If you’ve ever wondered how we ended up here, with substandard airline service, angry passengers and disgruntled employees, here’s something to consider. It’s a receipt for a Trans World Airlines flight from Paris to New York — in 1953.
“I dug this out after reading Bob Herbst’s piece yesterday,” says reader and former airline employee Jerry Castellano. “This says it all. No wonder airlines are in the dumpster.”
Castellano’s mother paid $295 for the flight. A deal, right? Yes, until you do the math.
He explains:
Adjusted for inflation, that one way ticket would today cost $2,388.
I brought my family to Italy this past summer and our tickets roundtrip from St. Louis to Rome were about $800.
Running that through an inflation calculator would price the 1953 ticket at just over $100
So what’s the problem? The business model is messed up.
I often point out to people that when I first joined Ozark Air Lines in 1978, if our system wide load factor was North of 55 percent, we were profitable. Bob Herbst could probably give you much more accurate information regarding load factor and yields.
There’s a paragraph in Airframe by Michael Crichton where one character mentions how startup carriers were in essence pyramid schemes. I saw a lot of this as at TWA we did a lot of contract training for these startups that had limited lives.
He’s right. This says it all.
{ 9 comments… read them below or add one }
I did kind of the same comparison on a cruise recently. Had the receipt from our honeymoon cruise back in 1988. We paid $2100 (adjusted for inflation it would be $3800 today) for an inside cabin on a 7 night Eastern Caribbean cruise on the S/S Norway in March.
An inside cabin on the Norwegian Epic in March of 2011 would cost $1907
If the cruise lines pricing can remain profitable while bucking inflation, why not the airlines?
Mike:
I can think of three reasons:
1> The difference is not so great. Adjusted for inflation, a cruise has declined in cost about 50% since 1988. I’d have to check but I think the airline change in time is closer to 80% as they have priced themselves to oblivion. Also, cruise ships have increased in capacity by a larger percentage, allowing for economies of scale.
2> Staffing. Cruise lines rely on cheaper labor from the Phillipines, etc, and much of the labor on board is relatively unskilled.
3> Ancilliary revenues. Cruise ships have gift shops, bars, get a cut of excursions, etc, all of which provide additional revenue. The airlines are embracing this approach.
You could also make the case that service has reduced on Cruise ships during that period, and also add in a multiplier factor based on the different number of vehicles operated by an airline versus a cruise line (each vehicle adds a fixed cost).
The price we paid for our cruise in 1985 is less now. But, the drinks we paid $1.75 for in 1985 are now $5.50-$7.50 each. The pictures we paid for that cost $2 for are now $6-$10 each. There are also more onboard items that never existed in 1985 that passengers pay a premium for, such as bottle water at $3.50 that I can get here at home for $2.99 a 24 bottle case.
I think the airlines are following in the cruise lines footsteps with their added charged, don’t you?
We traveled round trip Boston – London – Boston in late October. We knew our travel plans well in advance and purchased our tickets on BA’s website in January when they were having a sale. Total price per person was $544.21 – not bad. The base fare per ticket was $180.00, with $364.21 per ticket in taxes – more than double the fare.
On the picture of Mrs. Castellano’s ticket, which isn’t totally clear, but it looks like the total tax for her ticket was $120.00. If that was in fact the amount, the base fare for one way transatlantic flight was $175.00, compared to our round trip base fare of $180.00. I know our family’s fares were based on a round trip purchase and carried many other conditions and restrictions – so perhaps that is an unfair comparison.
Assuming $120.00 was the correct amount of tax charged, the percentage of tax on the base fare of $175.00 is somewhere around 68.5%. The total of taxes on my base fare is more than 200%.
I am in no way defending the airlines – on each of these flights the service was not up to the usual BA standards and they ran out of hot meals in each direction. Perhaps with the airlines having to collect so many taxes and surcharges, they have no recourse but to reduce the base airfares to a ridiculous amount simply in order to keep the total charge to the passenger fairly reasonable, prompting the rise in the other service fees to add to the airline’s revenue stream and not the government. Just a thought…
Lillian Castner December 4, 2009 at 6:24 pm
We traveled round trip Boston – London – Boston in late October. We knew our travel plans well in advance and purchased our tickets on BA’s website in January when they were having a sale. Total price per person was $544.21 – not bad. The base fare per ticket was $180.00, with $364.21 per ticket in taxes – more than double the fare.
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NOT BAD?…………No seriously, why arent you saying. IT’S AMAZING, in the year, 2009, i can fly to EUROPE each way for $270.00???
Can you travel to Europe, any other way, more cheaply? Yet, the choice of HOT meals was sub-standard when they ran out.
Frank – I think you missed my point, sorry. I was not complaining about what we paid to go from point A to point B to point A, but what actually made up the total price of that ticket.
As compared to the other economic theories expressed by others above (adjusted for 2009 dollars, or adjusted for inflation, etc), our round trip base airfare of $180.00, or $90.00 one way doesn’t fit the comparisons the other posters are trying to make. As I said, we had the advantage of advance purchase, non-refundable conditions which contributed to the good price.
My point is that when 2/3 of the total cost of a transatlantic ticket is taxes, the airline is spending more effort in being a tax collector for the various governments and agencies involved. The proportionately smaller amount of the actual airfare going to BA or any other airline which 1) results in substandard service because the airline itself isn’t making enough money for itself to operate properly. That leads to 2) their need to impose the additonal fees for services which used to be complimentary.
And.. trust me, when you have to get up at 4 am to take an 830 am morning flight, the only choice of reheated, gummy pasta for breakfast is disgusting.
Lillian December 5, 2009 at 7:16 pm
Frank – I think you missed my point, sorry.
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No apology necessary. Actually, your second response was acccurate in regards to how heavily taxied this industry is.
Please do not buy that taxes load of hurt. Those so-called taxes are made mostly of what is encoded as a YQ or YR tax, widely known as fuel surcharges and easily translated to human language as ‘money we should be charging in the base fare but are charging somewhere else so it looks like our flights are cheap’. If you don’t believe me check your e-ticket Itinerary-Receipt and look for YQ/YR taxes. The airline, and not a government, is charging you that.
C. November is absolutely correct. YQ/YR taxes enable the airlines to advertise low base fares. Ever wondered why the ticket that’s advertised at $180 ends up costing twice that? It’s because the airlines know that $180 plus tax looks a whole lot better than $540.