Are Airline Fees Good?
That doesn’t sound like such a good question, but that is what Brett Snyder at the Cranky Flier would have you believe in his post “Why You Should Love Airline Fees”. His argument rests on the idea that fuel costs have created such a supply shock to the airlines, that they are forced to un-bundle services to sell of individually as ancillary fees. After attempting following his admittedly strained analogy regarding a hypothetical television producer, I can only conclude that he feels that it is better to have these fees than to see airlines reduce flights and go out of business.
Who Is “You”?
I am a leisure traveler and a consumer advocate, not an airline industry insider like Brett, so my position is quite different. Yes, I am left scratching my head as to why he feels that I should “love airline fees.” It is only when I read the last few words of his post that his perspective became clear. He concludes that “the a la carte pricing method is a good thing for this industry.” I will grant him that it is an undeniable fact that this new pricing model has resulted in a more profitable industry. Therefore, if the “You” in “Why You Should Love Airline Fees” refers to an industry CEO or stockholder, I have to agree with his conclusion. That said, I always felt like his moniker, “The Cranky Flier” referred to the plight airline passengers, not their stockholders or executives. Perhaps he’s changed his focus as he has gained recognition within the industry.
It’s About Price Transparency
To a consumer, there is nothing better than price transparency; the idea that you can quickly know what a transaction will cost you so that you can more easily choose the best product or service. For example, when you shop at E-Bay or Amazon, you can sort the prices by “Cost + Taxes and Shipping”, rather than having to perform a myriad of calculations yourself. The airlines have taken a relatively transparent market for airfares and made them hugely complicated. If I want to fly a family of four to Colorado for a ski trip, I used to just find the lowest airfare. Now, I have to estimate how much luggage my family will need, and reconcile it with the various airline’s policies for checked luggage; not a fun task.
A False Choice
Snyder’s insistence that airlines would have to cut routes and raise fares if they did not increase fees does ring a bit hollow. For example, airlines still do not charge for checked baggage on international flights, yet they have been growing that sector of the market. Besides if an airline did cut routes or raise prices, that would just entice new competition to fill the void.
Perception Of Value
As a pilot, I could argue the fuel costs incurred by the marginal increase in payload are an order of magnitude less than what airlines are charging for checked bags, but I don’t have to. Consumers are not stupid, they know that it doesn’t actually cost an airline $50 to check a bag, or a $150 to use their web site to make a change to a booking. Often, they find it more expensive to check two bags on Delta than their entire ticket costs on Southwest. This is great for Delta, but bad for consumers. Ultimately, people are viewing airlines very negatively when they are charged outrageous fees that bear little or no correlation to the service provided. It cannot be good for the industry when so many airlines join the ranks of the cable company or Ticketmaster as the worst companies in America.
Fragmentation Of The Market
Let’s face it, not everyone hates fees. I used to travel for business every week. Back then, I couldn’t care less what the ticket cost, so long as my boss didn’t care. In fact, when I put the airfare and fees on my mileage earning credit card, I was glad to pay more. If I were a business traveler today, it wouldn’t bother me at all to pay luggage fees, priority boarding fees, or change fees. Just as long as I was reimbursed by my company, these fees would be just another line item on my expense report like lunch or a taxi ride. While business travelers represent a sizable proportion of travelers, they represent an even greater percentage of airline revenue than their actual numbers. The airlines know this, and it seems like United and others are just hoping to cater to this niche of business travelers, leaving the leisure travelers to fly Southwest. United knows that status holding business travelers rarely check bags, and usually have these fees waived when they do. The a la carte model may just end up further bifurcating the market between leisure airlines like Southwest and Jetblue, and business oriented airlines like Delta and United.
In Conclusion
Snyder makes very good points as usual, however I am just not sure of his perspective anymore. The industry is also making profits while earning a black eye with the public. Fees may work for most airline’s bottom line, and they may even work for some of their business customers, but when you are paying for your ticket from your own savings, I can’t see any reason to love these fees.
