Future of air fares: More 'special' charges on the way
Not that long ago, paying to check a bag, watch an inflight movie or get an airplane meal would’ve been inconceivable.
Today, flight surcharges for a lengthening list of redefined extras are the norm, sparking strong reactions in favor and not.
“I like having fees unbundled,” says one flyer on CNN.com. “I can endure a flight without a can of soda and stale peanuts. Anyone who hates all these fees is 100 percent free to purchase a higher fare ticket that includes all of the services already bundled in.”
“It’s easier to understand the Higg’s Boson particle than airline surcharges,” vents another.
If you thought the lists of fees were already confusing, be warned -- it's likely just the start of a new era in unbundled air travel rates, according to some pundits.
Barebones travelers who simply want to get from A to B may welcome these changes. Families watching their vacation budget bulge with checked luggage tolls, credit card surcharges and (new!) seat reservation fees for the added luxury of sitting together will call it a gouge-fest.
Making margins ... just
Airlines, meanwhile, feel justified, pointing to their operating costs, crazy seat deals, fuel overhead and tight margins -- about 6 percent in 2012 according to the U.S. Bureau of Transportation Statistics, with other research pundits calling it 3 percent for many carriers, if that.
At 6 percent, an Economy Super-Saver fare of US$331 from New York's JFK to London's Heathrow nets an airline under 20 bucks. And, like popcorn and soda at the movies, that net is more likely coming from all of these other add-ons.
“If you take a look at the airlines ancillary revenue -- money generated from checking bags, changing reservations, selling food, snacks or headphones, or any of those other added or optional services -- that number almost always equals or comes close to equaling the airlines profit, at least within North America,” says Henry Harteveldt, Airline and Travel Analyst at Atmosphere Research Group.
“What airlines are really trying to do here is get a margin.”
That won’t stop consumers balking at the latest numbers. Like US$1.8 billion in baggage fees alone during the first two quarters of 2012 according to BTS.
Or over US$36 billion in total ancillary charges in 2012 (an 11.3 percent jump from 2011) according to the Amadeus Worldwide Estimate of Ancillary Revenue, which covers 176 airlines.
What remains to be seen is how far it can go before air passengers opt to take the bus across the Atlantic instead.
Recently, U.S. domestic carrier Spirit Airlines broke new ground when it started collecting carry-on fees -- US$35 online, US$40 over the phone, US$50 at the ticket counter and as of this November, a whopping US$100 if you have the gall to leave it until the boarding gate.
While the airline credits its “Bring Less, Pay Less” bag program for helping to conserve the equivalent of several million gallons of fuel, it’s also fueling another surcharge trend.
Allegiant and London-based budget carrier Wizz now charge for carry-ons too. Passengers begrudgingly pay them. And you can bet lots of other airlines are mulling over this low-hanging fruit.
Hovering closer to the edge of consumer snapping points, Dublin-based Ryanair’s brief experiment with airplane toilet fees was dropped last year and dismissed by some as a malodorous publicity stunt.
Also on CNN: Ryanair’s ‘cheapest’ money-saving schemes
But it hasn’t stopped the bargain basement carrier from forging ahead with several ledgers of knick-knacky “admin fees” and “web check-in fees” -- or from upping its unapologetically ludicrous Boarding Card Re-Issue Fee from £40 (US$65) to £60 in spite of a recent Facebook rally after a family was charged an additional €300 (US$396) for five boarding passes at the gate.
Is anyone wondering when optional oxygen mask surcharges are going to be proposed?
Creative ways to charge
“Of course there’s a limit, but it’s a fine line,” says George Hobica, founder of travel site Airfare Watchdog. “There’s no end to the imagination when it comes to new and ‘improved’ fee structures.”
Hobica suggests we might start seeing baggage charges scaled by distance traveled. “If these fees are really about fuel consumption, why should a checked bag flown 300 miles cost the same as one flown 2,500 miles?”
Economy seat prices might be scaled by distance to the front too. “A seat closer to the front of the plane is more valuable real estate, just like row F center orchestra is a better seat than row R. You pay more for it on Broadway, so why not at 35,000 feet?”
The next wave of common fees, Hobica forecasts, may include airlines offering the ability to change the passenger name on a ticket for a price (“Frontier and Interjet already do this”) as well as an upswing of penalties (“er, fees”) for passengers who don’t check-in online or don’t handle their baggage surcharges before arriving at departures. “Want to deal with a human at airport? You’ll pay for that.”
Is there any silver lining here?
“Airlines are finally making a little money, which is a good thing. Bankrupt airlines lead to less competition, consolidation and stranded passengers,” says Hobica, adding: “Air travel has never been cheaper, adjusted for inflation -- or safer.”
'Free' services just hidden
And don’t forget that popular misconception that “free” services on flights weren’t just built into ticket prices that have gone down over the last several decades.
Of course they’ve gone down, says Charlie Leocha, director of the Consumer Travel Alliance (CTA). Just like calculators, computers and cellphones.
“Airline companies have been benefiting from a number of things over time -- like lighter airplanes with better fuel efficiency, greater control over capacity and the ability to carry more people for less,” says Leocha. “So when you look at it only from dollars and cents, yes, it costs less today to fly than it did 50 years ago. But ... I think you'd find that their profit and loss statements are about the same."
That said, CTA’s main contention here isn’t as much with the surge of surcharges, but the way that airlines are disclosing these charges -- or not.
“A big issue is about transparency,” says Leocha. “If airlines are going to break out all of these extra fees, there still needs to be an easy way for people to compare ticket prices across several airlines -- and there just isn’t anymore. Airlines make it sound simple. It’s not.
“When a family of four with two checked bags, four carry-ons and a baby seat has to now go to three, four or seven different airline sites to figure out, if they’re lucky, how all of these extra costs will break down before making a decision -- that’s a problem. What we’re now facing is a situation where consumers are flying blind.”
Of course, one could point out that flying blind also lets us debate over the chutzpah of inflight entertainment fees without having a clue about how an airplane actually works.
Or how hundreds of them just landed at LAX or HKG in the last five minutes without a hitch.
Or how we just flew across the pond (any pond) for under US$200 -- okay, plus checked bag fees.
Maybe if airline companies had set an earlier precedent -- charging for meals, bags and other 'extras' -- there wouldn’t be as much head-shaking these days about having to shell out for a lousy sandwich.
Which isn’t that lousy if you recall the food they were handing out 20 years ago.
But that’s all hindsight. When it comes to weighing the giant strides of air travel (cheaper, safer, far less mysterious meat between the bread) against our natural concerns about being taken for a ride in spite of all that, it’s no contest.
Customers push back
“A few years ago, US Airways tried charging travelers on its domestic flights for soda, coffee, tea, even bottled water,” recalls Harteveldt of Atmosphere Research Group.
“There was enormous pushback. People complained. The airline got a lot of negative PR. And, unfortunately, that also obscured the fact that at the same time US Airways had taken steps to become a much more reliable airline.”
Currently, the chief architects of unbundled fares are the U.S.-based airlines. Increasingly, it’s becoming a global thing.
If you fly Iberia within Europe in economy, you will now pay for bottled water, notes Harteveldt.
British Airways now charges a fee, even in business, if you want to select your seat ahead of the 24-hour check-in window if you’re not elite status in their frequent flyer program.
And if you want extra legroom or a better meal in economy on Air France and KLM, you can pay for that too.
“Based on the conversations I’m having with airlines operating outside the U.S., they are all thinking about how they can grow revenue through more of these optional services,” says Harteveldt.
“And, overall, I think passengers are saying, ‘Okay, if you’re going to charge me, don’t make it a nuisance. Make it something I value, something that makes the journey a better one.’”
What makes the journey a better one?
For some it’s added comfort and convenience. For others it’s all about the bottom line.
There’s a market for passengers who will gladly pay extra, or not, to make the journey palatable -- “whether that means more pleasant or cheaper,” says Harteveldt, who predicts that in the next 20 or 30 years we may not even see divisions between first class and economy anymore.
Just one open cabin occupied by passengers enjoying the benefits of extra space, early boarding, wine service and Wi-Fi, carry-on benefits, expedited de-boarding and security check-through -- or some, or none, of the above. You get what you pay for.
As for the crew: “Flight attendants will be fully trained not only in safety,” predicts Harteveldt, “but in merchandizing.”
Maybe you will buy those inflight pajamas and that nifty red-eye amenity kit. With all the dough you saved on no bags, limited legroom and remembering (at all costs) to print out your own boarding pass -- you owe it to yourself.
Do you like seeing what you're paying for or do unbundled fees just make the process more confusing? Let us know what you think below