Airline fees are worth more than Facebook

Airlines, Facebook and money

Outside the travel world, everyone’s marveling at the prospect of a Facebook IPO, which could be valued at as much as $100 billion. So, what are we missing while we fawn over Mark Zuckerberg’s creation? How about the slow, stodgy, ugly airline industry. Known for a painful user experience and a steady decline of free features, the likes of Delta and American Airlines are outdoing the hottest online property in the world simply by annoying their customers.

According to data from the U.S. Department of Transportation‘s Bureau of Transportation Statistics, baggage and reservation change fees brought the U.S. airline industry a whopping $5.7 billion last year. Delta picked up close to a billion dollars on baggage fees alone, which doesn’t include what they yanked from the wallets of soldiers returning home from combat. The largest airline in the country also brought in approximately $700 million from reservation change fees.

American Airlines, the fourth largest airline in the United States, came in second in both categories, with $580.7 million in baggage fees and $471.4 million in reservation change fees.The particular beauty of these fees is that they are basically found money. Some passengers need to check bags, and the airlines have to invest in the overhead required to meet this demand. It’s an expense that can’t be avoided. With this fee, they monetized what they’d have to pay anyway. The same is the case for reservation change fees.

The top five earners of baggage fees in 2010 are:

1. Delta: $952.3 million

2. American: $580.7 million

3. US Airways: $513.6 million

4. Continental: $341.6 million

5. United: $313.2 million

Unsurprisingly, the top five earners of reservation change fees don’t look much different:

1. Delta: $698.6 million

2. American: $471.4 million

3. United: $321.5 million

4. US Airways: $253.1 million

5. Continental: $237.4 million

No doubt, activist groups will be up in arms shortly. And airline employees will lament the fact that their executives are so richly compensated while they have endured round after round of pay cuts and layoffs for years upon years.

Frankly, I offer my congratulations to the airline industry. Yes, they are soaking us. Passengers are a captive audience, particularly on routes with limited coverage, and we sometimes have no choice but to pay. The airlines are using this to generate profitable growth for their shareholders, which is their primary responsibility.

So, what about Facebook? The company is estimated to pull in revenues of somewhere above $4 billion this year, most of it from advertising. It is pretty interesting that the popular social network is annoying its customers as a way to generate revenue, just like the airlines!

Who knew that pissing off your target market was an awesome business model?

[photo by Tobin Black via Flickr]

Ask Gadling: You missed your flight


Even in this day and age of flight delays and cancellations, it’s always not the airline’s fault that you miss your flight. It happens: you oversleep, get stuck in traffic, or just run late on the way to the airport and miss your flight. A few months ago, my husband and I were heading out of Istanbul for the weekend and because of unusually long security lines and non-functional check-in kiosks, our flight closed just before we got to the check-in counter and we missed the flight. Turkish Airlines rebooked and ticketed us on another flight with a small change fee. Recently, some visiting friends missed their flight home though they were *at the gate* due to a last-minute gate change and zero announcements. Despite the fact that other passengers made the same mistake, they paid a change fee plus the fare difference, and they were also flying Turkish Airlines.

So what can you do if you miss your flight?

View more Ask Gadling: Travel Advice from an Expert or send your question to ask [at] gadling [dot] com.
  1. Proceed to the airport check in counter – There used to be an unwritten “flat tire” rule that meant if you got a flat tire en route, you could show up and be put on the next flight with no charge. That rule seems to have gone the way of the free meal in coach, but many airlines may still try to help depending on demand and schedules. If you are on your way but think you will miss the check in cut off time but not the departure time, try calling the airline in case they are able to check you in and then rush you to the gate. Even if you know you will miss your flight, your odds of being rebooked are better if you are physically at the airport than if you go back home or to your hotel. You may even still make the fight if you can (politely, please!) push through security if you tell other passengers you are about to miss your flight.
  2. Use your status if you have it – If you are flying an airline you hold status with, now is the time to call the Gold desk. Flying a full-fare or upper class ticket can also help. This is not to say you should threaten anyone or act self-important, you want to show you are a valuable customer who would greatly appreciate being accommodated. Missed flights are another good case for travel insurance, if you’ve ensured your trip, you may be able to be rebooked for free.
  3. Be calm and flexible – It may not be your fault that your taxi driver took the long way to the airport, but you’re still in the weaker position and at the mercy of the ticketing agent. It won’t help to be difficult or angry. Additionally, being flexible about your routing can help, especially if you’ve missed the last direct flight of the day. Ask about connections or even flights to neighboring cities where you can take a train or drive the rest of the way. The day we missed our flight out of Istanbul to Pristina, we ended up on the next flight – to Prague. Your travel plans may not always be so flexible, but getting a seat on a connecting flight may mean you get home – or on vacation – faster.

Gadling readers: what’s your experience been when you’ve missed a flight? What airlines do you find to be the most accommodating?

Airline fees never going away, $1.2 billion in first half

In the first six months of 2010, U.S. airlines raked in $1.2 billion – and that’s just from change and cancellation fees. The industry is on track to see $2 billion in revenue just on ticket-related fees this year.

According to the Bureau of Transportation Statistics, here’s where the money’s going:

  1. Delta had the most at $347.1 million in the first half of 2010
  2. American Airlines was a distant second at $235.3 million in ticket related change fees
  3. United Airlines pulled in $158.3 million
  4. US Airways generated $128.3 million from ticket fees
  5. Continental Airlines picked up $120 million

JetBlue didn’t hit the top five (finishing sixth), but it did lead the low-cost category in change and cancellation fees, with $55.7 million.

[photo by cliff1066 via Flickr]

50% of air travelers will fly with the flu to avoid a fee

I’m a one of the those people who always seems to get sick after a long plane ride. A few days post-trip, I suddenly get a runny nose, sore throat and all the other telltale signs of a cold, most likely contracted from a sick passenger. Usually it’s minor, and I’m out of commission for only a few days.

I guess I’ve just been lucky that it hasn’t been the flu, because, according to a recent TripAdvisor survey, over 50% of travelers would choose flying with the flu over paying a fee to change their flight. As if we needed more reason to get a flu shot before we travel this season, now we know that someone with the flu may end up on our flight, just to avoid the fee.

Out of 2,327 people, 51% said they would fly while sick with the flu rather than pay the $150-$200 fee (plus any change in price) imposed by most airlines in order to change their flights to a later date. This is obviously, alarming news, but I can see why it is the case that people would rather cough up some germs on their fellow passengers than cough up the extra cash to change the tickets. Especially because costs for the new dates will often be higher, meaning you may end up paying more like $300-$400 per ticket for the change.

In the case of inescapable commitments, I can understand why someone would not change the ticket. But for a leisure trip, I would consider it. Of course, I don’t want to get others sick, but from a purely selfish standpoint, I don’t want to spend my time in the air shaking and shivering with the flu, or to spend my entire vacation laid up in bed. But then again…if I felt well enough to get on the plane despite having the flu, I would definitely do it rather than incur the extra charges and have to change all my travel plans.

On his blog, Christopher Elliot offers a solution – airlines need to lower or waive the change fees during flu season. We need to stop financially penalizing those who get sick and allow them to change their flights easily, or they will continue to fly and risk spreading the flu to other passengers.