New Fees from US Airways Make Sense but United’s Don’t

US Airways loyalists (and I mean the old East loyalists) aren’t going to like what I’m about to say, but I think they’ll probably agree that it’s true. When US Airways announced several new fees and other changes yesterday, it made sense considering that airline’s strategy; however, when United did the same thing, it didn’t.

US Airways fliers have seen this coming for a long time. 08_06_13 usairwaystollIn fact, I’m surprised they can even find the energy to get frustrated anymore. It was clear when America West management took over US Airways that the airline was going to become more like an America West-style product and less like a full service legacy-style product that used to be the norm for the airline.

Benefits have slowly eroded since the takeover, and as far as I’m concerned, the writing has been on the wall since day 1 of the “new” US Airways. Management has made it clear that they want to provide a clean airplane that flies on-time for a low price. That’s about all you can expect. Everything else is just a legacy benefit that seems to me will slowly be stripped away. So with that strategy in mind (whether misguided or not), yesterday’s moves make sense.

This time, the airline adopted American’s $15 fee for a first checked bag, and to be honest, I’m surprised they didn’t think of this first. You’ll also now have to pay $2 for a soda and $7 (up from $5) for alcohol. There will be fees for using a Dividend Miles award, and a bunch of other fees will increase. On top of this, elite members in Dividend Miles will no longer receive bonus miles, and that is bound to have the FlyerTalk crowd up in arms more than anything else.

But is anyone really surprised? I mean, aren’t you just waiting for them to start charging for elite first class upgrades before they remove the first class cabin from the plane completely? The only thing that’s missing here is that while they’ve tried to go bare bones and low fare in some ways, there are still plenty of high fares lurking. I suppose it’s all about supply and demand. If people will pay, then that won’t change, but it doesn’t exactly fit with their persona. Still, the changes announced yesterday fall exactly along the lines of what I’d expect from this airline.

But then there’s United, which also matched the $15 first bag fee yesterday. This is an airline that has long talked about how it likes to be more of a premium carrier, but once again it has shown that it is not really trying for that market. Sure, elite members will be exempt from these fees, but the unwashed masses in the back of the bus will be treated like, well, unwashed masses. It’s a very confusing message, especially when an elite who pays a $100 fare will get treated better than a non-elite who pays $400.

This shows the problem that United is once again trying to serve all different types of passengers when that really shouldn’t be the case. Yes, I understand that they need cash right now and that they’re in worse shape than others due to mismanagement, but if you want to be a premium carrier, you don’t implement fees like this. You try to differentiate yourself instead of helping Southwest establish itself as the true premium carrier that doesn’t actually charge these fees.

In fact, Southwest has been stepping up its “no-fee” campaign lately, and if people are serious about despising fees, they should be voting with their wallets and flying Southwest more often. Maybe then the other airlines will see that there is demand for this type of service. Until then, it will apparently continue to be a race to the bottom.

While there’s certainly plenty of room for airlines at the bottom, I think the further they go, the more opportunity there will be at the top. United would seem to be the airline best-positioned to try that strategy, but it’s clear that won’t be the case. Instead, the airline will set expectations too high and customers will be disappointed time and time again.

[Original image: iandavid at Flickr]

31 Responses to New Fees from US Airways Make Sense but United’s Don’t

  1. Evan says:

    I find it interesting that the other airlines are giving Southwest free marketing and cachet without Southwest having to do a thing. All they do is sit back, say “We haven’t changed a thing,” and they look like heroes to travelers. Their revived “no fees” campaign brings to mind this classic commercial: http://www.youtube.com/watch?v=hjUlrirW480

    /E

  2. JS says:

    Frankly, flying United is paying someone to treat you like dirt, even in International Business Class.

    http://steele-street.blogspot.com/2008/05/united-airlines-worst-airline-ever.html

    As a DEN flier and former United Premier, I can do just fine taking Southwest, Frontier, JetBlue, and Airtran anywhere I need to go in this country, as I have vowed never to set foot on United again.

    For International travel, virtually any foreign carrier is better than any domestic international one. I love America, but our Airline business is somewhere where our automotive industry was in the 70’s, an unmitigated disaster that they only have themselves to blame for.

  3. Zach says:

    United is generally my airline of choice, if only because I live in Chicago. I’m probably in the minority, but I find their service and attitude fairly decent and more reliable than the other legacy carriers. My biggest complaint about the airline, though, is the fact that they make reward travel–and upgrades, specifically–next to impossible. You are not able to use miles to upgrade on their codeshare partners, and even on the United itself, the stars have to align just so in order for a regular customer to upgrade. Any idea why they make it so difficult? I’m always more than willing to drop the 15,000 or so on a long-haul upgrade, but in hundreds of flights with United, I have yet to find one on which upgrades are allowed. Does it have to do with the fact that I’m a regular joe and not an elite-silver-platinum-diamond-bling-bling member? They should do away with the upgrade option if they aren’t willing to honor it.

  4. Zach says:

    Oh, and by “15,000 or so,” I mean miles, not dollars :-). I guess it must have to do with the fact that they can’t afford to grant many upgrades, since the seats up front are where they make their living, but I still think that they shouldn’t advertise that they offer upgrades if, in reality, they’re really only offering them to elite members.

  5. A says:

    I’ve never understood the bonus miles for elite members. Frequent flyer programs should take a tip from the credit card benefits people. Your status should depend on how much $$$ you spend, not how far you travel or how frequently you do it. Reward the passengers that help your bottom line. It’s a pet peeve of mine as I’m usually stuck in steerage on a full price 1 day adavance purchase ticket while some other guy is up front on his super premium status from taking weekly $200 coast to coast flights. That’s BS in my book. Dumping bonus miles is a step in the right direction.

  6. Dan Webb says:

    Good point on United’s screwed up branding by trying to appear as a premium carrier. That’s something I stupidly forgot to mention when I blogged about this yesterday.

  7. Art says:

    It’s too bad Doug Parker doesn’t have the balls to counter Southwest’s new add campaign with “at least we didn’t have to ground 60 airplanes for deferred maintenance” with a picture of some parked WN aircraft. It’s amazing how quickly the public forgets these things. I’ve had more negative expierences on WN lately than I’ve had on the “legacy” carriers.

  8. Artie says:

    I think the point you made in today’s blog about Southwest essentially becoming the only Luxury Liner is so true and so hilarious. Who would have expected 10 years ago that the airline known for good, if sparse, service, would one day become the only US domestic airline to offer the MOST services for the cheapest fares??

    In the past, the “Southwest Effect” was in reference to price. Moving into the future, it seems that the “Southwest Effect” can also include statements like best service and value for the price!

    And the most important point: as other airlines race to the bottom, devalue their product and STILL lose money – Southwest continues to effectively and consistently offer their product at a profit. In my opinion, another way to make revenue for Southwest could be an “Airline Management Academy” where they can teach the idiots managing MOST other airlines how to effectively run an airline at a profit! They could add millions to their revenue with such an academy :)

  9. eponymous coward says:

    “Frequent flyer programs should take a tip from the credit card benefits people. Your status should depend on how much $$$ you spend, not how far you travel or how frequently you do it.”

    You mean like VX? Virgin America’s eleVAte points are accrued at a rate of 5x(dollars spent on fares).

    Of course, you still can’t USE those points yet…

    Cranky, the problem I see with US trying to turn itself into Southwest is that they’re aiming for the worst of both worlds: the endless blizzard of fees, CASM, fleet and hub-and-spoke inefficiencies of a legacy, but without any of the FF perks or creature comforts that would differentiate themselves from a low-cost carrier.

    In fact, one can argue that unless you HAVE status on an airline, there’s really no reason to not fly Southwest (or, I suppose, Jet Blue if you can avoid a fee or three), because arguably the experience in coach on a LCC is superior than, say, US. The legacies are well on the way to making their ultra-cheap and inedible pizza…

  10. CF says:

    Zach – Award travel and upgrades are very difficult on just about every airline. That’s probably not going to change anytime soon. And yes, it’s probably because you aren’t an elite. Even elites have trouble getting upgrades, especially the ones at the bottom of the food chain, the Premiers.

    A – I agree completely, but no airline is willing to alienate all its current elite customers and make that jump yet. I’d like to think that maybe US Airways will give it a shot at some point.

  11. Oliver says:

    Free publicity for Southwest indeed!

    All the other airlines are nickel and diming passengers. I feel sorry for people who do not live in a Southwest served city. This can be a tipping point for people who vow to “never” fly on Southwest to try again and be totally amazed on what they’ve been missing. And now, Southwest will get to enter into another age of growth, simply by taking market share lost by the other legacy airlines.

    I think it’s funny that the other airlines just don’t understand customer service and valuing the passenger. This is especially important since US Airways and United have consistently been at the bottom of the barrel. Now they are alienating customers more with the added fees!

    Bottom line, when it comes to getting to your destination ON TIME with your bags at a fair price, Southwest can’t be beat. Compared to American, United, and US Airways, now Southwest really looks like a premium carrier!

  12. DRG says:

    The “Southwest effect” mentioned by a previous commenter actually refers to the significant increase in overall passenger air traffic out of a market when Southwest enters a market due to two cost-related reasons: People move into airplanes from other modes of transportation, and people are more quickly to take a trip they might not otherwise have thought to take.

    In Europe, the “Ryanair Effect” is similar, only with more drunken stupor involved.

  13. Zach says:

    Makes sense that upgrades would essentially reserved for people with status. I wish I could get status on an airline, but I don’t fly much for work, so I don’t accrue miles at nearly the rate necessary to become “elite.”

  14. liz says:

    I think Joe Brancatelli nailed United best this week. The airline is falling apart, and, as JB clearly points out, a financial mess. AGAIN.

    http://www.portfolio.com/business-travel/seat-2B/2008/06/10/Worst-Airline-Ever

  15. Steve says:

    Well if they are going to CHARGE, would one expect better service? Remember the US Airways misconnected luggage nightmare. Boy.. when people are now being required to PAY and their luggage is lost or misconnects, will that not raise a WHOLE NEW set of liability for the airlines??

  16. DRG says:

    “will that not raise a WHOLE NEW set of liability for the airlines??”

    It should, but probably won’t. In the least, you should get a full refund of that fee. It’s a bit like when Fed Ex is supposed to get you something by a certain time and it’s not there.

  17. CF says:

    Zach – Yes, that’s the problem. There are plenty of people like you who would be willing to pay not to have to break out the wallet at every point, but that’s not an option. It would be different if they charged you for a bag and you could pay up front at the time of ticket purchase, like Air Canada allows for many products, but that won’t happen anytime soon.

    Steve – There is no change in liability. You pay, but nothing changes.

  18. mike says:

    U$ Airway$

  19. Yo says:

    The whiny east cost US culture needs to either shut up or quit. Without AWA, they would be working in Walmart today.

    The merger has not been good, a union entitlement culture and a can do culture cannot mix.

    I wish the best for US, but they will never get anywhere until the easties stop whining about the past and realize they work for another airline today. They can either lead, follow, or get out of the way.

  20. David SF east bay says:

    I was also going to point out that status in a mileage program should be by how much a person spends not how many miles they fly. The airlines need to learn to respect those the give them the most money. It’s funny how most business travelers are flying on a ticket that their company paid for using a discount contract the airline gave that company, yet the individual gets the miles and the perks. Mr & Ms Average can be paying more money for their ticket then the high status guy upgrading or outright sitting up front, but the airline doesn’t care if they only travel a couple of times a year. The airlines have always done things backwards and again logic.

    The other issue is the big airlines always have to do what the other airline are doing. And they jump right in with giving it any thought. They think if they do follow then the other airline will get the better of them. Well surprise, following the other guy only gets you into chapter 11. And no USAir couldn’t have started the $15 bag fee first as they are not big enough for others to follow on that one. Let’s see if their $2 for a coke, water, juice, or coffee holds. Acturally they are smart in a way on that one as more people are taking Starbucks on and their own bottled water. I think for $2 they know people will not pay it and they will then not have to carry much stock on board which would save money on buying the supplies and the fuel to carry it.

  21. I wonder if the $15 bag fee actually will have a material impact in on time due to longer passenger loading times with everyone monkeying to get stuff into the overheads.

    As for the $2 fee, its a reasonable ides, but will they accept plastic and perhaps sell tickets at the kiosks/online?

  22. Sean O'Neill says:

    Cranky, The SEC filing might be of interest to you, if you missed it, for US Airways
    http://www.sec.gov/Archives/edgar/data/701345/000117902208000111/form8k061208.htm

    On June 12, 2008, US Airways Group, Inc. (the “Company”) announced via press release that it is making additional domestic capacity reductions, reducing headcount and implementing several new revenue and cost-cutting initiatives in response to rising fuel costs. At current fuel prices, the Company estimates that it will spend an average of $299 in fuel costs alone to carry one mainline passenger on a round trip journey, which is an increase from an average of $151 in 2007 and $70 in 2000.

    I could’ve sworn they used to use a cents per seatmile calculation in the past and that it was about 12 cents on average domestic with 5 cents of that in jetfuel costs, but my memory’s not as good as it used to be.

  23. David M says:

    Art: I suspect the airlines don’t want people thinking to much about maintenance problems, thus why US doesn’t bring up WN’s deferred maintenance in advertising. It could also be turned around on them pretty easily, remember the recent incident of a panel coming of the wing of a 757.

  24. CF says:

    David SF East Bay – I’m not convinced that whether or not someone matches US Airways is going to matter to them. I’d bet they keep the $2 fee for drinks even if nobody else does.

    Sean O’Neill – I don’t know the seat mile cost of fuel off the top of my head right now, but I do think they’re trying to put things in language that everyone can understand. A couple cents per ASM means nothing to a regular person, but $299 on a roundtrip means a lot.

    David M – Good call. I think you’re right on this one.

  25. Mike says:

    Yeah, the $2 drinks fee isn’t going to be a deal breaker for most people. If the schedule and price were right, people would fly with the cargo. I, personally, would rather pay more when I buy the ticket instead of on the plane (you said earlier about Air Canada allowing you to buy drinks and stuff when you buy your ticket; that’s a great idea). I understand that fuel prices are crazy and airlines are in the business of making money, but I wish they’d do it with a fare hike instead of sneaking up on me when I’m on the plane and want my drink.

  26. Albert says:

    For everyone who suggests that airlines grant status by $ spent and not miles flown, look at SQ. Their premium tier FF program (PPS Club and not the KrisFlyer program) used to require 25k miles flown in Biz or First, now it’s SGD 25k/yr to qualify.

    Most people are up in arms about it but it hasn’t hit a year yet since it’s been implemented. I’d be curious to know how his has affected their bottom line and their passenger loyalty.

    And for everyone else commenting on Mr JetSet upgrading … indeed, the upgrade rewards with most US based airlines is really driving down the product. Why pay for a seat upfront when you know you’d be sharing your seat with those who didn’t pay? (Not to mention dirty, lousy service, meals, etc.)

  27. Chris Diamond says:

    How about “miles” dependant on the profit each passenger generates? (Management and overhead of course excluded).
    Now that would generate interesting comparisons.

  28. CF says:

    Chris Diamond – I think that would be ideal from an airline perspective, but it’s going to be a pretty ugly marketing message. It’s too hard to communicate how much people will earn.

  29. Richard Baker says:

    Wow, I flew from Boise to Pheonix last Friday. It was the worst landing ever. The turn coming in was so bad as was the approach, jerk, jerk, jerk, speed up, speed down, tdhen at the last second, full speed, because we are not safe to land, so we circle the airport to try again. Who in gods name was at the controls. Take your life in your hands if you plan to fly with US Airways. I think not.
    I was not alone, my fellow passengers were equally as upset.

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