How much does ‘free’ travel cost?

THE EDITOR: The airline industry is the focus of a great deal of interest at the moment and one of the local issues is “free travel”. Plenty “ole talk”. I would like to try to discuss what appear to be widespread misconceptions about “free travel”, or rebated travel, in the airline industry.

What precisely, in direct economic effects, will curtailing “free travel” have on an airline’s bottom line? The answer is very little. In terms of extra cost, there is a small amount of extra fuel burned to carry the passenger, and anything they consume that would not otherwise have been consumed or thrown away. The recent addition of service charges means that in some cases it is a net gain for the airline, rather than a cost.

In terms of revenue loss because of the availability of the reduced rate tickets, most airline employees and eligible family cannot afford to travel at regular prices. Those who can afford the full fare usually do not want to travel on a rebated ticket because of the uncertainty, and the stress of having to stand around waiting to see if they are going to get a seat or not, or being off loaded in some foreign place, not knowing when they will be able to get out. To understand “free travel”, one needs to know how it came about and how it works.

An airline seat is a highly perishable product. Once the door closes, the value of that empty seat is zero, lost forever. Back in the early days of aviation, load factors were low, not much more than 55 percent most of the time, and all those empty seats bothered everybody. It was not long before deals were being made that traded pay and benefits for “free” or rebated travel. This made empty seats a little less wasteful, and reduced cash outflows in the form of pay. Win-win! Employees loved it because it meant that they could go to places they could otherwise only dream of. Airlines loved it because it recovered some of the value of the wasted empty seats, and it reduced their cash burn. Some airlines are more generous than others, but the basic travel privileges are just about universal.

The whole issue is based on the premise that once there is a fare-paying passenger, an employee has to stand aside. Complex rules and regulations cover who is eligible and a host of other implementation issues, but they tend to be quite similar from airline to airline. In almost all cases the employee has the dreaded “two-striper” ticket that brands them as “subject to load” and they often get put off halfway along their journey because the flight has filled up (if they actually got on in the first place). Employee travel with family at holiday times is all but impossible in these days of high load factors, and who can, or wants to, travel when their kids are in school? The exceptions to this are very senior employees, who enjoy benefits similar to many large companies with regard to annual leave and travel. They get a “one striper” that means a better deal than regular employees but still subject to many restrictions, and lower a priority than a regular passenger.

The only case where an employee can displace a fare-paying passenger is when that employee is travelling on duty. Many of the perceptions of airline staff travelling on a flight where regular passengers are left behind stem from employees travelling on duty. Of course, as with everything else, there are those who find ways to subvert the system, and airlines vary in their capability in preventing abuse, but by and large the system works well for most properly managed airlines. It has become accepted as one of the perks of the industry, much as bankers get special deals on loans, Government officers get deals on vehicles and computers, etc, etc. I would hope that this will explain some of the basics of airline “free travel” and perhaps reduce some of the uninformed “ole talk” that has been around on the subject.

SIMON KELSHALL
Diego Martin