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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!
Well on the rare occasion you take the two week Euro-trip it would at least be nice to know that there's going to be a 20% markup on the ticket when you book.
It's not about the cost, it's about the disclosure.
This is what really pisses me off; people take this attitude that, hey..I don't have extra bags, I don't want the food, so I am flying cheaper! Well guess what stupid, you're not flying cheaper.
I travel very often so I have a fair idea of how the traveling costs trend and what I notice is that I get fucked harder and harder by the airlines, but since there is price fixing, there's not a damn thing I can do about it.
Don't get me wrong, if the tickets WERE actually cheaper by not including the bags, than I would be fine with that. BUT, they are not cheaper. If anything, they are more expensive AND you pay your extra 100 bucks for bags. WTF?
You want to go by weight? I weight 160lbs and my wife is 105lbs. Why should she pay the same like me? Why can't she have an extra bag?
Why can that fat as fuck American sitting next to me get the same price?
They should chance the whole thing to per lbs, yourself and bags included. That is whats fair.
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.
Well, there's spam egg sausage and spam, that's not got much spam in it.
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!!!
No. You don’t. That’s the very point of this.
They unbundled it. But they did not lower the prices. So in essence it just is a sneaky way to make it more expensive.
Which in my eyes is fraud, and should result in expelling everyone involved from the country until the end of his life, making it punishable by death to ever enter the country or try to directly or indirectly start or take over a business in the country.
Why do so many people never get, that you can just go “MY COUNTRY, MY RULES!”.
Any sufficiently advanced intelligence is indistinguishable from stupidity.
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
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.
You are completely missing the point. Companies are not being honest, that is the problem. With your self-sufficient attitude, you may as well go to the place walking. But your approach is selfish. Maybe one day your grandma or your pregnant wife would not be able to handle her luggage by themselves, or will need to eat something at the plane, and they will be taken advantage of. Of, course, you will not have a problem with that, would you, big guy?
If the fees they charge for these services are in line with the cost of providing them, then no, I don't have a problem with that. TANSTAAFL. OTOH, if they're overcharging for them in order to subsidize a cheaper price on the ticket than it should be, then yes, it's a problem.
"Convictions are more dangerous enemies of truth than lies."
When heading into the States not long ago I had to transfer through Chicago O'Hare to a smaller, provincial airport. American Airlines unsurprisingly lost my luggage, but thanks to a tag it was located as being with the handlers back at Chicago. The friendly woman at the check-in desk where I'd arrived after the second flight gave me a complimentary kit that included a toothbrush, toothpaste, mini-haircomb and so on.
The expedient service was what struck me most though; the next day a guy in a van drove up to where I stayed and dropped it off needing a signature and ID to confirm. All this was free, all of it was worked out and the lady at the desk looked astonished at me if I asked there was a fee to expedite getting my suitcase back - it contained mostly clothing that I could buy at a mall or whatever, but also a few items somewhat more important.
AA must have yearly meetings where this baggage issue is brought up; remember that scene from Fight Club where the anti-hero played by Ed Norton opposes the cost of keeping a shoddy system with unhappy customers that might kick up an occasionally costly issue to fixing everything and performing a good service. If the good service is more expensive than paying customers off, and in the case of improving baggage loss rates it likely is, then AA keep the crappy service to the inconvience of customers.
As cynically compelling as that movie was, this principle is applied rigorously behind closed doors in many firms who simply seek to maximize profits by definition of what they are. If it means a person losing something valuable or otherwise getting aggrieved (crashing a shoddy car and being injured), then let's cast that aside and keep the margin at an acceptable level. Unethical? Sure, but that's business.
That airlines are now charging seperate fees for this service without presumably making a marked improvement could be harmful to them in the long term; if passengers know they're paying X for luggage carriage for every piece inclusive of the first then they can more directly demand a refund. Something which isn't quite as easy to do if its bundled in and you get chucked a cheap kit of goods to clean up that they manufacture in quantity. So this all could be a good move with respect to luggage, as it might make firms like Delta or AA or anybody else with high passenger volume improve somewhat.
Why does the government care? They now get a lower tax revenue! Before, if your ticket cost $500, they got whatever percent (let's say 10), so $50. Now if they strip down the ticket so that it's only $400, plus $100 in other fees, the government is losing $10 they would've previously received. Food, baggage, seat placement, etc, all get taxed at a lower (or non-existent) rate when they're sold separately.
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
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
One change that they introduced some months back was a charge on credit card use. Because they have to offer one form of card payment without charge (a UK or EU law) they chose a card that almost no one uses -- a prepaid card that costs some £15 a year and a 50p transaction charge. It is all about grabbing as much money from their customers through hard to avoid extra charges so that they can make decietful adverts claiming to be cheapest.
You fly cheaper in the same way that those grocery club cards save you 50% on your groceries.
Sigs are too short to say anything truly profound so read the above post instead.
SouthWest
Their ticket price may be a few bucks more but..
They don't nickle and dime me.
They don't charge to check your bag.
They don't charge for the crappy airline food.
They don't have assigned seating
They are easy to deal with.
And they seem to adapt to the times.
You check your self in online the night before. The people who check in 1st get a lower boarding group.You print your boarding pass at home.
When you get to the airport you hand the well staffed baggage desk your bags and check your self in on the touch screen where you have the option of reprinting your boarding pass if you lost it.
When i get to my airport I look over at the other airlines and see 2 people trying to deal with lines a mile long. Southwest has 4 or 5 people working the check in and hardly any line.
Southwest changes with the times and makes a profit. They seem to understand that if you make your customers happy they will keep coming back.
Everyone else is operating the same old inefficient way..pissing people off.. and loosing money.
I have to return some videotapes...
but fares over the Atlantic are much higher
In 1990 I flew YVR-LHR. It was my first big backpacking trip after university. I remember the fare was around $950 - Around $1540 in today's dollars. By comparison, that same trip on those same dates would cost $1400 today - Almost $150 less.
In the mid 70s my parents flew the family to England to visit the relatives. My parents had to take out a bank loan to cover the airfares - They were that high.
Now they fly to England twice a year without thinking about it.
Historically, TATL fares have never been lower.
Solution, start weighing every passenger and charge them by weight. Or, everybody pays the same up to 175 lbs and then there's a $20 surcharge for every ten pounds over that.
US carriers would clean up.
You are welcome on my lawn.
I don't understand people when they complain about companies making profit.
We complain about companies making profit when *at the same time* they're whining to the government about how they are in fact not making any profit because of circumstances A, B and C and therefore need to be allowed to screw over their customers through methods X, Y and Z without getting any hassle over it.
People replying to my sig annoy me. That's why I change it all the time.
They even took my blunt ended scissors away. Not sure what the hazard potential of scissors specifically designed not to allow you to accidentally stab yourself but...
My old boss had his cigar cutter taken because it was plastic and could be taken apart and used as a weapon. The next time he flew he took a metal cutter and they took that away too because it was heavy duty and could cut someone's finger. Being the angry Cuban he is he went into one of the shops inside the secure area, bought a new cutter and went back to show it to the screeners.
It's all about CYA. No one wants to be the guy who let through something that caused trouble later.
He's talking about the 70s, when you could buy a very nice 4 bedroom house for $32,000USD (that's what my parents paid in 1974 for their brick colonial in a town of about 100,000 people - and that was expensive back then). The average yearly salary was less than 10 grand. And a ticket overseas would cost about 5-6 grand. I remember it well.
Oh, I dunno. I can have as much luggage as will fit into my trunk, or, if going overseas, into my passenger ship cabin.
I'm sorry, but when the airline industry decided that instead of actually solving the problem (completely isolating the pilots from the passengers, thereby completely eliminating the possibility of using the aircraft itself as a precisely directed weapon) they were going to permanently oscillate on the knife-edge between screaming paranoia on the one hand, and utter moral cowardice on the other, they lost my family and myself as customers.
But ships, and cars, remain quite lovely travel options. No homeland insecurity personnel pretending to be useful, no unreasonable limits on what you may transport, and both types of travel are competitive, financially speaking.
Also... cruise ships and passenger ships are still committed to making your journey pleasant, even entertaining. Given the extra time they have to work with, they can go beyond dressing the service people attractively (which the airlines have given up on) and simply picking attractive service people (which the airlines have also given up on)... there are shows, gambling, fine meals, pools, rock wall climbing, many other things.
Of course, if you can drive yourself somewhere instead of flying, you can add as many recreational activities as you like -- you're the cruise director, as it were. Everything from fine meals to strip clubs to side trips to the nearest museum or art showroom.
As opposed to being scanned, searched, checked for listing with various intrusive (and massively unconstitutional) agencies, forced to wait in long lines, having your toiletries and snow-globes confiscated, shoehorned into seating that was apparently designed by a one-armed/one-legged midget engineer with no objection whatsoever to the idea of the person in front of you reclining right into your crotch, eventually being fed government-surplus nuts (only on luxury flights, though) and diet soda by a transvestite in a hideous pantsuit for about the same cost as a fine meal on a ship.
Last year, on my trip to the east coast, I took a side trip through Crater of Diamonds State Park and took home a sweet little trophy -- a blue-white -- which sits in my mineral collection today. Got where I was going on time, did my business, and drove back the long way around, took lots of photos, etc.
Airlines. Man, I'd have to be *so* short of time to sink that low ever again. Or they'd have to roll themselves back to the 60's in terms of service, and then step it up. Difficult to imagine either way.
I've fallen off your lawn, and I can't get up.
Southwest changes with the times and makes a profit.
Southwest is a company I respect and I fly with them sometimes but there is much not to like about their service too. The main thing I think they have going for them is that they have come to grips with the fact that air travel is not a luxury item anymore. It's a bus that flies - nothing more. I don't dislike Southwest but they aren't perfect by any means.
Generally I'll look at Southwest as an option but they simply aren't flying many of the places I go.
Well, for what it's worth, I'm an airline pilot.
:-/). And those finely tuned revenue models all say the same thing - people buy for the sticker price, and expect fees to be added in anyway. If you include those fees in the 'sticker price', your seat will bring in less revenue as most people order flights between A and B by sticker price, and sticker price alone. Consider it a fact.
And when I commute between DC and NYC, I drive. Everything you say is true - it bothers me a lot that the industry has sunk so low, and it bothers a lot of other pilots too.
Unfortunately, our ideas don't count for much, and the reality is that the huge majority of paying people pick how to get from A to B on the basis of price alone. The amount of resources airlines bring to 'revenue management' (a fancy way of saying figuring out how much to charge for a seat) is rather amazing; they have models that adjust the value a seat will bring in based on time to departure, and they are constanly refining their models, to the point where they can predict their revenue from a given flight within +-1% pretty consistenly desipte cancellations, rasing, lowering, then rasing the price of the seat (Costs? Not so much
Several airlines have tried the idea of 'all first class' - establish a brand specifically known for its top notch service, and deliver it. They have all failed in recent years, Midwest being one of the last. It seems that there are not enough people willing to pay for superior service to make a go of it as a scheduled airline. The non-scheduled operators, who charge an order of magnitude more (see Netjets et al.), on the other hand, apparently take superior service with absolute seriousness, and deliver it well - they are growing relatively robustly to fill the gap between dedicated corporate/celebrity bizjets and the becoming Greyhound scheduled operators.
I actually wish more people would think and do as you, so it was economic to run a quality airline, even if it was smaller in size. When enough people demand something, the market sometimes delivers. Enjoy your travels!
You don't do much travel in Europe then do you?
Ryan air, takes unbundling and hidden costs to a new level, even charging as much as 40 Euros to "print" your ticket for you if you didn't print it at home. And then the flight is like one long advertisement from the moment you take off until you land, only allowing 1 carry on of any type (not the usual Carry on + personal item (purse/laptop/brief case etc...)
EasyJet, Wizz Air, and German Wings, while slightly better aren't much better. And the big name brands aren't all that far off either.
Generally speaking... Start earlier, plan instead of react, gather your obligations and commitments timewise... If you can't do this, perhaps it's worth re-considering how you've arranged your life. Very few folks on slashdot are short of mental resources. If your life sucks, perhaps a reboot is called for.
So if you can't take six weeks off at once your life sucks?
Boy, you must be a schoolteacher.