How Airlines Make Money

So blindingly obvious, now that The Cranky Flier blog pointed it out:

There is value in the upsell.

When American first rolled out increased legroom for all coach seats on the airplane many years ago, the idea was to become a premium airline that people would pay extra to fly. That didn’t happen. A lot of coach travel is viewed by consumers as a commodity. They just want to get places for cheap. So when American removed seats, it increased its unit costs (costs ended up being spread out over fewer seats) and it couldn’t get enough revenue to justify it.

With United, however, Economy Plus was just a subsection of coach. It took the airline years to figure this out, but there are absolutely some people who will pay for more legroom. Some people. United’s Economy Plus has now become so popular and profitable that not only did the new (ex-Continental) management decide to keep it despite biases to do otherwise, but American and Delta have all copied it as well.

Link - via The Economist's Gulliver Travel Blog

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I'm 6'2" and my knees hit the seat in front of me when I'm in a United coach seat - I can put up with it on a short flight, but nothing more than an hour. Econ+ is the same price and legroom as Virgin's coach, but without any extra baggage fees - so my response is to avoid United altogether when possible. With these shenanigans it's no longer a commodity for me, I went from not really caring to actively avoiding United.

Good job!
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Agreed, I don't think the legroom fee itself is even a primary money-maker. It's more of a redistribution of fares than it is a straight fee. It's also a free benefit for frequent fliers, which in turn lowers demand for full upgrades to business/first, allowing more full fare sales in those classes again, which declined in the years of upgrade fever. (upgrades have also gotten much more costly thanks to co-pays)

United has received a tremendous amount of ridicule for have 31" standard pitch in coach, which is too cramped even for an average person with the newer thicker seats. As a result the newer planes (like the new 787 configuration) and airlines that chose to copy United have to preserve more leg room, and don't see a huge direct benefit from redistributing the space - certainly nothing like the diagram above implies.

They are still losing seats, but they provide a service a lot of people want with enough of a fee to make it balance out, but low enough to sell, and push the plane to full occupancy - something which wasn't happening for years and also really helps with profitability.
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