Wednesday, April 05, 2006

There's No Such Thing As a Free Pretzel

When someone coined the phrase, "There's no such thing as a free lunch," they could just as easily have said there's no such thing as a free bag of pretzels, soda, or pillow. These are just a few things that airlines have begun to charge separately from the ticket price.

You might react strongly, as some passengers did, and claim that those greedy airline companies are just trying to pry more money from your wallet. "Sharon Ansara, a government supervisor from El Paso, Texas, flew an American Airlines flight from Dallas to Washington Monday morning. 'We didn't even get peanuts," she said after the 2-1/2 hour flight. "They offered us a snack pack for $4. It stinks.'"

Some airlines still offer their passengers a "free" lunch. "Continental Airlines is one of the few that still offers hot meals on domestic flights. Sandy Gorie, 45, a real estate project manager, lives in Cleveland and takes Continental to Washington on Monday mornings and returns on Friday nights. 'I've been doing this since November and my Continental experience has been great,' she said."

My flight is not made significantly more enjoyable by eating "free" bags of pretzels or drinking "free" soda or juice from little plastic cups. I don't mind bringing my own snacks or drinks in my carry-on bag. I am sure others value the convenience of being served in-flight meals to some extent, as do I. But how much do they value it? Airlines seem to have found that people are more concerned about the price of the ticket than whether their bag of pretzels will cost them $1. "American spokesman Tim Wagner said that passengers have made it clear that their first priority in buying an airline ticket is price. The company offers a la carte services -- such as snack packs -- for those willing to pay for them." Airlines will be able to earn more money from those with a high willingness to pay, and less from passengers like myself, who are not willing to pay for snacks on flights.

This reasoning reminds me of Landsburg's explanation of why popcorn at movie theatres is so expensive. Here's a brief summary: "Most people think that it's so expensive because the movie theater has a monopoly over concessions. Since you can't buy popcorn anywhere else, the theater owner has you over a barrel. But this view assumes that moviegoers decide to see movies without considering how much it's going to cost to buy popcorn or a soda. Are moviegoers so shortsighted as to carefully consider the price of admittance to a theater but not the price of concessions? No, say economists who have studied this issue. Moviegoers are well aware that popcorn is overpriced. But the price remains high because theater owners have learned that exorbitant prices enable them to reap big profits from moviegoers who care little about cost, while still collecting ticket fees from those who are concerned about the cost."

After reading about American Airlines and Continental, I did some research and looked up flights departing from Dallas, TX and arriving in Washington-Dulles International Airport, similar to the flight where Sharon Ansara, the government supervisor from El Paso, complained snack packs cost $4. American Airlines costs approximately $379 for a non-stop flight (about 2.5 hours total flight time) and no "free" snack. Continental Airlines, which would have offered her a hot meal, costs approximately $374 for a flight with 1 stop (about 5 hours total time). While Sharon might have received her "free" food, she would have had to pay with two hours of her time with only a $5 discount. Although I'm not sure what a government supervisor does or how much a government supervisor earns, two and a half hours of Sharon Ansara's time is probably worth more to her than $5 and a hot meal.

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