Money tip: Evermore fees catch airline customers by surprise
Airline revenue from sources other than tickets is ballooning as carriers tack on a bewildering menu of charges for services once part of the ticket price.
Buying a plane ticket today can be a dizzying consumer experience, sometimes with an overwhelming number of choices to make, each with its own price tag.
Checking a bag? With most airlines you’ll have to pay for that — and maybe for a carry-on.
Prefer an exit row? That will cost you.
Want to board early to snag overhead bin space for your roll-aboard? Be ready to pony up or use an airline credit card.
Need to change your flight? That might set you back a whopping $200 on a big carrier.
Want a Coke during beverage service? Frontier Airlines charges $1.99.
Each airline, large and small, has its own offerings and prices, creating a bewildering hodgepodge of tack-on fees.
Eventually, airline prices will simplify, industry experts say.
“The fees are so high these days that the actual price of the ticket loses its meaning,” said Max Levitte, co-founder of Cheapism.com, which recently charted airline fees among a dozen carriers. “You feel like you’re being nickel-and-dimed all the time. ... Consumers don’t know what to expect unless they read all the fine print, which is a lot nowadays.”
What consumers call fees, airlines call unbundling — a la carte choices of services formerly included in the fare.
Airline officials couch it in terms of giving fliers more choices. United Airlines CEO Jeff Smisek last month likened it to customizing a pizza.
“We used to serve you a pizza with all the toppings, and that’s all you got,” he said during a speech to the Chicagoland Chamber of Commerce. Unbundling allows passengers to pay for only the services they want, he said.
Jean Medina, spokeswoman for industry group Airlines for America, said fees have a consumer benefit. “The model of charging customers for services they value and are willing to pay for has enabled airlines to keep airfare affordable,” she said, adding that airfare increases since 2000 haven’t kept pace with the national inflation rate.
Without ancillary revenue, airlines in 2012 would have lost more than $8 per passenger, she said.
The fee craze began in 2008, as airlines scrambled to boost revenue to offset rocketing jet-fuel prices while not raising base fares, which would put them at a competitive disadvantage, said Jay Sorensen, president of IdeaWorksCompany, which regularly examines airline fees.
To be fair, some fees are for new services — wireless Internet access and new economy seats with extra legroom, for example.
Fees are big business. In 2012, airline revenue from sources other than tickets, so-called ancillary revenue, amounted to an estimated $36.1 billion worldwide, up 60 percent from 2010, according to IdeaWorksCompany. Fees were a big part of that growth.
Airline stock analyst Hunter Keay said in a report this month that fees are a key indicator of an airline’s financial prospects. “We factor in our opinion of an airline’s willingness to pursue new fees when we decide whether or not to recommend the stock,” he wrote.
But for consumers, the trend is not a good one, said Anne Banas, executive editor of SmarterTravel.com, which also has published a chart to help readers negotiate the fee minefield.
“For the consumer, it is very confusing,” she said. “Unless the consumer fights back, airlines are going to keep getting away with this and make it harder to make a good decision.”
No-frills Spirit Airlines, recently named America’s most-hated carrier by Consumer Reports, is king of the nickel-and-dime. In 2012, about 39 percent of its revenue came from ancillary revenue, according to IdeaWorksCompany.
Examples? It charges $10 if an airport agent prints your boarding pass at the airport rather than you printing it yourself at home or at an airport kiosk. Its website has 38 different fees for luggage, including carry-ons. It charges $3 for soda or juice.
Spirit officials have defended the fee strategy, saying passengers who fly the airline know what to expect. “Our customers have told us again and again they want low fares and the option to choose the add-ons they want,” said spokeswoman Misty Pinson. “And we’re proud to give them what they need.”
While Spirit and other high-fee airlines get slammed in consumer satisfaction surveys, customers don’t seem to vote the same way with their wallets.
Spirit is thriving while America’s most loved airline, Virgin America, which has one of the best all-inclusive airfare offerings, struggles, Sorensen said. “We see surveys that say consumers hate fees, but I’m not seeing that in practical application,” he said.
Big network carriers have joined the fee party.
In May, United, American Airlines, Delta Air Lines and US Airways raised ticket-change fees to $200 from $150.
While a passenger changing a flight has a real cost to airlines — they potentially won’t be able to resell the vacant seat — a $200 fee is reaching too far, Sorensen said. “It’s a decision obviously made by the bean counters rather than someone who’s in operations,” he said, calling it a fee “filled with conflict.”
“If you apply strict enforcement, you get a black eye with the consumer. If you begin to waive it based on consumers begging, then you train consumers to behave that way.”