I read THIS about Transportation Secretary Ray LaHood being outraged at Spirit Airlines’ newly announced carry-on bag fees.  It would appear that he thinks this should be stopped or mitigated by the government and says the FAA is looking into what it can do.

Well, those who know me know I am *not* a fan of bag fees in general and I’m certainly not anti-government either.  In this case, Secretary LaHood is way off base.  It is not the job of the FAA or the government in general to prevent these kinds of fees from being implemented.  If these fees are as bad as some think (and I don’t think they are for this particular airline), the market should respond accordingly. 

What is the government’s job is making sure that these de-bundled fee based services on various airlines is transparent and currently it is not.  When a consumer is attempting to shop various options on traveling to a destination whether by most airlines’ websites or by an online agency (Orbitz, Travelocity, etc), they really only get to see the base fare plus taxes and fees.  This is a lack of transparency in pricing because the various fees are being implemented in conjunction with other desired services and some, although not all, are not advertised in the price.  

For instance, one does not see the convenience charge for using a credit card or the online booking fee that some charge.  Others don’t see how much it costs to transport a checked bag or, now, a carry-on bag.  If we’re going to have de-bundled fees for various “services” on airlines, I think it’s time we also be able to see the “all in” price of making that trip.  In other words:

• How much is that base airline fare?
• How much are the taxes?
• How much are the airport fees?
• How much is the fuel surcharge (if any)?
• How much does it cost to pay a checked bag fee at the time of ticket purchase?
• How much does it cost to pay a checked bag fee at the gate?
• What limits does this airline impose on both carry-on and checked baggage?
• Can one pre-purchase a meal and, if so, how much is that?

There are many more questions that should be answered in advertising those fares so that there is transparency instead of “gotchas”.  That is what should be imposed by the government.  Mind you, when the government does begin to impose such rules, the airlines will scream, holler and stamp their feet that they can’t afford the infrastructure to do this.   Sorry but if you’re going to have fees, you need to have the infrastructure to support a fair and transparent communication of what those fees are.  That’s the job of the government. 

Airlines would abhor such a thing because the very next development in online airline shopping will be websites that present the “all in” price for making a trip and that will make things hypercompetitive among airlines at present.  All I can say is that life is hard in the big city. 

There are other areas where transparency could and shood be better.  Codeshares are one area of that.  I don’t object to codeshares at all but I do object to the lack of transparency in how those codeshares are presented currently.   What is presently being done is the equivalent of offering one brand of flavored rice at a price and then giving the consumer another brand of flavored rice after the purchase.  Both brands may be great brands but what if you *really* wanted Rice-A-Roni instead of Lipton’s?   An airline isn’t going to let you change your ticket upon discovering that you really aren’t flying on their airline for particular flight.

There has been a lot of laxness in allowing airlines to operate for 2 decades or  more with this lack of transparency.  The argument that it would take time and money to present this in a fashion much like we expect virtually every other retailer or service provider to do is cost prohibitive just doesn’t fly.  Shame of the government for ignoring this for so long but shame on the airlines for doing it too.  The FAA has long been under the influence of exceptionally airline friendly forces for an very long time and they, more than anyone else, permitted this to happen.  I’m glad that Secretary LaHood wants to stop some of this abuse but I would suggest that he needs to be a little less media friendly in his words and a little more active in promoting fair for both airlines and consumers.  This is one part of the house that is long overdue to be put back into order. 

I”m a very experienced shopper for air fares and I’m exceptionally well acquainted with strategies to find a good fare and even I am finding it exceptionally difficult to do this in a manner that allows me to compare the cost of a trip in an apples to apples manner.  It takes an exceptional amount of time to make an informed purchase for air travel and if it is that hard for me, how hard is it for just the average consumer? 

I never want to let an airline have its cake and eat it too.

Filed under: Airline Fees by ajax
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I’ve come to accept that we’re going to see lots of fees and a “de-bundling” of services in the travel world and, most particularly, the airline world.  I’m even willing to accept it with good humour at this point.  Indeed, I see advantages to a more “a la carte” system of pricing in the airline world.

I still have an objection, however.  These increased fees for checking bags, changing flights, food and drink and even booking online should also come with some new guarantees.  A checked bag should come with an arrival guarantee that is money back if your luggage doesn’t arrive with you.  A fee for changing flights should come with a money back guarantee if, say, you’re bumped from a flight you changed to.  If you’re going to charge a fee for booking online or accepting a credit card, then you should also make a “prompt refund” guarantee if the flight gets cancelled and unable to travel on a different flight.

The thing is, passengers haven’t really shown much interest in trying to hold an airline’s feet to the fire and I think I know why.  Frequent flier programs.  You see, the airlines *know* that you’ll stick with them in order to earn points that, by any account are worth at most about a penny a point. 

Let’s say you are taking a 2 hour flight to someplace.  Just to be generous, let’s say the mileage is 900 miles earned (and on a 2 hour flight, I would say that is way generous) for each way.  1800 miles or point are earned for completing the trip.  You just earned yourself a reward that at most is worth about $18.00. 

Let me ask you something.  Is that $18.00 worth the abuse?  I’d wager that on any one flight where you had trouble with a lost bag, bad food, a changed flight or anything else that we’re now seeing fees charged on, you would happily pay $18 to see that go away.   Would you change airlines for a flight if another airline made a value promise to handle your luggage responsibly or get your money refunded if they don’t if you weren’t earning $18.00 of credit for that flight?  I’ll bet you would change in no time flat. 

Indeed, I would argue that legacy airlines are punishing fliers dramatically for trying to earn those points.  This is why Southwest Airlines is getting traction with its “no fees” policies for changing flights or checking luggage.  People are starting to figure out it isn’t worth $0.01 / point to earn “free” trips or “free” upgrades particularly in light of the new fee based systems being implemented. 

Sure, an elite frequent flier program participant doesn’t pay many of those fees.  Only, they do.  They pay it in the form of exorbitant prices for fully refundable tickets purchased with a short lead time.  It’s just not necessarily coming directly from their pocket.  It comes from their employer’s pocket.  But there is still a price.

Until passengers start choosing airlines based on the real value being provided, airlines aren’t going to change their behaviours particularly with these fees.

Filed under: Airline Fees by ajax
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According to the Wall Street Journal Middle Seat blog, American Airlines has decided to match the bag fees recently implemented by Delta and Continental.  You can read more HERE.

So, at present, Delta (including Northwest), American Airlines, Continental, United and US Airways are now all charging $25 for the first bag and $35 for the second bag with some of the airlines offering “discounts” if you perform your “bag fee purchase” online.   That would imply that they each see this price for checked bags being a bit more elastic than one would have thought.    Or, at the least, they see it as elastic as long as they all go for the same increases much as the case is with air fare increases. 

So far, no low cost carrier has adopted this pricing model or even raised their checked bag fees.  I suspect they won’t either as it gives them an opportunity to show themselves as the good guy while gaining some incremental revenue. 

If this rise in fees sticks for the next 1 or 2 quarters, I do think it will put tremendous pressure on Southwest Airlines to institute their own version of bag fees, at least by institutional investors and analysts.  So far, Southwest and its CEO Gary Kelly have resisted these calls to add checked bag fees and, so far, they believe it is resulting in incremental revenue from passengers switching to Southwest to avoid fees.  Since CEO Kelly (and Southwest as a whole) is not one to shade the truth, I’ll continue to believe these claims. 

However, with other LCC carriers such as Airtran and Virgin America and even jetBlue (on the 2nd bag) have added fees and do report significantly improved revenues from that, I would imagine that the call for Southwest to add these fees will be defeaning particularly when Southwest could implement a jetBlue or Airtran style program and see improvements to their quarterly results which haven’t been too impressive in the last year. 

It is sad but I don’t believe we’ve seen the last of these increases.  I do think that some airline will probe the upper limits of these fees just a bit more yet.  I do think that Southwest will resist the call to add these fees for at least another 6 months but if there hasn’t been some kind of collapse in the price of these fees by then, I would not be surprised to learn that Southwest has begun to make changes to their infrastucture to implement them.   I think the first sign will be the withdrawal of their “no fees for checked bags” advertising.

Filed under: Airline Fees, Airline News by ajax
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Delta Airlines chose to announce they are increasing their checked baggage fees.  If you pay online, your fee goes from $15 for the first bag to $23 for the first bag.  The second bag checked rises from $25 to $32 (paid online).   Continental matched those fees almost immediately.  While it seems exorbitant to me, I wonder if anyone will really notice right now.

I suspect Delta did this simply because they have pricing power at most of their hubs (ATL, MSP, DTW, SLC, CVG, MEM) and because they don’t think it is going to affect the consumer’s decision about which airline to fly in most cases.  Delta doesn’t get a lot of LCC competition at its hubs except for ATL and there seems to be a unspoken agreement with Airtran not to get too ugly there.  Besides, Airtran has checked baggage fees too. 

The thing is, most online sites that offer booking for airlines in the US do not mention baggage fees when displaying prices for routes.  Delta will continue to appear to be very competitive on routes while likely adding additional incremental revenue through the “gotcha” approach.   Quite honestly, I suspect they’ll get away with it.  At least until there is a healthy recovery in the airline industry and that is likely 18 to 24 months away still.  Maybe more.

Will others match it?  I suspect that American Airlines might.   There is no precise harmony among airlines on these fees, not yet anyway.  Continental already had pretty high fees at $18 and $27 for online checked fees (with a $2 and $3 surcharge at the airport).  AA is at $20 and $30 respectively whether you check online or at the airport.  US Airways is at $20 / $30 for online (with a $5 surcharge for checking at the airport.)  United is $15 and $25 for online checking.

By contrast, Southwest Airlines has no fees up to the 3rd bag, jetBlue offers the first bag free and $30 fee for the second while Airtran charges $15 for the first and $25 for the second.  In other words, these fees are all over the place.  The truth is, as competitive as airfares are on many routes, these fees can change the equation pretty dramatically in some cases since those fees are for each way on a round trip flight. 

These fees have added dramatic amounts of revenue to airlines’ bottom line and I don’t see them going away at all.   I don’t think the fees among legacy airlines will harmonize much at all until and if online travel sites begin showing an “all in” pricing when comparing fares.  Even with such comparisons, I don’t think the fees go away so much as they just begin to merge together among the airlines. 

Will anyone else raise their fees?  Well, maybe.  I’m sure it will be tempting to do so among all the legacy airlines.  One or two may even try to raise the ante some.  I kind of  think both United and American Airlines will try some kind of new mix in the future.   I don’t see the LCC carriers playing around with their fees much if at all.  They have the revenue and now this may be their chance to follow Southwest’s strategy in a modified form by advertising lower checked baggage fees. 

I don’t think Southwest will change its attitude on these fees based on this new development.  Their strategy appears to be working for them and they don’t have a history of following the pack when something works.   That said, I’m sure it is something they’ll re-examine from time to time and it doesn’t mean they won’t add fees at some point in the future.  Right now, they appear to be capturing customers with their ‘no fees” approach and their aggressive advertising seems to have caught some attention. 

As much as I hate these fees for the 1st bag checked, I hate that airlines and travel websites  have done really little to truly show the “all in” price for these trips.  It makes things just that much more murky for the consumer and that is a bad thing.   However, the best thing you can do is learn the fees for the airlines you may be shopping for a trip and do the math yourself.  You’ll be frustrated by it and no doubt resent it but there isn’t a ready made solution at this time. 

Frankly, these developments are just one more reason why I wonder about Southwest re-joining the travel agency world.   The world has changed since they left it and, quite honestly, I think they could re-structure their IT infrastructure and re-join those agencies with little incremental costs involved.  At that point, they become the no brainer for many consumers from my view.  Even as aware as I am of airline options and even being located in the DFW area, even I tend to forget about Southwest as an option sometimes. 

One strategy for learning these fees is to visit LuggageLimits.Com (also linked in my sidebar).

Filed under: Airline Fees, Airline News, Travel Hints by ajax
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Several airlines are implementing surcharges for peak travel days such as American Airlines and Continental Airlines but others too.

This strikes me a bit like the fees for checking the first bag.  In this case, airlines are advertising fares but charging surcharges for those peak days most attractive to the traveler.  It makes me wonder a bit on whether or not taxes are being collected on the surcharges and it makes me wonder if the surcharges aren’t a bit deceptive when it comes to advertising.   

If those surcharges are needed, why not just raise the fare $10 (or whatever the surcharge fee is) for those particular days.   Because then they would have higher fares when being shopped against airlines without surcharges.

Filed under: Airline Fees, Airline News by ajax
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