Posted by Milos Sugovic
Don’t fly without cash! I learned that one the hard way this weekend. It was my first flight since the recent oil shock and I ended up watching “Get Smart” without audio. Turns out, charging for headphones is a movie admission fee on flights these days.
Back in the day, watching a movie on an airplane seemed like a textbook example of a public good. It was non-rival, meaning consumption of the good by one individual did not reduce availability of the good for consumption by other passengers, and non-excludable, meaning that no one could be prevented from using it.
But airlines found a way to turn a seemingly public good into a private one by making its consumption excludible. How? Continental Airlines, for example, is charging $1 for headphones, and at no surprise, i-Pod headphones were useless aboard the 737. What was once complimentary is now an expense.
In effect, Continental and others airlines are capturing consumer surplus -- the utility or benefit experienced by a consumer but not reflected in the price of the ticket -- by implementing hidden costs. But that can go only so far.
Some airlines are still stuck in the monopoly, state-backed mindset, yet those times have changed with the introduction of JetBlue and EasyJet. At the other end, airlines like Emirates that sit on all the fuel they could possibly need, have equipped every seat with a personal system and 1,000 channels of entertainment, all for free! If the trend continues, the airline industry will be divvied up accordingly, and giants will have to decide on which side of the fence they sit.
Till then, the next time you fly with Continental, or any other airline for that matter, make sure you bring a pillow and blanket if you plan on taking a nap. Otherwise, you might be forced to spare some change.
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