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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."
I don't have luggage I can't handle alone, I don't drink the crap they serve, I don't eat the latex eagle they serve, so I fly cheaper.
One of which is the excessive amount of carry-on baggage that people now bring on to planes. Instead of checking that larger bag and only bringing the laptop case/bookbag/etc on the plane, everyone tries to cram as much stuff as they can in their two carry-on bags so they don't have to pay baggage fees. On the airlines on which I have traveled they tend not to enforce the carry-on restrictions tightly, so many people bring oversized bags which monopolize the limited space available. As a result, you pretty much have to hover by the entry area on the concourse and rush on to the plane to ensure that you will be able to find a place for your single bag. Moreover, this rush for space creates a lot of tension between passengers. On planes with limited carry-on space I have seen arguments break out between patrons over the bag placement. It's distinctly unpleasant to be crammed into an aluminum tube while two people trade insults over space for their laptop case.
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. For we have a choice, and that makes our way of life the envy of everyone.
Any minute now. Any minute!!!
I am also waiting for a better cable company, better internet service, a better bank, and oh, a better PC...
Any minute now!!!
I'm sorry, but could you show me where it was TFA (or some other source) said that this revenue (not profit) is above and beyond what the airlines were making before?
It matters.
1) You are going somewhere with a large climactic difference from your present location.
2) You are going for say, a month. Oh and yes it is on Business so you need suits and formal shirts.
3) you need to take a laptop.
4) the flight is say 10+ hours.
Then the airline only allows 5 or maybe 10kg of carry on which they weigh every item.
Frankly you are stuffed. You have have to pay.
Kerching. Kerching. Kerching. Dig deep my friend. You have just made the airline lots of money. Welcome to the Machine aka Cattle class on budge airlines.
These so called 'low cost' airlines are in many cases more expensive that full service ones. I've just returned from a week in Budapest on Business. SleazyJet was £20.00 each way more expensive than BA. Add to that, I live much nearer Heathrow than Luton then guess which carrier I chose.
Don't even get me started on LyingAir (RyanAir) who wouldn't let me take my Nikon 200-400mm Lens (worth $6K) in the cabin with me and oh, they wouldn't insure it as hold baggage.
Did I say I'm a pro photographer? Guess how much kit I can take with me even when travelling light? 21kg is normal. Full fare airlines see that it is pro gear and say 'carry on? No problem'.
Low cost? forget it sunshine. I'd rather drive or take the train.
Watch out LyingAir want to make you stand for your flight if they have their way.
Nothing different that a commuter train really. but do you want to stand during turbulence?
Nope I though not.
It's not discriminatory , it's physics. It costs X amount of energy to move Y mass from point A to point B. Guess where that energy comes from? Fuel :)
The problem with the current system is you can't compare costs easily between airlines. Plus if you have a complaint your only option in most airports is to suck it up and do what they say. Even if they are clearly in the wrong. If you complain to vigorously, they involve security, which makes flying in the future more of a pain in the ass. They avoid the overbooking flight rules, by offering useless credits for future flights, that can only be redeemed for places nobody wants to go to at times nobody wants to fly. You can't walk away and not use them when poor service angers you. Tickets are mostly non-refundable, changing flights has a ton of silly rules, airline employee's have no incentive to keep you as a happy customer, so canceling you flight on one airline normally means to pay out the nose to file another equally poor option. Plus if you fly a lot, but with multiple airlines, you are still treated like cattle, because you don't have status. It is a broken industry, that needs to be disrupted, but high capital costs, limited access to gates and no viable alternative have left us no choice.
It will be just a matter of time before Orbitz, Travelocity, Expedia, or an upstart comes up with a "Bottom Line Price" website that takes into account the number of bags, food preferences, etc. that you input (note that they already take into account airport fees and taxes). In the meantime, the airlines are exploiting the cost of individuals to indepently acquire this information. The airlines figured out a way to re-intermediate the disintermediation that the Internet introduced. The Internet will route around this disintermediation.
You always have a choice in a free, competitive marketplace: you don't have to fly with Spirit Airlines.
If you are flying domestic, you can always fly Southwest, which to date has no luggage fee up to two checked in bags (I think).
If you are flying international, any of the major airlines (Spirit isn't even the biggest or second biggest airline) will be happy to take you w/o charging for carry-on luggages.
One could make an argument about whether the airlines have been completely forthcoming about the costs of these "unbundled services" (and that would fall under the government's role of preventing fraud), but as far as choices a private company offers, you always have the choice of not dealing with them.
Isn't Spirit airlines the same airline that will charge you for luggage whether you check-in or carry-on. How many people travel with no luggage? Simply put the only choice Spirit offers you is whether you pay them more to handle your bags or pay them less for the privilege of handling your own bags.
You mean pay them less for the privilege of shipping your bags across the country along with you. Do you expect that UPS would do it for free if you just loaded it onto their airplanes for them and unloaded it yourself at the destination? If it really doesn't cost anything for Spirit to do this, they should go into competition with UPS -- they can put UPS out of business if they've managed to eliminate all costs of shipping beyond handling.
"Convictions are more dangerous enemies of truth than lies."
Because you're buying more of what they're selling. If you went to the hardware and bought lumber, you should expect to pay the same as everyone else for a 2x4. If you went to the hardware store and bought "enough lumber to make me a bed", you should expect them to scale the price to how much lumber you actually needed. Airline tickets aren't exactly like either of these cases, but I hope you can see that what's not "discriminatory" flies in the face of reality.
-Dave
The problem is that the competition takes place on web sites like Orbitz or Travelocity where the only criteria for comparing airlines is route and ticket price. There's no indication of whether a particular airline charges extra for checked bags, carry-on bags, or refreshments. Nor is there any indication of how much leg room to expect, how often the airline departs on time, or how often the airline leaves passengers on the tarmac for six hours.
When the only information passengers have is route and ticket price, the airline that can scheme to have the lowest upfront price will win.
Admittedly I don't fly a lot in the states(I do occasionally on business, but at least for the time being transcontinental flights have free baggage...) but it seems that the baggage fee policy more often than not causes delays due to people futzing around with the overhead bins. These bins invariably become full and then the flight attendant always comes on and announces that they will now check bags for free, which kind of defeats the whole purpose of charging for a checked bag to begin with. A lot of seasoned flyers know this and intentionally pack huge carry-ons(which almost never get weighed/measured even though the airlines could conceivably do this) because they know they will be allowed to check them for free after they get on the plane.
By the time all this crap gets settled it's usually 30 minutes after the scheduled departure time and all the airline has done is cost themselves money and pissed a lot of people off..... brilliant!
Monstar L
Real economists, not the political panderers most people think are economists, have three words for you. "Barriers to entry."
Yeah, putting the government in charge would _really_ improve airline travel.
You say that as if they weren't already in charge, through extremely restrictive regulation.
The airlines are part of the transportation infrastructure. You could as easily leave road-building to unregulated private citizens as airlines.
Jet aircraft are noisy and dangerous. Air traffic is a nuisance and a hazard. They need big areas to land in and take off from which should be as close as possible to major population centers, so they can't really be built without the application of eminent domain, and access to these airports needs to be negotiated and scheduled. People and goods coming from international flights need to go through border control, and therefore the whole facility needs to be securely under government control. It's not feasible to avoid having government stand between the customers and the service providers, except in a few special cases (i.e. regional service between airports in rural locations).
With the type of aircraft operated by airlines, going between the locations the airlines use, strict government oversight is something that is unavoidable. Perhaps in the future less costly, more versatile, safer aircraft, combined with greater energy resources, will change this, and allow air travel to be even less restricted than road travel.
HA! So rather than let the free market handle it (and it will handle it quicker than the government will), you want to have to wait until the next election cycle and then hope that the people remember that it was some politician that caused the problem with the airline and not the people running the airline.
Yeah, I'm sure that'll work real well.
Politicians got this country into the mess it's in right now. We don't need them doing to the airline industry what they've just done to the banking industry (which will make banking more expensive for everyone, especially the people that really need the services and can't normally afford it).
That's worked wonders for other industries.
You are welcome on my lawn.
Yyyyyeah. There do exist those of us who would rather not fly Redneck Air.
Just like there used to be people who liked to hang other people on crosses, or set them on fire for witchcraft, or string them up on nooses because of the color of their skin.
I'm not sure how you feel about joining the ranks of such distinguished company, but there's very little at this point between you and them. I'd think about that were I you.
Myself, I am open minded to people of all backgrounds, and they can make whatever cringe-inducing rhyme they like in return for providing an airline with no bag fees, no flight change fees, and letting the technologically ept sit wherever they like in the plane by getting first dibs on seats.
If you are going to let your prejudices get in the way of that then at least the only one harmed is yourself - but it still comes off as pretty stupid on a site filled with otherwise intelligent people.
"There is more worth loving than we have strength to love." - Brian Jay Stanley
What free market fundamentalists like you fail you comprehend is that we humans have a relatively short lifespan. Life is too short to wait a decade for the mythical "competition" to maybe sorta improve the airline market. Free marketeers remind me of a religion. Those, too, promise that all wrongs will be fixed a few decades later once your life ends and you are in heaven. Maybe, but I'd rather have them fixed in this life, and soon. For the last 30 years, lunatic free market policies have caused crisis after crisis while making life worse for working people. It's time to dump this discredited, outdated religion for a 21st century pragmatic approach that actually makes life better for those who work, rich scum squealing notwithstanding.
No, the one where the government institutes regulations that don't inhibit competition and don't ensure that the established companies make a nice profit and deliver piss poor customer service.
If you're going to make this argument then the actual ticket price would be calculated by a complicated function involving weight, width, seated height, nasalness of voice, and body odor. Passengers flying with children would be required to post a bond paying for everyone else's ticket ahead of time, potentially but not probably refundable on arrival.
Instead, passengers who can more or less fit into a seat pay for a seat, and passengers who don't pay for two. And if you don't like it, travel some other way.
"You're right," Fisheye says. "I should have set it on 'whip' or 'chop.'"
No, no, a hundred times no.
Charging people ridiculously high fees for checking baggage means that people do the logical thing and carry on their bags. This clogs up the security checkpoints and means that you can no longer find any overhead space in the bins, meaning that after 10 minutes of fruitlessly shoving their suitcase into a space too small from it, the stewardess has to come by, take it off the plane, and gate check it, delaying the flight and possibly costing people a connecting flight (has happened to me more than once on a tight connection).
Charging for checked luggage hurts everyone.