Is the cost of airline surcharges worth it? Yes — and no
The airline world is being roiled by an “unbundling” trend. Once the costs of baggage, meals, drinks, pillows and blankets were included in fares.
Today, most airlines are beginning to charge for these as extras — add-ons to the basic charge of getting passengers from Point A to Point B. But not all of them.
This change in the industry is attributed to the airlines’ need for more revenue in the age of high-priced jet fuel. However, the move to this payment for each phase of service is also a result of new airline revenue platforms rolled out by Amadeus and other major computer reservation systems that now allow airlines and other travel providers to charge for individual items that were once bundled in the total price.
Struggling airlines are jumping at the chance to collect additional revenue. Others, like Southwest Airlines, are sticking to all-inclusive pricing; and yet others, such as Delta Air Lines and Continental Airlines, are blending some charges for additional services like extra baggage with a menu of included items like meals and free first-checked bags.
Decisions such as these to not charge for extras are high-stakes marketing decisions. They come at millions of dollars of cost from potentially lost revenues. These “forgone revenues” affect Southwest, Continental and Delta’s bottom lines just as much as new income streams from the first-checked bag policies impact the profits of American, United, US Airways and Northwest. According to a recent post by Cranky Flier Brett Snyder, they could backfire.
Southwest needs this campaign to work, otherwise we could see fees coming from them as well. Since nobody else is really going the “no-fee” route, they’ve got a very strong position here. The biggest problem? It’s going to be really tough to tie revenue back to the no-fee stance. CEO Gary Kelly has said so himself, so it’s mostly going to have to be a leap of faith that the value of “no-fees” is worth the cost of not having any.
Not charging for all the extras means less revenue. Not charging for a first-checked bag and providing real food on flights adds costs to an airline’s operation. These are real costs that are looked at a part of their marketing expense. Southwest, Continental and Delta are betting that they will attract enough passengers with their decisions to curtail fees to make up for the “forgone revenues” of fees uncharged.
Southwest has recently started a major advertising campaign to push the savings that they offer over airlines that charge additional fees. A recent ad with passengers singing “hallelujah” is making TV viewers smile across the country and hopefully getting the message across that additional charges add up rapidly. Here is another ad that began Southwest’s “no fee” campaign.
Since Southwest is so wedded to the “no-fee” message, I expect it to stick to its guns for a while. Delta and Continental not charging for the first-checked bag and Continental serving meals for free on domestic flights might be in a more precarious position.
Airline passengers need to vote with their wallets as these fees become more evident. To this point, the additional fees are flying under the radar so to speak. Once consumers realize how much the additional baggage charges and other fees cost, they should gravitate to airlines that don’t have those charges.
If they don’t, those airlines that do not charge fees will have no reason to hold the line against higher fees and more of them.
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9 Responses to “Is the cost of airline surcharges worth it? Yes — and no”
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I’ve said it before, and I’ll say it again… the legacy airlines need to stop charging legacy prices if they want to offer the services of a low-cost carrier. They also need to cut out the marketing that implies their airlines provide the lap of luxury. I have no problem with airline fees, but not if they are backed with ticket prices that reflect that. The legacy airlines look pretty stupid right now charging more than Southwest while offering less service.
SirWired
Except that, at least for my upcoming flights, the legacy airlines are LESS expensive than Southwest even adding in all the fees.
The problem I have with charging extra for food, drinks, pillows and blankets, is that it applies to all passengers seated in coach, even those one or two per flight who pay “full economy” fares. I would feel better about this if they would give those passengers some coupons at check in that could be used for food, drinks, pillows and blankets. Kind of like the drink coupons you can buy from Continental. Fortunately for me, I’ve only had to pay “full economy” once in recent years, and got an automatic upgrade to business class as a result.
It is like going to the Carnival , being nickel and dimes every time you turn around. You can not carry a bottle of water through security as they will take it away and then you pay a premium price for water on the other side of security. Nickel and dime, nickel and dime, only it cost more. Like a land line company’s bill. nickel and dime.
And Continental just announced they will begin charging $15 for the first bag on October 7th.
If we boycott the airlines that nickel and dime you, I am sure that the decreased passenger demand would be noticed and this nickel and dime stuff would end. If the airlines would raise the fares to an honest competitive level, the passengers would be a group of happy campers. I have seen many nasty passengers who are frustrated with this stuff but they take it out on the flight attendents and passenger reps who are not responsible.
Have a wonderful day - Cliff Woodrick
Rules of the world:
1) Southwest rarely has the lowest advance purchase fare on any route;
2) Southwest rarely has seats available at the last minute even at their non-advance purchase fares.
3) The legacy carriers are poorly managed and generally have unmotivated employees the result of their poor management.
4) No one in their right mind thinks the legacy carriers offer service, much less good service.
5) Proper grammar mandates that the topic title be: “Are the cost of airline surcharges worth it? Yes — and no.” Because the plural being modified is surcharges. . . .
Southwest can and does raise prices to cover these costs because they do not show in the same websites as AA and Delta and Continental. The “legacy” airlines have to be very careful about raising prices of their fares because just $15 can push them off the all important first page of results. SW isn’t even on there, so no biggie for them.
I am an Australian and living so far from the US eventhough I haev been a OnePass member for approx 20 years, I am sure Continental would not be interested in my opinion but I have been a staunch supported of my favorite US airline since I first flew with them in the early 1980s.
In that time Continental has been through some rough times but Gordon Bethune brought it through to become a real innovator in the aviation field - a leader. I did not expect them to start charging for a passengers first bag - I believed that they would rise above that petty penny pinching of the other heritage airlines and remain as an innovator and leader in the field. I expected that by joining Star Alliance they may try to bring United and US Airways to a higher level - maybe even bring serive back but I am wrong.
Continental looks as though they are descending down to the level of the other heritage US airlines. The reason given for all these extra charges is additional costs - especially fuel. Am I wrong or has fuel dropped in price considerably lately?
Continental - I am dissapointed! I did expect better.
Lets just hope they CO might decide like United to suspend their ‘trial’ of an unpopular and totally unwanted burdon on their customers.