Today, I had the pleasure of giving a metals market outlook to the members of Prime Advantage, a co-op largely comprised of metals buyers, in Birmingham AL. On the way down, I couldn’t help but listen to a few folks gripe about Spirit Airlines’ new carry-on baggage fees going from nothing to $50 per bag to $65 per bag. How does this all relate to metals you might ask? Well, it reminds me of some lessons I learned long ago about packaging, weight, bulk and freight rates. As all of you know, when you ship something, you tend to pay by weight or by bulk. If you ship foam, you cube out before you weigh out. If you ship a wrecking ball, you weigh out before you cube out. And so I chuckled when I listened to these passengers complain (personally, I only fly Southwest because they don’t deploy these ridiculous nickel and dime pricing mechanisms deployed by nearly every other major airline) because I wrote a piece for this blog back in the spring of 2008 (when there were only a few of you readers). I wrote it then because of the newly deployed “baggage surcharge strategies of airlines such as American, United and others. And what it offered was a very politically incorrect method of streamlining airline passenger fees, essentially moving it to a bulk shipping model.
We predicted back then, “Â¦the airlines that are charging for baggage have actually deployed the wrong strategy, failing to tackle the actual problem. They also don’t pay attention to total cost. For example, the goal of any airline would be to “lighten up the plane, unless of course there was a means of recuperating the loss in fuel efficiency with a higher priced fare. The baggage strategy, as currently deployed, encourages passengers to do a couple of things: first, clever passengers will endeavor to use the overhead bins instead of checking luggage, so more boarding/de-boarding delays (which also decreases customer satisfaction). Second, though United, American et al may recoup some revenue, they haven’t actually done anything to reduce the weight of the plane which is something that customers wouldn’t see as much anyway (as opposed to the removal of snacks or increased fees for flight changes, extra baggage etc).
And what did we propose back then? “One radical idea would be to adopt a bulk freight model. Essentially, the fare is tied to a passenger’s total weight or cube body weight, carry-on weight and checked baggage weight. Bulk items or over-sized luggage would be part of this strategy. Premium fees are of course levied for business and first class but essentially passengers pay a consumption fare. What would this do in the long run? Initially it will set off a firestorm of fury of course offending various groups of people. But it will also encourage passengers to look for low weight alternative travel items (such as aluminum and magnesium alloy cases, which are being adopted in the computer industry). Furthermore, people will simply pack less. And who knows, maybe centrally organized sourcing organizations will ask their frequent flyer employees to diet as a cost reduction effort!”
Yes, I know, those that are large (naturally let’s say) have an unfair disadvantage to those that are small and petite. So maybe the way the airlines deploy this new scheme involves a tiered pricing approachÂ¦.the “regular published air fare includes some total weight, say 250 pounds in which one flies for the airfare quoted. Then, surcharges apply for anything up and over that weight tolerance. This of course involves “total weight so you and your carry-ons step up and weigh in. Heavier passengers can lighten up the load by packing lighter. Lighter passengers have the benefit of carrying more luggage.
Yes, I know, this proposed solution would cause nothing but an uproar but the incremental revenue enhancement strategies practiced by most of the major airlines have done nothing to build strong customer loyalty anyway. A bulk freight model, used by all of you in shipping your metals would certainly alleviate the “cram-on with the bulk overheads, ensure the airlines incent the right behaviors by encouraging folks to lighten up and improve customer satisfaction.
Yeah, I know it’s not politically correct but neither is the current strategy.