Having to pay for airline comfort, convenience

Economists have a high level of faith in pricing to convey information to the consumer and to influence consumer behaviour. Recently I traveled to eastern Canada and in so doing observed several cases in which pricing policy did its job – and cases where it conspicuously didn’t.

For example, the Airbus 319 used on the Kelowna to Toronto non-stop flight has so little leg room in most rows, it’s virtually impossible for someone who is 1.88 meters to sit upright with feet on the floor. You might think the solution to this problem is the removal of two rows of seats to provide more leg room throughout the economy class. The ticket might cost a bit more but the comfort level would be increased immensely.

Instead, Air Canada Rouge forces us tall people to purchase a more expensive seat assignment in the few rows with standard (not cattle-car) legroom. A higher price is used to signal that in these seats you will not be squashed if the seat in front of you is reclined to any degree and that, if you put down the tray for your drink, it will be level. Useful to know, if irritating.

Another distinguishing feature of the flight was incabin carry-on luggage. Now that Canadian airlines charge $25 (plus GST) for checked baggage, people avoid the charge by carrying on all their stuff. There is a device at each counter just before you board your flight that supposedly sets the limits for the size of carry-on luggage.

Ground crew also make beseeching announcements inviting passengers to check their bags for free (which somewhat cheeses off the people who just paid $25).

Despite these measures, a large fraction of carry-on bags exceed the size limit and large amounts of crew time is devoted to finding a storage place for bags that should have been checked in the first place. There is an even bigger problem in winter when most people wear large outer garments. If the overhead compartments are jammed with oversize luggage, where do you put your coat?

So, what to do? Can’t the airline simply enforce the size limit? I imagine counter staff experience devastating flack when enforcing the rule and, indeed, why should they suffer the abuse?

It’s time to look at the problem from a pricing perspective. Checked baggage imposes costs on the traveller in terms of both fees and time needed to collect bags at the other end – which sometimes takes 20 to 30 minutes to arrive at the carousel in the terminal. No wonder people try to carry on their giant backpacks and duffle bags.

So, airlines need to start charging more for carry-ons than for checked luggage. In addition, of course, airports need to speed up the ground handling of bags in arriving planes. Neither of these suggestions would do extensive damage to the profits of Air Canada which stood at $1.7 billion in the most recent quarter. And they would greatly improve the in-cabin experience and customer satisfaction.

Once we landed at Pearson, we took the relatively new rail service that goes directly to Union Station in downtown Toronto. It is fast, clean and convenient and accommodation for baggage was ample and safe. When first established, the price of a one way ticket was just about equivalent to that of a taxi to downtown. Not surprisingly, the use of the facility was minimal. However, when management substantially reduced the price (for a senior at off peak times the fare was about $6.50 versus $50 for a cab) the usage grew by leaps and bounds. When I took it on a Saturday evening, virtually every seat was taken.

What this little story shows is the impact of intelligent pricing. The price of anything contains information not just about its costs but also allows easy comparison with the possible substitutes. And thoughtful pricing can also encourage socially beneficial consumer behaviour.

David Bond is an author and retired bank economist. Email: curmudgeon@harumpf.com.