Southwest wins on bet against extra fees

How did Southwest score its recent record revenue? Well, it could be because it isn’t jacking up fees for all the extras. The decision to do business the old fashion way seems to have been good for a quarterly profit of $112 million and may provide a good reason for other airlines to reconsider these unpopular measures.

In a roundup of coverage on the airline’s quarterly financial results, USA Today, found the answer in reports by Bloomberg and the Las Vegas Sun, attributing the results to “the company’s policy of not charging for bags and excellent customer service offered by employees.”

Rather than take the short returns on charging for blankets and checked luggage, Southwest is apparently making a longer-term bet on customer satisfaction, with a policy that’s more likely to appeal to the average passenger.

Is it sustainable? Well, that remains to be seen. It’s worth keeping in mind, though, that Southwest has built its business on something of a contrarian strategy … and it’s been working.

[photo by Mr. T in DC via Flickr]

Congress to investigate airline fees … but not for your benefit

Congress is digging into all those new airline fees. Extra bags, special check-in situations … you name it. Before you start cheering on our lawmakers, though, you should know that they aren’t doing this from a sense of consumer advocacy. Frankly, Congress doesn’t give a damn how much you pay for air travel. But, it does care how you pay. Why? A cash-strapped government is wondering if it’s leaving money on the table.

When you look at your receipt, the line with “taxes” has never been lost on you, right? Well, the add-ons aren’t included in this number: Congress has a tax on airfare, not all the other stuff. So, for the airlines, this has been a tax-free revenue stream, one that’s been crucial to helping the already bruised airlines survive the current recession.

Yet, is it really just airfare in another form? That’s what Congress wants to know. Even if this is a different form of revenue, do you think it will be left untouched? Of course not! The government needs money, and there’s nothing stopping it from passing a new bill to tax the extra services. How much resistance would be raised?

Think about it.

The average person, even if traveling frequently for personal reasons, wouldn’t be hit too hard by the tax on the fees. If a $10 bag surcharge were taxed at 30% (just to pick a random and unreasonably ugly number) and a passenger flew weekly, he’d rack up $152 in taxes on the additional fees … and that’s assuming he needs to check the extra bag and did so every week. If faced with this or a higher income tax, how would you ask your congressman to vote?

Add it all up, and there’s some tax money to be had. The airline industry has pulled in more than $3 billion this year from the extra fees we all love to hate. If they were taxed at the same rate as fares — a much more reasonable 7.5% — $225 million in tax revenue would be generated. That’s not a trivial number.

The fees aren’t going to go away, and if all goes as it seems, a new tax will be here to stay, as well.

On Southwest, the internet’s no longer free

Starting tomorrow, Southwest Airlines is going to start charging for internet access on four of its planes. The fees will range from $2 to $12, based on how long you’re in the sky and how you connect. For the past few months, access has been free, but the lure of additional revenue must have been hard to resist.

Yep, another extra fee to add to the list …

Both Delta Airlines and American Airlines are planning to add internet access to more than 300 planes each, but they’re still in the early stages. The fee to connect can reach $12.95, though less on shorter flights or when you use a handheld device instead of a laptop. I tested out Delta’s offer on a flight from New York to Atlanta and had great results. If you’re looking to recapture a few hours of your professional life, the price is well worth it.

For once, there’s a fee well worth paying.

New fees aren’t new, but airlines keep trying

Cheaper fares are being offset by an array of extra fees, as airlines try to bring in some extra revenue in order to keep planes in the sky. And, to a certain extent, it’s working. United Airlines forecasts $1 billion in revenue from these fees this year – accounting for more than 5 percent of its revenue. But, as they try to find new ways to dig into your wallet, fewer and fewer new ideas are popping up, according to an article in MSNBC.

US Airways and United have found that the best new fee is just the same ol’ one: put one fee on top of an existing one. Passengers who pay their extra baggage fees online can avoid an additional $5 fee that’s assessed at the airport. United’s came into effect on June 10, 2009, with US Airways’ bringing it to life on July 9. AirTran is nailing passengers for the extra legroom of an exit row to the tune of $20. Again, it’s not new … it’s just new to AirTran’s passengers.

You don’t need to be big to think big. Smaller airlines are getting in on the game, too. Allegiant Air charges a $13.50 “convenience fee” for passengers wanting to buy their tickets online. This one actually is fairly new, as most airlines realize that they can save a fortune by using technology (who’d’ve thunk it?) to sell things instead of paying people more for a slower process. Spanish airline Vueling makes you pay for choice. Want to pick your seat? Pay €3 (around $4.50). Another €30 will get you an aisle or window – and an empty aisle seat beside you! That’s a deal I’d definitely pay for.

Of course, Ryanair remains the master. If you want to check in at the airport: €10 ($13.50). So, you decide to save some cash and check in online … €5. You can’t win!

Only a year ago, most passengers were able to dodge the fees, since you didn’t get slammed until you checked a third bag or sent an unaccompanied minor into the sky. Today, nothing’s sacred. Delta and AirTran claim not to have plans to charge for carry-ons … but why would they say that? Clearly, it’s crossed somebody’s mind.

The only way to beat the fees, it seems, is to fly first class. Hey, if you’re already paying a fortune, the airlines will probably want to treat you well.

Less space in overhead bins? Blame it on the airplane

There’s a video of Aaron trying to close an overhead bin. He’s a determined sort, so eventually it looks as though he hits pay dirt once he moves the bag to another location. If you noticed the first bin, you’ll see it was full. Very full. So was the final bin, for that matter.

That’s becoming a common problem according to this article originally published in the St. Petersburg Times. More and more overhead bins are proving to be quite the challenge for passengers scoping out space. Is it that people are carrying on more than ever before to avoid those pesky fees? One of Scott’s posts today pointed out how those fees are continuing to climb.

Actually, the number of carry-ons hasn’t increased that much.

What is happening is that as flights are becoming fewer as airlines have cut back the number of flights each day, planes are becoming more crowded. More crowded planes equal more carry-ons because there are more people. In research terms, this is what can be called a direct correlation.

Also, because airlines are tending to fly smaller, older planes, the bin space is smaller. Newer planes are the ones with the bins that look like they could double as sleeping quarters. Think of the closet space difference between brand new homes and those built before people could buy so much inexpensive stuff.

And here’s one more reason given to explain the lack of bin space. Last summer the baggage fees weren’t charged to people who had purchased their tickets prior to early June. Now, we’re having a different scenario.

Regardless of why bins are becoming more full, know that they are more often than not stuffed to the maximum and be prepared. Hopefully, you won’t have to work as hard as getting the bin to snap closed as Aaron did.