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."
You're not flying cheaper! (Score:5, Interesting)
This is what really pisses me off; people take this attitude that, hey..I don't have extra bags, I don't want the food, so I am flying cheaper! Well guess what stupid, you're not flying cheaper.
I travel very often so I have a fair idea of how the traveling costs trend and what I notice is that I get fucked harder and harder by the airlines, but since there is price fixing, there's not a damn thing I can do about it.
Don't get me wrong, if the tickets WERE actually cheaper by not including the bags, than I would be fine with that. BUT, they are not cheaper. If anything, they are more expensive AND you pay your extra 100 bucks for bags. WTF?
You want to go by weight? I weight 160lbs and my wife is 105lbs. Why should she pay the same like me? Why can't she have an extra bag?
Why can that fat as fuck American sitting next to me get the same price?
They should chance the whole thing to per lbs, yourself and bags included. That is whats fair.
Unbundling without choice (Score:4, Interesting)
Baggage in the US (Score:4, Interesting)
When heading into the States not long ago I had to transfer through Chicago O'Hare to a smaller, provincial airport. American Airlines unsurprisingly lost my luggage, but thanks to a tag it was located as being with the handlers back at Chicago. The friendly woman at the check-in desk where I'd arrived after the second flight gave me a complimentary kit that included a toothbrush, toothpaste, mini-haircomb and so on.
The expedient service was what struck me most though; the next day a guy in a van drove up to where I stayed and dropped it off needing a signature and ID to confirm. All this was free, all of it was worked out and the lady at the desk looked astonished at me if I asked there was a fee to expedite getting my suitcase back - it contained mostly clothing that I could buy at a mall or whatever, but also a few items somewhat more important.
AA must have yearly meetings where this baggage issue is brought up; remember that scene from Fight Club where the anti-hero played by Ed Norton opposes the cost of keeping a shoddy system with unhappy customers that might kick up an occasionally costly issue to fixing everything and performing a good service. If the good service is more expensive than paying customers off, and in the case of improving baggage loss rates it likely is, then AA keep the crappy service to the inconvience of customers.
As cynically compelling as that movie was, this principle is applied rigorously behind closed doors in many firms who simply seek to maximize profits by definition of what they are. If it means a person losing something valuable or otherwise getting aggrieved (crashing a shoddy car and being injured), then let's cast that aside and keep the margin at an acceptable level. Unethical? Sure, but that's business.
That airlines are now charging seperate fees for this service without presumably making a marked improvement could be harmful to them in the long term; if passengers know they're paying X for luggage carriage for every piece inclusive of the first then they can more directly demand a refund. Something which isn't quite as easy to do if its bundled in and you get chucked a cheap kit of goods to clean up that they manufacture in quantity. So this all could be a good move with respect to luggage, as it might make firms like Delta or AA or anybody else with high passenger volume improve somewhat.
TAXES! (Score:5, Interesting)
Why does the government care? They now get a lower tax revenue! Before, if your ticket cost $500, they got whatever percent (let's say 10), so $50. Now if they strip down the ticket so that it's only $400, plus $100 in other fees, the government is losing $10 they would've previously received. Food, baggage, seat placement, etc, all get taxed at a lower (or non-existent) rate when they're sold separately.
Re:You're not flying cheaper! (Score:3, Interesting)
It's one thing to charge people more for taking up a second seat, but charging people who naturally way more isn't really appropriate.
I don't know, man, it's a slippery slope here. A second seat is a resource just like added fuel is a resource; if a plane full of 105 pounders costs 75% as much as a plan full of 200 pounders, then there is just as much reason to charge heavier people more, regardless of the cause, as there is to charge people who take up more than one seat. In fact, you might say that charging more by weight is more fair, because the per-seat issue would be a natural extension. Someone who is 400 pounds would take up 2 seats and already be paying for them based on weight.
Don't forget, that 400 pounder might have a genetic glandular problem. Maybe they were born to be larger than you; why should you get off the hook just because you got lucky with your glands?
Re:You're not flying cheaper! (Score:1, Interesting)
1) Weigh. It's spelled weigh.
2) Why is it okay to charge for somebody who naturally takes up a second seat but not somebody who naturally weighs more? The fact of the matter is that you and I (260 here, and I'd die before my body could hit 220) impose more of a fuel cost than this man's wife. She could bring 100 pounds of luggage and still impose less of a fuel cost than me without any luggage. If the airlines want to claim that the baggage fees are just penny-pinching by weight, then they have to consider all of the weight on the plane.
Re:You're not flying cheaper! (Score:2, Interesting)
Why should I have to pay more because I'm a larger person than you?
Easy: because it costs more to fly you than it does to fly me over the same distance. Why should I subsidize the cost of flying your big bones? Answer: because life, for fatties and string beans alike, is rarely fair.
Re:You're not flying cheaper! (Score:3, Interesting)
Don't you remember when they started charging the baggage fees? They started doing this in 2008, when crude oil was, what, at $140/barrel at its height?
The baggage fee was the option for many of these airlines (which didn't hedge their fuel costs wisely, as, e.g. Southwest had done) to stay in operation, without scaring all their customers away with fee hikes.
Perhaps today when the fuel cost isn't so high, we are not exactly paying less by getting less service for the "basic" ticket. But it was certainly true in the past (i.e. 2008) that a casual traveler without checked-in bags paid less than he would have, if the airlines had to pay for their costs entirely through uniform ticket price increases, and this may be true again, as oil prices won't be forever in the 70s and 80s.
Re:I like it (Score:2, Interesting)
I used make between twenty to twenty-five flights a year and the prices have clearly risen significantly. The original claim was that it was because of 9/11, then fuel price increases. The classic airline whine has been they were going to go bankrupt because of costs and had to add these fees (fuel surcharge, landing surcharge, e-ticket surcharge) yet strangely they still are making a profit. The biggest offender is SouthWestAirlines (SWA). TWA used to be called The Worst Airline, but SWA has them beat by a mile. Between TSA and SWA I stopped flying. I cann't afford to have TSA destroy my bags and laptops and I won't pay money to be insulted by SWA staff
Comment removed (Score:5, Interesting)
Re:So what happens when... (Score:1, Interesting)
I'm with the poster here.
A couple of years ago 20 of us wanted to go from Koln in winter to Sweden to photgraph bears in winter.
A low cost flight was booked well in advance and we got written leeway to take all our gear as hand luggage at no cost. This flight was on a sunday evening in the winter and the flight was nearly empty.
We all turn up at the airport and bingo. The staff refuse to let us take our gear on board.
They only relented when one of the party who happened to an MEP( member of the European parliament). He explained in very clear terms what would happen if they didn't let us on.
They didn't let us on. We all missed our holiday.
We sued the airline who lost and had to pay us damages as well as cover our losses. We had a contract. They renaged. They lost.
Suddenly imposting 'extra' charges between the time you book and the time you fly is common practice in this part of the airline industry. This is a breach of conract but the airlines plan that most people just pay up. The factor in those who sue for breach of contract.
This is all part of 'doing business'
Frankly, the sooner these practices are outlawed the better. No frills shouldn't mean having to read 100pages of small print only to find out that the conditions of carriage clealy break local laws but the airlines could give them a '*uck'.
jUst look at the grovelling apology RyanAir had to give EasyJet last week. Classic. did the RyanAir boss lose any sleep over it? Far chance.
Sigh.
Oh well. I shall see how bad the EasyJet flight from Dusseldorf to Gatwick is tomorrow. Oh joy. Only £11.00 per bag. Half price Wow!. And the flight ticket is also below cost...
Re:Pure shareholder profit? (Score:3, Interesting)
Airlines should probably be treated like public utilities
They once were; look up the Civil Aeronautics Board and the Airline Deregulation Act. From 1938-1978 airlines were told between where at what times to fly and how much to charge by a government oversight board.
Re:So what happens when... (Score:5, Interesting)
Solution, start weighing every passenger and charge them by weight. Or, everybody pays the same up to 175 lbs and then there's a $20 surcharge for every ten pounds over that.
US carriers would clean up.
Re:I like it (Score:3, Interesting)
>>>strangely they still are making a profit.
I don't understand people when they complain about companies making profit. If they weren't making a profit, then there'd be no planes for you to fly, because the companies would be bankrupt. BTW have you ever thought about driving? Back when I traveled a lot from Oklahoma City to Minneapolis, I used to drive. My coworkers flew. They usually arrived at 5 o'clock while I arrived at 6 or 6:30. Not a significant difference but my drive was a lot more relaxing (and cheaper).
Bundle my ass.... (Score:3, Interesting)
They advertise $100 tickets then you get stuck finding out there is:
Airport Fee $10 (2x)
Gate Fee $10 (2x)
Drink Cart Fee $10
Fee Summation Fee $5
Pressurized Cabin Fee $10
Baggage Scanning Fee $10
Baggage Loading Fee $5
Baggage UnLoading Fee $15
Airplane Taxiing Priority Fee $10
Advertising Fee
SABRE Ticket Processing Fee $5
Convenience for not requiring human intervention in purchasing tickets $5
Do you really think you can fly from SF to LA for $99? No. Because the damn fees for everything. I'm waiting for those airmasks to have the following instructions on them:
In the event of a lose of air pressure, please secure the mask to your face. Take a calm deep breath and then exhale normally so that it is replenished for the person in the seat next to you.
Can you imagine if McDonalds did this shit?
Ordering Fee $10
Cooking Fee $5
Putting paper on food tray Fee $5
Fee Per Ketchup $1
DriveThrough Convenience Fee $10
Spill proof lid $10
Straw ($2 per)
Hot food guarantee Fee $10
Re:Security vs. checking baggage (Score:4, Interesting)
They even took my blunt ended scissors away. Not sure what the hazard potential of scissors specifically designed not to allow you to accidentally stab yourself but...
My old boss had his cigar cutter taken because it was plastic and could be taken apart and used as a weapon. The next time he flew he took a metal cutter and they took that away too because it was heavy duty and could cut someone's finger. Being the angry Cuban he is he went into one of the shops inside the secure area, bought a new cutter and went back to show it to the screeners.
It's all about CYA. No one wants to be the guy who let through something that caused trouble later.
Re:I like it (Score:3, Interesting)
That might all be true, but it does not really change my point.
Sure, but 'your point' isn't really germane to the discussion at hand - It doesn't really matter whether my parents took out a loan, sold the family jewels or won the lottery. The point is that in the 70s airfares were hella expensive, to the point where one had to lay their hands on a large pile of cash just to buy a few tickets, whereas today you can almost buy a ticket to Europe simply by smashing open your piggy bank.
Re:I like it (Score:3, Interesting)
The point is that they DON'T.
Airlines piece-price services for two reasons. 1) Price it high enough, nobody will use it and they can stop providing it. 2) Remove the cost of that service from the base ticket so that the base ticket prices can be profitable -- not lower, just profitable.
Every time I buy a ticket from United, they offer to sell me 6 inches more legroom. That's despite knowing I already qualify for their premier seating. They offer to sell me a year's "baggage free" service, bypassing the regular checked baggage fees that I already don't have to pay. That's called "profiteering". The price of your ticket doesn't go down if I fall for the trick.
You can try comparing ticket prices from 1990 to now, but it really doesn't mean anything. There are so many changes to the service in the last 20 years that what it cost then in today's dollars isn't important. What is important is any hand-in-hand price reduction for tickets when the new fee services are introduced. That doesn't happen. Your ticket isn't $25 less because you didn't check a bag, it's the same. The only difference is that the airline coerced you into carrying your own bag for part of the flight. The amount of gate-check baggage has gone up considerably, so I suspect that this is one way the consumer has to ding the airline back at its own game.
Round Trip Ticket: Seat Is Extra (Score:2, Interesting)
While booking a WestJet flight recently I was annoyed to discover that the ticket price did not include the seat I would sit in: that was $10 extra.
Now I can see charging extra for a window or aisle seat, or one behind a bulkhead. But that wasn't the case here. All of the seats on the flight were the same price.
Does this mean that I can forgo the seat and fly standing up? Not a chance. Unlike meals or baggage the seat is mandatory, so it should be included in the price. This isn't fare rationalization, it's just a cheap attempt to bamboozle passengers into thinking they're getting a better deal than the really are.
Re:2+2=5 (Score:3, Interesting)
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?
Airlines were bleeding cash.
Their main expense (fuel) is mostly locked in through multi-year contracts
and that hasn't changed over the timeframe we're talking about.
Now they're not bleeding as fast.
The only significant change has been the unbundling.
Re:Southwest (Score:4, Interesting)
You know what makes Southwest better than the other airlines?
They're not like you.
They aren't pompous assholes who are too good to take the occasional traveler. They don't take themselves, their airline, or their industry too seriously. When they screw up, they are genuinely sorry.
Southwest understands that they are in the business of hauling people from A to B as efficiently as possible. They understand that people who fly Southwest aren't flying because they like flying, they are flying because it's the best way to get where they want to go.
Need to change your plans? They don't charge fees for that. No other airline does that.
Want to bring a bag or two? They don't charge you $30 to do it.
They aren't pricks, they get the job done, and they don't charge you BS fees. That's more than you can say for just about any other airline.
Re:I like it (Score:3, Interesting)
Re:You're not flying cheaper! (Score:4, Interesting)
Re:Ticket prices (Score:3, Interesting)
Unfortunately, you are in a quite slim minority of people who are actually willing to pay a revenue premium for decent service. The large majority of people who fly today are not. This is, unfortunately, a well demonstrated fact that every airline marketing department is highly aware of and literally testing every day with their revenue models.
Southwest is quite an anomaly - they are operationally extremely efficient (one unified fleet type, eliminating burecratic cost holes and personnel time sucks like assigned seating, etc.), and have spent decades building both their 'can do' culture and reputation for (dare I say the word) 'fairness'. I think in Southwest's case, 'fairness' is really a proxy for simple/transparent/understandable. It's sorta the flat-taxer's argument that the simplicity of the rules would pay for itself in lots of ways, even if some are hard to measure. In Southwest's case, it works, it works well, but it takes decades to build up such a thing. People who work there take a lot of pride in their jobs, and that may be hard to measure but it comes across. I have several friends who made the jump to work for them (and you lose a LOT when you jump from one airline to another), and none of them regret it a bit.
So... tell your friends to vote with their wallets and be willing to pay more for decent service, and not to give business to airlines with lousy service. It might actually make a difference if enough people do it.
At least, I hope it does....
Re:Unbundling without choice (Score:3, Interesting)
>>So, reality supports my (implicit) claim that airline industry is "free, competitive marketplace". What reality do you live in?
Southwest Airlines looking into coming to our local airport. The other airlines blocked their entry so that they could continue to charge three times the price for an equivalent ticket.
As long as gate space is a concession regulated by local governments, the legacy carries will do everything they can to make the marketplace as non-free and non-competitive as they can.