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Airlines are always looking for ways to cut costs, and the newest solution is a rather interesting one. Changing the type of seats on a plane to thinner, lighter seats is a growing trend among airlines. And several parties are realizing the benefits.
Thinner seats being installed at United Continental (NYSE: UAL ) and Southwest Airlines (NYSE: LUV ) are lighter than the thicker seats they're replacing. And the savings add up. The Boston Globe reports that United expects the new seats to reduce the weight of an Airbus A320 by more than 1,000 pounds, and Southwest expects to save around $10 million in fuel costs per year.
But this trend extends beyond United and Southwest. Delta Air Lines (NYSE: DAL ) is also in the process of installing slimline seats into its own aircraft, hoping to realize the same fuel savings as other airlines.
Before you think these thinner seats mean more legroom for you, the airlines have another idea in mind. With each seat taking up less room, passengers can get the same amount of legroom even while more seats are added to the plane. In some cases, an entire row of seats can be added.
Even Boeing is noticing this trend. In the widebody Boeing 777, airlines used to order the configuration with nine seats across, but today orders are increasing for the version with 10 seats across. So airlines are increasing the number of seats both through more rows and more seats per row.
This trend is another way for airlines to cut costs and boost revenues. In an industry historically known for poor financial management, this development should be something investors can view as a positive. However, there's a limit to how far this trend can go. At some point, there will be no more room to increase the number of seats without encroaching on legroom.
Future savings and revenues
The airline industry is always looking to cook up new ways to cut costs and boost revenues. Many future savings are likely to come from right-sizing operations as the United-Continental integration continues and more data gives major airlines a better feel for where and when to fly.
With load factors near record highs, airlines are looking toward extras and fees to boost revenues. With the simplest of fees already implemented, many other fees on things that used to be free are likely to anger customers. I therefore see the potential for a large growth in voluntary extras that come for a fee. Already some airlines are offering door-to-door baggage delivery services for an additional fee, but this really only scratches the surface of what carriers can eventually offer.
Going forward, I see the cost cuts and revenue-increasing measures at airlines still having a lot of potential. Investors who agree that airlines can continue on this path should see whether the airlines fit with their overall investment strategy.
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