Once again, it appears that those north of the border have figured out a better way to raise money . . . charge for new services instead of ones that are currently free. The latest comes from WestJet, which has announced it will begin offering seat assignments for a fee.

WestJet currently uses a model we don’t see much of here in the US. You can’t reserve a seat at the time of booking on WestJet. But, when you check-in, you can pick your seat. This is different from Southwest which doesn’t ever assign a seat and just has you pick when you get onboard. Of course, check-in behavior for both airlines is the same. People try to check in as early as possible so they can get the best seats.

Now on WestJet, you will be able to reserve a seat any time prior to after booking for $10 (I assume that’s US or Canadian money.) For $15, you can reserve an exit row seat. Not a bad deal, huh? It’s funny how perspective changes how you view a fee.

If an airline currently offers me a seat assignment for free (or a first bag, or really anything), it makes it a lot more annoying when they take that away. It’s a reduction in value, and that doesn’t go over well. On the other hand, when an airline offers me something that previously wasn’t available, I think it’s great.

Legacy carriers in the US have a problem in that a lot more stuff used to be included in the fare than is the case with someone like WestJet. But that doesn’t mean it’s impossible. Air Canada has done a great job of adding value by charging for things that previously weren’t available. Yes, they’ve charged for things that were free as well, but at least they’ve tried to add value.

So, is there anything bad about this? Well, I had one reader say that if you buy a sale fare, you can’t pay to reserve a seat. That doesn’t make sense. Charge more for sale fares if you’d like, but why turn away money? I’m not sure what the full story is there.

Other than that, if I fly WestJet, I’m probably happy about this, because I’d rather be able to select my seat ahead of time for that nominal fee. If someone doesn’t want to pay the fee, however, that person is probably not so happy because now all those people that pay the fee will take away seats that could have previously been had by checking in early. Still, it’s a net positive for the airline’s customers, and it’s a net positive for the income statement as well.

Has anyone had the chance to check out Yapta yet? The site originally launched as a way to see if the price of a ticket you had purchased had gone down. Since some airlines will give you a credit if the fare goes down, this could be a handy little tool to help you save some money. When it first launched, it required you to download a browser plug-in to work, but now you can get Yapta on the web. Unfortunately, there were some kinks that made the site unusable initially, but while some of those have been fixed, there’s still a ways to go before this is a helpful tool.

I decided to go to Yapta (Your Amazing Personal Travel Assistant) and put in four itineraries I had already purchased to see what I could find.

Northwest to Indianapolis
This one ended before it started. You can’t check Northwest flight information on Yapta (maybe they won’t give you credit for a lower fare?), so I moved on.

United to Indianapolis
By entering my confirmation number and last name, Yapta originally told me that fare had gone down, but that’s because it saw our total price (for two people) as the per person price. Bzzzzt, no good. Now that’s been fixed, and it’s saying that the fare has gone up from $242 to $349. That’s still not quite right. I go on to United.com and it tells me that the price is $370 for that flight right now. So I’m not sure where this is coming from. True, the outcome is the same, but it won’t necessarily always be that way.

JetBlue to San Jose
I figured the third time would be the charm, right? Not quite. Yapta came back saying that the price has gone up from the $109 we paid to $149 per person so there’s nothing to gain here. But just out of curiosity, I checked JetBlue.com and the price is actually $139. Still nothing to gain, but it doesn’t exactly inspire confidence when the fares are not accurate on every itinerary I try so far.

Alaska to Seattle/Portland
This one I thought would be interesting. I’m flying out of Long Beach, going to Seattle, and then flying back from Portland to Orange County. This time, it was just me traveling so there was no issue of viewing two fares as one accidentally. The result? It says that the fare has gone from $310.57 all the way up to $744. Whoa, not so much. I did pay $310.57 (with a % discount certificate), but the current fare is $324. For those keeping score, Yapta was 0 for 3 in getting the correct current price of the ticket. Not good.

Bottom Line
The site has a great idea, but man are there problems. I’m glad to see they’ve worked out the kinks on the fare initially paid. That’s working perfectly now, but every single time it returned the wrong “new” fare that was currently available. Both components need to be right for this site to be successful. Without that component, I still find myself going to the airline website to double-check to actual fare, and that makes Yapta not very useful. Once they solve these problems, it’ll be worth a return visit.

Ever get the feeling US Airways is a sinking ship that’s throwing off as much weight as it can to stay afloat? This week we’ve seen the airline drop inflight entertainment on domestic flights and ditch all the onboard equipment. They’re also getting rid of ovens in the coach galleys. Yep, that means they’re really, honestly, trying to get as much weight off the plane as they can to save gas. But it’s not just on the plane. They’re also getting rid of ticket jackets. I always thought that ads made those profitable, but I guess not.

You might think that I’d be flinging a Cranky Jackass award for this move, but actually, I’m not. Surprisingly, I have to give them credit here for actually following the strategy they’ve laid out, right or wrong. This is the strategy that was outlined for us at media day back in March. In their eyes, all that matters is price and schedule as long as the appearance is clean, the flights are on time, and it’s convenient. They’ve held their own when it comes to on-time performance, and I think they’ve been cleaning up their planes (though I haven’t flown them in quite some time).

In other words, though many people bemoan the direction the airline is taking, US Airways is actually delivering on its promises. With that in mind, I started thinking about what they’re going to spring on us next. No matter what it is, there’s a very good chance people will hate it, but at least it’s not false advertising.

Here is my list of the top 5 ways I’d expect to see US Airways increase revenues next, in no particular order. And no, this isn’t a joke or some snarky post about “gee, what could the airlines possibly charge us for next.” There have been far more than enough of those floating around.

• Overhead Bin Ads - Ah come on, they’ve already done tray table ads, so why not just go to the overhead bins as well? It’s worse, yes, because you can’t actually hide those from sight, but it wouldn’t surprise me if they could make some decent money off of it. And that means it could actually happen, even if it does somewhat degrade the “appearance.”




• Charge for Advanced Seat Assignments - I know, this is a little late to the game with Spirit already setting the bar, but why not jump on the bandwagon? If someone is really going to choose you because of price and schedule, then advanced seating assignment fees won’t really alter the decision, right?




• Remove Window Shades - This takes a page out of the Ryanair playbook. No window shades = less weight and fewer things that can break. Ryanair also doesn’t do seatback pockets, but there’s too much money in the magazine and Skymall to take that away. Would US Airways actually do this? I’m not sure what the savings would really be, but if they are real, then I don’t see why not.




• Sell Products Onboard - They already pimp their credit cards, so why not follow the Skybus model and start selling products, like duty free in the international world? True, that would technically add weight to the plane, so it would have to generate good revenue to make sense, but they might think it’s worth a shot.




• Charge for First Class Upgrades - I’ve saved the most controversial for last. If you think there have been objections to the latest round of changes, just wait until something like this happens. All hell will break loose. I’d argue that free First Class upgrades are by far the most important reason someone desires elite status with the airline. But, would people walk away if they had to pay $25 for the privilege on a domestic flight? It’s a risky move, and it would absolutely piss off the elites, but at some point they may consider it for the revenue it would raise.

Some of these are pretty risky moves, but with fuel where it is right now, I’m sure everything is in play. Would any of these moves stop me from flying the airline? Nah, not more than anything they’ve already done. (I haven’t flown them in almost 18 months, or at least that’s what my Dividend Miles expiration notice tells me.) The reality is that they’re right about a lot. Price and schedule do matter most in the domestic world, and they rarely if ever have a price or schedule advantage from my home in the LA area.

The airline has made it clear that it is racing to the bottom when it comes to amenities being included in the fare. At some point, passengers will revolt, that is, if they actually have a better option to choose. With all the legacy airlines following similar paths, there aren’t many options left for someone who wants to protest. But one of these moves will cross the line, and passengers will start to defect. Until that happens, you can expect to see airlines continuing to push the envelope on what they’re willing to try to reach profitability.

It was a sentimental day over in Dallas yesterday when Herb Kelleher officially stepped down as Chairman of the Board of Southwest Airlines. It won’t, however, be the end of his involvement with the airline. He’s still going to be around for at least 5 years. Apparently he’ll be focusing on getting a more fuel efficient replacement for the airline’s 737s. Rumor has it that the new plane will be powered by Wild Turkey.

With the end of Herb’s tenure in Southwest management comes the end of an era of true airline people. I know, it’s funny to say that since Herb is a lawyer by trade, but he knew how to run an airline. And drink. And smoke. A lot. He’s not the corporate-type, and he’s not afraid to be very blunt. There’s really nobody made of that kind of metal anymore. Crandall is gone, so is Bethune, and so are countless others who built this industry on their own backs. It really is the end of a era.

So it was fitting that at the same time this happened, American stepped into a new era for the airline industry. The plentiful and cheap seats that we’ve known for a long time are history . . . at least until (if?) fuel costs begin to subside. American was just the first one to take the plunge.

American not only announced that it would slash domestic capacity in the fourth quarter by 11 to 12%, but it also said it would retire at least 75 aircraft and it would start charging $15 to check your FIRST bag. The second bag will still be $25. Why are they doing this? We’ve talked about it a million times. High fuel costs + weakening demand = doom and gloom in the airline industry. But more important than “why” is “what” does it mean to you as a traveler?

The capacity cut will help keep fares up after the heavy summer travel season has passed. So get ready to continue to pay more. Start readjusting your sense of what a fair fare would be, because it’s going to need to be higher.

No details have been released as to which flights will be going away, and American never responded to my query, but we do know that 40 to 45 of the planes will be mainline, another 35 to 40 will be RJs, and there will be an undisclosed number of turboprops going away as well.

Of those mainline planes, most will be, as expected, the gas-thirsty MD-80s that are either now bound to fly for Allegiant or be earthbound for Miller Brewing Co. Those flight cuts could come from anywhere in the US, but I have to think that St Louis is going to see further shrinkage. Meanwhile, they’re also retiring some of the A300s. These are exclusively flown to the Caribbean, so you’ll see smaller planes, if not fewer flights, down there. There will also be RJs and turboprops going away. I’m not sure where the cuts will be, but it wouldn’t surprise me to see the California turboprop flying disappear as well as some of the west coast regional flying. This is, of course, all speculation.

And then there are the baggage fees. Oh boy, what a can of worms this opens. It’s funny that AA was the lone holdout on the fee for checking a second bag for a long time, but now they’re the first to jump right in and charge for the very first bag. This is going to be an ugly transition period.

Now, people will do anything they can to avoid checking a bag. But wait, you still can’t bring liquids over 3 oz through security, so what can you do? Well, you can try to sneak liquids in, and I’m sure many people will. You can just suck it up and pay the fee for checking bags as well, and some will have to do that. I think it’s a safe bet that most people will try to cram as much as they can into a carry-on, and that leads to filled overhead bins and possibly some pretty ugly fights at the gate. What if the overheads are full? Will they charge you to gate-check your bag? There are so many painful operational scenarios here that would keep any customer service agent up at night.

But ultimately, it was American’s realization that as fuel costs continue their upward trajectory, they really don’t have a choice. This is truly the least imaginative way to raise money, but it’s the EASIEST way. Raising fares isn’t even as easy as this. And right now, they’re going for quick and easy. So, once again, brace yourselves when you have to travel. This is going to contribute to an even more difficult experience at the airport. Practice meditating and lay off the coffee when you’re heading out on a flight. The industry is going to be fundamentally changing, and it’s not going to be pleasant while it happens. Hopefully, when things settle down, airlines (existing or new) will find a better way to do business, but for now . . . yikes.

Thanks, Brett, for the opportunity to guest post on your blog.

Hi everyone, my name is Henry Harteveldt. I’ve been a friend of Brett’s for several years, and I’m delighted to have been invited to post while Brett is on vacation.

I’m just as much of an airline dork as Brett, maybe even more so. Hmm. No, scratch that. No one can match Brett for his airline dorkiness. Regardless, my “day job” is that of a Vice President & Principal Analyst at Forrester Research, a leading technology market research firm. I’ve been at Forrester since January 2000, and lead our airline and travel industry research practice. The majority of our airline research is on topics related to eBusiness, product and channel management – think distribution, Web sites and self-service – as well as social computing, mobile, customer experience, brand loyalty/CRM and interactive marketing. We also do some IT research – for example, we just did a joint study with the OpenTravel Alliance, a trade group that helps to establish XML development standards for the travel industry.

Now, I have a confession to make: Despite doing a lot of research on social computing and its role and impact on the travel industry, this is the first time I’ve blogged. So, if I’ve done something wrong with this post, go easy on me.

When Brett and I were discussing what I should blog about, he jokingly – well, maybe not jokingly – suggested I write about airline premium cabin service (to me, the economy class seat is an icon of inhumanity). Tempting as that was, I thought there might be something more interesting and relevant to write about: How US airline travelers view the economy. We just completed a Q1 2008 online study of 4,488 US travelers (1,970 took at least one airline round-trip in the preceding year), giving us fresh insight.

In general, US online air travelers – that is, air travelers who use the Internet at least once a month for any purpose – are doing a bit better than US online travelers overall. For example, we asked travelers to evaluate how their personal financial situations changed during the preceding 12 months. Among air travelers, 21% said they were financially worse off; 31% said things had improved. Among all travelers, nearly 29% reported a decline, while 29% said their personal financial situations had improved.

What about their outlook for the next 12 months? Air travelers are a tiny more optimistic than the general traveler population. Thirty-eight percent of air travelers believe they’ll be financially better off 12 months from now than they are today, slightly above the 36% we see for all travelers.

When we asked travelers how their travel behaviors might change, most indicated a desire to keep everything at current levels – for example, 54% of air travelers said they’d spend just as much on leisure travel in the next 12 months as they did in the preceding year, and 61% said they’d take just as many trips. These opinions, to me, reflect travelers’ perspectives that travel is a right, not a privilege. Travel is an activity we view with almost the same level of importance as paying our rent or mortgages, putting food on the table, and saving for our retirements or kids’ educations.

So do the airlines have anything to worry about? Of course they do – the drama in the airline industry is never ending and takes multiple forms. Remember that question we asked about future leisure travel spending intentions? Nearly 28% are considering cutting back to some degree – just 18% say they’re considering spending more (we didn’t ask the dollar amounts they’d consider increasing or decreasing their spending by, nor did we ask whether any increases were to account for expected higher fuel costs). And while 15% of air travelers said they’d consider taking more leisure trips, nearly one in four say they’re contemplating traveling less.

The fact that more air travelers are considering cut-backs than are open to increases is a cause for concern. Against the extraordinarily high cost of fuel, the softening economy will only intensify travelers’ desires to get a good fare – good fares that are less likely to exist because airlines simply can’t afford to profitably offer these anymore.

I’m finalizing a more detailed report for our clients on this topic, and expect it will be published on the Forrester site within two weeks or so. This is a topic we expect to follow throughout the year. After all, as I recently stated at TravelCom, the travel industry is a lot like the Tennessee Williams’ character Blanche DuBois (in “The Glass Menagerie” “A Streetcar Named Desire”): We’re dependent on the kindness of strangers. How so? The travel industry, including airlines, depends either on the largesse of business executives who determine their firms’ business travel budgets, or consumers who choose how to spend their disposable income. Blanche DuBois, of course, goes crazy at the end of “The Glass Menagerie” “A Streetcar Named Desire” – let’s hope the airline industry is able to better withstand this latest challenge.
Updated 5/7 @ 1032a to reflect Blanche DuBois association with “A Streetcar Named Desire” and not “The Glass Menagerie.”

Late last week, a friend of mine asked me why airfares were so expensive. Of course, I asked her where she was trying to go. She said she wanted to head up to San Francisco at the last minute, and the fare was a horribly high $200. $200?!?! I’d say that’s more than fair for a last minute trip up north.

For some reason, people hold on to the notion that air travel should always be insanely cheap. It should be $200 roundtrip to fly coast to coast every time. How absurd that they would have the audacity to raise fares?! Here is my public service announcement. (Cue “The More You Know” Theme Music, old image copyright of NBC)

Fares HAVE to go up. Stop complaining and pay up.

I know, I could have at least added some cherry flavor to that medicine, but I find it has more impact this way. Oil is now above $110 a barrel. For most airlines, this is the number one cost, above labor.

And for all those airline employees who have suffered through wage cuts, that is barely making a dent in the overall cost structure. I’ll let Jamie Baker of JPMorgan (via PlaneBuzz) explain it for you.

It’s Just Math. Industry fuel likely to be some $25 billion higher than 2002, overwhelming the $7 billion in labor savings wrought by the Ch.11 cycle.

Fares have to continue to rise. More than one airline CEO has said that with the prospect of high fuel prices continuing, they’re going to be looking at big changes. That probably means fewer flights because they just can’t make money at these cost levels.

So, next time your ticket is priced higher than you expected, don’t complain. Just realize that it’s the way it has to be.

I know, I know. I’ve been writing about US Airways way too much lately. I can’t help it if there’s a lot to talk about.

I’ve seen a flurry of discussion in the last couple weeks about whether or not US Airways has done away with their $5 booking fee. The short version of the backstory (long one is here) is that US Airways added $5 to cost of most itineraries if booked on their website or through their call centers. Since most online travel agents charge a booking fee of their own, the net price when booked at usairways.com or an online travel agent was about the same. Of course, you could always go to Priceline and save $5 since they have no booking fee.

I received a handful of emails in the last week asking if that additional $5 has now disappeared. I checked my usual route, Long Beach to Phoenix, and sure enough it’s not there anymore. Hooray, right? Not so fast.

I spoke with the PR team and was told “We’ve relaxed it for now, although you might still find it on some US domestic and to-from Canada ticketing transactions.” Uh oh, so now it’s a game of hide-and-go-seek.

It may be there, it may not, but they certainly won’t tell you. At least we know it’s relaxed. Maybe that means it’s only on flights to the tropical islands of the Caribbean and Hawai’i. How do you go about figuring this one out?

It’s tough to say. Your best bet is probably to stick with Priceline where they don’t charge you a fee on any itinerary. Otherwise, just compare usairways.com rates to your favorite online travel agent or metasearch site. If usairways.com is within a couple of dollars of that site, then the fee is in place. If it’s a bigger spread, like $5 to $10, then it’s not.

How many of you knew that JetBlue didn’t have a single refundable fare until today? I know, it seems surprising. You’d think that at least their full fares would be refundable, but they weren’t. Now they are.

Today’s announcement shows that JetBlue is trying harder to appeal to business travelers in order to increase revenues. Apparently, they don’t want Southwest to be the only one getting in on this demographic.

So let’s say I’m a business traveler. I live in Long Beach and I now have an urgent meeting in New York that requires I fly out tomorrow morning and return Thursday night. I go to JetBlue.com and I’m instantly annoyed that you have to choose if you want to see refundable fares or just the lowest fare. I wish they could show me both, but I’ll just do two queries to see the difference.

The lowest available fare is $717.50. The refundable fare is $1,117.50. Since this is a last minute trip and I know it’s going to happen, I’m probably not going to bother buying the refundable fare. But what if I think I’m going to have to take the same exact trip two weeks later but I’m not sure?

The lowest available fare is $397.50. The refundable fare is $1,117.50. Considering the change fee is $50 ($40 if you book online) plus the difference in fare, I’m probably still going to go with the non-refundable one assuming I’ll be able to use the credit in the future.

In other words, these top fares probably have limited appeal to most people, but that’s not to say they’re a bad idea. JetBlue might as well offer a refundable fare for those people who really like the flexibility and find that it’s worth it even at high prices. It can’t hurt revenue - it can only help.

If these end up becoming popular, JetBlue is going to need to be careful. Remember, they don’t overbook right now. Refundable fares tend to breed higher no-show rates (since there’s no penalty), so there will be pressure to starting overbooking.

But, I think it’s unlikely that we’ll see that happen, especially since these shouldn’t be huge sellers. It’s just another option for the business traveler that JetBlue can and should be offering, especially since they can make more money with it.

We all know that crowded airports create plenty of nightmares for fliers here in the US, especially during the busy summer. A couple weeks ago, the FAA came out with its latest proposal to fix this by allowing for congestion pricing. There has been a lot of talk about this in the blogosphere, and some people are in favor of this plan. I am not one of those people. (If you’d like to read the the opinion of someone who thinks it is good, try here.

Before I get into my thoughts, let’s outline the plan itself. If you’d like to read along, you can see the entire 25 page docket in this PDF file. There are three basic parts to the plan.

1. Landing fees determined by both departure and weight instead of being solely by weight
2. Allowing airport construction costs to be included in landing fees before completion of project
3. Allowing airports to charge landing fees for secondary airports to the primary congested airports instead

It might (definitely) not be clear why this would reduce congestion, so I’ll talk about each one as I explain why they won’t actually solve the problem. It’s important to know before we get started that airports are required to charge “reasonable fees [that] must be based on the capital and operating costs of the facilities for which the fees are assessed.” (from the PDF)

Proposal #1 - Right now, landing fees for aircraft are almost always determined by weight of the aircraft, but airports are allowed to charge on a mix of per departure and by weight. This proposal actually just clarifies and I guess encourages airports to start charging landing fees based on a mix of weight and a per departure basis.

The idea here is that small jets are problems because they don’t carry a lot of people, but they contribute just as much to airport congestion as a 747. So, if you charge on a per departure basis, it will effectively push smaller jets out because they can’t spread the cost of landing over nearly as many passengers. Will that stop regional jets from flying to an airport? Some of them, sure. Higher landing fees will make for unprofitable flights.

The end result, however, may be a less congested airport, but it’s also going to mean less access to the hub from smaller communities. If flights are marginally profitable to a small city now, this plan could end up making it largely unprofitable and the service will cease. We shouldn’t be discouraging flights to smaller cities just because they don’t have as much demand.

Proposal #2 - This is really the heart of the congestion pricing proposal. Since airports can’t charge above and beyond their cost of operation, the FAA had to get creative here. Currently, airports cannot charge for construction projects in their landing fees until that project is finished. There has to be a tangible and current passenger benefit for inclusion of the cost in landing fees to be permitted. This rule would change that to allow for projects under construction to be included when construction begins.

I don’t really have a problem with this proposal in its basic form. It will encourage airports to start construction projects because they can pay down their debt faster. It’s definitely an incentive that would help get things rolling, but how does this encourage congestion relief?

Well there are two proposals here. One of them would let them only charge for construction projects during congestion periods. That way, they could charge more when the airport is congested and less the rest of the day. The other would allow these costs to be charged at any time. So why would you only charge this during congestion periods? I guess because it’s the only way they can figure out how to charge more during busy times without breaking the rule about having reasonable fees.

As a congestion-relief tool, this proposal is garbage unless you’re willing to accept large fare increases. A small increase in landing fees during peak periods will not get any airline to shift their flight times to a non-crowded time. A large increase for a more massive construction project may get some flights out of there, but the remaining flights would have to raise fares a lot to remain profitable. So you either don’t relieve congestion or you end up with extremely high pricing during peak periods just to cover costs.

Really, this would be a temporary measure anyway. As they say: “Any costs recovered for principal and interest during the construction period would have to be deducted from the amount later capitalized and amortized for recovery in the rate-base after the facility is put into use.” So, once construction is done, the fees would then be spread across all departures as they are now.

Proposal #3 - This one would allow primary, congested airports to begin charging landing fees for secondary airport operations. Put it this way. If LAX is a primary airport and it’s congested, it would be able to incorporate landing fees for Ontario into its landing fee package. Meanwhile, Ontario would be able to lower its fees so that costs would be lower over there. This can only work if the two airports are owned by the same operator.

I still don’t see how this would relieve the larger airport. Lower fees would probably encourage more flights at the secondary airport, but people still want to fly out of the larger airport. As long as that’s the case, the flights won’t disappear just because the costs go up. Instead, the fares will go up and the customers will have to pay.

Can you see a common theme here? These proposals aren’t really going to fix the problems. Now, if you could start jacking up fees to the point where airlines would stop flying routes, then you’d be able to reduce congestion. But at that point, you’d also see a steep fare increase, and that shouldn’t be the goal here.

There’s even more ridiculousness, like the fact that Pittsburgh, St Louis, Tucson, Long Beach, and others are all defined as “congested” by this proposal. Um, those are not congested airports, but I won’t get into that right now.

The primary goal should be to create more capacity by building more runways and terminals. In the mean time, we need to get better at increasing the number of flights that can be handled at the airport. I know that at JFK, for example, there are ways to get more flights in an out by reconfiguring runways. That’s not an easy task, but it’s a good medium term fix until the long term airport projects are completed. And in the short term? Airport caps. You’re going to get to the same place with caps as you are with congestion pricing. The only difference is that with caps, fares will stay the same whereas with congestion pricing, fares are bound to increase.

Anyone else having flashbacks to 2000?

Fares are going up, sort of, but not in a healthy way. This time, it’s in the form of massively increased fuel surcharges. United put together a $25 each fuel surcharge for domestic flights, and the usual suspects have matched except for Northwest. They may match today, or it may fall apart, but I don’t like the trend this is setting.

No, it’s not the increase in fares that bothers me, but rather the piecemeal way in which it’s happening. All I know is that with fuel prices where they are, fares need to go up. They can do it with a fuel surcharge even though that seems like a waste of time. Why not just increase fares? Maybe there is a hidden reason that I don’t know. Are fuel surcharges commissionable? Anyway, that’s not the point.

As with most fare increases, this happens on higher structure fares. Take LAX to Chicago on United, for example. Right now there are sale fares out there for as low as $224 roundtrip. The surcharge doesn’t apply to these fares. In fact, the fuel surcharge doesn’t apply until you reach the “UA” fare for a whopping $437 each way. You think there are a lot of leisure travelers buying that fare? Nope.

So, it’s like we saw in 2000 right before the bubble burst, fares at the upper end of the spectrum kept going up while leisure fares stayed where they were. When the economy started going downhill, business travel started to drop off or at the least became much more cost conscious. That meant fewer seats were filled and less revenue was coming in the door. To compensate, the airlines had to fall back on the leisure fares, and those were still too low. Since the number of passengers dropped off, fares dropped so that people would buy more tickets. And that’s how the airlines started bleeding money last time.

People may say that we don’t need less capacity since planes are full, but it’s higher business fares that are propping that up right now. Planes may be full, but airlines will be losing money when they have to rely on leisure fares that they have been unable to increase. That doesn’t work.