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Pilarski says: Unbundling guided by tax considerations leads to misleading statistics
12 April 2012
Extra costs onboard an aircraft may be more calculated than the passenger thinks.
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Pilarski
Unbundling
Extra Charges
I want to explore two semi unrelated issues that have an important connection to our understanding of economic realities facing the aviation industry. The first is the trend of unbundling, when airlines charge separately for all aspects of the flight. This is different from the old-fashioned way of pricing, with one ticket price covering all services.
The second element is that these unbundling trends are reinforced by peculiarities in the US tax regime.
Airlines started a trend of separately charging for parts of the flying experience some time ago. The rationale is that the airline�s mission is to transport paying passengers from one location to another. It should not be to feed, entertain or in any other way coddle the customer. Since the additional services are not part of the core objective of transportation, airlines should charge separately for them. So, if a passenger desires food, that...
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