Wednesday, May 23, 2012

The problems of airline industry and cheap tickets

Airlines spend a vast amount of capital money on buying the planes and crewing as well as maintaining them. To earn a realistic rate of return on this investment, they must maximize the number of seat sold. Twenty years ago, this was straightforward. Air travel was the accepted way to move long distances, whether for business or pleasure. Only a small percentage of the population were prepared to drive long distances. Following 9/11, the need to maintain a high level of security has forced airports and airlines into major changes. Many of these changes have created difficulties and reduced the number of people prepared to fly. With rising gas prices, many people now stay home or drive only short distances for holidays. Recognizing the problem, the US has been holding a number of consultations with interested parties including Airlines for America, the trade association representing the airlines. The need is to promote travel and tourism without sacrificing safety and security.
As to international travel, the american market has already lost a great volume of business from the countries that used to be able to visit on their own passports without a visa. Now advance notice of an intention to travel to the US must be given and, upon arrival, people are fingerprinted, retina scans are taken and, from their point of view, they are treated as little better than criminals or terrorists. No countries treat American citizens in this way. Tens of thousands of potential tourists are therefore voting with their feet and refusing the visit America. Why should this matter? In 2011, only sixty million people visited USA. Nevertheless, they spent spent about $135 billion and paid for about 7 million jobs in the hotel, food and beverage, and retail markets. When you add in domestic travel, travel contributed about $1 trillion to spending. The US government has therefore committed itself to speed up the visa application process and to make the Visa Waiver Program more welcoming. In this, the US government has accepted the need for there to be equal treatment between countries. This means employing far more staff and upgrading the computer systems to allow passengers to be processed more quickly.
So can offering cheap air tickets help the industry?
As to purely domestic travel, the government is reviewing the current security systems. In doing so, it is acknowledging that many now consider the procedures to get on a plane excessive. In particular, they consider some parts of the process highly intrusive. Again, this is all a question of balance, looking for a compromise that will respect a legitimate desire for privacy against the need to prevent terrorists from interfering with flights. With so great a contribution being made to national consumption, both state and federal authorities have to consider how best to bring more people back to air travel. This is not just a case of offering cheap tickets. People have been driven away by some very poor PR and it will take a serious effort by all interested parties to restore trust and confidence. This does not deny that cheap air tickets will help. The low-cost, discount airlines have proved there is a real market for budget travel. But even there, problems arise with a lack of transparency on prices. Everyone needs to work together to boost air travel's appeal.

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