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There’s No ‘Free’ Lunch At 40,000 Feet, Either

Published on Feb 22 2017 10:04 AM in General Industry tagged: Continental Airlines / Delta Air Lines

There’s No ‘Free’ Lunch At 40,000 Feet, Either

Back in 2010, Continental Airlines was the last carrier standing, offering passengers in cattle class a free snack while rivals, desperate to cut costs, had begun to charge for that cheeseburger. Then it too succumbed, and travellers began to incorporate the pre-gate sandwich purchase into their itinerary.

Seven years later, financially robust airlines are starting to sniff around the idea of returning “free” food to the masses. This spring, Delta Air Lines Inc plans to serve a complimentary meal on longer, mostly trans-continental routes. Options will include fruit-and-cheese plates, a breakfast sandwich, and wraps.

Delta already offers free alcoholic beverages on domestic flights for those who sit in its roomier “Comfort Plus” cabin. One can also stream movies and tv shows - Delta wants you to know these are also free, just like the free video now available on Alaska, United, American, Southwest, and other carriers equipped with in-cabin Wi-Fi. Delta tested the economy meal service for six weeks late last year on flights between New York-JFK and Los Angeles and San Francisco. Not surprisingly, the airline found that satisfaction scores rose on those flights.

You already paid for it

Yet while people always like a “free” sandwich, it might be better to think of the “free” snack with an asterisk: you’re actually paying for these perks in other ways, unlike in years past when airlines offered food, drink, and flicks and rarely realised remuneration for them. Delta, for example, told investors in December that it commands 9 per cent more revenue for each seat flown one mile than its domestic rivals. Those carriers, especially American Airlines Group Inc and United Continental Holdings Inc, are keen to narrow that gap and to surpass each other. As in, they want to charge more, too.

To achieve its revenue premium, Delta touts its schedule reliability in terms of flights being on-time and rarely cancelled, its refurbished cabin interiors, and extensive renovations to its large hub airports, among other attributes, luring customers who appreciate these things.

Free food - especially on highly contested domestic routes - can help further this approach. A Delta spokeswoman, Catherine Sirna, declined to discuss how the company chose which “strategic markets” had gotten the new meals, or how much the effort will cost (many of the markets face direct competition from Alaska and JetBlue Airways Corp). Flights with American and Delta had previously restored meals on their flights to and from Hawaii.

Beyond passenger enticements, US airlines have also begun helping themselves financially by cramming more seats into the back of their airlines, a programme of “seat densification”. This strategy, which has been adopted widely, provides dual benefits from an airline perspective: it allows more revenue for each flight while trimming the per-seat operating cost. The three largest US airlines are also flying bigger aircraft - so-called “fleet upgauging” that offers larger capacity in many markets and can help to reduce overall costs.

Solidly profitable industry

Indeed, the coach-class amenities come as the US airline industry is solidly profitable, restructured due to bankruptcies and consolidation, with at least some carriers poised to weather the next economic downturn minus the traditional red ink.

On 14 February, Atlanta-based Delta paid employees $1.1 billion in profit sharing for last year’s financial performance, the third straight Valentine’s Day that these payouts have topped $1 billion. Even Wall Street oracle Warren Buffett, a withering critic of the industry’s financial record, has become a major owner of the four largest US carriers.

This robust financial health is also manifesting itself in operational reliability. US carriers posted record performance in 2016 in terms of flight cancellations, mishandled bags, and passengers bumped involuntarily due to seat oversales. All three problems are expensive when they hit a carrier, providing a powerful incentive to fix them. And being able to crow about such achievements is certainly helpful for raising fares.

Thus, as you enjoy that liberating feeling of munching on a turkey wrap without handing over a credit card, remember that there really is no such thing as a free lunch, at any altitude.

News by Bloomberg, edited by Hospitality Ireland

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