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Tuesday, April 21, 2009

Cable Companies are bundling, airlines are unbundling...

Most, if not all, of the cable companies are offering the "triple play," or voice and data in addition to cable entertainment. While individual offerings go for $30-$50 per month, the "bundled" offer is around $99 per month.

The airlines, on the other hand, are unbundling everything in sight. Now, a passenger pays the airfare just to get on the flight. Aisle seat is extra, window is extra, bulkhead seats involve premium charge, checked bags are extra, and so on. Today, Delta announced that it will charge $50 for international travelers who want to check a second bag. When an airline is running at 75% to 80% of capacity and cannot make money, it is the cost structure that has to be considered, not the revenue side. More unbundling of this sort will only reduce demand. It is time that the CEOs started getting paid in 5 figures instead of eight figures and pilots made a half of what they do currently. The cost structure has to come down significantly. Otherwise more planes will be parked, and more capacity will be reduced, but it will not help the business in the long run.

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