2 of America's favorite airlines are increasing fees

The last couple of years have not been kind to JetBlue Airways(NASDAQ: JBLU) and Alaska Air Group(NYSE: ALK). Rising fuel prices have pinched profitability across the U.S. airline industry, but due to competitive dynamics and other factors, JetBlue and Alaska have had more trouble offsetting these cost headwinds than some other carriers.

Both airlines have tried to get profitability back on track through a combination of cost discipline and tactical capacity adjustments. However, it hasn't been enough. As a result, JetBlue and Alaska have both decided to increase various fees to boost their ancillary revenue and counter the weak fare environment.

High customer satisfaction doesn't always mean high profits

JetBlue and Alaska Airlines regularly rank as two of the top airlines in the U.S. for customer satisfaction. While Southwest Airlines(NYSE: LUV) has been the highest-rated airline in the annual J.D. Power North America Airline Satisfaction Study for two years running -- following JetBlue's 12-year reign at the top -- JetBlue remains a close second. Alaska Air routinely takes the No. 3 spot. Meanwhile, JetBlue still has the highest-rated loyalty program in the country, followed by Southwest and Alaska.

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Secrets airline agents won't tell you
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Secrets airline agents won't tell you

Pardon us for staring at the computer -- we're really busy

From opening the door of an incoming flight to coordinating assistance for wheelchair passengers and children traveling alone to preparing the same plane to depart again, gate agents have their hands full. They also deal with last-minute seat assignments, upgrades, customer questions, and crew or maintenance issues. When they seem like they're tapping endlessly on archaic computers for no reason, they're actually accomplishing countless tasks in limited time. Delta Air Lines management once required gate agents to make eye contact with anyone within five feet of the desk every five seconds. Delta agents will tell you just how tough that is. Check out the 13 things airlines don't want you to know.

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We can't upgrade you for wearing a tie

The myth that dressing well gives you a better chance at a business class upgrade has been around for some time—and perhaps it was once true. Instead of picking the smartly dressed, though, today's agents follow a priority list, starting with elite frequent fliers. Not following that list, especially when customers can view that information on airline apps, is a big no-no. The only time an agent might upgrade someone for free is if economy class is overbooked and there are no more eligible passengers on the upgrade list.

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We can get you a better seat -- if you ask nicely

As eligible passengers are upgraded, more (and often better) seats in economy class will free up. Plus, seats that were previously blocked can now be assigned, so you could ask for an upgrade to a seat with more legroom. Try asking politely about half an hour before departure to see if you can move out of that middle seat at the back of the plane. Don't forget these other 10 etiquette rules for flying on an airplane.

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Don't panic if you don't have a seat assignment

This doesn't mean that the flight is overbooked or that you are not confirmed. Because many airlines block seats for families or those who need assistance, there may be times when you won't get a seat assignment right away; other seats might be blocked for frequent flier elite members or still open for sale. If you opt not to pay for a seat in advance—or couldn't pick one at check-in—never fear. Gate agents are working hard to get you an assignment before departure. Keep an eye on the standby list for your name.

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Occasionally, we can hold a flight for you

Airline computer systems can alert agents to passengers who might miss a flight because of a late connection. In fact, gate agents are monitoring the record of passengers who might be en route to determine if they should give their seat away to someone else (but only if it is clear the passenger won't make it). They even have a term for late passengers who scurry to the gate: "runners."

If a large group of passengers is delayed by a flight—or if the agents are boarding the last flight of the day—they might hold a plane. But they have to weight a lot of factors: For example, will the crew "time out?" (Pilots and flight attendants can only work a limited number of hours.) On the other hand, they don't want to strand any unaccompanied minors or elite frequent fliers. In other words, you could get lucky if you're running late—but don't count on it.

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If you're really late we'll give your seat away

If boarding has finished before you breathlessly charge the gate, there's a good chance the agent will have given away your seat. Agents have to print paperwork listing all of the passengers, plus weight and balance information about the plane, which pilots use for flight calculations. To let a late passenger on the plane, the gate agent would need to redo all that paperwork, delaying the flight even more. You're better off getting there early. If you have time to kill, here's how to never be bored at an airport again.

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The computer picks the compensation for bumping -- not the agent

When you're angling for more benefits, the agent can't do much—the computer is calculating how badly the seats are needed and how much of a travel delay it would cause you; then it derives your compensation. Most agents don't have access to airline lounge passes or drink vouchers, so attempts to finagle more goodies most likely will prove futile. However, you could politely request that the agent ask a supervisor if it's possible to offer more. Just don't get your hopes up. Airlines from the European Union—and U.S. carriers operating from it—are subject to strict guidelines on what they can offer passengers if a flight is delayed, canceled, or oversold. However, agents won't always offer extra up front, so it helps if you ask. Here are 12 tricks for stress-free air travel.

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Misbehaving can go on your permanent record

Seriously: Although each airline is different, agents can and do make comments on a traveler's record. While the agent may have to search for the info, your nasty behavior or comments in the past can haunt you when you travel—you could even be more likely to get bumped from future flights if you've been really disruptive. Don't miss these other 22 things your flight attendant won't tell you.

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But while customers love all three low-fare airlines, that hasn't translated to equivalent financial results lately.

As recently as 2016, Alaska Air and JetBlue were among the most profitable airlines in the U.S. JetBlue's profit margin was 11.4%, right in line with Southwest Airlines' 11.6% adjusted margin. Alaska Air's adjusted profit margin was even higher, at 15.4%. By contrast, while analysts project that Southwest's adjusted earnings per share will reach $4.16 this year -- up from $3.75 in 2016 -- analysts expect adjusted EPS to fall from $7.32 to $4.16 for Alaska Air and from $2.22 to $1.49 for JetBlue over the same period.

The sharp EPS declines for Alaska and JetBlue are even more notable given that they are getting big windfalls from tax reform this year. With fuel costs rising and profitability plunging, both carriers' management teams are highly motivated to find new sources of revenue. That's leading them to rethink their fee policies in an effort to boost non-ticket revenue.

Policies are becoming less customer-friendly

In April, Alaska Airlines announced that it would make several policy changes in an effort to generate $150 million of incremental revenue annually. Most notably, it will launch "Saver" fares in late 2018, its version of the basic economy fares adopted by the legacy carriers in recent years. Customers buying Saver tickets will only be able to select seats at the back of the plane, they won't be eligible for any flight changes or upgrades, and they will board last.

Additionally, Alaska Airlines has done away with its policy of allowing free flight changes up until 60 days before departure. Flight changes will cost $125 in most cases, regardless of when they are made. The fee for same-day confirmed changes has doubled to $50. Alaska also has started charging extra for exit-row seats and has adjusted its frequent-flyer award chart.

During JetBlue's second-quarter earnings call, management hinted that it, too, was looking to raise fees. Sure enough, JetBlue will increase a variety of fees at the end of this month, according to The Points Guy.

First and second bag fees will increase by $5 (for fares that don't include a checked bag allowance). The fees for a third bag, oversized bags, surfboards, and other bulky equipment will be increased by $50. The pet fee will rise to $125 from $100. Finally, JetBlue will raise its change/cancellation fee for vacation packages and for pricier tickets to $200.

There's no middle ground on fees

Southwest Airlines has had considerable success marketing itself as an airline that doesn't nickel-and-dime customers. Every fare comes with two free checked bags and can be changed or canceled for free until 10 minutes before departure.

These customer-friendly policies cause Southwest Airlines to miss out on some ancillary revenue opportunities, but they have helped the carrier develop a large and growing following of loyal customers. The no-hidden-fee policy boosts ticket revenue by enabling Southwest to get more than its fair share of bookings.

Alaska Airlines and JetBlue have occupied a middle ground between Southwest and the rest of the pack in terms of fees. All JetBlue fares included a free checked bag until 2015. Meanwhile, Alaska Airlines allowed free flight changes up until the 60-day mark. And JetBlue is still the only U.S. carrier to offer free high-speed Wi-Fi on every flight.

However, these carriers appear to realize that customers haven't been giving them much credit for having lower fees and friendlier policies than the legacy carriers. That isn't very surprising. It's hard to build a marketing campaign around the concept of "bag fees are a little lower" or "no change fees if you let us know really far in advance." Southwest has seized the moral -- and marketing -- high ground with its "bags fly free" and "no change fees" mantras.

Thus, the best strategy for Alaska Airlines and JetBlue Airways is to boost their ancillary revenue so that they can at least afford to keep base fares low. That's exactly what they're doing. But it means that these popular airlines may seem a little less customer-friendly going forward.

 

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