United Airlines' 'Premier Baggage' takes fees to a new altitude

On Monday, United Airlines (UAUA) unveiled the latest move in the airlines' game of let's-find-another-fee. The carrier's new program, Premier Baggage, is a year-long subscription costing $249 that enables customers to carry on up to two bags per passenger per flight without any additional fees.

Given that United usually charges $50 for two bags on each leg of a flight, a customer could recoup the price of the program in three round-trip flights. Furthermore, program enrollees can extend their benefits to up to eight passengers if they all purchase their tickets on the same account, which means that a good-sized family can come out ahead with a single flight.That doesn't mean Premier Baggage is a good deal -- it's more like an insult. Beyond the airline fee fad, United was likely inspired by the All-You-Can-Fly promotion that JetBlue (JBLU) ran earlier this year. That program allowed participants to fly as often as they wanted, wherever they wanted, for a month for $599. It was such a success that JetBlue had to end it three days early because it was concerned about ticket availability.

Presumably, United caught on to the fact that airline customers are willing to pay ahead of time for a program that isn't tied to a particular trip. Morever, just as JetBlue's program guaranteed that customers would stick with the airline for a month, United's program encourages customers to keep booking with it, lest they have to pay another carrier for baggage fees that they've already covered. In the current economic climate, baggage fees of $100 per trip could be a dealbreaker for many passengers.

United promotes Premier Baggage as "a great gift for any frequent flyer," but it's more likely that most of the airline's customers won't get past the bald-faced effrontery of this move. Historically, checking two pieces of baggage had been free. That changed back in June 2008, when United began charging for the first piece of baggage, with the justification was that doing so would help it offset the rising price of fuel. However, like so many of these fees, the charge for the first piece of checked baggage not only outlasted the fuel price spike but managed to actually increase. Now, by offering a yearly subscription rate, the carrier is telling consumers that luggage charges aren't only here to stay but that United is planning to exploit them as much as possible.

One of the most irritating aspects of the new program is that it exposes the airlines' fee strategy as a very pricey con game. While the new service won't cover charges associated with overweight or oversize bags, it encourages United's customers to get their money's worth by packing at least two bags on every flight. Admittedly, the airline is probably counting on customers to sign up for the program but not actually use it. Even so, United is sending the message that the link between baggage weight and fuel consumption -- the very reason cited for baggage fees, overweight fees and other charges -- is effectively meaningless. In so doing, it casts a great deal of doubt on its own pricing structure.

If the combination of this new program and the tendency of airlines to copy each others' fee structures were not enough, it's also worth noting that Premier Baggage's $249 price tag is an "introductory" price, suggesting that United plans to increase the charge, depending upon what the market will bear. Given that checked baggage charges generated $669.6 million in the second quarter of 2009, more than triple the amount they made the year before, it would appear that the market is willing to bear a surprisingly large amount.

Barring an (unlikely) customer revolt, it seems that premier baggage may soon be the standard.
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