Continental Gets It Right, Scene 1

Continental Airlines will charge for meals this fall. It’s about time. And money, and choice. Lots of travel managers and many more travelers will hate seeing this movie.
“You shouldn’t do this – it’s going to cost me more money!” “You’re just like all the other airlines – unbundling every little thing to make more money”…I can hear the wailing all the way up here in the back seats of this movie theater.

And there, my movie-going readers, is the lesson you already know. Customers want choices.

Imagine going out to see a movie, and being told that your ticket now costs an extra $7. Naturally, you ask why, only to learn that your new higher-priced ticket includes a large bag of popcorn and a small drink.

“We’ve conveniently bundled our two most popular items for you – it’s easier this way.” But I just ate. “Sorry, that’s how we sell tickets now.” Can I at least get something healthier than a soda? “Sure, but that’s ala carte and will cost a bit extra”. I don’t get a credit for what I’m not using? “Sorry, no. Please buy your ticket or step out of the line.”

Unbundling may feel like nickel and diming (yeah, it pretty much is), but that doesn’t make it a bad way to price goods and services. You trade a bit of inconvenience (more decisions to make, more data to track) but get a more efficient market. And here’s the scene-stealer: Efficient markets keep costs down.

It may feel like all this unbundling is driving your travel costs up. I’m not so sure that’s the case. It depends on how sensitive the airlines think the buyers are to these types of price increases. It’s hard to tell, given how often airfares change, if the total cost of a fare and a meal is higher - or lower - than it would have been in the good old bundled days.

Markets have a wonderful way of sorting themselves out. And like movie studios, airlines know they need to put out a good product if they want to fill up their seats. Isn’t that ultimately what we all want to see?

Scott Gillespie is the author of Gillespie's Guide to Travel + Procurement. These thoughts are excerpted with permission from his blog.