there is no standard unit like a "seat" to base it against, so it makes sense to charge by package characteristics; the increase in price for some people may make it more cost-prohibitive for them to fly, such that flights will either be less full or would be filled with lighter people with less baggage who command a smaller ticket price; it would be harder to prepare forecasts or trends, and the changing customer base would introduce an extra variable complicating stable, predictable income.

    Take your pick as to why this wouldn't work.

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  4. If you have ever flown in small planes they always weigh the passengers. If the passengers weigh too much, the luggage stays behind!

    Our airlines are run by idiots. This is a great idea that we will probably never see.

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  5. I agree. We should be charged X amount for moving X amount of weight from here to there.It may not be entirely fair to people who are just tall,and therefore heavier, but then, they do get to see better in movie theaters and shows.There are no accomodations for petite people in general. Life's not fair, that's just the way it is. If you have an advantage in one aspect, you might have a disadvantage in another.

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  6. I think you must do a more complex calculation. The aircraft has a certain weight, divided by the number of seats. This must be accounted for in the ticket price; in other words, there needs to be a 'basic' price per seat to cover the cost of transporting the vehicle which transports the passengers. Can't have one without the other, eh? So, to this basic seat price, one could then add a weight surcharge. Lighter passengers pay less than heavy passengers. I think this modification makes your price-per-pound scheme work a lot better.

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  7. Interesting concept. I doubt whether the airlines have any financial incentive to make the TSA more efficient, by not having to screen so many bags. But shifting some of the weight from the overhead bin to under the plane would perhaps speed up the loading/unloading of the plane and improve on-time metrics.

    It also makes sense for the overall travel experience, which would theoretically be a rising tide that would raise all the boats.

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  8. If you also got rid of the government run TSA and put in a private company it would also raise the overall service and happiness of customers and I agree with a per pound price it just makes since as UPS and FED EX do it all the time if you want over night then you pay more.

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  9. Flight costs:

    60%

    Airplane amortization
    ATC
    Check in
    Security
    In flight food
    Air system
    Inflight entertainment
    Pilot
    Flight attendants
    Marketing
    Administration
    Credit card fees

    etc

    Fuel:40%

    of which

    50% to move the empty airplane
    10-20% to move freight

    30%-40% to move the passengers AND baggage

    Assuming 28 kg baggage per person, the difference between a minute and VERY obese person is about 10% of a ticket, factor in that obese people may be more likely to book bigger seats (premium economy), buy more inflight food, perhaps more likely to cancel unrefundable tickets, perhaps more likely to buy less cheap tickets, and the benefit is at best very little, and perhaps even less than zero.

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