At first blush, it makes sense for legacy carriers to have low-cost brands. GM
, Ford, and Toyota each sell more than one line of cars, to cater to different segments of the market. Black & Decker sells DeWalt, geared towards the professional, while B&D is geared towards the do-it-yourselfer.
But amenities are a small portion of the cost of getting a flight in the air. The two largest costs are labor and fuel. Other significant costs are the aircraft itself, maintenance, gate leases, and landing fees. On a plane with 120 seats, the cost of replacing turkey sandwiches with roast beef is less than adding an additional flight attendant.
I think that the legacy carriers have to understand that business flyers will no longer pay fares that are 3 to 10 times the lowest leisure fares. The legacy carriers should also realize that instead of trying to attract the leisure traveler with low fares, and then hoping that business flyers will make flights profitable, they ought to price walk-up fares at reasonable levels. Then, leisure fares should be marked at a percentage off the business fares, but not as cheap as Southwest or JetBlue.
Look at this way, Brooks Brothers will have a sale to clear out seasonal clothes, but they are still going to be more expensive than Wal-Mart.
In 1994, I used to pay $230 for a leisure fare from ORD
. In 1995, it dropped to $118. Today, I can still fly for as little as $165. The price of jet fuel has gone up since 1994. So has the cost of labor, even with concessions. So why do American, United, and Delta match AirTran? If AA
, and DL
were to charge $500 roundtrip for a walk-up fare and 40% off for a leisure fare, $300, that would make some sense. If a leisure flyer thinks that's too much, there's AirTran to ATL
or Southwest to Birmingham.
But, if the legacy carriers decide to truly cater to the business flyer, they must add amenities, like free meals that taste good and more leg room than Southwest.