building wealth in the pursuit of happiness

Aug 14, 2007

flying on the cheap (for the airlines, not for you)

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I have not flown Northwest Airlines in a while, although I once flew them frequently. I was taken aback on my recent flight to notice that they are now charging for snacks. Charging for every single last type of service is the model used by Ryanair, an Irish airline. The traditional airlines - Continental, Northwest, United, etc. - have had a series of bad years which do not appear likely to improve in the near term future. I think the future model will be to pay for food, drinks, even water and blankets on airplanes. Ryanair already goes so far as to charge you for having luggage. Soon I could imagine charges for that free cup of coffee, or even a charge to board the plane first. Imagine if this pricing scheme was applied to other aspects of life:

  • You can sit on the subway if you have a gold Metrocard.
  • You can drive between 55 and 65 with a gold E-Z Pass or between 65 and 75 with a platinum E-Z Pass.
  • You can take the elevator for $1 or the stairs for free.
  • Taking the moving sidewalk at the airport cost a quarter.
  • Airlines charge you $1 per hour for reading lights.
  • An elevator might not open if you don’t pay first.
  • An airline might charge you for water - or even to use the bathroom on the plane.

Before you think any of those ideas are too far-fetched, consider this: the New York subway system will soon allow you to tap a credit card on the turnstile to let you through. In Japan, you can wave your cell phone near items you want to buy and pay for them that way:

Sony, working with NTT DoCoMo, has been spearheading the mobile phone wallet technology, commonly known as ‘FeliCa‘. This technology makes use of a RFID chip inside the handset that can communicate with reading devices when the phone is placed near them. Though the technology is relatively new, there are many locations such as convenience stores which allow users to pay for goods using their phones; some vending machines even accept phone payments. Users must ‘charge up’ their accounts with credits before they can pay using their phones. The growing popularity of the system is compelling other manufacturers to make compatible phones.

So imagine if it becomes possible to wave your cell phone at any item with a bar code and pay for it that way. It makes the current credit card situation look positively benign. You will have your “waving card” in your hand all day to pay for the slightest small item or service, and keeping track of it will be impossible. Your daily life might end up being dozens of small transactions. I think ultimately Americans will pay more for things we accept for granted if we think we’re getting a “bargain.” If I can get a “free flight” as Ryanair often offers, I head off to the airport gloating about my frugality, only to find it’s $3.50 to check luggage, $19.95 to bring my bag onboard with me, $11.95 to use my laptop in flight and $2.99 per minute in the bathroom. By the time I get to my destination, I’ve spent $212 and it’s no cheaper than a “traditional” airline. Restaurants and bars hook people in with cheap appetizers in order to get them to buy expensive entrees and drinks. Credit card companies offer low initial rates to encourage running up debt.

This scenario was what I thought about as I paid for a $5 snack since my 17-month old son, my wife and I were all hungry and I hadn’t had the foresight to buy snacks for a 6:30 am flight. I got a cheaper ticket by flying Northwest but all of these services I’ve taken for granted in the past will be disappearing year by year. When you book a cruise, you book a more-or-less all-inclusive ticket. I think this will lead to an overall inflation in expenses and one more headache for the American consumer.

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