2015 Airline Profits, Unbundling and Higher Ed

On baggage fees and fancy residence halls.

January 26, 2016

Will some colleges and universities follow the airline playbook to financial sustainability?

Will some traditional postsecondary residential institutions unbundle their services in order to drive revenues?

In 2015 U.S. airlines made a combined $18 billion in profits. Cheap gas helps, but due to prior hedging contracts not every airline has been able to maximize fuel savings.

What is really driving airline profits are fees. All those extras that we pay for to check our bags, change our flights, and secure a good boarding slot really add up. According to Time.com, U.S. airlines pulled in about $18 billion in fees last year.  

Unbundling is not a strategy for every school. An already unbundled institution, such as a commuter school or one that offers minimal non-academic services, is not an unbundling candidate.

Nor will highly selective and/or wealthier institutions unbundle anytime soon - as all the pressures are to offer a higher level of baseline services.

Unbundling, however, may be a good strategy for some less wealthy residential institutions.

As with flying, some students (and their parents) may be willing to pay more for superior amenities. Tuition dependent schools with lower endowments may need to make some hard choices between honoring the value of equality and ensuring financial stability.

What would we think of a school that offered fancier residence halls for first-year students for those able to pay? Throwing freshman together in similar housing circumstances has long been a stated goal of most residential schools. Could it be, however, that offering better housing to some would allow investments in housing for everyone else?

What are other examples that we can think of beyond the residence hall where college and universities could follow the airline unbundling example?

Some services are clearly off limits. A first class seat, or a checked bag, does not guarantee the passenger a safer trip. No matter what you pay to take your flight you are going to leave and arrive at the same time.

Education is not the place to look for differentiated services. Every student should get the same access to faculty, classes, and learning support.

So what then? What could higher ed get away with pricing at a higher level for premium services?

How strongly would our higher ed community object basic grounds of fairness and ethics if colleges and universities followed imitated airlines? We are, after all, social enterprises - endowed and funded around a positive social mission. 

Not-for-profit colleges and universities are intended to stand outside of a system where the market assigns all value. 

And who wants a postsecondary system that mimics the worst aspects of privilege - aspects that all of us witness first-hand on every flight?

On the other hand, all those fees have kept ticket prices down. Airline tickets have never been cheaper for those of us willing to book a non-changeable flight and fight for overhead space.

Do we have examples of schools already following the airline unbundling path to financial sustainability?

What lessons do you draw (if any) for higher ed from the record 2015 airline profits?



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