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Airlines Get Billions From Unbundled Services
Hugh Pickens writes "In hearings before Congress, the Government Accountability Office (GAO) said that airlines reported revenue of $7.9 billion from baggage fees and reservation change and cancellation fees in calendar years 2008 and 2009 — fees on unbundled services that once were considered part of the ticket price. 'We believe that the proliferation of these fees and the manner in which they are presented to the traveling public can be confusing and in some cases misleading,' says Robert Rivkin, the Department of Transportation's general counsel. Published fares used by consumers to choose flights don't 'clearly represent the cost of travel when these services are added.' However, Spirit Airlines President and CEO Ben Baldanza defended the practice of unbundling, saying it allows his airline to charge lower fares (PDF) and allows the customers the choice to purchase the services or not."
If they're making billions (from unbundled services) that they weren't making before, then they obviously didn't lower fares all that much.
This is good for them, not so good for us.
[Fuck Beta]
o0t!
I find it interesting that the airlines have unbundled services so that they can "lower air fares", yet they still can't seem to make profits the way they used to. This article in the NYT (see link below) points out that while passenger and freight volumes are back up to pre-recession levels, the airlines are still not making pre-recession profits. Another point that I found interesting is that passenger load factors are also significantly higher in the past. So from a cost-accounting perspective, the airlines have reduced or shifted several large factors in their cost bases: underutilized aircraft, "fees" for things that used to cost the airlines extra, and industry consolidation that should also reduce employee costs (two merged airlines don't need as many mechanics, pilots, or flight attendants). A couple more points should also give some food for thought. The aforementioned industry consolidation gives the airlines more power to raise ticket prices because of reduced competition (and fewer routes). Also, oil prices are not nearly what they were in 2008/2009, so that's another large expense that has been reduced.
The point I'm trying to make is that the airline industry has seen major shifts that should in theory increase revenues while decreasing expenses. Something else must be going on and I don't have the whole story, but it makes me wonder if there is some serious mismanagement going on. Or maybe unbundling combined with all the other hassles of air travel are starting to make customers change their behaviors.
http://www.nytimes.com/2010/07/19/business/global/19iht-ravover.html?_r=1&ref=business
But they DID lower prices. A quick search shows this. Last year, Southwest was the cheapest to Vegas. Now, Delta and others are $100 or so cheaper. Add in the bag charges and it's back to where it was when I flew last year.
With our brilliant free market capitalism in place, a competitor should be here to the rescue to innovate and beat the crap out of these guys who don't take care of their customers.
There is, Southwest Airlines. No bag fees (a fact which is heavily advertised).
The thing people like you don't realize is that capitalism is not an instant fix, but it does fix things in the long run - Southwest has been very popular and is expanding to more cities and locations. I can take that airline to a lot more places in the U.S. than I used to be able to, in part because of better customer service that made sure I would fly Southwest unless there was no other choice.
How is that not capitalism in action?
"There is more worth loving than we have strength to love." - Brian Jay Stanley
It's disriminatory? It's like saying Walmart charging you biggies $1-2 on large clothing sizes (they do) because they use more material. For the airlines, more weight = more fuel burnt. I bet you have a bigger food bill than a 120 lb person as well, who are you going to cry discrimination there?
It's not discrimination. It's reality.