Strangling fliers with fees a false economy for embattled airlines

by Mark H. Anbinder

14850 Magazine > Fees a False Economy

The airlines are desperate to salvage their business model, which is being battered from all sides, and to be honest, I sympathize. People want to spend less and less to get around the country and the planet, and they expect more and more. Meantime, all of the airline's operating expenses have skyrocketed, not least of which the huge leap in fuel costs over the last few years. They're having to absorb extra costs to implement lunatic security measures, unions are driving pay upward faster than inflation, and inflation is making everything else pricier -- while consumers keep demanding low fares and keep screaming at every hike.

Photo: US AIrways plane
A US Airways jet makes its way north as the sun sets. 14850 Photo by Mark H. Anbinder.

Last Wednesday's USA Today had a good piece on how British Airways has reinvented itself by focusing more and more on the higher revenue opportunities like first class and business class travelers, earning a reputation for excellent service that you can have if you're willing to pay for it. There's no margin in moving someone across the U.S. for $200, but the airlines that are successfully charging $700, $1,200, or $4,000 for a large percentage of their seats are the ones who'll survive.

Inexpensive travel -- or is it?

Much as I'd like to be able to keep enjoying inexpensive travel, I realize it's not realistic. As one frustrated traveler put it, "The era of democratic travel may be over." Michael Shappe adds, "Through most of human history, travel of any sort was a luxury enjoyed by a privileged few. Our grandparents were privileged to witness a revolution that made travel available to a much wider audience. Now we will be 'privileged' to watch that revolution die gasping."

The problem is that the consumer airlines like US Airways haven't realized this, or are desperate to keep the business of the consumers who refuse to accept it. $150-300 vacation fares have always been subsidized by sales of much pricier tickets. It's not that it's not possible to make money with a plane full of seats sold at $200 each, just that it has to be done in such a no-frills way that people whine that they're not getting their money's worth -- when that's exactly what they're getting.

Ice cream companies trying to avoid raising prices can can quietly shrink their packages from a half gallon to 1.75 quarts, cereal boxes can drop from 22 ounces to 20, and bags of coffee can shrink from a pound to 13 ounces. For better or worse, airlines don't have much more they can shrink rather than raising prices, so additional fees for what was once included may seem like the only way to go.

Unintended consequences of bag-check fees

Last week's announcement that United has joined American in charging $15 for the first checked bag really makes me shake my head. US Airways has followed suit, and will be charging $15 for the first checked bag by the time I next fly in August. This trend, following fast on the heels of the now almost ubiquitous charge for a second bag after a first bag gets aboard free, is just the latest desperate attempt by the airlines to avoid raising their fares to compensate for those skyrocketing fuel costs. (Another was the revelation that many planes are flying more slowly to conserve fuel, on the same theory that drove President Carter to push a 55 mile per hour national speed limit.)

Unfortunately, I think the result won't be a big stack of $15 fees for the airlines, but a lot more people bringing too-big bags on board the plane with them. This doesn't help cover the fuel cost, and doesn't reflect a charge based on whether you're bringing luggage. It just makes the cabin more cramped. If the charge were per pound of luggage whether you checked it or carried it on, it might help to reduce fuel costs by getting people to pack lighter. (Similarly, telling someone whose suitcase weighs 51 pounds they have to carry a pound of it by hand doesn't accomplish anything, except possibly keeping luggage a reasonable weight for baggage handlers.)

Those passengers who do decide to check their bags, or who have no choice because they want to bring their shampoo or spray deodorant or toothpaste or pocket knives with them, will slow down the process as check-in agents are forced to handle lots of additional monetary transactions. Those who decide to carry their luggage aboard will slow down the process at the security checlpoint, as each bag has to be x-rayed, and more and more have to be searched by hand; at the gate, as roll-aboards that just won't fit in the overhead compartments have to be "gate checked;" and in the aisles of the plane as twice as many people try to cram twice as much into those incredible shrinking bins. (Yes, I'm sorry, I do mind placing my laptop bag in the space where my feet need to be, just because the other passengers refused to check their luggage.)

A slower process at the ticket counters, security counters, and gates, and in the aisles of the planes, simply means higher costs. Boarding a plane whose passengers have more carry-on bags will take longer, driving up airport gate charges. At the same time, staffing costs will go up at the ticket counters and security checkpoints. Will airlines counter those costs by laying off half of their baggage-handling staff, now that fewer bags will be going through the cargo system?

You know what might work better? Allowing passengers one bag of up to 50 pounds for free, whether they'd like to check it or carry it on, and charging for a second (or each additional) bag -- again, whether they'd like to check it or carry it on. One bag? No charge, no problem. Two bags checked? $25. One checked and one carried on? $25. Two carried on? Seems nuts, but it's your $25. At least giving passengers the option of checking that first bag for free should help keep the aisles and overhead bins a little clearer. Or, solve the bin problem once and for all by letting travelers check bags for free, and make them pay for carry-ons.

Food and Drink

I'm torn on whether airlines should charge separately for food. I bet the businesses who've sprung up selling sandwiches to go in airports just love that the airlines are charging for food on board; might as well just charge for a meal for those who actually want it. I think that's less nickel-and-diming than some other aspects of air travel.

Photo: US Airways beverage service
The airline beverage cart may soon be a thing of the past. 14850 Photo by Mark H. Anbinder.
At the same time, I can't abide the predictable move by US Airways on Thursday, announcing that they'd begin charging $2 for soft drinks, starting August 1st. (They'll also raise the price for beer, wine, or spirits from $5 to $7, the first hike I can remember since I started flying.) No doubt other carriers will soon follow suit. This shift is especially troubling for me not because I begrudge the airline their attempt to make up for rising costs, but because the hyper-paranoid security ban on bringing liquids past the security checkpoint means travelers who can opt to bring a sandwich from home won't likewise be allowed to bring a can of soda or a bottle of water. I can, and do, bring an empty water bottle with me and fill it once I'm inside the secure area, but if I wanted to be able to bring orange juice instead, I should be able to -- whether I have a child with me or not. Having to choose between a $2 can of juice on the plane or a similarly overpriced drink from an airport vendor is going to make a lot of already over-extended travelers very unhappy.

Compound that with the fact that many travelers will be leaving from airports such as Ithaca's where there are no vendors inside the secure area, or at times when all of the vendors have closed up shop for the night, and the combination of ludicrous security rules and on-board beverage fee creates an unacceptable captive market.

Charge more, nickel-and-dime less

Sad though I am to admit it, I think the solution is for the airlines to start charging more realistic (read "higher") fares to begin with. Sure, provide some discounted seats for those who can book well in advance, as long as you do so in a predictable and reasonable way. And, provide sharp discounts for the last couple of days before a flight, since an unsold seat might as well bring in a few bucks rather than none. (Charging three times as much for a last-minute flight has always struck me as self-defeating.)

Charge me $300-500 for a trip, depending on where I'm going. That's still a reasonable price, especially considering inflation over the last decade. In fact, it'd probably be one of the lowest average airfares in history, adjusted for the value of the dollar. Stop the nickel-and-dime treatment for those who want to check a bag rather than racing around through airports with it, or for those who want to watch the in-flight movie.

What's the answer?

The solution almost certainly isn't a return to Federal airline regulation. You could say that airline deregulation created the current mess, but I think it's more accurate to say that deregulation provided decades of affordable travel, and current problems are due to the unfortunate amalgam of rampant paranoia and unchecked surge in costs.

Some have suggested that the airlines might, or even should, start charging based on the weight not only of the luggage, but of the passengers. Charging more for a traveler who, together with his luggage, weighs 300 pounds than one who's traveling light for a total of just 150 pounds might not be friendly or politically correct, but it would at least have the advantage of actually reflecting the additional cost of moving the extra weight through the air. Yes, I weigh 200 pounds, and if taking me across the country actually costs appreciably more than the 100 pound college student next to me, then I should probably pay a little more.

The only other possibility is to hope that the economic pressures that caused the current mess will subside. A growing supply or shrinking demand for fuel should lower fuel costs and relieve some of the strain on the airlines' costs on several fronts, not just on jet fuel itself. A return to a strong dollar would result in correspondingly lower oil prices and would thus have the same effects less directly. Meantime, airlines really will need to charge prices that better reflect their costs.

In a sense, I'm taking a difficult position for someone who lives in a tertiary air market. Ithaca's airline service is barely adequate as it is, and we don't have any of the no-frills options like JetBlue or Southwest available to us. Ithaca air travelers won't be able to choose between $150 and no-frills vs. $500 with all the bells and whistles. Worst of all, major airfare hikes out of Ithaca might kill some or even all of the existing service. I don't want that. But I don't think the current situation is sustainable, and if the service is going to die, it might as well be for the right reasons rather than the wrong ones.




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14850 Magazine > Fees a False Economy