US menu offers food for thought to Asian airlines
Airlines have been a big beneficiary of low oil prices. But investors would love to see Asian airline companies take a leaf out of their US counterparts’ book to further boost earnings.
Imagine this. The combined after-tax profit of the 25 US airlines last year hit $25.6 billion — up a whopping 240 percent from the paltry $7.5 billion in 2014 — according to the US Department of Transportation.
Tumbling fuel costs accounted for a big part of the profit surge — a factor that applied to all airlines around the world. Then the question is: Why are US carriers doing comparatively better than their counterparts elsewhere?
The answer lies in the fact that US airlines have done away with nearly all the freebies that have been a drag on the profits of other carriers.
For years, passengers on US airlines have had to pay for baggage, meals, drinks and a range of other services which air travelers in other countries take for granted.
Fliers in the US are willing to swallow the extra fees because the system is inherently fair. For instance, in Asia, why would any passenger need a meal on a typical two-hour flight from Hong Kong to, say, Shanghai?
The cost of the meal, which isn’t cheap, is factored into the airfare. Therefore, it’s unfair to ask any passenger who doesn’t care about the meal to pay for it.
Asian airlines have built their reputations on quality service even on short-haul flights.
Of course, their customers have to pay for it whether hethwant they want it or not.t.
Most passengers value new aircraftrcraft andcomfortats.
comfortable seats. But more and more canan do without the other services,ervices, such as inflightt entertainment, as they cann always turn to their portablee music players or tablet computers.
You may argue that those who can’t be bothered with inflight service can choose the alternatives provided by a growing number of budget airlines.
That’s not always a valid choice because of their low flight frequencies and limited destinations compared with full-service carriers.
Chinese mainland airlines, many of which are listed in Hong Kong, could greatly lift their incomes