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| While it makes sense from an ABC perspective, is it right to charge customers by weight? Source: directline-holidays.co.uk |
An understanding of costs is imperative in the airline industry, where competition is intense, and where industry conditions have been hit hard by the fallout from the Global Financial Crisis. In 2012, overall airline profits totalled $7.6 billion. While this sounds like a lot, this only boils down to about $2.56 per passenger (Source: IATA). This makes an accurate understanding of costs crucial, and acting on activity-based information to improve margins by finding opportunities to reduce costs or accurately pass customer-generated costs is important.
But can there inappropriate activity-based actions to improve a company's bottom line? Consider the recent decision by Samoa Air to become the first airline in the world the charge passengers based on their weight. You can watch and read more about their decision here and here. From a business standpoint this makes sense. People are charged accurately for the cost burdens they place on the airline (weight adds to a plane's fuel requirements, and a larger person may take up and extra seat that might have otherwise been available for another passenger). The CEO of Samoa Air indicated that, from their perspective, this is the fairest way to charge customers, because "a kilo is a kilo is a kilo." However, does this seem fair in the court of popular opinion? Many would argue that this discriminates against larger people, many of whom may be unable to help their situation. Some may also argue that it also sends out the wrong image regarding body image.
What do you think?
