Airline Passengers Are Feeling the Squeeze

More seats and slimmer seats make for packed planes and airline gains.

Mar 21, 2014 at 12:02PM

A lack of legroom has long been a criticism of air travel by passengers who are unable to fully extend their legs for hours on end. But the latest trends in seating could make flying even less comfortable, while helping to boost airline revenues.

Ultra-discount model
When it comes to offering a cheap fare, it's tough to beat Spirit Airlines (NASDAQ:SAVE). While taking on some of the strategies of more traditional discount airlines, Spirit adds its own touch through tight seats and numerous fees.

To keep unit costs down, Spirit packs as many passengers into a plane as possible, and this means some of the least legroom in the industry. At only 28 inches of pitch (the distance from a point on one seat to the equal point on the seat in front of it), Spirit's fleet offers far less space than the 30 or more inches of pitch found on most other airlines.

But Spirit operates on an ultra-low-cost model, so for many passengers, it's Spirit Airlines or the bus. No one's forcing you to fly Spirit, but its seating arrangement provides an example of the latest in cost-reduction strategies.

Slim fit
Do you think airline seats are too thick? Probably not. But every inch of extra seat thickness is another inch of space the airline can't put another seat into. Turns out, airlines have realized this, and slim-fitting seats are all the rage.

Southwest Airlines (NYSE:LUV) has joined this trend with plans for slim fit seats that enable the airline to add an entire new row of seating. While not on travelers' lists of  likes, the new seat designs are expected to add around $200 million in revenue to Southwest Airlines.

Delta Air Lines (NYSE:DAL) is also taking advantage of this opportunity with its own "slim-line" seats, which will allow the airline to add another 19 seats to its Boeing 757-200 aircraft. The move comes as Delta outfits aircraft for both greater revenue generation, as well as adding more electrical ports, and larger overhead bins. To do this, the airline expects to spend $770 million through the end of 2016 on aircraft upgrades.

More seats, more revenue
Air Canada (TSX:AC.B) is looking toward simply adding more seats as a way to build revenue and cut unit costs. Part of its expansion strategy has been through Air Canada rouge, a discount subsidiary that provides less legroom in exchange for a cheaper flight.

But mainline Air Canada is getting in on the action, too, with its high-density configurations on its Boeing 777 aircraft. Packing in 100 more seats than the standard configuration, the airline hopes to boost revenue with a relatively minor impact on costs. Passengers may be against this, but with airline seats tight across the industry, and passengers always seeking out lower fares, Air Canada's decision may well be the correct one.

Time for the upsell
Airline seats have been shrinking through a variety of revenue-generation and cost-reduction strategies. Amidst all the passenger frustration, airlines are helping to boost an entire new line of business: the ancillary revenue generating upsells.

In my next article, I'll take a look at how pinching passengers space is benefiting airlines through more ways than greater ticket revenues and lower unit costs.

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Alexander MacLennan owns shares of Air Canada and Delta Air Lines. Alexander MacLennan has the following options: long January 2015 $22 calls on Delta Air Lines, long January 2015 $25 calls on Delta Air Lines, and long January 2015 $30 calls on Delta Air Lines. This article is not an endorsement to buy or sell any security and does not constitute professional investment advice. Always do your own due diligence before buying or selling any security. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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