United Airlines New Profit Oriented Changes
United Airlines recently came up with a new cost saving initiative. They will now charge for carry on luggage. It makes sense to "the economist", when you consider that heavier planes waste more fuels. Still, the costumers and future flyers are not pleased. It will only be a matter of time before other airliners follow in suit. United Airlines originally started restrictions by placing limits on basic economy fliers. These fliers were limited to a single free carry-on bag. This bag had to be small enough to fit under the seat. It could only contain the most important personal items, like cellphones and the passport. Anything bigger and there might be fees including. The new change will start next year. It will affect only those who buy basic economy tickets. These fliers will also not be able to get airline miles. Their seats will also be randomly selected on the day of the flight. This means that people with the same ticket will be split apart. As of late, airliners have been trying to reduce cargo weight. Samoa Air solved this issue by charging over weight passengers extra. United Airlines is the number 3 airliner in the US. They expect that this change will help boost them to number one status. The expected revenue of this new charge will be $2.8 billion over the next 3 years. This is assuming that they do not lose customers because of these changes. If the costumers pay for higher tickets, they will be allowed two free carry-ons. This will not be free; if one considers that the carry-ons will be included in the price of the ticket. This measure was done in order to compete with Delta Air Lines. To maximize profits, Delta air Lines will soon sell cheap tickets that prohibit itinerary changes and seat selections. Angela Basco, who frequently travels to New York on Christmas, is unhappy with the changes. She says, “I have small children. Not being able to sit next to them, will put a lot of strain on them. These changes are going to be horrible for vacationing families.” Charlie Leocha, chairman of Travelers United, notes that these actions aim at eliminating passenger’s choice. Both companies lure new customers with cheap fares. Once they have them, the costumers learn the hundreds of restrictions in their tickets. Other low-cost carriers that charge for charge for add-ons are Spirit Airlines and Frontier Airlines. For more choice options, passengers will have to get a Basic Economic ticket. They will still not have advance seating selection. They will also not get flight changes or upgrades. These restrictions will not be applied to Elite-level frequent fliers and cardholders. The rest of the passengers will subsidies these elite fliers through extra fees. There is a silver lining to this problem. By removing choice options, the boarding process will be faster because fewer costumers will be able to fill over bin space. At least, this is what United hopes will happen. Starting in 2017 during the first quarter, United will also sell no-frill fares for travels starting in the second quarter. The prices will be akin to charges in the economic cabins, but with more restrictions. Since 2014, domestic airfares profits have started to fall. This is part the fault of Spirit Airlines. Declining oil prices have also encouraged larger airlines to expand their capacity, beyond their usual rate. In 2016, after Quarter 2, the domestic airfare of all carriers went down 11 percent. Still, they were able to record profits thanks to price-cutting measures. Now, the oil prices have started to increase. There are also unions who are bargaining for higher pay. In the middle of it all, air fares are continuing to decline. At this rate, airliners will be forced to break even. To maintain profit margins, the airliners liked United started doing Machiavellian profit oriented changes. United’s profit margin went from 7 percent to 5 percent. Last year, it was 10.4 percent. Maybe the problem, is that they are losing returning costumers? There is only so much strain one can place on the consumers before they jump ship. “I used to travel in United Airliners all the time,” complains frequent business flier Dennis Sherman, “Even the quality in the business classes are starting to suffer. It is simply not worth staying true to an airliner, if they punish their loyal customers with these greedy changes. And let me not even get started with the food…It is worse than hospital food, if that is even possible.” The root of the problem goes back to Spirit Airlines. United and other airliners are in a price war with Spirit Airlines. If this keeps up, Spirit might end up with a virtual monopoly. Monopolies rarely benefit consumers. United cannot also match the free amenities of Spirit. Not allowing seat assignments in Economic class will at least benefit the customers who buy last minute tickets. They usually get seated at the back of the plane. Now, they can be randomly assigned a good seat that would have gone to an economic class passenger. Plus, the airfares will continue artificially low, even if it might cause United Airlines to go bankrupt. The company will cross that bridge when it gets to it.