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Marginal Utility: Airline Fares and Fees

Mar 29, 2013 • 178 Views
EST. TIME TO READ: 2 minutes

On my recent flight to San Francisco, I had baggage fees and reservation change fees. My exit row cost me more and if I not brought my banana and yogurt, I would have had to pay for food. I was amazed by how much the extras cost.

And now, there’s talk of oversize people paying more for their airline seats.

Citing financial, environmental and health benefits, the Norwegian economist who proposed the “oversize” fliers’ charge suggested 3 ways to “pay as you weigh.”

  1. Charge by the pound. Plane fare can depend on your weight and your baggage. Taking 150 pounds on a plane will cost one half as much as 300 pounds.
  2. Charge above a base fare for extra weight. Obese individuals would pay more.
  3. Charge above a base fare for extra weight and give a discount to those who are slim.

 

From the airline’s perspective, another fee makes sense. Baggage fees added more than $3.3 billion to the bottom line in 2012. During 2011, reservation fees were worth an extra $2.38 billion. In addition, on my flight, United needed fewer onboard attendants because they no longer had to serve a meal to everyone and they had a new revenue flow (actually a trickle) from meal purchases.

An economist would say that airline passengers are identifying the marginal utility of each extra fee and fare hike. If the good or service they get is sufficiently useful, then paying more is worth it.

And finally, here again is extra at the margin…

In 1962, the average American male backside was 14 inches wide when seated. Women? 14.4 inches. In 2002, an Air Force study noted 15 inches was the average.  Consequently, at 17-19 inches, average airline seats are too narrow. One reason is that using backside girth was a mistake. Instead, as the widest parts of our bodies, shoulders and arms would have been more accurate.

Your opinion of the oversize flier fee?

Sources and Resources: Covering topics ranging from fees to seat width, CNN articles here and here had the facts about flying. For my information on the proposed oversize fliers’ charge, this Chicago Tribune article provided the details.

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