Flying Food

We’ve talked about airlines charging for onboard food in this space before – most of the surviving US carriers are already doing so, in the hopes of lowering costs, if not actually making more money. The problem with such programs, traditionally, is that while it is certainly possible to save money by eliminating services, it isn’t always possible to make money by charging for the same services. A good case in point is the current legal action being taken by the union that represents flight attendants, which is claiming that since the airlines started charging a checked baggage fee, more and more of their membership is being injured by overloaded and oversized carry-on bags being carried by people trying to avoid the fees. It’s possible that the airlines will come out ahead on this move - $35 to $100 a head is a good incremental increase on a service that doesn’t actually cost you anything (since you were already paying the baggage handlers) – but once you factor in the cost of the lost business from angry customers and the worker’s compensation lawsuits from flight attendants getting hit with oversized bags that pop out of overhead bins during flights, it seems unlikely this will remain a major revenue stream for long…

Now Continental Airlines is jumping on the food-for-sale bandwagon, with the company claiming they will make $35 million each year from food sales. It’s a nice idea – the company could certainly use the additional revenue – but I think we are justified in questioning the numbers involved. If the numbers in the linked AP story are correct, the airline has about 900 flights a day, and a number of those (international flights, domestic flights over six hours, etc.) will still, of necessity, feature free food. If we eliminate those and ignore all flights of three hours or less (e.g. non-meal flights), that should still leave somewhere on the order of 180,000 to 200,000 flights each year in which food will be for sale. Which means that Continental will need to make around $200 worth of profit per flight in order to hit that $35 million target – and that may be optimistic…

Now, it’s always possible that Continental will work out some program of high-margin, high-appeal food items that will persuade the majority of their passengers to shell out extra money for food. Keep in mind, however, that even if they can get another $10 per person for food (and they won’t) that it’s only the profit that enters into this calculation. On an airliner with 150 people in Coach (First Class food is still free – it has to be!) $10 per person is $1500; if your margin is 10%, that’s well short of the $200 figure the airline is expecting. Increase the purchase amount or the margin and your sales percentage can be lower, but raising prices will lower the number of sales, just as in any other retail business – and so will lowering the amount you spend on food in order to raise the margin…

One of the best approaches to this I’ve seen so far was the one used by US Airways, which has food for purchase on board, but also has snack items and convenience-store favorites like Cup-of-Noodles for about what you’d pay in a convenience store. The sales amounts are undoubtedly lower per customer, but these stabilized food products don’t require any labor in terms of preparation and will stay fresh for days or months without having to be replaced after every flight. Still, once people become accustomed to food-for-purchase programs, they’ll probably start bringing their own food in their carry-on baggage – which will exacerbate the carry-on problem, undermine the food-sales program, and generally make life on an airliner even worse than it is now (imagine sitting next to a passenger who is enjoying a nice limburger cheese and sardine sandwich, for example). I’m no expert on air travel, but if your corporate goals include making more money, annoying fewer customers, losing fewer employees (and fewer workers’ compensation suits) and generally not looking like a corporate buffoon, I’m not sure food-for-sale programs are really your best bet…