What's Fair Is Fare
Seat 2B
The Tech Travel Essentials
Nothing Fair About Airfares
The Road Warrior’s Data Set
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The tax implications of a la carte pricing also became an issue last week during a House of Representatives hearing on airline practices. Unintentionally hilarious exchanges between Democratic Representatives Peter DeFazio of Oregon, Laura Richardson of California, Jerry Costello of Illinois, and Spirit Airlines chief executive Ben Baldanza nevertheless yielded an astonishing claim: Baldanza insisted that luggage fees should not be taxed because, unlike passengers, checked baggage imposes no burdens or costs on airports or the aviation infrastructure.
An incredulous Costello was left to sputter: "I think it is pretty clear that it does."
There's also considerable hand-wringing on whether the Department of Transportation has a role in creating a level playing field to allow travelers to honestly compare travel prices. In a package of proposed regulations unveiled earlier this year, the DOT was at pains to admit that it was no longer sure of how wide a net to cast. It wants to make an apples-to-apples comparison available to travelers, but the agency says it needs help defining prices in these free-for-all days.
I personally know how the DOT feels. A few months ago, I needed to get to Rome and was prepared to book a great price on a business-class seat to Paris' Orly Airport on OpenSkies, the boutique carrier owned by British Airways. I was fully prepared to book a Paris-Rome connecting flight on Vueling, a Spanish airline that flew the route. But since I didn't know what Vueling offered as part of its "fare," I searched its website fruitlessly for details of baggage pricing, boarding procedures, seat assignments, and the like. Unwilling to be a sucker, I booked a Continental Airlines nonstop to Rome instead.
Not all travelers are lucky enough or savvy enough to be able to weigh their many confusing options, however. A recent survey by the Consumer Travel Alliance says that travelers now pay as much as 54 percent of the ticket price in additional "hidden" fees. Moreover, current airline websites, third-party travel agencies, and travel-industry reservation systems aren't equipped to display all of the ups and extras. So most travelers can't find out what their travel will really cost until after they make the fare purchase and start buying extras on an ad hoc basis.
The next obvious questions: Do airlines that indulge in a la carte pricing profit from the practice? And do they even know which fees work and which don't?
The answer, quite simply, is that no one knows. They may say they know, but they don't. No two carriers account for extra fees or even define "extra" charges in the same way. Many still don't have the capability to drill down and do profit-and-loss assessments because their computer systems can't reliably tag each individual extra charge. One airline consultant recently told me that one of his client airlines was astonished to find a upsurge in ancillary revenue for checking ski gear in a Sunbelt city. It wasn't until a manager realized that ticket agents at the airport were coding baggage charges as ski equipment (the first extra-revenue item appearing on the agent's computer screen) that the "mystery" was solved.
The most recent "reliable" estimate of the extra cash that airlines create from a la carte pricing is this: About 4 percent of the industry's revenue comes from fees generated outside the fare purchase. But that estimate includes everything from long-established extra charges (club-lounge memberships, unaccompanied-minor fees, etc.) to all of the new revenue streams.
Some revenue-generating ideas have clearly failed. US Airways, for example, briefly tried to charge for soft drinks. All of its competitors have admitted that, despite initial expectations, charging for meals and snack boxes is not profitable. (Their fallback rationalization: At least they no longer "lose" money by serving free meals in coach.) Carriers are also rushing to find ways to exempt passengers from baggage fees. Several now promote affinity credit cards that include bag-charge waivers and all exempt their best and highest-paying flyers from the fees. Spirit's upcoming carry-on fee is unlikely to be matched because all of the major airlines have promised politicians they would not follow suit. And any widespread attempt to charge customers for the right to use their credit card for ticket purchases may have been shelved after a German court ruled that Ryanair must offer customers a fee-free method of purchasing passage.
Then there's this: Southwest Airlines has mounted a massive advertising campaign to alert travelers to the fact that it continues to allow travelers to check two bags free of charge. The result: Southwest gained a full point of market share last year, an astonishing growth spurt in the usually glacial airline industry. And, of course, Southwest has been profitable for 37 consecutive years and last week declared its 136th consecutive quarterly dividend.
The Fine Print…
British Airways flight attendants, who have struck the carrier for more than 20 days this year, this week overwhelmingly rejected the carrier's latest contract offer. A new series of strikes now appear likely, although the union will be required to take another ballot and give seven days notice before any work stoppage. Earlier strikes have cost BA about $225 million and, by some estimates, upwards of $2 billion in lost revenue.
Joe Brancatelli writes Portfolio.com’s business travel column, Seat 2B. Brancatelli is the former executive editor of Frequent Flyer magazine and operates the membership site JoeSentMe.com. You can reach him at jbrancatelli@portfolio.com.
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