United to try checked luggage buffet

by Tom Johansmeyer on

Do you always travel with two bags to check? Some people don’t travel light, and they know that, in this new world of airline fees, they’re going to have to stomach an extra charge as a result. Under a new United Airlines plan, you’ll be able to “subscribe” to extra bag privileges. Instead of paying $20 for the first bag checked and $30 for the next one, you can shell out $249, buffet-style, and enjoy a full year of checking two bags.

This works for both domestic and international flights. The program pays for itself after a mere five trips. So, if you’re a road warrior or just like your vacation time, this could be a smart program for you.

But, don’t get too comfy: United is calling this an “introductory price.” If the program works well, expect your breakeven point to creep a bit higher next year.

Airlines can breathe again – bottom of their recession may be in sight

by Scott Carmichael on

There is no doubt that 2009 is a year that most airlines will want to put behind them as fast as they can.

In essence, it was the perfect storm combining everything that airlines hate.

A report published back in May told the doom and gloom story about airline profits – and that not a single airline in the world would earn anything this year.

As the first very small signs of economic recovery begin to show, airlines are starting to be a tad more optimistic, and are even projecting a growth in passenger traffic for 2010. In 2009, traffic was down 2%, but 2010 could bring a 4.9% rise, which is obviously just what the airlines need to stay alive.

Total losses between all the world’s airlines is $9 billion, which really doesn’t seem like that much in this new economy. Still, it’ll be at least 6 months till the airlines will know whether the worst really is over, especially as the busy summer travel months come to an end and passenger numbers drop. The real indicators will be business travel and freight – neither of which have recovered yet.

Once everything returns back to normal, we’ll emerge battered and bruised with lower airfares, higher (and newer) fees, a couple less airlines and some airlines that have removed premium seats. None of the major carriers vanished, but most of them did cut their workforce substantially.

Airline fees continue, necessary evil

by Tom Johansmeyer on

Yes, you’ve heard about this all year, and you’ll probably hear about it for a while to come. Airlines are still looking for ways to pull every dollar they can out of your wallets, but the reality is that they have no choice. Seven of the nine largest airlines in the United States had a rough time in August, making these measures more important than passengers might realize.

The second bag, according to an article in USA Today, remains the most popular fee target for airlines. Continental Airlines, US Airways and American Airlines recently announced that they are going to charge for this, and Hawaiian Airlines is going to charge passengers for the first checked bag on flights between islands beginning September 14, 2009.

I understand charging for checked luggage (the money has to come from somewhere), and I honestly don’t see charging for a second bag as a bad idea. Frankly, it can be pretty frustrating to stand in line behind someone who’s fumbling with more luggage than he or she can move along. The first bag? That’s a bit different. This fee could cause passengers to push the envelope with carry-ons, which is likely to trigger arguments with gate agents and flight attendants, tie up the boarding process and result in hefty doses of frustration for everyone else on the plane.

I’m more a fan of Southwest‘s new policy, which will put passengers at the front of the line – even ahead of frequent fliers and those paying premium fares – for a fee of $10 each way. Since the airline doesn’t assign seating, this small sum offers the chance to get the best seats on the plane. I’m not crazy about the notion that it comes at the expense of frequent flier comfort (alienating your best customers is rarely a good idea), but the price is low enough that these passengers would probably pay it anyway. For this perk, I’d definitely pay more than $10.

There’s money in extra fees, as we’ve discussed on Gadling in the past. Some analysts predict that these charges could be good for more than $2 billion a year for an industry that could definitely use it. The airlines need to be careful, though, as going to far could lead to disgruntled (and lost) customers.

Passengers, however, should be realistic. Fares are cheap. To make ends meet, airlines have been cutting flights and services, generally making the experience incredibly uncomfortable.

In fact, taking this approach to the extreme might be a good idea. Airlines could offer dirt-cheap prices for passengers who want nothing more than to get from one place to another. Then, if you want to enhance your experience – with a meal, cocktail or better seat – you can pay a little more. This à la carte approach would empower passengers to create their own experiences, ultimately improving customer service and airline responsiveness. To an extent, it’s already happening, but to make the strategy work, it would have to become part of a cohesive offer.

That said, airlines would have to be careful with their general cuts. Fewer flights, less legroom and degraded customer service affect everybody, and there’s no way to work improvements in based on price (with the exception of flying in business or first class, which involves a considerable price gap). Finding a middle ground could change both the airline industry and passenger perception of the flying experience.

Airline cancellation fees worse than baggage fees

by Tom Johansmeyer on

Airlines rely on you to have minor and major personal crises. Everything from changed meeting dates to family emergencies generate around $2 billion in change and cancellation fees a year, according to the Department of Transportation. That’s pretty much twice the amount the airlines pull in from extra bag fees – a measure that’s already been lauded by the Wall Street set for its impact on the airlines’ finances. For American Airlines parent AMR, for example, change and cancellation penalties came to $116 million for the first quarter of the year, while baggage fees amounted to $108 million.

These penalties, lamented almost universally by passengers, upped airline passenger revenue by 3.2 percent in the United States. As usual, business travelers get screwed most (probably because they travel most. They paid the bulk of $527.6 million in first quarter change fees.

Even with fewer people climbing onto planes this year, increases in penalty amounts have led to a net gain in revenue for airlines from this type of fee. A number of the larger airlines upped their change fees from $100 to $150. JetBlue moved it from $40 to $100 – and saw first quarter fees surge 29 percent, from $25 million to $32.2 million, relative to the first quarter of 2008.

These change fees are actually pretty important. With the money they bring in, airlines can offer discounts elsewhere, financed by the extra income. And, they make it more attractive for passengers to buy full-fare tickets, that way they have a bit more flexibility. The more expensive tickets benefit the passenger … and of course, the airline.

Airlines run out of services to cut, eye flights

by Tom Johansmeyer on

Cuts aren’t limited to airline employees and passenger amenities. In the next few months, capacity – the number of asses that can be accommodated – will be sliced. Having fewer flights will lower costs and boost the all-important revenue per available seat-mile (RASM) metric. For passengers, the drop in supply is likely to push fares higher and convenience lower (if you’re looking for non-stop flights, you’ll have to look harder).

It’s earnings season – and what happens down on Wall Street will ripple through every airport in the country. Six of the nine top airlines in the United States posted profits for the year – fun! – but they did it on falling sales. What’s that mean for the average traveler? It means airlines have had to cut their way to profits, because they aren’t growing. If passengers aren’t spending as much, all the airlines can do is take away services that cost money. And, with RASM down 19 percent year-over-year for seven U.S. airlines, they have little choice.

If you’ve been on a flight recently, you’ve seen there isn’t much left to cut, which is why airlines are going to be cutting the flights themselves. For the fourth quarter of 2009, total available seat-miles (one person flying one mile on one flight) is expected to fall to 12.4 billion – which is close to post-9/11 levels. Two years earlier (Q4 2007), it was 14.2 billion.

I hope you believe that “getting there is half the fun.” If you do, the decline in non-stop flights won’t bother you as much. Prepare for layovers – lots of ’em. This will help airlines consolidate flights, fill vacancies and boost RASM. But, it also means that you’ll spend a bit more cash at Auntie Anne’s (get some cheese with those pretzels!).

Cutting costs could actually lead to higher prices, which the airlines desperately need – but it means a smaller base of seat-miles on which to make money. Competition will fall on some routes, and overall supply drops – both of which give airlines the power to increase fares. Of course, these really are minor forces compared to broader economic conditions. The ability of customers to pay is ultimately what drives the cost of a ticket, and absent an economic recovery, fares will stay low, as will airline earnings.