Free the Hangers

I typed this from 10,000 feet, while on my way to the annual econ gabfest known as the ASSA meetings. I was lucky enough to score an upgrade to first class, and as I settled into my seat I was informed about the most astonishing cost-cutting measure: U.S. Airways has taken the coat hangers out of its planes.

Arriving uncrumpled used to be one of the few perks for those at the front of the plane, but now the racks behind seat 4B sit unemployed. It can’t be that these hangers had much value on the secondary market, and the number of flight attendants hasn’t changed, so I can only guess that the cost reductions come from the fuel savings that come from carrying a few less ounces. (How big could these be?)

But U.S. Airways beware: If I were an aspiring entrepreneur, I would be rushing a collapsible travel hanger onto the market; and if this occurs, passengers will simply be adding that extra weight onto their carry-on bags, undoing the airline’s cost savings. And that’s the difference between the simple accounting of cost-cutting and the economic approach, which takes account of how behavior responds to incentives.

In fact, I had a hanger in the bottom of my bag, and so I arrived in San Francisco, recognizable as the least-crumpled economist.


Garrett Pendergast

When will airline marketing departments understand that chiseling on full price passengers (or any other) is a good way to drive them to discount airlines.

G

scott

In attempts to keep profitable, these guys have been doing all sort of ridiculous things...no pillows, blankets, now hangers. US Air even did away with movies on long domestic flights after measuring the fuel savings from not having to lug around that 10 pound DVD player.

One would think that the airlines would try to reinvent themselves as transportation companies and eliminate short routes and invest in rail.

sumeet

I know what the problem was ... They would have probably wanted the hangars to be free ... :D

Eric M. Jones

I published something on this question a while ago but it is still applicable: The real question is what is losing a pound worth? Here's my rough estimate:

Let's say your aircraft is worth $100 million and weighs 200,000 pounds empty. Does this mean your airplane is worth $500/pound? Probably not.

A better way to estimate the savings is to look at the total lifetime operating cost of the aircraft. In this case let's imagine the aircraft will go 100,000 hours and costs $3500 per hour to fly. That's $350 million. At the end of this time we assume the aircraft will be worthless and parked for parts salvage in Mojave. So that's $350 million/200,000 pounds; or $1750/pound.

Let's apply the reasonableness test to this: Does 1750/pound mean that your typical Boeing 767 sitting on the ramp is worth $1750/pound? No. This figure says that the cost of flying one pound of airplane all over the sky for 100,000 hours $1750. That's perfectly reasonable.

So how much should you pay up-front to avoid the $1750/pound expense? If you invested $860 compounded annually (with zero inflation) at 4.85% you would have $1750 in 15 years. So the answer to how much losing a pound of fixed aircraft weight could be $860.

There are many ways to figure this, but this should help.

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kathy

Well, for passengers in coach, Northwest Airlines is no longer offering milk or lemon/limes. A couple behind me on a 3.5-hour flight predicted a disaster situation with their 18-month old when they were told milk was no longer available as a cost-saving measure. They were right.

I don't think this will result in any new products or shift in demand for milk or coach tickets (although there is a surplus of milk right now), but it makes me wonder what they'll cut next.

adrienne

Maybe it was a typo in a cost reduction memo:

"maintain fewer hangers"

versus hangars.

Crumpled suitcoats abound.

Doc

interesting but irrelevant mainly. The person making the hanger decision probably coud not have done Eric's math. Somebody that well trained would have understood that adding a pound of hangers (probably less) to the 200,000 pound aircraft might have an impact of 1.7 cents per hour on operating cost (I believe the actual operating cost of the craft is quite a bit higher than $3500/hr as that was a year 2000 estimate). US Airways has about 360 active aircraft, let's assume they average $3,000/hr to operate (those old 737s they operate are cheaper to run). Across the entire fleet they have saved about $27,300 per year assuming 360 active days and 12 active hours per day per aircraft, which I believe is generous. Thus they have jeopardized the goodwill of their passengers for an amount roughly equal to 40 transcon coach tickets or 7 paid first class tickets.

This is a great demonstration of why whatever we teach in business schools doesn't always seem to come through in actual firm behavior. Next time I'm sentenced to fly USAirways (an acronym for Unfortunately Still Alleghennu In Reliability) I'll find the heaviest hanger I've got and carry that on board for my jacket.

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james

Perhaps there was an policy set to free up some hangers within the company. They just freed the wrong kind of hanger.

Michael

I would have suspected that someone once discovered that their seat had a damaged hanger and punched an air hostess because of this. Having estimated that this will happen on one percent of flights and carry a compensation bill of $500,000 it becomes worthwhile, through wholly imagined numbers, to remove all hangers and save 5 grand a flight.

Nosybear

A kilogram of weight costs $131/year to fly on an A310, or about 60 gallons of fuel. The actual issue is how much weight is actually removed by the measure vs how much is customer satisfaction decreased. Do customers care? Do they begin to bring their own hangars? Do they now carry a travel iron to touch up their wrinkled suits? Do they become frustrated and fly another airline (for a savings of about 150kg/person in operating costs but with attendant losses in revenue)? In short, too many variables to decide with the data available but I strongly suspect the decrease in service (always dangerous) was judged not to create enough dissatisfaction that someone doomed to fly USAirways frequently would defect to another carrier (because there is no one else with direct flights out of Charlotte, perhaps?).

Great thing about this process change: There's no way to measure your success or failure financially (signal is so small as to become completely lost in the noise and no one will put "no coat hanger" on the customer satisfaction survey) so someone gets promoted for a bit of slightly fuzzy math and for decreased customer satisfaction. Brilliant!

Is there an economic name for the principle that goes something like penny wise but pound foolish?

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Better By Design

The ridiculous thing here is that they pulled out the hangars but not the closet. On Southwest (and many other airlines) the aircraft interiors were finished without closets. With Southwest, this was part of their (at the time of their founding) a MAJOR departure from the standard, high service, regulated fares competition they faced.

The reason they did it? More space for seats. They correctly predicted that a large segment of Americans would choose much cheaper tickets for much cheaper amenities. This is also why SWA doesn't have beverage carts - eliminating the stowage area of the carts also helps to add space for more passenger seating (in addition to the faster/more flexible service not trundling the carts up the aisle allows).

The move mentioned here eliminates a perk for first class - one of the few tickets on a plane that is undoubtedly profitable and differentiated from SWA and other low cost carriers. In these times, one would think the pendulum could swing back to providing differentiated services at premium prices - at least for those customers willing & able to pay for it, but here as in many other cases, the legacy carriers have embraced a "race for the bottom" approach that may leave them as higher cost/lower service providers.

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Steve

#2, ain't no such thing as a ten pound DVD player that's FAA certified. Most, maybe all, of the certified systems weigh well over 100 pounds. (Why does it have to be FAA certified? It must be instantly interrupted by cockpit and attendant announcements, which while sometimes are shilling for airline credit cards, occasionally include real safety information.)
Then there is the cost of the movies themselves, which also must be specially edited for flight use, not just the usual pan-and-scan 4:3 aspect ratio stuff.
Weigh (pun intended) all of this against the increasing number of folks bringing aboard their own entertainment as DVD players, laptops, smartphones, etc.
I may not like it either, but I think removing the movies is a justifiable business decision with solid pluses and minuses on both sides.
But hangers? Hangers?

mae

Hanging up coats is (was) a service provided by the flight attendant in first class. They would hang up coats as one boarded and bring the coats back to the customers' seats at the end of the flight. Without hangers, no service.

So... might this be a labor issue rather than a weight issue? Maybe it will lead to fewer attendants. That _would_ be a cost saving.

Tom Woolf

I wish some airlines would read the quoted line below, and just make some sort of effort to think before changing a policy:
"And that's the difference between the simple accounting of cost-cutting and the economic approach, which takes account of how behavior responds to incentives"

I recently flew on American Airlines. I had two bags I was planning on checking - one a large suitcase, one small enough to be a carry-on if I so chose. When checking in, I noticed a $50 charge for checking the 2nd bag. After inquiring (politely) about the charge, the AA rep said that there was indeed a $50 charge for a 2nd checked bag. Since one bag was small enough (barely) to be a carry-on, I carried it on.

On the return trip, I tried convincing the AA rep that it makes sense for them to simply let me check the bag. If I checked it, THEY decide where it goes on their plane, letting them load balance the plane better than I could (one bag won't matter, but there were many of us with that sized bag on the plane), and it would save time by NOT having a klutzy passenger lug a suitcase onto a plane then try to stuff it in an overhead bin.

The rep wanted nothing to do with it, and so I had to keep the 2nd bag. Lo and behold, when it came time to board, I found out that it was not a puddle-jumper, and all carry-ons were checked at the gate. Ironically, the rep had moved from ticketing to the gate area while I was waiting, so she took the bag anyways.

In the end, AA aggravated a paying customer, showed no sense (neither logical nor economic) in their policy-making, and may have lost a customer. I've always been more fond of Southwest Airlines anyways.

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Ben

I'm not surprised at the need to quantify things here, but I'm still amused by it. I think it can be said that the airlines are screwing up in a way that is hard to put a number to, but was mentioned about - Good service.

I flew NWA this year for the holidays. I got caught in the Seattle snow "storm", and spent 15 hours in Seatac airport. Why? Because the airlines under bought de-icing fluid. The NWA rep who made the announcement said specifically that that was the reason. I'll spare you the mass amounts of confusion leading up to the flight eventually getting out of that airport, and skip ahead to the next airport, where we had of course missed our connection.

I get to the NWA counter, and they have no flights to my final destination until the next morning. They do not offer to put us up in a hotel, insinuating that we need to pay for it ourselves or spend another night in an airport. They would admit no liability in us having missed our connection, it was amazing. The only reason I didn't push the point was that we were on standby for the last flight out to our destination, and 17 people were going to miss that connection because of... More problems in Seattle. We made it on that flight, relieved yet angry. At no point did NWA feel helpful in the least.

Of course, there are all the other things missing in between. No space to hang up my garment bag, no movie on a 3hr 45min flight, less legroom than I can ever remember having (I'm 6' and my knees touched the seat in front of me the entire flight), no food service, etc etc. The more everyone scales back, the more they all become budget airlines. So in the end, how do you get good service if you can't afford first class? Demanding it goes nowhere when they're trying to service an entire plane of people with missed connections, etc. Write a letter? Right.

It's simply a disappointing state of affairs in the industry. I foresee a MAJOR restructuring if airline travel is to become anything resembling comfortable for the coach passenger again.

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Goose

If you're cruising at 10,000 feet, then the airlines are taking much more extreme measures than dumping their hangers: that's less than a third of the normal cruising altitude :)

Commoner

I agree with Mae, seems a service savings. Attendants are union, no? Perhaps wages were reduced and the union forced reduced service for reduced wage?

Matt

Personnally the flight is the least enjoyable part of most journeys I make. I don't really care about the amenities that most airlines have cut as they were only nice to have things with marginal value. The sole deciding factors for me is the fare and the time from here to there, but now there is a more to consider. For instance my wife and I recently made a trip to FL from RI. I was bringing scuba gear so part of my planning included the price the airline was going to charge me to check my dive bag. As I was comparing fares I sat with a list of baggage check fees, which it took me a bit to compile, to find the lowest out of pocket cost. That to me is more of a hassle than the lack of pillows blankets and free drinks.

Like most of the posts USAir's cut backs make me laugh, and they charge for everything. Perhaps removing the hangers and the like are working though, they've been the low cost carrier for may past two trips ...or maybe they're making it on the revenue stream from in the flight beverage service that's no longer gratis.

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Nate C.

I might be the only one, but I'm 100% for the individual costs we see on airplanes now. I have absolutely no issue with paying to check a second bag. I fully support a charge per drink, or per pillow, or per headphone, or per napkin.

Frequently I fly without any checked luggage. Why should my fare subsidize the flyer who checks two large bags? I'm glad that my behavior is rewarded. Additionally, I bring my own bottle of water onto the plane. If I'm not drinking the soda, I'm glad I don't have to pay for it.

Of course, when I do check bags, I hate the fees just as much as everyone else. But from an economic perspective, our actions as flyers are more internalized than in the past. Other externalities (lack of overhead space) have been mentioned, but I feel that these fees are justified.

Jay Levitt

The hanger/hangar jokes are wide of the mark. What the memo *actually* said was that there would be massive layoffs if the company couldn't remove the dead weight from all the hangers-on.