Airlines Cutting Costs But Where are the Consumer Benefits?

These articles reminded me of our discussion about the airline industry.

While US airlines could save as much as $50 billion on jet fuel this year, consumers are unlikely to see those savings. Fuel constitutes at least a third of an airline’s operating expenses, however airlines are not basing ticket prices on their own costs, but rather on what travelers are willing to pay.

This article discusses the growth of the “slim-line” seats in major airlines. Apparently seats that used to have a pitch of 32 to 34 inches now typically has 31 inches. In a survey, 42 percent of consumers said they would be inclined to purchase a seat with less legroom if its cheaper.

How can the airline industry “innovate” to better address consumer preferences? Is the industry too heavily regulated and entrenched by bigger players making it difficult for new market entrants? Could some sort of policy entrepreneurship in airline regulations catalyze new options for consumers?

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