Airlines Get Billions From Unbundled Services 432
Hugh Pickens writes "In hearings before Congress, the Government Accountability Office (GAO) said that airlines reported revenue of $7.9 billion from baggage fees and reservation change and cancellation fees in calendar years 2008 and 2009 — fees on unbundled services that once were considered part of the ticket price. '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 Robert Rivkin, the Department of Transportation's general counsel. Published fares used by consumers to choose flights don't 'clearly represent the cost of travel when these services are added.' However, Spirit Airlines President and CEO Ben Baldanza defended the practice of unbundling, saying it allows his airline to charge lower fares (PDF) and allows the customers the choice to purchase the services or not."
I like it (Score:1, Insightful)
I don't have luggage I can't handle alone, I don't drink the crap they serve, I don't eat the latex eagle they serve, so I fly cheaper.
Re:I like it (Score:5, Insightful)
Well on the rare occasion you take the two week Euro-trip it would at least be nice to know that there's going to be a 20% markup on the ticket when you book.
It's not about the cost, it's about the disclosure.
This forgets the unintended consequences... (Score:5, Insightful)
One of which is the excessive amount of carry-on baggage that people now bring on to planes. Instead of checking that larger bag and only bringing the laptop case/bookbag/etc on the plane, everyone tries to cram as much stuff as they can in their two carry-on bags so they don't have to pay baggage fees. On the airlines on which I have traveled they tend not to enforce the carry-on restrictions tightly, so many people bring oversized bags which monopolize the limited space available. As a result, you pretty much have to hover by the entry area on the concourse and rush on to the plane to ensure that you will be able to find a place for your single bag. Moreover, this rush for space creates a lot of tension between passengers. On planes with limited carry-on space I have seen arguments break out between patrons over the bag placement. It's distinctly unpleasant to be crammed into an aluminum tube while two people trade insults over space for their laptop case.
So who's to the rescue? (Score:5, Insightful)
With our brilliant free market capitalism in place, a competitor should be here to the rescue to innovate and beat the crap out of these guys who don't take care of their customers. For we have a choice, and that makes our way of life the envy of everyone.
Any minute now. Any minute!!!
I am also waiting for a better cable company, better internet service, a better bank, and oh, a better PC...
Any minute now!!!
Re:I like it (Score:3, Insightful)
No. You don’t. That’s the very point of this.
They unbundled it. But they did not lower the prices. So in essence it just is a sneaky way to make it more expensive.
Which in my eyes is fraud, and should result in expelling everyone involved from the country until the end of his life, making it punishable by death to ever enter the country or try to directly or indirectly start or take over a business in the country.
Why do so many people never get, that you can just go “MY COUNTRY, MY RULES!”.
Re:I like it (Score:3, Insightful)
Actually you don't, what really happens is that they price they charge for the tickets stays the same and the "fees" just become pure shareholder profit. If anything the prices for tickets has become more expensive even when correcting for the price of fuel and labor. So, we have more expensive flights with a lower quality of service - isn't baronism wonderful?
Re:I like it (Score:2, Insightful)
Re:2+2=5 (Score:4, Insightful)
I'm sorry, but could you show me where it was TFA (or some other source) said that this revenue (not profit) is above and beyond what the airlines were making before?
It matters.
So what happens when... (Score:1, Insightful)
1) You are going somewhere with a large climactic difference from your present location.
2) You are going for say, a month. Oh and yes it is on Business so you need suits and formal shirts.
3) you need to take a laptop.
4) the flight is say 10+ hours.
Then the airline only allows 5 or maybe 10kg of carry on which they weigh every item.
Frankly you are stuffed. You have have to pay.
Kerching. Kerching. Kerching. Dig deep my friend. You have just made the airline lots of money. Welcome to the Machine aka Cattle class on budge airlines.
These so called 'low cost' airlines are in many cases more expensive that full service ones. I've just returned from a week in Budapest on Business. SleazyJet was £20.00 each way more expensive than BA. Add to that, I live much nearer Heathrow than Luton then guess which carrier I chose.
Don't even get me started on LyingAir (RyanAir) who wouldn't let me take my Nikon 200-400mm Lens (worth $6K) in the cabin with me and oh, they wouldn't insure it as hold baggage.
Did I say I'm a pro photographer? Guess how much kit I can take with me even when travelling light? 21kg is normal. Full fare airlines see that it is pro gear and say 'carry on? No problem'.
Low cost? forget it sunshine. I'd rather drive or take the train.
Watch out LyingAir want to make you stand for your flight if they have their way.
Nothing different that a commuter train really. but do you want to stand during turbulence?
Nope I though not.
Re:You're not flying cheaper! (Score:4, Insightful)
It's not discriminatory , it's physics. It costs X amount of energy to move Y mass from point A to point B. Guess where that energy comes from? Fuel :)
You can't complain, you can't compare (Score:5, Insightful)
Re:I like it (Score:5, Insightful)
You are completely missing the point. Companies are not being honest, that is the problem. With your self-sufficient attitude, you may as well go to the place walking. But your approach is selfish. Maybe one day your grandma or your pregnant wife would not be able to handle her luggage by themselves, or will need to eat something at the plane, and they will be taken advantage of. Of, course, you will not have a problem with that, would you, big guy?
If the fees they charge for these services are in line with the cost of providing them, then no, I don't have a problem with that. TANSTAAFL. OTOH, if they're overcharging for them in order to subsidize a cheaper price on the ticket than it should be, then yes, it's a problem.
A matter of time (Score:3, Insightful)
Re:Unbundling without choice (Score:2, Insightful)
You always have a choice in a free, competitive marketplace: you don't have to fly with Spirit Airlines.
If you are flying domestic, you can always fly Southwest, which to date has no luggage fee up to two checked in bags (I think).
If you are flying international, any of the major airlines (Spirit isn't even the biggest or second biggest airline) will be happy to take you w/o charging for carry-on luggages.
One could make an argument about whether the airlines have been completely forthcoming about the costs of these "unbundled services" (and that would fall under the government's role of preventing fraud), but as far as choices a private company offers, you always have the choice of not dealing with them.
Re:Unbundling without choice (Score:2, Insightful)
Isn't Spirit airlines the same airline that will charge you for luggage whether you check-in or carry-on. [google.com] How many people travel with no luggage? Simply put the only choice Spirit offers you is whether you pay them more to handle your bags or pay them less for the privilege of handling your own bags.
You mean pay them less for the privilege of shipping your bags across the country along with you. Do you expect that UPS would do it for free if you just loaded it onto their airplanes for them and unloaded it yourself at the destination? If it really doesn't cost anything for Spirit to do this, they should go into competition with UPS -- they can put UPS out of business if they've managed to eliminate all costs of shipping beyond handling.
Re:You're not flying cheaper! (Score:5, Insightful)
Because you're buying more of what they're selling. If you went to the hardware and bought lumber, you should expect to pay the same as everyone else for a 2x4. If you went to the hardware store and bought "enough lumber to make me a bed", you should expect them to scale the price to how much lumber you actually needed. Airline tickets aren't exactly like either of these cases, but I hope you can see that what's not "discriminatory" flies in the face of reality.
Re:So who's to the rescue? (Score:3, Insightful)
I get your point and I do agree overall, but you picked some really bad examples. Cable companies are (natural) monopolies, and most ISPs are simply the cable companies or the phone companies, also a monopoly. Free market practices don't particularly apply there.
Banking? There WERE small-town banks but most of them are closed these days. There are still credit unions and a handful of banks to choose from, though I'm not sure what you're looking for.
And PCs? They're not exactly the best PC company in the world, but Dell did a tremendous job in getting relatively powerful PCs in consumers' hands for cheap prices. Hardware prices have plummeted. I'm not sure what else you want from free market influences.
That said, the problem with the idea that free markets solve something is it's predicated on the idea that people actually put value on anything other than money. I recall reading a story on Slashdot some time ago about somebody who went to a small mom-and-pop store for a TV (I think it was) and he raved about the great service he got from them in figuring everything out and getting it all squared away. And then he went to the big-box store to buy it.
A competitor airline re-bundling things to get rid of the hidden fees is almost guaranteed to result in higher fares (even if the total overall cost is lower), and most consumers will not look any farther than that. That being the case, the free market is powerless to solve the issue.
In a way it's a lot like those infomercials you see on TV. "Order now and we'll send you a second money sink FREE, just pay [$9.99] postage and handling!" Well, sorry, if your product is $10 and you're charging me $10 postage it's most certainly not free, you're just re-structuring the costs in a way that is even more beneficial to you (since S&H is not taxed).
Re:I like it (Score:0, Insightful)
Which, as you well know, is exactly what's happening. Nice how you just cowarded your way out of an argument you couldn't win.
Ticket prices (Score:5, Insightful)
The problem is that the competition takes place on web sites like Orbitz [orbitz.com] or Travelocity [travelocity.com] where the only criteria for comparing airlines is route and ticket price. There's no indication of whether a particular airline charges extra for checked bags, carry-on bags, or refreshments. Nor is there any indication of how much leg room to expect, how often the airline departs on time, or how often the airline leaves passengers on the tarmac for six hours.
When the only information passengers have is route and ticket price, the airline that can scheme to have the lowest upfront price will win.
I wonder how much they lose due to delays (Score:4, Insightful)
By the time all this crap gets settled it's usually 30 minutes after the scheduled departure time and all the airline has done is cost themselves money and pissed a lot of people off..... brilliant!
Economics has the answer (Score:3, Insightful)
Re:I like it (Score:5, Insightful)
You fly cheaper in the same way that those grocery club cards save you 50% on your groceries.
Pure privatization is not really possible. (Score:2, Insightful)
Yeah, putting the government in charge would _really_ improve airline travel.
You say that as if they weren't already in charge, through extremely restrictive regulation.
The airlines are part of the transportation infrastructure. You could as easily leave road-building to unregulated private citizens as airlines.
Jet aircraft are noisy and dangerous. Air traffic is a nuisance and a hazard. They need big areas to land in and take off from which should be as close as possible to major population centers, so they can't really be built without the application of eminent domain, and access to these airports needs to be negotiated and scheduled. People and goods coming from international flights need to go through border control, and therefore the whole facility needs to be securely under government control. It's not feasible to avoid having government stand between the customers and the service providers, except in a few special cases (i.e. regional service between airports in rural locations).
With the type of aircraft operated by airlines, going between the locations the airlines use, strict government oversight is something that is unavoidable. Perhaps in the future less costly, more versatile, safer aircraft, combined with greater energy resources, will change this, and allow air travel to be even less restricted than road travel.
Re:Pure shareholder profit? (Score:3, Insightful)
HA! So rather than let the free market handle it (and it will handle it quicker than the government will), you want to have to wait until the next election cycle and then hope that the people remember that it was some politician that caused the problem with the airline and not the people running the airline.
Yeah, I'm sure that'll work real well.
Politicians got this country into the mess it's in right now. We don't need them doing to the airline industry what they've just done to the banking industry (which will make banking more expensive for everyone, especially the people that really need the services and can't normally afford it).
Re:You can't complain, you can't compare (Score:5, Insightful)
Re:Ticket prices (Score:5, Insightful)
Only initially, and only with very occasional travelers. Taking me as an example, I don't fly more often than 2-3 times a year, yet I've had my share of good and bed experiences with different airlines... and I'll always look for options from the airlines I had good experiences with while scanning through Kayak's results.
Now, if they are much more expensive than somebody else, I'll consider the others... but I'll pay the 5-10% more to fly the ones I like.
We all remember the crappy legroom, shitty entertainment options, and bad food, even if the search engine doesn't show it.
Re:Pure shareholder profit? (Score:3, Insightful)
That's worked wonders for other industries.
Re:I like it (Score:5, Insightful)
I don't understand people when they complain about companies making profit.
We complain about companies making profit when *at the same time* they're whining to the government about how they are in fact not making any profit because of circumstances A, B and C and therefore need to be allowed to screw over their customers through methods X, Y and Z without getting any hassle over it.
Re:I like it (Score:4, Insightful)
He's talking about the 70s, when you could buy a very nice 4 bedroom house for $32,000USD (that's what my parents paid in 1974 for their brick colonial in a town of about 100,000 people - and that was expensive back then). The average yearly salary was less than 10 grand. And a ticket overseas would cost about 5-6 grand. I remember it well.
Bigotry in any form is an ugly thing (Score:3, Insightful)
Yyyyyeah. There do exist those of us who would rather not fly Redneck Air.
Just like there used to be people who liked to hang other people on crosses, or set them on fire for witchcraft, or string them up on nooses because of the color of their skin.
I'm not sure how you feel about joining the ranks of such distinguished company, but there's very little at this point between you and them. I'd think about that were I you.
Myself, I am open minded to people of all backgrounds, and they can make whatever cringe-inducing rhyme they like in return for providing an airline with no bag fees, no flight change fees, and letting the technologically ept sit wherever they like in the plane by getting first dibs on seats.
If you are going to let your prejudices get in the way of that then at least the only one harmed is yourself - but it still comes off as pretty stupid on a site filled with otherwise intelligent people.
Re:I like it (Score:3, Insightful)
Excuse me, a bank loan to cross the atlantic???
Hey, it worked for Chris Columbus.
Re:Southwest (Score:5, Insightful)
What free market fundamentalists like you fail you comprehend is that we humans have a relatively short lifespan. Life is too short to wait a decade for the mythical "competition" to maybe sorta improve the airline market. Free marketeers remind me of a religion. Those, too, promise that all wrongs will be fixed a few decades later once your life ends and you are in heaven. Maybe, but I'd rather have them fixed in this life, and soon. For the last 30 years, lunatic free market policies have caused crisis after crisis while making life worse for working people. It's time to dump this discredited, outdated religion for a 21st century pragmatic approach that actually makes life better for those who work, rich scum squealing notwithstanding.
Re:I like it (Score:3, Insightful)
In most cases people only get "frauded" if they let themselves. For example I recently was charged $35 late fee for a credit bill I never got. The phone operator refused to do anything, so I got ahold of the supervisor and told him point blank, "Remove the fee or close the card. Your choice." He decided he's rather not lose my ~15,000 a year business and refunded the money.
You pay $15,000 a year in credit card interest? Or you get charge $15,000 a year and pay no interest? If the latter, you're more likely worth about $300 a year to them. Credit card companies are usually glad to get rid of customers like that.
Re:Southwest (Score:1, Insightful)
No, the one where the government institutes regulations that don't inhibit competition and don't ensure that the established companies make a nice profit and deliver piss poor customer service.
Re:I like it (Score:3, Insightful)
Excuse me, a bank loan to pay for airfares??? I can see where the credit crisis originated. How hard is it to save money (and earn some interest) and then pay for the flight to England?
If you've just been told your Grandmother only has a few weeks to live ? Very hard.
Re:I like it (Score:5, Insightful)
Oh, I dunno. I can have as much luggage as will fit into my trunk, or, if going overseas, into my passenger ship cabin.
I'm sorry, but when the airline industry decided that instead of actually solving the problem (completely isolating the pilots from the passengers, thereby completely eliminating the possibility of using the aircraft itself as a precisely directed weapon) they were going to permanently oscillate on the knife-edge between screaming paranoia on the one hand, and utter moral cowardice on the other, they lost my family and myself as customers.
But ships, and cars, remain quite lovely travel options. No homeland insecurity personnel pretending to be useful, no unreasonable limits on what you may transport, and both types of travel are competitive, financially speaking.
Also... cruise ships and passenger ships are still committed to making your journey pleasant, even entertaining. Given the extra time they have to work with, they can go beyond dressing the service people attractively (which the airlines have given up on) and simply picking attractive service people (which the airlines have also given up on)... there are shows, gambling, fine meals, pools, rock wall climbing, many other things.
Of course, if you can drive yourself somewhere instead of flying, you can add as many recreational activities as you like -- you're the cruise director, as it were. Everything from fine meals to strip clubs to side trips to the nearest museum or art showroom.
As opposed to being scanned, searched, checked for listing with various intrusive (and massively unconstitutional) agencies, forced to wait in long lines, having your toiletries and snow-globes confiscated, shoehorned into seating that was apparently designed by a one-armed/one-legged midget engineer with no objection whatsoever to the idea of the person in front of you reclining right into your crotch, eventually being fed government-surplus nuts (only on luxury flights, though) and diet soda by a transvestite in a hideous pantsuit for about the same cost as a fine meal on a ship.
Last year, on my trip to the east coast, I took a side trip through Crater of Diamonds State Park and took home a sweet little trophy -- a blue-white -- which sits in my mineral collection today. Got where I was going on time, did my business, and drove back the long way around, took lots of photos, etc.
Airlines. Man, I'd have to be *so* short of time to sink that low ever again. Or they'd have to roll themselves back to the 60's in terms of service, and then step it up. Difficult to imagine either way.
Re:I like it (Score:3, Insightful)
That's ok if you've got six weeks to get there. If you've only got a couple of days then ships aren't too practical.
Re:You're not flying cheaper! (Score:3, Insightful)
If you're going to make this argument then the actual ticket price would be calculated by a complicated function involving weight, width, seated height, nasalness of voice, and body odor. Passengers flying with children would be required to post a bond paying for everyone else's ticket ahead of time, potentially but not probably refundable on arrival.
Instead, passengers who can more or less fit into a seat pay for a seat, and passengers who don't pay for two. And if you don't like it, travel some other way.
Re:I like it (Score:5, Insightful)
And when I commute between DC and NYC, I drive. Everything you say is true - it bothers me a lot that the industry has sunk so low, and it bothers a lot of other pilots too.
Unfortunately, our ideas don't count for much, and the reality is that the huge majority of paying people pick how to get from A to B on the basis of price alone. The amount of resources airlines bring to 'revenue management' (a fancy way of saying figuring out how much to charge for a seat) is rather amazing; they have models that adjust the value a seat will bring in based on time to departure, and they are constanly refining their models, to the point where they can predict their revenue from a given flight within +-1% pretty consistenly desipte cancellations, rasing, lowering, then rasing the price of the seat (Costs? Not so much
Several airlines have tried the idea of 'all first class' - establish a brand specifically known for its top notch service, and deliver it. They have all failed in recent years, Midwest being one of the last. It seems that there are not enough people willing to pay for superior service to make a go of it as a scheduled airline. The non-scheduled operators, who charge an order of magnitude more (see Netjets et al.), on the other hand, apparently take superior service with absolute seriousness, and deliver it well - they are growing relatively robustly to fill the gap between dedicated corporate/celebrity bizjets and the becoming Greyhound scheduled operators.
I actually wish more people would think and do as you, so it was economic to run a quality airline, even if it was smaller in size. When enough people demand something, the market sometimes delivers. Enjoy your travels!
Re:I like it (Score:3, Insightful)
If you want to see what government regulation can do to an industry take a look a telephones in the last century. Phone technology virtually stagnated for 50 years because there was no competition thanks to a whole library full of government regulation.
Why not take the libertarian approach here? Let the government regulate the airlines for important stuff like safety -- not baggage fees. Jeez, go spend my tax dollars on something that matters.
Re:2+2=5 (Score:3, Insightful)
No, no, a hundred times no.
Charging people ridiculously high fees for checking baggage means that people do the logical thing and carry on their bags. This clogs up the security checkpoints and means that you can no longer find any overhead space in the bins, meaning that after 10 minutes of fruitlessly shoving their suitcase into a space too small from it, the stewardess has to come by, take it off the plane, and gate check it, delaying the flight and possibly costing people a connecting flight (has happened to me more than once on a tight connection).
Charging for checked luggage hurts everyone.
Re:I like it (Score:3, Insightful)
What if the pilot has a heart attack? Let him or her die, even if by some lucky chance there's a doctor among the passengers? Not to mention flying the plane will be a bit harder without the pilot. Should the copilot do CPR, or fly the plane? What if the plane suffers a serious but not quite fatal problem, and there are experts among the passengers who can help, as happened in this flight [wikipedia.org]? What if a pilot needs a bathroom break? Could a pilot ever need access to some part of the plane outside the cockpit? Supposing the PA system fails, how will the pilots communicate with the rest of the crew? There are plenty of things hijackers could do outside the cockpit to make it very hard for the pilots to say "no".