Well, this is going to be a popular post, huh? The idea that you should love airline fees probably sounds ridiculous to you. After all, complaining about fees has now replaced complaining about airline food as the traveler’s favorite pastime. But you really should be happy that there are fees out there. Before you start an internet campaign to talk about how much I suck, hear me out.
Since airlines are private entities, I assume we can all agree that airlines have a right to make a profit. If airlines were run by the government, then that would be a different story, but they aren’t. So airlines are trying to make a profit (some better than others) and should do whatever they can to get to that point. On a basic level, this means revenues need to be higher than costs. Ok, I think we’re still on the same page.
The problem, of course, is costs have spiked to a new sustained high level in the last few years thanks to jet fuel prices. This is probably familiar to many of you, but take a look at this graph showing jet fuel prices per gallon at the beginning of July in each year:
Even excluding that spike year of 2008, jet fuel prices have still more than tripled to become the largest single cost at many airlines. And fuel prices is pushing higher once again as I write this. Just think about that. Let me try to put it in easy-to-relate terms.
Let’s say that you sell televisions and times are good. To make this easy, you only sell one type of TV and it sells for $550. Your total costs average out to $500 a TV, so you make a 10 percent profit. (That’s not great for a lot of businesses but for airlines it would be stellar.) Up until now, your cost for a screen has consistently been $50, or 10 percent of your total costs. But all of a sudden, there’s a change in the screen world and prices permanently jump by 300 percent. Now, screens cost $150 and there’s absolutely nothing you can do about it. If you keep prices where they are, you lose $100 per TV for a negative 18 percent margin that will put you out of business.
So you have to raise prices to cover your costs. You think about jacking up prices from $550 to $650. You’d make a 7.5 percent margin which is ok but a lot fewer people want TVs at $650 than they did at $550. This is where things get ugly.
If you bring prices up to $650, you have to figure out how many TVs to make. After doing the math, you realize that if you jack up prices to that level you might lose half your demand. Since you have so much invested in the factory and tooling, if you cut your production by half, the cost per TV will rise dramatically because you have fewer TVs over which you can spread your fixed costs. It might rise to, say, $700. Then you’d have to raise prices even more and that’s going to cut demand even further. It’s an ugly spiral.
There are a couple ways out of this. If you’re a manufacturer of TV, you can just keep producing TVs and sit on them until you hope demand grows again. But that’s not an option for airlines, so let’s pretend that’s not an option here. So that cuts down on decent options dramatically.
You can lay people off, but you also need to get rid of machinery and tooling that you don’t need anymore. You might need to move into a smaller factory too. This might not even be possible so you have to consider bankruptcy to keep your company as a viable ongoing operation. There has to be a better way.
You then realize that there’s a way to keep prices in check without killing demand. You do raise your prices about 10 percent to $599 and most people are still willing to pay that much. But now, you tell people that the $599 version doesn’t have HD capability turned on. To get that, they’ll have to pay an additional $25. Then you start adding new options to help get the price up. They can order a deluxe remote control for $25. You start offering wifi capability for another $25. Now, those people who want the add-ons can pay more for them. But those people who wouldn’t pay the higher price can still get a base unit for a relatively affordable price. People can buy what they want and demand stays relatively high.
In the end, your total revenue per TV goes up to $700 with all of the add-ons that people choose. The basic TV being priced at $599 still keeps demand high for the unit, but the amount that some people pay to dress up their TV to make it better is what actually pushes you into profitability.
This isn’t a perfect comparison, of course, but the idea is sound. With the high cost of fuel today, there are two ways the airline industry could go. It could keep the previous pricing scheme but that would mean a lot fewer flights, much higher fares, and probably another visit to bankruptcy-land. Or it can provide a menu of options via fees that keeps the base price low for the no-frills traveler and still keeps a broader schedule available to serve everyone.
In the end, fees are a good thing. I may not like how many airlines have implemented them in a clunky, difficult to compare way, but that will change as airlines start to get better at this and consumers demand more. It doesn’t change the fact that the a la carte pricing method is a good thing for this industry.
The problem missing from your example is that if I buy the TV with whatever options I like, my viewing enjoyment is not degraded based on what other customers select. I understand the need, and even like it for selecting choice seats, but I wish airlines would allow just one checked bag for free. The in-cabin experience is terrible thanks to people who don’t want to pay for checked luggage, yet do not correspondingly adjust their expectations of how much stuff they can bring with them. Ugh.
Dave, the 2 bag rule went into effect some 22 years ago. Flight attendants lobbied Congress for a federal regulation to LIMIT the amount coming onboard. In essense, it’s ALWAYS been a problem, regardless of FEES. What’s changed is that there is NO longer a slow period, low season for air travel. Many years ago, Jan, Feb and March used to be a great time for employees to non revenue. That’s not the case anymore, airlines want every seat occuppied and attempt to do that with websites. FULL FLIGHTS also contribute to keeping fares reasonable.
Kudos to Cranky, this quote says it all: You then realize that there’s a way to keep prices in check without killing demand.
This article clearly states how fuel prices affect the industry: http://hubpages.com/hub/rise-in-fuel-prices-airline-industry
Increases in fuel prices affect the airlines in two ways; the cost of fuel has an obvious and direct impact on the cost of operation, and fuel cost increases have repeatedly triggered economic recessions, which in turn result in a substantial decline in demand for air travel and air cargo.
Fuel price increases have a particularly adverse impact on airlines because even in good time fuel costs constitute roughly 10-12% of our operating expense. Every penny increase in the price of jet fuel costs the airline industry $180 million a year. In the absence of pricing power – the ability to pass these costs along in the form of higher airfares – these increases come right off the bottom line.
So, they’re regained some pricing power by adding Fees and still keeping air fares in check. Brilliant.
Feb and March have always been bad due to Spring Break. Sept-Oct-early Nov had been safer for me when I non-revved.
James, I traveled to Europe, generally during those slow months. Jan, Feb, and March were easier months to travel to Europe, many years ago.
Yes, but now those who have airline branded credit cards get one bag free for up to 8 people in their itinerary, which I think was a good move by whoever started it (Delta?)
This does make me understand it a bit better, thanks.
Southwest is largely anti-fee, and has become my preferred airline directly because of that. As a Phoenix resident, I reject the idea that I should prefer Usair because they have fees and Southwest does not.
Also, I would point out that your TV analogy is false: Usair basically is now the case that 100% of their _profit_ comes from their fees:
“The Airline Biz blog of The Dallas Morning News reports US Airways expects to net $500 million this year in fees on items such as bag fees, change fees and on-board sales, according to comments US Airways president Scott Kirby made Wednesday at a securities conference in New York.And US Airways expected profit for this year? Between $450 million and $475 million, according to Wall Street analysts.”
So, the ticket prices are basically keeping up with the actual costs of running the airline; the baggage fees (and other such fees) are basically Usair’s profit.
Southwest does have fees, in fact they are one of the larger collectors of fees, but they haven’t applied fees to the things you use, so they are effectively invisible to you.
The TV analogy is not false. It is just that an analogy, which is by definition imperfect. That said, the fees are doing exactly as Brett posits at US Airways, they are allowing an airline to stay in business despite volatile fuel costs. Without those fees they would have lost $25-50 million and of the airlines US Airways is one of the less health in terms of cash cushion.
Southwest’s fares are also steadily creeping higher on key routes, as everyone with a brain knew they would. Run the comparisons yourself on Orbitz if you don’t believe me. The economics of running an airline aren’t different for Southwest than anyone else, regardless of whatever B.S. their marketing machine would like you to believe.
In my opinion the only reason Southwest is surviving without bag fees is because they are the only ones who have yet to do it (besides Jetblue of course). However a quick look at those two airlines and you’ll see that their adjusted pre-tax profit margin was worse than AS, DL, G4, HA, CO, and US. Jetblue’s was 2 places behind WN as well. Without their fuel hedging benefits, and little room to grow…WN is going to find themselves having a harder time providing high returns. Unless of course they raise ticket prices…which they are already doing and has been pointed out by others here. They’ve just done a good job of tricking everyone into thinking they’re always the cheapest. They’re not.
I agree with you on this, Ryan. I think Southwest can do this because they’ve used it as a huge marketing advantage. But Southwest also doesn’t allow travelers to compare with other airlines on the same site, so they make it tough for people to realize that Southwest is often much more expensive. I rarely find them to be the cheapest, and that’s really to be expected because without bag fees they need to build that into the price. Only one problem – I don’t check bags, so the higher base price becomes problematic.
@Wonko: The example said exactly that. The TV manufacturer loses a dollar for every base TV sold, and all the profit is made on the add-ons/fees.
>In the end, fees are a good thing.
So does paradigm this just apply to airlines, or does it equally apply to other services that are also heavily dependent upon the price of fuel?
should baggage fees apply to taxis?
should baggage fees apply to cruise ships?
should baggage fees apply to public buses/light rail?
what about Amtrak?
It would apply to all these, but airlines are much more sensitive to fuel prices than other services, and their market is not the same:
The customers for taxis and cruise ships (I think) could and would pay the extra fees, since there are cheaper alternatives anyways: walk/take the bus, and don’t go on a cruise. Also, they probably are making more money to start with.
Public transport is subsidized by local or state governments 99% of the time, and people would rarely want to take 3 large bags on a public bus anyways.
From what I have noticed, Amtrak has gotten more expensive (rather than adding fees) over the past few years, and trains are also incredibly efficient, so fuel costs are much smaller.
Airlines do seem to be somewhat unique with this problem. (But they could also raise base fares a bit as well as adding fees; air travel is still quite cheap imo).
When I used to work in the fruit business we passed along our fuel surcharge on both the trucking and the ocean liner side of things. A consumer doesn’t pay these directly, but the grocery stores roll into the price of your food, albeit usually its delayed, so you’re paying the fuel surcharge of last month this month, etc.
In some cities there are baggage fees for taxis
What Carl says is true (In some cities there are baggage fees for taxis)
Also in some places you may pay extra depending on how many people are getting in the cab.
(Not saying I love it), but every time I get in a taxi at DCA (my “home” airport), the “airport fee” is passed along to me, I pay for each piece of luggage that goes in the trunk, and I pay more if an additional passenger is in the cab.
Every taxi service in the DC metro area charges these fees. Where they are differentiated is service — some are reliable and show up on time, some have drivers that are always helpful with the bags, etc. I see as the same with the airlines — you can justify the fees, but in a world where the vast majority are charging the fees, service becomes EVEN MORE of a differentiator. That’s why I really applaud Alaska’s baggage guarantee — charge me for the bag, OK, but give me the money back if the bag doesn’t make it or if it’s not delivered to bag claim in a timely manner.
Definitely agree, both on service as the differentiating factor and on the Alaska example.
On the service side, air travel has largely become a commodity, where service as a whole will continue to degenerate into the cheapest (not necessarily worst, but definitely cheapest) that the flying public will tolerate, in the name of lower costs and lower prices. Those airlines that can resist this and provide superior service without dramatically affecting costs will be able to not only obtain more demand, but also (possibly) to price it at a slight premium to others- think Singapore or Cathay for international flights.
For Alaska, I honestly (mistakenly) thought that all airlines would have that policy. I mean, isn’t that a no brainer? If you pay do ship a package by FedEx overnight and it gets lost or arrives two days late, wouldn’t FedEx refund your money? Wouldn’t almost any other company in the same situation refund you money, to keep you happy and to keep you as a customer? Seems obvious to me, but apparently a lot of airlines don’t agree, or not many consumers demand this.
It’s a willingness-to-pay issue. If people were willing to pay more in the base price, then airlines wouldn’t bother going to all the trouble to charge fees. It’s not insignificant in terms of cost in order to bring systems up to speed. So if those other modes of transport are having trouble making a profit because people won’t pay, then yeah, they should try it.
Coincidentally, CF, Elliott wrote on a similar note:
Disagree. I have a family with small kids. These are taxes on families. They know you have to travel with an army of crap with kids. Screw the airlines. Worst companies in the world – and this includes cable companies.
I must respectfully disagree with your “taxes on families.” I remember when my family traveled when I was little. The whole family of 4 with one checked bag and 4 backpacks. Perhaps people in your position should reevaluate the “crap” they take along when traveling with children.
Additionally, it isn’t as though you don’t know the fees before you buy the tickets. If you factor them into your travel then it is just part of the cost. You could also fly Southwest (no bag fees… yet), United (buy the add-on package that gives free bags and Economy Plus), Frontier (on an Economy Classic fare), or Delta (with a Delta AMEX card). The options are there, you just need to use them.
Taxes on families? Seriously? When I was young paren’t did not fly the whole family down to Florida every year. Vacation for most was a road trip to a regional destination. That’s all they could afford. You should feel lucky that airfares are cheap enough that you can afford to take your family on a trip. Inexpensive air travel is a priveledge – not a right.
OK, it costs the airline something to transport the bags that your family checks.
You would like the airline to transport those checked bags for free.
Why exactly should a person who travels without bags subsidize the cost of travel for a family that checks bags?
What you want is for people without bags to subsidize travel for your family. How is that fair?
I am Premier Exec, my dad is 1K, that means we can essentially get 11 people two free checked bags, yet we go very light on the checked luggage. For a week long vacation in Hawaii myself and two others checked on bag and brought the rest as carryons. My 3 younger siblings checked 0 bags for a week in Hawaii, as Jason said, maybe reevaluate what you are bringing.
It is great that there are those fees, people like me, who check bags infrequently, save a little bit of money on our fares, while people costing the airline more pay more.
Great post Cranky…I think you did a good job at breaking it down in layman’s terms.
Mike, I feel for you…as I also have 2 small children and have to haul a ton of cr@p from A to B…..be it an afternoon in the playpark or cross country to see relatives. Unfortunately, we (the leisure family travelers) are not the core demographic that keeps the lights on: it is the business traveling road warrior. Ironic, because most frequent biz travelers know how to get around these fees or are exempt from them thanks to their gazillion mile Plutonium cards. So yes, these fees come off the backs of the semi-frequent travelers. But from a cost-revenue standpoint, the revenue has to come from somewhere, lest we end up with an airborne Amtrak (*shudders*)
Hey I like Amtrak. They’ve been making great strides. Just stay away from that bastard child the Cardinal, that’s almost lethal and quite sad.
Amtrak? You mean the service that not only charges much more than you’d pay to drive, it’s also slower than any other commonly used motorized method of land travel (even Greyhound is faster!) and much more prone to delays?
As much as I like the comfort of Amtrak (an extra 10 inches of pitch compared to a plane, easily accessible outlets), I really don’t see the value proposition. You can drive or take the bus faster and cheaper, and with both of those you can reasonably expect to leave and arrive close to on time- unlike Amtrak, where 3+ hour delays in the NE corridor are all too common. I’d take Bolt Bus over Amtrak any day, and would probably even take Greyhound over the train.
Part of the value proposition of Amtrak is enjoying the trip there, and not worrying about getting there as quickly as you can.
Regarding the delays, this is a relic of the feds not enforcing the appropriate fines on the freight railroads for not giving Amtrak priority as they legally are required to. (Remember Amtrak was created to take money losing operations off their books and place them on the governments to die. Albeit, that dying part never happened.)
Its also a great way for those of us who have gotten rid of our cars to go intercity on nearby trips.
Interesting example but I disagree. Airlines have huge fixed costs (aircraft/labor), with fuel being the largest variable cost. Airlines can reduce their fuel cost to nothing (by not flying), which means, that by flying it’s better than not flying, (minimize losses in airline speak) strictly speaking.
First, the fuel fee is just a “for profit” add-on that has no direct bearing to the actual fuel cost incurred by airlines. If it was, it would be different at each airline due to their fuel hedging strategy. It would also vary both up and down as prices changed, yet it seems to be static from my observations. Airlines should build the cost of the fuel charge into the ticket price instead of making it a line item – as I recall, no fees were removed when fuel prices bottomed out last year.
The other issue is ancillary fees. The airlines have it backwards – they should charge for carry on bags and let checked bags fly for free. Being able to keep your bag with you is much more lucrative than sticking it underneath. Think of how much time is wasted waiting for people to try to cram their overstuffed, two weeks worth of clothes for a two day trip in the overhead.
Best comment so far – exactly how I feel:
“The other issue is ancillary fees. The airlines have it backwards – they should charge for carry on bags and let checked bags fly for free. Being able to keep your bag with you is much more lucrative than sticking it underneath. Think of how much time is wasted waiting for people to try to cram their overstuffed, two weeks worth of clothes for a two day trip in the overhead.”
At least on United the fuel surcharges are included in the cost of the ticket. When booking the ticket to Singapore, while selecting prices it showed ~$1200, when actually paying is was around $1280, yet the fuel surcharges are $360.
And fuel is the largest cost, variable or fixed.
But to airlines it is in the cost. You are putting your own bag in the overhead bin. To check it, they have to get the bag on the cart, drive it over to the plane, open the door, load it on the belt, and BALANCE THE WEIGHT in the belly of the aircraft. So much goes on in 25 minutes. So checked baggage is definitely a bigger cost.
…and the cost (in real profit) of having to spend 10 extra minutes per flight, on average, in my experience, to gate check bags, have people arguing over the overhead space, the general disorder of the boarding process, etc all have fungible costs that likely outweigh adding another 10-20 bags to the bin. I would imagine every business traveler would pay for the convenience of carry on. Again, I believe the airlines have it backwards, and only did not charge for carry on bags due to the political firestorm it would have caused (look at Spirit).
I totally agree. As a green field exercise, ignoring politics and the status quo…
If your goal is to make a profit, you want to use your most expensive assets (planes) most efficiently, and to do that you have to have quick turns. Why not go all out, and limit people to an item that fits under the seat in front of them (e.g., briefcase), then charge the same price for both a carry on and a checked bag? People will be induced to check most bags (less hassle), especially leisure travelers (who are presumably slightly slower at handling their carryon bags). An airline could always compromise and give top tier FFs free carryon bag privileges. Leisure pax especially would revolt at first (carryons are seen as a “right”, as the politics show), but they’d get in line if the total price (ticket + fees) were cheap enough (witness Allegiant’s legendary fees, and its popularity with leisure travelers), and 98% of all business people would just expense it anyway and not worry about the cost.
[Does Japan have stringent restrictions on carryons, or is my memory bad?]
For that matter… Why not do something similar to the rear airstairs on the old TriStar, but use ground-based stairs instead to load/unload pax through the back door by the galley and lavatory? That way the plane doesn’t carry the weight of the stairs, and I bet you could save a good 5 minutes in turn time for a single aisle plane doing that, without adding a ton of complexity. Especially if most people aren’t going to be carrying on suitcases, they should be able to climb a few stairs to get on the plane (and those who can’t will board first anyway, with the kids and the disabled folks).
I do think that ultimately it’s the slow/ignorant/rule-breaking/packrat pax (not all of them, just some of the serious offenders and first time fliers, etc etc) that are most delaying the turns of the plane and possibly even causing many departure delays. Take most large onboard bags out of the equation and speed up the movement of pax to/from their seats, and you could really make a difference on plane utilization and ultimately costs and assets per seat mile flown. Whether this is politically feasible and whether pax will accept such a system remains to be seen, but I’d love to see an airline like Spirit or Ryan try.
Wes – I’m not really referring to fuel surcharges here because that’s a different story. Fuel surcharges are required to be included in the base price of the ticket. You can’t get a price quote without it, so it’s not really the issue. This is more about additional fees that people can either pay or not pay depending upon whether they want the benefit.
As for checked bags vs carry-on, I think people should experiment more with this. Allegiant certainly went against common sense by charging people to book online. The more costly way to book is via a person at the airport, but Allegiant knows that people won’t bother to go to the airport very often, so they switch it around from what you’d expect. I hate that personally, but it’s a similar idea. Instead of charging for things that cost more, you charge to maximize revenue based on consumer behavior.
Tell me again where any business has the “RIGHT” to make a profit? You either earn a profit or you don’t. There’s no such thing as a “RIGHT” TO A PROFIT!
There absolutely is…I’m sorry but you’re 100% out to lunch with that post
I’m sorry, A business tries to make a profit, but you cant say that they have the right to said profit. It mustt be earned & is not an entitlement.
Business has a right to MAKE a profit, not the right TO a profit. Those are two completely different things. The first is how it should be, the other is a in fantasy world.
I can’t believe how many comments were focused on this one piece of the post. An airline has the right to try to make a profit. The point here was that there are some people who think that airlines should be public utilities that shouldn’t be able to profit. I disagree with that.
Sean, I think the point he was trying to make is that we shouldn’t see anything wrong with the simple business goal of making a profit. While we don’t necessarily want the fire department to engage in heavy profit-maximizing efforts, the airlines have a right to TRY to legally make as much of a profit as they can for their shareholders.
Fair enough, but read the words a bit more carefully. There’s a difference between earning a profit & the right to a profit.
No, you read the words a bit more carefully, he said they have the right to make on, not the right to one. That means nobody should come in and stop them from making a profit, it is up to them alone. You seem to think that the right to make a profit means the absolute right to a profit.
The problem with fees and the public is simple. If the airlines would have cut all their fares by 50pct (as an example) and started fees at the same time, people may have understood it all and thought hey I’m paying less or the same and getting everything I got before (ie: a meal, checked bag, etc). But the airlines didn’t cut their fares by 50pct (as an example) so people think they are being screwed. They don’t understand that the airlines didn’t raise fares by a lot because of the fees to try and make a profit. They just see it as paying the same and having to now pay for what they got for ‘free’ before.
I’m disappointed to see airlines continuing to nickel and dime their passengers, for example, charging for checked baggage, especially the first checked bag. While I realize that airlines must make a profit to stay in business, I fail to understand the logic of nickel and diming the passenger with extra nuisance fees on top of the airfare. I’ve discussed this with my co-workers, friends, family and business associates, and there is a general consensus among us that airlines should charge one honest fare and eliminate the extra fees. One carrier, Southwest Airlines, agrees and is capitalizing on this with its “No Hidden Fees” advertising. JetBlue has the decency to allow one free checked bag.
I know which two airlines I’ll go out of my way to support in the future.
My issue with Southwest is that sometimes I just can’t get the right schedule. They don’t fly very many late night flights and no red-eyes. I was trying to book a DTW-BWI and the last flight on southwest was 5:30pm while Delta has one at 9:30pm. So, while I would love to support Southwest, the schedule says I’m flying Delta (and I don’t have checked baggage anyway).
And I find a direct correlation with this and the fact that I can now usually find much lower fares from Chicago on the legacy carriers instead of Southwest, where my fare is subsidizing other people’s bags whether I like it or not. I don’t check bags, and fees have definitely made the legacies much more competitive for people like me.
Agreed. I would LOVE to fly SWA and JetBlue (and would even pay a premium to try JetBlue), but they don’t fly most of the routes I want, and when they do they’re either much more expensive or have bad times/routings (can’t wait until the Wright Amendment is fully phased out). As you said, though, if you’re not checking bags, and if the prices are comparable, why fly SWA- especially if you have status with one of the majors?
I do agree that the legacies seem to be much more competitive now than they were a few years ago. I can’t tell a ton of difference between the legacies as far as their products go, and prices are often similar enough that even for leisure travel I choose my carrier based on departure time or FF status, not price or perks.
Great article. I have no problem with any company making a profit. That said, I hope that Southwest profits by NOT charging customers for their first two bags.
I have several problems with the baggage fee issue though. First, it makes it harder to compare prices for flights since the airlines are all over the board with their pricing. I’ve tried to make it easier for people :) http://hiddenairlinefees.com/baggage_fee_calculator.html
The 2nd problem is that rather than trying to find innovative solutions to add VALUE to the flying experience, they’ve added frustration. Instead of thinking “How can we profit by making our service BETTER?” the airlines should be thinking about how to make their service and offerings stand out above all others.
I thought the extra legroom that American incorporated a while back was a great idea but they didn’t promote it very well. Of course, not everyone needs it, which I’m sure is part if the issue. I’m 6-2 with broad shoulders and a fairly lean 215 pounds and I’d love to see more airlines offer roomier seats as an upgrade. I don’t mind paying extra because I’m getting more value.
10 or 15 years ago their was an airline that flew out of Love Field in Dallas for a short while called Legend Airlines. They flew out of a smaller terminal, so it was super easy to get to the gate and EVERY seat was first class but the prices were super reasonable. Unfortunately, American forced them out of business by suing them relentlessly, as Legend was creatively, legally operating interstate flights out of Love Field by flying with only 56 seats per aircraft. Read more: http://en.wikipedia.org/wiki/Legend_Airlines
But that’s the way business unfortunately seems to work these days.
Anyway, hope you check out my site!
CF, I got halfway through your post before I realized you weren’t talking about YQ fees. Those should be included in the base fare since the customer does not have the option to not pay them if he wants the ticket.
I have to agree with you that fees for some items are fair. My wife and I seldom check bags – why should those that pack everything but the kitchen sink not pay their fair share? Including these costs in the price of the ticket would mean we’re subsidizing others. It’s the same with food. I don’t mind forking out $18 for a sandwich and snack box when travelling in coach. Those who don’t eat shouldn’t have to subsidize my food.
While there is a two bag limit, flight attendants hardly ever enforce it. Many female business travelers (and a few males) have a roll on board, lap top case, hand bag and a shopping bag of local treasures. I count that as 4 carry ons. Several times and every time I have flown Southwest boarding from section C, I have been asked to check my bags behind a woman like the ones i mentioned. When I point out they have four they flight attendnants smile and say “don’t worry it iwll be in the jetbridge when you get off”. Guess what they are not and one particular time i was conecting in LAS and had to leave the concourse, pick up my bag at baggage claim, wait on line to go through security again only to get back on the connection and get asked to check the bag again….didnt happen that time.
It’s funny, this is all about the bag fee. No one seems to care about food, beer or select seats (because a service is provided). When bag fees were introduced, the airlines didn’t lower fares and now provide a new service. They added a fee and low and behold if they lose or damage your bag, no refund. That’s not service so that is one reason the fee is not popular. Only Alaska has a bag gurantee. If you pay for something, you expect something in return 2) In the case of Allegiant, the fares are ultra cheap, so paying for bags really feels “unbundled” and appropriate. When you pay $500+ round trip for a ticket and now the airline want’s another $120, I’m not feeling value. And as many have pointed out, if people loved fees so much, they wouldn’t try to carry on so much stuff. The cabin on non-Southwest flights is a disaster.
I avoid airlines where I will pay for bags. I either go SWA or on a carrier I have elite status on.
Airlines, as private businesses, should have the right to price their products as they wish – as a bundled price or a la carte. At most government should enforce disclosure, since on virtually every routing we have a choice of airlines (may not be non-stop) and in addition we usually have the alternative to drive or drive to another airport. While the airlines don’t have a right to a profit, they have to earn profits over time to get access to capital to buy airplanes and other capital they need for their business.
Airlines will figure out which pricing is most effective for them. Many of the airlines with first bag fees have a variety of offerings which let you get you first bag more cheaply or free – whether it is by signing up for the airline’s credit card, or buying an annual subscription (which rewards loyalty), or flying enough with the airline to become elite, or buying a bundle that includes things like United’s Economy Plus seating.
As Cranky’s article points out, the development of ancillary revenue has enabled airlines airfares to be lower than they would otherwise have to be to generate some profits. It also means that travelers who pack light, and don’t check bags, can pay lower fares.
I always check my bag. There’s no way I want to drag it thru the airport security.
I would much rather the airline lug it around. The thing I don’t like about the fees is that they charge them individually. I would rather they allow you to pick any and all the services you want from a menu, add up all the costs and present you with one biill. There there is one receipt for the airline travel.
By the way I would prefer the airlines lose my luggage, on the way home. So when they eventually fine it (and they always have) they deliver it to my house.
If complex fee structures that are inconsistent across airlines make it difficult-to-impossible to compare ticket prices, then those airlines are engaging in misleading sales practices. Period. Hotels have done this for years, but the sheer volume of the problem when airlines do it makes it obscene.
Every airline publishes its bag fee structure on its website. Most of the legacies are even pretty similar, so it is pretty easy to know how much to add on to the quoted ticket price to compare. There are even websites that will do it for you – you tell them the bags you will check and it will show you fares that include the bag charges.
This is not an area that needs more government regulation. Heck by that measure, Chinese restaurant pricing and menu names need regulation so that I can compare menu prices and bundles. I think the Las Vegas hotel resort fees are much more duplicitous since they are generally mandatory, don’t provide anything of value, and are often not disclosed.
Another factor is that some airlines, notably Southwest, don’t participate in some airline GDS distribution systems, and so their fares aren’t always shown. Maybe Spirit and Allegiant are similar – or in the case of Allegiant they fly from random nearby airports so they may not show up in fare results. Does that need regulation too? I’d rather let the airlines plus websites figure it out.
Oh and since you got my dander going…. Another thing I find duplicitous is all the rental car add-ons. They are starting to add 50% or more to the cost of renting a car. The car rental agencies are responsible for some of them, but the public airport authorities are responsible for a chunk, and then state and local governments for even more. The airport authority already takes a 10% cut, but then we get additional facility charges, and transportation fees. And governments tax rental cars because they think they are taxing out of towners who can’t vote.
Exactly, this will be an issue until we get a next generation Kayak or Google Travel that incorporates fees and compares across airlines.
I know both Amadeus and Sabre are working on this right now.
1. The TV vs Airline fee analogy is fine, however the glaring difference is that if my TV salesperson treated me like $hit, I wouldn’t buy from him, no matter how cheap the price was. There is a value to dignity and the airlines seem to have forgotten this. I am a freq flier (120k so far this year and 2 weeks to go), but I have steadily noticed the decline of even the most common curtosey as a ‘hello’ when boarding. Granted, passengers are responsible for common curtosey as well, but this is a service being provided to them, so there is a bit of leeway. Yes, the majority of my flights are upgraded but it’s still not pleasant listening to the flight attendants bi$%ch about passengers, the plane, the delay, the overhead luggage, the mom with 3 kids, etc while you’re sitting up there. And this is more the norm than the exception.
2. I get it about airline carry on luggage. I travel for business mainly and my bag is carry on approved. However, I am a business woman and yes, I do carry a very small purse along with my slim laptop bag and my carry on. I’ve seen guys board with garment bags twice the size of all mine put together and then cram it in the overhead. Outside of that though, what miffs me is the amount of luggage flight attendants carry on. Yes, I realize they go from city to city but come on, they’re not pack mules – 1 rollerboard, 1 laptop bag, 1 duffel bag type bag, 1 purse, 1 lunch sack, the list is endless. Should they get an extra bag, sure. Should they get an extra 4? No. Throw it downstairs with the others if you are terminating in that city.
Just because other people do stuff that breaks the rules doesn’t mean it’s ok for you to do it too.
And don’t complain that you’re penalized for carrying your purse as a separate bag. Nothing prevents you from combining your small purse with something else, or carrying a larger purse that could replace another bag, or even wearing clothes with pockets and sticking your wallet in there, like men do.
That’s just a ridiculous comment: “Just because other people do stuff that breaks the rules doesn’t mean it’s ok for you to do it too”
This post is talking about airline fees, and the most common and most complained about fee is extra bags. My statement was making a point about flight attendants, not getting into the ethics of one bag vs twenty.
Also, I didn’t say I was penalized for carrying my purse as a separate bag. I put my purse in my luggage or laptop bag and go about my day. Again, the comment was about people that bring one or two large (albiet “legal”) pieces of luggage that are far larger than my three put together and flight attendants that board looking like pack mules. And come on, really – clothes with pockets? Is that a new invention? Have you ever looked at the size of pockets on woman’s dress pants (or jeans) for that matter? You can barely fit a wallet (without a checkbook of course), no chance on a blackberry and a wallet, and then forget about car keys as well. And what “larger purse” could I replace with another bag? That would look pretty professional walking into a customer site carrying a gym duffel bag that had my laptop, customer files, purse and whatnot in it.
There’s a far more basic reason why fees are desirable — at least for things like baggage.
Transporting bags costs money. It’s economically optimal to charge separately for this service and it’s economically irrational not to.
Since bag fees have been instituted, the number of checked bags has declined by about 50%. This indicates that there were way too many bags checked when they were “free”, which is exactly what you would expect.
Also, another comment — airlines do not have a right to make a profit. They have a right to *try* to make a profit. No business has a right to a profit.
I think what Cranky meant was they have a right to make a profit and if that means charging added fees to do it, then that is their right.
A question for everyone about bag fees.
Do people complain because there is a bag fee period or because of the price charged?
If it was $5 instead of $25 would people still complain about having bag fees?
David, I’ll answer that. YES. People complain, just to complain. Through the eighties and most of the nineties, that complaining got you vouchers for free drinks, an upgrade, complimentary miles, a phone card, blah, blah, blah. Airlines and employees eventually caught on and now disperse those bennies much less frequently.
There’s been a mentality that air travel should be CHEAP for decades! What?!? A headset costs money!?! A beer for $5.00 bucks!?! Outrageous.
One minor nitpick/correction: You got your price increase math in the example. If the base price is $50 and the price goes to $150, that can be described as either a 200% price **increase** (not 300% as you stated) or a tripling of price (3 times the base is 200% more than base, as the base is by definition 100% of itself, think of it that way). If prices were to increase by 300%, the $50 price would quadruple to $200. Very minor point that doesn’t affect the analogy, but just thought I’d point it out.
I actually have no problem with the fees, and find it amusing that people get so upset about them. Sure, in many markets and routes there aren’t much in the way of alternatives, but are you really getting screwed? Even with the fees, inflation-adjusted prices are about the same as they were several decades ago, or even lower. Even in the best of times, the airlines don’t make much money, and they certainly don’t make the 20%+ net profit margins that many large corporations make year after year. Are you also complaining about those corporations?
If airlines want to add a few fees to make ends meet, by all means let them! If the people don’t like the fees (and some don’t, and I understand that) and would prefer to pay a higher base fare instead, there’s a business opportunity in that- one that SW, which consistent has higher fares (out of DAL) for the routes I fly, has tapped quite well.
I’m about to book a Christmas flight, and will probably have to decide between shipping a package or checking a bag. That said, $150 base RT DFW-ATL is as low as I’ve ever paid for a fare, and I have no problem paying another $50 or $70 RT to check a bag.
One service that I would really like to see more of is gate-checked bags. On many flights, especially if I’m in Zone 3 or 4, I’ll pre-emptively gate check my rollerboard. I know that with such a late boarding there’s a good chance there won’t be any space (forcing me and other pax to gate check our rollerboards anyway, and delaying the departure), and even if there is it’s not worth slogging through the aisles, banging other pax with my bag before attempting the “shotput and cram” to get it into an overhead bin.
Far easier to just slap a tag on the bag, drop it off at the end of the jetway, and wait 2 minutes to pick it up on the jetway at the other end. I LOVE doing this, especially as airlines never charge for it, and would gladly pay $5 or $10 for the privilege. All the convenience of having your luggage at hand (who really opens up a rollerboard in flight anyway?!), with none of the wait and expense of actually checking bags.
I don’t get this last bit about wanting to pay to gate-check your bags. You “pay” for the convenience of having access to your bags in flight and not having to wait by dragging it through the airport yourself, including hassling with it at the security checkpoint. To go through all that and still have to check your bag at the gate seems like an extraordinary hassle for little payoff. If airlines gave at least the first checked bag free, more people would do it and there would be fewer cases of people being forced to check their bags at the gate because all the overhead bins in the cabin are full.
There is also the problem of turboprops and RJs that have nearly no useful overhead bin space, so most of the carry-ons get checked at the plane anyway. The issue here is that if I don’t check a bag plane-side, I still sometimes get penalized by having to wait until the ground staff unloads those checked bags and gets them to the door of the airplane, before any passengers are let off.
I understand the inconvenience gate checking poses for those who don’t- even if you don’t have to wait longer to get off the plane, you have the crowd lining up on both sides of the jetway, and things get crowded. That said, on many of those planes, especially the props and where the airport doesn’t use a jetway, it’s easy to walk past those waiting around the wing for their bags, as the handlers are just starting to unload them.
To be honest, this is more of a personal preference for me; I like the convenience of dropping my bags off at the jetway and picking them up the same way (if I could do the same with my larger bags, fee or not, bringing them through security etc instead of checking them with the ticket agent just inside the front door of the airport, I would- less chance of loss/theft).
To me this “extraordinary hassle” of picking my bag up at the gate (which to me is non-existent) is more than outweighed by not having to slog my bag through the aisle (I manage to bump every second person in aisle seats doing this; better hope you’re not on my flight if I bring my rollerboard in the cabin!), not worrying about the overhead bin jenga game, and not trying to fight traffic to eventually gatecheck my bag anyway when the bins do turn out to be full. May not sound like a big payoff, but for me it’s worth a minute or two of waiting on arrival.
I do think there is a way to do gate checking more efficiently on larger jets (think 737, not just the RJs) and maintain quick turns, I’m just not sure what it is. Perhaps someday an airline will make Aeroflot’s luggage at hand system (http://en.wikipedia.org/wiki/Ilyushin_Il-86#The_.22Luggage_at_hand.22_system) work out efficiently, though you could argue that people stuffing a large rollerboard and a coat into the bins today amounts to nearly the same thing.
The issue I have with the props is when the flight attendant doesn’t let anybody off the plane until the carry-on bags are ready for pickup. If I didn’t gate-check any bags, I still have to wait.
The “extraordinary hassle” I was referring to has to do more with all the security theatrics and dragging the bag through the terminal from curb to gate and on connecting flights. The carry-on fee at Spirit was what brought this to light in my mind: I get to *pay* Spirit for the privilege of having to take my bag to the plane itself, rather than paying them (in the form of a checked baggage charge) to do it for me.
Plus, in the Spirit case, their attitude when implementing this fee is very off-putting. They claimed it was to reduce the number of bags being carried on, resulting in lack of space, slower boarding, etc. A problem they created by charging an extra fee to check bags in the first place. So their response to the side effects of one of their customer-unfriendly policies is to create another customer-unfriendly policies, rather than changing the original customer-unfriendly policy.
Understood re: the FAs not letting you off while the bags are being unloaded. You’d think that the second the wheels are chocked they’d be eager to get the pax off the plane, and just have a “Wait Here” sign for the pax waiting for their bags (they already mention “Don’t go behind the wings” several times, but few pax listen).
Security theatrics are just that, and they are PITA, but that’s another issue. The problem with dragging bags around airports is something to consider, but to be honest as long as I have a decent rollerboard I would usually rather pull my bag around the airport, even for connections, than to have to be stuck waiting at the conveyor. That said, it **is** nice to have the occasional day trip where all you bring is a briefcase, and you don’t have to worry about bags at all period.
Re: Spirit… Understand the sentiment. That said, pax that bring their bags on the plane are delaying the plane’s departure, reducing the number of flights it can fly with each aircraft and costing it money indirectly, just as it directly costs money to load cargo and bags into the bottom of the plane. Think of a carryon bag fee as a fee to help the airline make up some of the money it could have made by an extra flight a day if you didn’t have 137 pax taking the time to carefully put their crap in the bin above. I know it sounds crazy, but it is partially true. What the status quo was before isn’t really relevant here; the point is that both carryon and checked bags cost the airline time and money on the ground (indirectly and directly), and the baggage handlers getting minimum wage appear to be much more efficient at loading bags below than the pax in the narrow aisles above.
Yes, Spirit isn’t terribly “customer friendly”, but that can be said for many true LCCs (possible exceptionxs: SWA and JetBlue, and it can be argued that neither of which is still a true LCC), like Allegiant and RyanAir. That said, there’s evidently a market for companies with fees like that, and there’s a market for people who don’t like it as well.
The way I see it, legacies and traditional LCCs have increasingly converged. In the SW markets, you have the “somewhat all inclusive” fares (SW) as one option and the “a la carte” fares as another. As SW implements its policies at AirTran, this will expand, and you should see a bit of a binary choice emerging for air travel with regards to being “nickel and dimed” vs at least getting a bag free.
I do agree that so much of this is focused on bags because those fees aren’t really creating value for the customer from before, just charging them for what used to be free. I would actually like to see airlines get more creative with fees and services that help to create value that didn’t exist- I like the “board first”, exit row, aisle seat, lounge pass, etc fees. Maybe a “bring a 2nd large bag aboard the plane fee”, with guaranteed overhead space for both your bags?
If anyone wants to play with numbers?
I have a PSA timetable from January 1980 and the fare between SFO and LAX was $48.00 and the transportation tax then was 8pct (per the timetable). While PSA is no longer around, a UA 14day advance purchase -L- fare TODAY is $45.58 and the current tax is 7.5pct. The full coach YUA $703.26 plus taxes. While there are other fares in between those, it shows that 30 years later, you can actually fly for less if just looking at the airlines fare and the one government transportation tax.
I can tell you from a September/October 1974 timetables UA and TWA between SFO-LAX charged $28.50 in first class and $19.50 in coach (not sure what the tax was then).
So now those who like to play with numbers, what would those 1974 and 1980 fares be today compared to what UA charges today as mentioned?
While I find the fees cumbersome, airfare is amazingly inexpensive, thanks to Herb Kelleher of Southwest Airlines. Does anybody remember the days when only business people and the well-to-do could afford air travel? Now everyone expects low fares. Well with low fares, comes no frills. I think the analogy makes part of the case. Fees are a necessity because the average traveler doesn’t do the math so they’ll pay an additional $125 in fees but wouldn’t pay an additional $125 for the base ticket. I guess it works for the no-frills traveler. Yes Southwest is not the lowest fare carrier in every market if you look at base fares but once you tack on the fees, there’s a world of difference.
I don’t mind add-ons, I don’t mind paying an extra $25 for extra legroom, or early boarding, it has given us more options for food than what you were given, but it has its downside, sitting next to someone shovelling down carried on board Sushi and spitting over you is one, and the excessive baggage fees are getting out of hand, and they are getting extra for the cargo in the hold where the bags used to be, it should be the other way round, the cargo should subsidise a little of the carry on baggage.
And then there is Ryanair!
someone owns airline stock
If you’re really referring to Cranky, though, check his Ethics page.
Well, duh! Most major airlines are public companies, and even private companies are owned by someone. Are you seriously suggesting that CF is trying to influence stock prices with this post?
I don’t fly much. That being said this is what I do. If either Southwest or Jet Blue flies there or nearby, the other airlines aren’t even a consideration. When I went to Denver in April, only Southwest was considered. When I fly to New York City next August, it will be with Jet Blue.
I have friend who doesn’t like Southwest because the seats are unassigned; however, she flies Southwest because it doesn’t have all of those fees.
Regardless of the business model, I think it’s an issue of basic fairness to charge for baggage. If I am traveling with one carry-on, and another guy wants to carry 100 lbs. of stuff, why should we both pay the same ticket price? In effect, those who travel light are subsidizing those who pack more. Same with the food. I get airsick and can never eat or drink on a plane, so why should my ticket price go to pay for someone else’s meal?
I understand where you’re coming from, and agree with you in preferring the a la carte. That said, I think this comes down two models: a la carte (think Spirit, Allegiant, or Ryan at that extreme) and all-inclusive (think: 1st class on Singapore internationally).
Just as some people want to go to an all-inclusive vacation resort (Sandals, anyone?), some want to fly on an all-inclusive airline. The problem is that many of these people want (or seem to think that they should be able) to fly on an all-inclusive airline for the price of an a la carte ticket, and that just isn’t going to happen. On the flip side, there are people like you and I who’d prefer the opposite. I really do think that there is room in the market for different degrees of all-inclusiveness, especially on the more popular routes.
You are missing an element of how this works, I think.
It requires the stupidity of the customer.
Many people buy purely on price and schedule. The level of service does not enter into their decision as they scan the price comparison on kayak.
So if kayak says United is $120, and JetBlue is $125, they’ll go get the United ticket. They took the cheapest thing they saw. But having done that, they’ll go on to pay various fees that make the United price higher than JetBlue would have been for a comparable product.
If customers act this way, why would you not price that way?
Well put, and very true. One major issue is that airlines like SWA that differentiate their product and have value-added services included for free instead of for fees have a hard time making customers remember that when customers go to book at Expedia or Kayak. Hence the fact that SWA is paying millions to advertise “Bags Fly Free”- few people ever check the fees, they just complain when they have to pay them.
I can’t wait until the next generation of travel sites come out, where you will enter the basic info plus questions like:
“How many bags will you be carrying on board? How many will you be checking?”
“Will you want to buy drinks, lunch, a snack, or nothing on board the plane?”
“Will you want a confirmed seat? With extra legroom? Near the front of the plane? On an exit row? On an aisle?”
etc etc. Those will allow you to get custom flight quotes for your situation.
I also think such a comparison web page is key, but it really would become quite cumbersome to answer all those questions before searching for a flight.
Especially with airlines like Spirit in the mix.
Couple of random thoughts and responses to earlier comments, which I’ll post in a separate entry since my feeble brain has long since lost track of where everything is:
1) Much has been made of WN, and the fact that they often aren’t “THE Low Fare Airline” anymore. I would argue, though, that this is by design – because they’re one of the few airlines that have successfully differentiated themselves on something other than price. Part of it is that they’ve tapped into the public’s anger about fees, but part of it is also service. It’s subtle, but if you watch WN’s commercials, they’re always full of happy, smiling employees. I’d argue that the promise of a “happy” experience has drawn people in, and together with “Bags Fly Free”, has successfully convinced a good number of passengers to pay a higher fare just to fly WN. Other airlines should take note and draw their own conclusions.
2) There is another reason why people don’t check bags, and that is, how ridiculously long it takes to get your bags back at big airports. Those of you who fly out of DFW will know what I’m talking about. I don’t even care so much about the $25 to check the bag. But when I’ve been on the road for a week and finally get home, the last thing I want to do is dork around at the carousel for 25 minutes at 9 P.M. So, it doesn’t really matter to me if you charge for a bag, I’m still not going to check it if I can avoid it.
3) My biggest problem with fees isn’t the fees themselves, but with their often deceptive nature and the difficulty it creates in comparing airfares amongst airlines with differing service levels. The second issue, as others have noted, will probably take care of itself eventually as GDSs and metasearch sites become more intelligent, and airlines themselves build sophisticated enough engines to allow a “menu” to pick from. But the first issue is a bigger problem. After all, the airlines claimed when they instituted baggage fees that they had to do it because of extraordinary fuel prices caused by $120 oil. But then oil crashed, and the fees stayed. That then causes a great deal of ill will among the public, as they now feel that they’ve been deceived. That’s entirely the airlines’ fault. (And as an aside, airlines have nothing on hotels when it comes to deceptive fees – the rapidly exploding mandatory “resort fee” has to be the most evil invention ever, and one that I actually wouldn’t mind the government outlawing.)
4) I will throw a hissy fit as soon as the first legacy carrier institutes a fee for booking online (with the only other choice an even higher fee for booking over the phone or in person), or convinces the banks to let them charge a “convenience fee” for using a credit card, a la Ryanair. Those types of fees add zero value to anything and are essentially unavoidable, and need to be rolled in to the fare.
Agreed on the DFW baggage issue. It’s one thing when you land at, say, ATL Terminal E, where the gate is literally more a mile from the carousel and it takes you a good 10-15 minutes to get to the baggage claim. There I can understand perhaps a 5 or 10 minute wait after you get to the carousel (20-25 minutes to unload the bags and move them a mile plus is long but close to reasonable IMHO).
When you can go from gate to carousel to cab in under 100 feet, however (like at DFW, which is great for O&D traffic and which was designed to minimize gate-curb distance), or when you can be at the curb within 10 minutes of the wheels smoking the runway (TPA sticks out in my mind, as does any airport with < 20 gates), you'd think they could get the bags to you in 15 minutes or so.
I think another issue you touched on is how "honest" and open companies should be (or should have to be) with regards to extra fees. Should they have a "Each checked bag costs $25" notice on the booking screen, or is it fine to hide it in the more obscure parts of the web site and just assume caveat emptor? Even some landlords do this; I was forced to pay a $100 "facilities fee" for my landlord at lease signing; apparently my lease doesn't cover the cost watering the dozen bushes on the property. Grr.
airlines run on a razor thin profit margin…most major airlines around the world receive huge government subsidies. IN the USA they do not…in fact airlines and passenger tickets are heavily taxed more than most industrys. This is why most US airlines end up going out of business..like eastern, panam, braniff TWA…and why US airlines have fairly OLD fleets…still flying DC-9’s like DL…and in the meantime our competitors fly 777-300ER or A340-600 a plane no USA airline can even afford…any fees that help USA airlines make some form of dent into their huge DEBT loads is good
You miss the main point here; it’s the internet and sorting by fare, that has caused all the additional fees.
When you search for a flight these days, it’s sorted by ‘fare’ — not total fare. It’s so vitally important to the airlines to be the #1 position; so they make the fare small, and the add ons that you have little choice to accept (or in the case of fuel surcharges — must accept) large.
Case: Air Canada to Europe
Fuel cost on YVR-LHR-YVR: $390 (approx based on their latest quarterly)
Fuel surcharge: $320
Fuel surcharge with respect to fuel paid by airline fare, well over 450%
Fuel surcharge by BA on same route; very similar
Fuel surcharge on AC YVR-NRT-YVR (almost exactly the same distance) is 1/2 that as on YVR-LHR-YVR.
It’s exactly the same bait and switch as ‘resort charges’ at hotels. It’s going to take legislation to stop this kind of monkey business.
What site are you looking at where it shows you the price before fuel surcharge?