Airline Fees On the Rise (Again)
We're beginning to sound like a broken record. It was just in May that we last examined the extra fees increasingly imposed by airlines, and they are at it again. New fees, part of a practice dubbed "unbundling," include peak travel surcharges, fees for standby, early boarding, and seat assignment, many sneakily hidden in the overall fare. The Department of Transportation estimated that now airlines present passengers with more than 100 additional fee options. So what do you need to know before you book?
The most egregious new fee is Spirit's controversial charge for overhead carry-ons. This prompted the advocacy group FlyersRights.org to demand that Congress ban such practices permanently. Flyers Rights president/founder Kate Hanni quipped that America's once-friendly skies had become the "Land of the Fee." And she's not the only one who is wary of what this will mean for consumers. "Being the only airline to add the charge, it's now even more likely that Spirit's self-proclaimed 'ultra low fares' will wind up costing more in the end than its competitors," says Anne Banas, Executive Editor of SmarterTravel. "So it's even more important for consumers to go beyond the advertised fare and compare prices on multiple airlines with all fees in mind before booking."
Spirit's official announcement stated the policy would "improve inflight safety and efficiency by speeding up the boarding and deplaning process." Ben Baldanza, Spirit President and CEO, testified before the House Transportation and Infrastructure Subcommittee on Aviation in July 2010 that the airline had reduced base fares when it led the checked-bag charge in 2007, then again just recently to offset carry-on fees. "Carry-on bags have become a nightmare for passenger boarding and deplaning," Baldanza argued. "Significantly, last March the Association of Flight Attendants reported that 80 percent of flight attendants had been injured during the last year by moving carry-on bags in and out of overhead bins." His argument seems like foreshadowing after the recent JetBlue incident. "Maybe, just maybe, Spirit Airlines doesn't look so stupid," says AirfareWatchdog president George Hobica. "Modern jetliners were not designed to accommodate every last passenger's carry-on bag, especially since flight attendants are not policing the size of these bags."
While no other airlines have plans to institute carry-on fees (at the moment), they are getting crafty with their add-ons, some of which you will never actually notice. Take the Peak-Travel Surcharge, for instance. Never heard of it? You may have already paid it. Holiday and summer fares are notoriously expensive, but they are even higher now that airlines such as American, Continental, Delta, United, and US Airways are adding between $10 (for mid-week summer flights) and $30 (for the Sunday of Thanksgiving weekend) to each leg. Delta was even so bold as to add a $50 surcharge to one-way flights on the day after the Super Bowl. And unlike fees for baggage or blankets, these surcharges are folded into the fare, making them undetectable. "It has become extremely difficult for consumers to effectively compare prices and make informed choices when purchasing a fare," says Banas. "And airlines have been taking advantage of that fact, especially by not disclosing fees appropriately."
Some airlines are still resisting tacking on fee after fee. During July's Congressional hearing, Southwest executive Dave Ridley saw a correlation between Southwest's commitment to "affordable, transparent, and easy-to-understand pricing structure and low fares with no hidden fees" and "a domestic market share shift worth close to a billion dollars" since the introduction of the "Bags Fly Free" advertising campaign. He added that another benefit is increased overhead space, unlike other airlines whose policies "'incentivized' customers to carry their bags onboard rather than pay bag fees."
Southwest also does not charge an extra fee if you want to go standby, another trendy new add-on that airlines have started implementing. The legacy carriers now charge $50 if you want to take an earlier flight than you are scheduled for. American gives you the option to bypass the standby charge -- if you want to pay another fee instead. Their new Your Choice "boarding and flexibility" package, which costs between $9 and $19 and is available on some of their most popular routes, provides early boarding, free standby, and a $75 discount on flight changes.
"The ancillary fees are not going away," says Cheapflights.com CEO Chris Cuddy. "[They] can generate 20 percent or more of an airline's revenues at high profit margins, quite simply helping the airlines stay financially aloft." A recently published Consumer Travel Alliance analysis, focusing on four popular routes taken by millions of travelers found that a typical traveler requesting just two ancillary fees (extra legroom and one checked bag) would pay an average of 26 percent more than the ticket base price shown on the website. A traveler checking two bags would pay 54 percent more, the actual increase ranging from 21 to 153 percent. And this has translated into big money for the airlines. The Bureau of Transportation Statistics reports that in 2009 U.S. airlines collected $7.8 billion in ancillary fee revenue, including $2.7 billion in baggage fees alone (up from $1.1 billion in 2008). Another $2.4 billion was made from reservation change fees. In the first quarter of 2010 alone, domestic carriers toted up $769 million in baggage fee revenue and a staggering $554 million from skyrocketing reservation change fees. Despite these gains, network air carriers reported losses of $163 million in the first quarter of 2010, and the industry as a whole only reported a profit of $12 million. Still, industry-wide second-quarter profits for the nine largest airlines numbered $1.86 billion. Every major carrier, save for American, was in the black. (See the chart below for the airline's 2009 revenue for the extras fees. It's interesting to note that Spirit's revenue has not been reported.)
So the moral is that profitability comes at a cost -- to the consumer. And it's not just new fees, but also sharp passenger capacity reduction both in the number of planes and routes (as well as consolidation/mergers), which inevitably increases fares due to competition for available seats. United Airlines president John Tague told the Wall Street Journal that the new pricing structure was "an unequivocal success" estimated to generate $1 billion annually.
What the government can and can not do to protect consumers from out of control pricing is up in the air. Various rulings mandate that some fees (fuel surcharges, peak travel and holiday surcharges, government taxes, and, as of May 2008, checked baggage policies) be disclosed in advertisements and during telephone and counter sales. Robert S. Rivkin, DOT's General Counsel, stated that's no longer sufficient. "We believe that the proliferation of these fees and the manner in which they are presented to the traveling public can be confusing and in some cases misleading," says Rivkin. "The published fare used by many consumers... does not clearly represent the actual cost of travel." The DOT may also require carriers to provide up-to-date, comprehensive fee information to Internet websites that sell airline tickets and to travel agents, having estimated that at least half of all airline tickets in the United States are sold by travel agencies.
It was Oregon Representative Peter DeFazio that really summed up flyers' frustration: "They just want to know, 'how much is the ticket going to cost them?'" See the updated chart below for whose charging what -- and how much the airlines are bringing in.
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With fees on the rise, the only thing airlines have left is service. Find out who flies the friendliest skies with the AOL Mystery Flyer.
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