Things in the Sky

Welcome to day two of “Dan loves making graphs way too much.” Today we’re going to look at revenue.

Here’s a graph comparing revenues from the second quarter of 2007 to the second quarter of 2008.

Increases are always good…but let’s look at the percent change in revenues versus the percent change in expenses.

Ouch. There are some special charges for some of the airlines exagerrating the increases in cost a bit, but I think you can see where I’m going with this. (Once again Alaska is the odd man out, that airline will be getting its own post later this week.)

So my point is just like yesterday’s – the industry is off to a good start but needs to do more. There is one important thing to consider about these numbers, though – many of the fare increases and fee introductions did not occur until mid-quarter, so we probably have to wait until the third quarter or fourth quarter (when a lot of the capacity cuts are occurring) results to see the effects.

But a quick thought on baggage fees – will they be effective? I see three ways they can go:

1. People will check luggage just as they did before and pay the extra fees (unlikely).
2. Travelers will bring more carryons. They don’t pay the fee, and boarding the aircraft can get more hectic and complex, perhaps delaying flights.
3. Passengers will simply pack less or possibly ship their packages if it’s a cheaper option. Either way, the airline isn’t carrying the bag anymore. That results in fuel savings, but I’m guessing some airlines would rather make more money off the luggage fee than not carry the bag at all (if my assumption about the cost of carrying the bag is incorrect, please let me know).

I think that a blend of options two and three is the most likely scenario. Also, I think that extra revenue from the fees will go down over time as travelers create their own strategies to avoid them.

Any comments?

EDIT: Check out Mark Ashley’s post on baggage fees, which discusses some things I didn’t even think about here.