Airlines Continue Bundling Fees to Replace Lost Revenue
As airlines continue to add fees to their pricing structure, travelers naturally want to know how they can avoid paying more than the base ticket price.
According to The Wall Street Journal, all you have to do is avoid actions that trigger fees, such as taking baggage with you, eating during the flight, or getting on the plane early. In other words, you probably can’t avoid the fees.
Fees for changing a domestic flight have increased from $150 to $200 for four of the largest airlines as of this past spring. Additional fees now apply for unaccompanied minors, processing tickets bought with award miles, buying a ticket from an airlines reservations clerk, upgrading a flight with mileage, and overweight or oversize baggage.
That’s not all. In an effort to make fees more palatable, airlines are now bundling them, mixing more desirable options with some that are less attractive, and calling the whole package a service. This tactic seems to be torn from the playbook of automobile dealers who have used this tactic for years, forcing buyers to take courtesy lighting and upgraded trim in order to get heated seats, for example.
The Wall Street Journal reported that last year American Airlines began selling a Choice Essential package for $68 on a round trip domestic ticket. The bundle eliminates the reservation-change fee and allows for a free checked bag and priority boarding. For $88, American passengers can upgrade to the Choice Plus package which lets you switch to stand by on a different flight and tacks on a 50 percent bonus in frequent-flier miles.
American's managing director of digital marketing, Rick Elieson explained the move saying, "We're a retailer trying to create a product line."
Early last month United Continental Holdings Inc. (NYSE: UAL) said it was bringing back annual subscriptions for Economy Plus coach seats and checked baggage. The cost? For a passenger flying in the continental U.S., $499. Other available variations include $399 to check two standard bags per trip for a year or $799 to cover worldwide flights for the same period.
Some perks that used to be free are no longer gratis. Carry-on bags are $40 on Spirit (NASDAQ: SAVE). In-flight TV costs almost eight dollars on United, and if you would like to enjoy a little extra legroom in coach on American, no problem – so long as you don’t mind forking over anywhere from $8 to $159.
The actual base ticket price you pay accounts for only 70 percent of revenue at major airlines. This is down from 84 percent in 2000 and reflects an economy that is, despite positive signs, still flat – at least for airlines.
Those extra fees allowed airlines to rake in an additional $6.1 billion last year, up from $5.7 billion the year before.
At the time of this writing, Jim Probasco had no position in any mentioned securities.
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