Airlines bank on fees in down times
By Kelly Yamanouchi
The Atlanta Journal-Constitution
Sunday, May 10, 2009
The onslaught of more airline fees on everything from checked bags to seat assignments is helping airlines bring in more cash, but for travelers it can mean muddled comparison shopping when seeking the lowest cost for a flight.
Add-on fees have become an effective way for airlines to boost revenue at a time when recession-weakened travel demand compels them to drop fares.
Atlanta-based Delta Air Lines in July starts charging passengers on international flights a $50 fee each way for checking a second bag. Other airlines are studying the move but have not yet matched. That means travelers who check two bags may find a lower fare on Delta compared with other carriers, but their cost for traveling could end up higher.
Various airlines have baggage charges that can add up fast. Pack a third bag on an international flight and Delta will tack on another $200 fee each way, for example. Overweight bags on a Delta international flight would each cost at least $300 extra round trip and oversized bags would each cost $350 extra round trip.
Even on domestic flights, “your $78 airplane ticket can be $600 or $700 in a New York minute just because you didn’t pay attention” to fees for extra, overweight and oversized bags, said Tom Parsons, founder of Bestfares.com.
The fees enable airlines to win bookings from customers using travel Web sites to compare prices and choose the lowest fare, then collect more revenue when travelers arrive at the airport with extra bags or seek other services.
Bill Swelbar, a researcher at the International Center for Air Transportation at the Massachusetts Institute of Technology, said airlines have had to look for other revenue sources because fares alone don’t cover the cost of travel.
“The airline seat is a commodity product,” Swelbar said. Airlines believe they must offer the lowest fares “because so many decisions on travel are based on price and price alone.”
AirTran Airways chief financial officer Arne Haak has said travelers will spend hours searching for fares online to save $8, then “come to the airport and spend $20 to buy a soda, a bag of chips, a candy bar and a magazine that they could have bought for half the price.”
Parsons said “John Q. Traveler” seems much more concerned about finding the lowest base fare. “All the other incidentals they don’t seem to be upset with,” he said.
While most airlines already charge for checked bags on domestic flights, baggage rules have been more liberal for international travel, where longer trips may require more bags and fares often are already much higher.
“Now they’re telling you you’ve also got to pay for bags,” Parsons said. “I remember when they used to give you bags. Where’s my old PanAm bag?”
Delta, which reported a $794 million loss for the first quarter, said it took in more than $160 million from baggage fees in the quarter. It expects the new international second checked bag fee to generate about $100 million annually.
Chicago-based United Airlines said it takes in about $14 in ancillary revenues and fees per passenger.
One carrier —- Southwest Airlines, which does not fly to Atlanta —- has held back on charging many of the extra fees, and it promotes the difference.
But other discount airlines, including Spirit and Allegiant, have gone further than the big carriers, including a fee for bookings made online and charges for non-alcoholic beverages.
And US Airways is adding a fee on top of a fee. On July 9, the carrier plans to begin charging $5 for paying checked bag fees at the airport instead of online. US Airways also charges for international checked bags to and from Canada, Latin America and the Caribbean, but not to and from Europe and Asia.
A consumer’s only defense at this point is careful research and adjusting plans to avoid fees.
Technology is in the works to make it easier for travelers to compare prices. The technology is being developed for reservations systems that airlines and travel agencies use to sell airline tickets.
Some travel Web sites also offer fee comparisons. TripAdvisor in February launched a flight search engine with a fees estimator that asks travelers how many bags they will check, whether they have elite frequent flier status —- which can affect which fees apply —- and if they will want food, drinks or entertainment in flight.
Other travel sites, including Orbitz, Expedia and Travelocity, offer charts that compare different airlines’ fees. Another site, flyingfees.com, compares airline fees.
According to a TripAdvisor survey, 36 percent of respondents said they have been surprised by the cost of checked baggage fees at the airport.
“I thought there would be more backlash from the traveling public over the payment of fees than there has been,” Swelbar said.