Victor Cook

Express Luggage Services: Charting a Demand Curve With No Data

Lea Ann,

Several other services are available on a relatively small scale. The purpose of this post was to explore the demand curve that might result if a small company like LuggageForward.com were to partner with UPS in providing such service to a large carrier like Continental Airlines.

For a detailed discussion of what that service might look like this see my post on seekingalpha.com/artic....

The decision by AA to charge $15 per checked bag sure raises the level of interest in exploring this option. Even so if you read the comments on my posts in this series most think the idea is pretty speculative at this point.

Thanks for your comment.

~V

Passengers, Packages: The Paradox of Air Transport

Sallfham,

“… only about 60% of all air passengers check their bags.” This is very useful statistic. Please give me reference.

“… who is going to have to take responsibility for securing their luggage when it arrives?” You may be out of step with the times on this one. Here’s the latest information I could find on baggage security at airports:

“Do you remember some airports before 9/11 had those “security” people who checked your luggage claim checks against the bags you were taking with you? Where are they now? Who is watching out for your luggage until you claim it at the carousel? The answer is NOONE is watching out for your luggage”

“ … what makes you think that passenger airlines can easily fill their luggage compartments with profitable cargo?” A comment by a senior operations manager at a legacy carrier that I quoted in an earlier post in this series.

“Just because Heathrow had day one problems, it doesn't mean that managing airport luggage sorting is beyond the reach of modern technology.” The Heathrow reference was just a lead in to my post on the problems with checked baggage, not a condemnation of modern technology.

“The biggest obstacle to efficiency is the spot checking and scanning that Homeland Security now requires, not the coding and routing itself.” Exactly! That’s another reason to remove luggage from the passenger transport system.

“Face it -- people want their luggage to travel with them.” I believe that you want your luggage to travel with you, but I’m not sure that you represent the traveling population.

Thanks for your comments.

~V

Express Luggage Services: Charting a Demand Curve With No Data

Hubogart1,

Looks like The Luggage Club has pretty thin margins – unless they get that 37% first tier big shipper discount. Their price for next morning delivery of a 25 lb suitcase from New Orleans to Dallas is $146.31. That’s just a bit more then the $142.40 rack rate I got from UPS for my 30 lb package. But they don’t give you the option to pick either a delivery window (except morning) or a specific time.

Thanks for the link.

~V

Passengers, Packages: The Paradox of Air Transport

Cookie Monster,

“People want to be pampered.”

Yes, that’s my point. Let the box specialists move the boxes and the passenger specialists pamper the passengers!

“While there are many air freight companies, there are really two powerhouses: FedEx and UPS.”

Actually there are three: you forgot the biggest one of all DHL.

“… anytime there seems to be a real chance of consolidating the airline industry down to 3 or four powerhouse carriers who might have a chance to become stable and profitable, there is a hue and cry from Washington about loss of service to remote areas and rising costs.”

The package carriers did not consolidate down to 3 or four. They created the business to diminish the government monopoly and expanded up from 1 to 3 or 4 companies.

“Passengers can't expect to pay air freight rates for their own transportation and then demand hot towels, lay-flat seats and hot fudge sundaes. Do you any idea of what air freight rates might be if the package carriers managed all the “free” checked baggage?”

Well, that’s really good question! I try to shed a little light on the it in my latest post: Charting a Demand Curve Without Any Data." If you have some additional data to add that would be great!

Thanks for your comments.

~V

Passengers, Packages: The Paradox of Air Transport

Airline Pilot,

Excellent points! Especially the requirement that passengers must plan ahead for what they'd be carrying with them and what would be shipped. I travel a lot too and you’re right, many travelers are unprepared.

Planning ahead is a lot to ask of the ones who are unprepared. But there’s an upside that even the most careless traveler will notice: they don’t have to carry their bags to the airport, lug them into the check in line, then wait for them by the carrousel at their destination, lug them out to a vehicle, into their hotel and go through the whole thing on the return trip. Maybe the relief from these chores and knowing their bags would be picked up and returned to their home would be enough to it motivate careless travelers to plan ahead.

Here’s another possibility. What about providing passengers with standardized, re-usable “air valise” containers in small, medium and large sizes to pack their belongings? This would remind travelers that they had to plan ahead. It would also make it a lot easier for package shippers to handle the cargo.

Thanks for your comments.

~V

Passengers, Packages: The Paradox of Air Transport

Frequent Traveler,

I wasn’t aware the Southwest Airlines used FEDEX to deliver late/delayed bags. You also make a good case for some of the advantages of express delivery of passenger luggage. Thanks for your comments.

~V

Passengers, Packages: The Paradox of Air Transport

JMike49,

Actually you’re way off on the UPS average person shipping cost.

I just priced a 30 lb. package on UPS. If I shipped it by regular Next Day Air from New Orleans to Dallas in a Large UPS box with a declared value of $300 it would cost me $142.50. Shipped by Next Day Super Saver with no declared value it would be $134.16.

Can the difference between the single shipper UPS retail fares and the Amazon Prime cost of $3.99 be driven by volume discounts? Maybe. See my latest post.

Luggage Forward Flying: How to Restore Passenger Confidence and Carrier Profitability

Concerned Traveler,

Thanks for your tip on Baggage Quest (BQ). Since I was not aware of this option I checked out their website. I noticed that both services are private companies looking for investors.

The front page of BQ looks just like Luggage Forward’s (LF). But, as you say, there are some important differences. For this reply to your comment I priced a one-way trip from ZIP 10023 to 33464 on April 30, 2008.

Like you, I found the LF pricing screen confusing. I think the main reason for the confusion is that it gives me more options. BQ has no detailed pricing screen. They specify a Platinum Service next-day delivery date -- without a pick-up time -- for $280. On the other hand the Express Service in LF’s pricing screen lets you select between a standard two hour pick-up time (i.e. 1:00-3:00) for $259. In addition you can specify an exact time (i.e. 1:00) on pick-up date for an additional $45 – or a total of $296 .

Currently both services are pretty pricey – several hundred bucks for same-day pick-up and next-day delivery. I’m sure these prices are a result of their relatively small scale of operations. See my latest SA post for a take on what next day service might cost in a large scale operation based on partnering with one or more major carriers.

~V

Passengers, Packages: The Paradox of Air Transport

Sckarolek,

Thanks for the reminder about the cost of Amazon Prime. I use the service so often it seems virtually free.

Rolling the dice is in the nature of membership clubs. My son's monther in law belongs to Costco. When we go shopping she rolls out two baskets full of so much stuff it probably pays for her membership in a single trip.

Luggage Forward Flying: How to Restore Passenger Confidence and Carrier Profitability

real_world,

Somehow you missed the underlying meaning of the LESS is more concept. And in doing so gave me an opportunity to clarify the issues. I’ll try to explain by beginning with the statement in JC’s book that jump-started this entire line of thinking about creating ‘power offers’ in air travel:

”For [passengers], less should mean that they get exactly what they need and nothing more, with no superfluous elements that create complexity and could destroy value (p.27).”

Checking baggage is one of the “superfluous” elements in air travel that “creates complexity” through check-in and pick-up and “destroys value” through mishandling and loss. The passenger benefits of not checking baggage are outlined on the Luggage Forward website in the section titled …why forward luggage?

… avoid carrying your luggage or sports equipment to and from the airport

… bypass long check-in lines

… don't pay excess baggage fees

… eliminate the possibility of the airline losing your luggage

… skip the wait at baggage claim

… have your luggage waiting for you at your destination

In a trip between Houston and Dallas these activities easily consume more time that the flight itself. Not to mention the hassles involved. By the way, if a Luggage Forward passenger's baggage shipped “within the United States is delayed, Luggage Forward will provide reimbursement of expenses of up to $200.00 per day per Item until the day the delayed Item arrives.” With this kind of luggage performance standard you can bet that very few LES travelers would be left “waiting for it” at their destination.

Your comments skip right over these passenger benefits. It appears you want to make the reader believe the idea that “parallel” flights by an express shipper are both ridiculous and unnecessary. It’s not. In fact it’s one of the subtle virtues of the LES option: the specialization of labor kicks in.

The shipment of packages compared with people make dramatically different demands on the carriers. FedEx, UPS and DHL specialize in packages. It’s obvious that package shipping is both easier to manage and more profitable than the shipping of people. A telling statistic is that in 2007 these top three express shippers generated $122.7 million in revenues per aircraft per year compared with nine air carriers’ $35.5 million. That’s 3.5 times more revenue for express shippers per plane per year. And packages are never “unhappy” about how tightly they are packed into the aircraft!

On the other hand, airlines are in the business of moving people, not bags. According to the DOT scheduled U.S. airlines flew 18.7 million hours in 2007 with no passenger fatalities, but they mishandled more than 5.1 million bags.

Finally, suppose your assertion that express shippers “currently rely on the airlines to support their overnight service …so, the luggage would wind up right back on the airline's planes” is correct. Here again, your comment overlooks a fundamental benefit of the LES is more option. That baggage winds up on the airlines’ planes as cargo, generating revenue at market rates based on weight and distance traveled.

Even if your assertion is correct, passengers are free from the curse of checked baggage and the carrier earns money on the shipment! Actually, I suspect the top three express shippers use passenger carriers to supplement their own fleets only when capacity is pushed to the limit, as may be true during holidays. If you have data to the contrary, please post it your reply.

Thanks for your comments.

~V

Creating 'Power Offers' in Air Travel

Doc,

Your two cents are worth at least a buck! A 'distributed clothes cache' is the whole idea behind the ‘Certified Airtravel Valise.’ And now that I’ve learned from the comment by Rich (above) that pre-screening won’t be allowed by the TSA, that name has to be changed. Maybe your Distributed Clothes Cache [DCC] is a better name. Not only does it get away from the pre-screening function, it’s a more appealing phrase.

Your comment also adds another dimension to this service that makes it even more seductive: the option of creating new ‘stashes’ while visiting exotic destinations. There is no reason to restrict the creation of DCCs to the home base. In fact, there is every reason for the airline to encourage it. The more deeply the carrier becomes involved in making air travel an exciting and pleasurable experience, the more committed passengers become. In Professor Larreche’s words, they begin to experience vibrant satisfaction! As a result they constantly are telling others about the service. Which is a fundamental force driving the momentum effect. Word-of-mouth costs nothing -- and it’s far more effective than advertising.

Thank you for your insights.

~V

Creating 'Power Offers' in Air Travel

Rich,

You’re right. I know little about airline operations and nothing about TSA policies. A colleague who knows a lot about both reviewed this article before I posted it and warned me about the TSA roadblock. In an email yesterday he said that:

“Inspection is not an airline function – it’s a TSA thing. So your CAV idea really should be sold to TSA. TSA has developed a verified traveler program which you may have heard of. Unfortunately TSA is a power to itself and cares not one whit for inconvenience to anyone but itself. It’s almost as if it answers to no one.”

This is pretty much what you said in your comment. As a result of his comment yesterday I added this to my post:

“The security must be such that the TSA will approve CAVs as pre-inspected baggage. Securing TSA approval would require careful planning of security safe-guards by the airline.”

It’s clear from your comment that “careful planning of security safe-guards” requires inspection of all CAVs by TSA agents to ensure against the very dangers you cite. I hadn’t thought about the (now obvious) security risks of entrusting a personal valet to pack the valise. Clearly, pre-screening is not an option. So, the airline must feed the packed CAVs through the regular TSA screening process. That’s something that can be built into the program – even if an airline employee has to walk the baggage through the regular inspection line.

Thanks for tipping me off about why my suitcase always gets the full inspection. I had no idea it was the computer that motivated the special treatment. But, just to correct one misimpression you took away from my post, I already carry an HP laptop in a shoulder bag. With my books and papers it weighs about 10 pounds. Guess I better take along another carry-on for the MacBook … or leave it at home.

Thanks for you comments. This is just the kind of informed feedback I need to figure out if a “personal valet service” is even possible, never mind whether it could succeed if offered.

~V