Hidden airline fees under attack, industry pushing back

by Tom Johansmeyer on

It isn’t so much the airline fees that are being targeted these days: it’s the extent to which they are hidden. Three advocacy groups are pushing for airlines to do a better job of disclosing how they’ll nail passengers for extra cash. So, a battle of paper is emerging. On one side, advocates are pushing a petition to get airlines to open the kimono a bit more. And on the other, airlines are looking to protect the paper they’re stacking from ancillary fees.

The stakes are high: last year, the airline industry pulled in a whopping $8 billion for extra charges. They stand to do even more this year, thanks to a recovering travel market.

The American Society of Travel Agents, Business Travel Coalition and Consumer Travel Alliance are getting together to push for fee transparency and to “allow travel booking companies access to fee schedules, making comparisons easier among airlines by third parties.”
According to the Dallas Morning News:

Travelers “are tired of arriving at the airport and finding huge unexpected costs for travel services they thought were part of the ticket price,” said Kevin Mitchell of the Business Travel Coalition, which lobbies for corporate travelers. “It’s time for consumers, corporate travel managers and travel agents to stand up and say, ‘We’re not going to take it anymore!’ “

Meanwhile, the airline industry is marking its territory:

“We remain confident that the level of transparency that some opine doesn’t exist, in fact, does exist,” said Air Transport Association spokesman David Castelveter, who points out that coverage of airline fees has become ubiquitous and that even casual travelers are likely aware of fees. “I went to the websites of all our members, and there isn’t one of our carriers that didn’t have bag fees prominently displayed when you book.”

The goal is to drop the petitions to the Department of Transportation on September 23, 2010.

[photo by williamcho via Flickr]

Southwest wins on bet against extra fees

by Tom Johansmeyer on

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]

Airline fees: Please don’t lie, don’t be moronic

by Tom Johansmeyer on

As much as you may hate ancillary fees on airlines, they’re clearly making a difference. The nickel-and-diming of the average passenger was good for a whopping $7.8 billion last year … up 42 percent from 2008. Airlines are making serious cash on inconvenient fees, which means they aren’t going away. The coming travel market recovery (look for it in 2011) will put more asses in seats and, of course, more bucks in the airline industry till. What was $7.8 billion last year only has the potential to become much, much larger.

And that could be the problem.

It might not be easy to sympathize with the airlines, companies with well-entrenched reputations for being among the most poorly run enterprises since the dawn of capitalism. But, at least when they were on the ropes (for real this time … right?), we could stomach that the ancillary fees were a survival mechanism. When revenue per available seat-mile starts to come back, passengers will become increasingly offended by the price tags popped on blankets and baggage and everything in between.Fortunately, there is a silver lining in all this: anything we feel is totally irrelevant. Airlines will charge what they can charge. Since ancillary fees are a market-wide trend, we’ll have to get used to them. Some airlines aren’t heading down this road with zeal, but they may not go to your desired destination, making the offer of goodwill moot.

And, if the extra charges were slashed, ticket prices would just increase for no apparent underlying reason, and we’d all have to share in the cost of the blanket that the gump in seat 11D feels he needs to stay warm.

The real issue, it seems, isn’t prices – they are what they are. Instead, passengers would be happier less pissed if the airlines were a bit more transparent. Notes Tim Winship of SmartTraveler.com:

The word “sneaky” appears prominently and often in consumers’ grumbling about fee-for-all pricing. And more substantively, adding injury to insult, consumers can’t make meaningful price comparisons if they don’t have ready access to all-inclusive prices from all airlines, whether it’s on the carriers’ own websites or on the site of an online travel agent.

Full fee disclosure is something the airlines should have done proactively, from the beginning. Soon, they may have no choice-as mentioned above, the DOT has included language in its proposed passenger-protection legislation that would mandate up-front disclosure of all fees associated with a particular ticket price.

The winning (or at least non-losing) formula for airline pricing seems to be simple: don’t be stupid, don’t lie and don’t charge people for the lav.

Hotels explore a la carte pricing

by Tom Johansmeyer on

We’ve spent plenty of electrons over the past two years griping about the almost comstantly arising airline fees. Paying to check bags, get blankets and so on has become part of the misery that comes with getting on a plane these days. Meanwhile, the hospitality industry managed to stay above the fray. The same pressures affecting the airlines came to bear on hotels, as well. And, the constraints on credit made it even worse, with buildings in progress struggling under the weight of insufficient or expensive capital.

Now, there are grumblings that hotels could follow the airlines. Look out for some extra fees.

That hotels would adopt an a la carte model isn’t surprising. Rather, it’s almost shocking that it’s taken this long. A recovery in the hospitality sector isn’t expected to begin until 2011, and like airlines, hotels sell a perishable commodity. For an airline, an empty seat on a particular flight can never be sold later. If 34C from New York to Las Vegas at 7 PM on July 2, 2010 is empty, it represents money that will never come in the door. Likewise, if hotel room 345 in Las Vegas is empty that night, it can never be recovered.

The money needs to come from somewhere else.Of course, hotels are no strangers to additional fees. Many charge for internet access and use of the gym, among other amenities. And, like the airlines, they cut staff and perks throughout the financial crisis and its aftermath, a situation that has not gone unnoticed. What’s on the horizon, however, could be extreme.

Could you imagine paying for use of the television? Housekeeping? Towels?

A hotel in Europe, easyHotel, is playing with this model. For low room rates, it will be hard to beat: it can get as low as $35 a night. But, the towel fees essentially mean that you’ll need to pay to shower. It will be interesting to see how this unfolds, but I’m not sure the model will be broadly applicable.

There’s more competition among hotels than there is among airlines – mainly because we have more choices available. Depending on your hometown and destination, the flights you can take are limited, even if you’re headed to a major city. Once you hit the ground, however, there are usually a number of hotels from which to choose. Often, you can pick from properties in a similar category (e.g., extended stay). With hotels eager to get guests in the door, it’s unlikely that fee-laden stays will get much traction.

Generally, I’m supportive of anything that can help a business turn a profit (that’s why they exist, after all), but I get the feeling that a la carte hotels will be niche at best. What do you think about this?

Germany bans Ryanair from charging credit card fees

by Scott Carmichael on

Ryanair has been handed a nasty blow to its business model in Germany when their federal court banned the budget airline from charging credit card fees on flight reservations.

The case was brought against Ryanair by the German consumer protection agency who complained about the fee. Every ticket booked for Ryanair flights comes with an additional fee, varying between $2 and $5, and there is no way to avoid paying it.

Because Ryanair does not offer an alternative payment method, the courts dismissed the Ryanair argument that the bank processing fees are simply being passed on to consumers. In their verdict, the courts said the airline must provide an “established” payment method that does not require any extra effort or cost.

This verdict is just another blow to Ryanair in Europe – recently the airline was hit with a three million Euro fine for not aiding stranded passengers. In the end, if Ryanair does start including credit card fees in their ticket prices, it’ll most likely mean ticket prices will simply go up.

Ironically, the court verdict came at the same time Ryanair boss Michael O’Leary was in Germany to announce a major investment in Frankfurt for a new maintenance facility.