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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Reuters is reporting HERE that JAL has announced a new CEO.   The founder of Kyocera probably most known here for cell phones, Kazuo Inamori, has been named as the new CEO in place of Haruka Nishimatsu who agreed to step down as part of a restructuring by a Japanese government fund. 

I see a few potential problems here.  First, Mr. Inamori is 77 years old and in his statement regarding this new position, he said:

“I am old and a full-time job is hard for me, so I would like to work three or four days a week and I will work for free.”

 

That doesn’t inspire my confidence.  The airline business is punishing and requires constant care and attention.  Anyone who will guide a successful restructuring really needs to be making a comittment to long hours for the next 3 to 5 years. 

Second, Mr. Inamori doesn’t have any prior airine or even transportation and/or hospitality experience.  His background is in electronics.  I’ve said it before and I’ll say it again, the airline business is a service industry.  One of the things that often confounds outsiders to the business is just how much cash it takes to run an airline even on a *daily* basis.  The amount of money flowing through an airline is staggering and newcomers often believe that simple “tweaks” will yield profit.  They don’t.

Yes, there have been outsiders that have come into the airline industry and succeeded nominally.  United Airlines is rather famous of seeking its CEOs from outside the business and most recently with its current CEO Glenn Tilton.  However, many would argue that Glenn Tilton is the perfect example of why it should NOT be done and I would tend to agree. 

JAL needs a dynamic leader with excellent ties to the Japanese financial world but who is also capable of leading JAL’s staff through what will be a very painful restructuring.  Jobs will have to be cut.  Routes will have to be restructured and new alliances found.  Japan is in need of an LCC carrier and someone who could identify how to start one would be an excellent candidate for JAL.  Sadly, LCC business models are outside the knowledge of most Japanese airline executives.  (If you think JAL Express is an LCC, read THIS and you’ll find it really isn’t.)

JAL also have to figure out its international routes which just boggle my mind at times.  For instance, JAL flies Tokyo-NYC-Rio de Janeiro and offers flights with 5th freedom rights between NYC and Rio.  Now, flying JAL between those two cities might sound attractive but it strikes me as silly.  JAL would be far better off flying to NYC and allowing AA (via the Oneworld alliance) carry their follow on traffic to Rio. 

JAL just announced a closer partnership with Oneworld member, Mexicana, for carrying traffic from the US to Mexico.   While there are strong ties between Japan and Mexico, this makes sense for JAL.  

At one point, JAL was flying to destinations such as DFW, Cairo, Beirut and Copenhagen.  That kind of flying reflects someone acting as a national flag carrier but not an airline acting in its own best interest.  The new leadership will have to rationlize the routes, rationalize the fleet and figure out which of two major airline alliances to participate in. 

The fleet is comprised of a mix ranging from Boeing 737s to Boeing 747Ds and capacity will have to be reduced and aircraft interiors reconfigured to reflect the accomodation of more coach class traffic.    JAL is in the enviable position of having 2 airline alliances, Oneworld and Skyteam, court their membership and offering generous financial packages in return.  But choosing the right alliance isn’t just about how much financial rescue packages offer, it is about identifying who can offer the best revenue improvements over the long term.  I still believe that JAL will ultimately remain with Oneworld if only because fighting anti-trust issues by joining Skyteam is not what an airline should be doing during the fight of its life.

Filed under: Airline News by ajax
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