Wednesday, July 16, 2008

Airline Revenue Part 2

If you haven't flown lately, you may not have heard of one of the newest cost-cutting moves: no more free snacks. While your average airline passenger may not be very pleased with this idea, it makes a lot of sense to me. Why were we all subsidizing people to eat snacks that they valued less than their cost? I know there have been plenty of times on an airline when I wasn't particularly interested in a snack, but heck if it's free I'll chow down a few peanuts or pretzels. Now, only those who really value a snack buy, and the rest of us don't have to subsidize our fellow passengers' snacking habits.

One thing the airlines seem to be missing, though, is a lesson from behavioral economics. Framing things as losses tends to irritate people much more. By charging for snacks, airlines lead passengers to focus on the tragic loss of their free snacks. Imagine the reaction, instead, if airlines offered everyone who skipped the snacks a $5 discount on their airfare. Same situation but a very different passenger reaction I would imagine. The loss of snacks is now framed as a gain (the $5 you save).


  1. I also like the idea. I look forward to seeing Peter Greenberg talk about gas prices at 815 tonight on Larry King