Is air travel a commodity or not?


It is quite clear that the airlines wish it were not, and there are a number of people offering up suggestions on how to break the trend we’ve seen of pricing and marketing air travel as a commodity. But is that really in our best interests as passengers? I’m not so convinced.

The most recent claim on this front comes from Evan Konwiser via tnooz.com. The crux of Evan’s claim appears to be that:

We refuse to reward airlines by paying more for things like good service, nicer planes, quieter terminals, or shorter lines…. [B]ut then feeling indignant and wronged when the service inevitably fails to meet expectations.

I cannot argue this part of Konwiser’s claim. As travelers we do, indeed, shop based almost solely on price and ignore the rest of the details. Why? Because at the end of the day the products actually are, quite frankly, a lot like a commodity. The seat is going to be between 17-18 inches wide and have between 29-34 inches of pitch. It is going to be in a tube where you fly some hundreds of miles per hour and eventually probably get where you’re going. So where is the differentiation?

The airlines are pushing Direct Distribution architectures where they interact directly with the customer rather than using the legacy GDS systems for their fare and inventory distribution. The theory is that such means will allow the carriers to differentiate their product offerings versus competitors and tailor the sales pitch on more than just the price. As stated in the article:

Direct Connect offers some hope by differentiating the shopping experience and tying more tangible product enhancements to the purchasing decision.

By being able to connect directly with consumers at OTAs or metasearch engines via an API (or directly via the carrier web-site), airlines can in theory provide a customized experience.

They can change pricing, amenities, and features depending on who you are and what kind of trip you’re looking for.

While price is still a primary concern, it might allow airlines to throw in other “value” items that shift the decision away from pure price to a value trade-off. The more consumers actively make those choices, the more they can link the purchasing experience to the flying experience.

But the Direct approach still doesn’t address the largest issue – that the travel experience is decoupled from the purchase point. Yes, an airline can advertise that they only charge $6 on board for booze instead of $7 or that they sell fresh food rather than just snack boxes. They can even integrate the purchase process at the time of the transaction to get you a discount (and there is ample evidence of many airlines doing this today with bag fees). But that’s not going to drive purchase behavior. Certainly not enough to offset a $20 difference in price in most cases.

I am afraid that I must concede that the trend towards the Direct model – where the airline can "tailor" the offering to the known customer, including skewing the price if they so choose with little to no transparency – is one that seems unlikely to be stopped any time soon. Such a trend will, for the near term, make it more difficult for customers to effectively compare the total cost of a journey, just as is the case today due to variations in bag fees for most customers on most airlines. It is hard to see how this is good for the consumer, especially when the product is essentially the same other than schedules.

If an airline were to offer some distinct difference and market on that then perhaps they’d beat the price comparison pressures. Midwest did so for quite some time with their larger seats and cookies in flight. But they couldn’t maintain that difference as they expanded to compete with the larger carriers. And there is scant evidence that any other carriers would be able to either.

I’ve written previously, railing somewhat against the Direct model and the potential impact it can have on customers. I’ve got nothing against the airlines offering up more data about the services and associated costs of the various bits of the travel experience. Far from it, actually, I’m hugely in favor of the airlines sharing that data in a consistent, indexed and searchable manner. The difference is that I want to see the data shared across a common platform so that everyone can see all the bits and compare them rather than the airlines only showing some parts to some customers and other parts to others.

Becoming a market leader should come from actually having the best product, not from obfuscating the details and hoping no one notices that you’re toying with them on the cost side of the equation. Maybe it is a chicken and egg game where no one is willing to pay for the better product because no one knows about the better product. But if that were really the case then it seems unlikely that United Airlines would have committed to keeping EconomyPlus in their fleet post-merger or that Delta would have matched the product with their deployment of Economy Comfort fleet-wide which was announced yesterday. And those airlines seem quite content to keep offering the product, knowing that they’ve monetized and commoditized it.

Blame the GDS companies if you must for not adapting quickly enough, but the airlines are still mostly to blame for not actually offering a substantially different product from each other. And why should they when consumers have demonstrated time and again that they are rarely going to pay for it?

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Seth Miller

I'm Seth, also known as the Wandering Aramean. I was bit by the travel bug 30 years ago and there's no sign of a cure. I fly ~200,000 miles annually; these are my stories. You can connect with me on Twitter, Facebook, LinkedIn and .

4 Comments

  1. On the other hand, not exposing your fares via a GDS also means that there are some channels that you give up. Agencies that book tickets on behalf of big companies come to mind. I asked about it at this year’s mega do and more or less got the response that GDSs aren’t going away anytime soon, at least on United.

  2. Keep in mind, William, that it is possible to publish fares into the GDS for corporate bookings but not for retail sale; Southwest has been doing so for years. That said, today’s announcement from United (http://blog.wandr.me/2011/10/amadeus-and-united-extend-partnership-with-a-twist/) suggests that United is definitely more interested in keeping their GDS partnerships alive plus keeping the public GDS availability showing than they are in going completely to the Direct sales model.

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