ATLANTA -- In the ultra-competitive airline industry, it's tough being out there alone as the only large network carrier to charge some passengers for soda, juice and coffee, especially in the middle of a deep economic recession that is sharply reducing demand for air travel.
US Airways is acknowledging as much, planning to announce Monday that free beverage service will resume on March 1 on board its planes.
The change, detailed in a memo to employees of the Tempe, Ariz.-based carrier sent Sunday evening by Chief Executive Doug Parker, reverses part of the a la carte business model the airline has trumpeted over the last year.
The airline began charging $2 for soda, juice, coffee and bottled water in coach cabins on domestic flights on Aug. 1 2008. First-class passengers and all passengers traveling on trans-Atlantic flights still received free drinks.
"With US Airways being the only large network carrier to charge for drinks, we are at a disadvantage," Parker said. "More importantly, this difference in our service has become a focal point that detracts from all of the outstanding improvements in on-time performance and baggage handling that all of us have worked so hard to achieve over the past year."
Parker said that when US Airways launched the beverage purchase program, it knew it would generate additional revenue - he didn't say in his memo Sunday just how much revenue the fee brought in. But while other major U.S. carriers instituted charges to check bags and use such amenities as pillows, they didn't match the fee for soda that US Airways has been charging.
Parker also discussed the economy in his memo.
"While oil prices have dropped, a global recession is having a material negative impact on industry revenues and our industry still needs business model changes as much as ever," Parker said. "Moving to an a la carte model has helped us build an airline that can withstand the uncontrollable factors that influence our industry and we need to keep trying new programs, like a la carte pricing. Frankly, it would have been a bigger risk for us not to have tried charging for drinks because innovation and a new business model are desperately needed."
Parker said US Airways will continue to charge for other a la carte items like checking bags, choice seats in coach and blankets and pillows. He said the airline expects to generate $400 million to $500 million in 2009 from a la carte items.
Parker said US Airways plans to issue a news release Monday announcing the change regarding soda, juice and other nonalcoholic beverages.
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