“Airlines continue to insult my intelligence”

Don’t look now, but the airline industry is getting rich off fees. Very rich.

The industry collected $2.5 billion in luggage fees for the first three quarters of the year, according to data released by the government yesterday. The damage from ticket change fees? $1.7 billion.

Delta Air Lines wins in both ticket change fees ($530 million) and luggage fees ($733 million). American Airlines came in second place ($353 million/$431 million) and United Airlines took third place for change fees ($243 million) while US Airways showed in the baggage category with $388 million collected in the first three quarters of the year.

Needless to say, passengers are furious about these fees.

“Airlines continue to insult my intelligence,” says reader Scott Higbee. “The baggage fee is a money-grab, pure and simple.”

If this had been a legitimate “unbundling” action, then airlines would have lowered their fares when they added baggage and change fees, he says. But ticket prices didn’t go down. In fact, they’ve been increasing and are expected to rise even more in 2011.

(Ironically, the airline industry is still complaining about its profits, which it calls “pathetic.”)

There’s more to this story, and in order to tell it, I have to rewind to an earlier column about good airline fees and bad airline fees.

Good fees, as I explain, add a service that the airline didn’t have before, like onboard Wi-Fi; bad fees take something away that used to come with the ticket, like the ability to check a bag or make a confirmed seat reservation, without lowering ticket prices in a meaningful way.

Well, yesterday, even as the government disclosed that these ancillary fees were going through the roof, United Airlines, the airline formerly known as Continental, introduced what I consider to be a “good” fee. It’s called FareLock, and it lets you hold your itinerary for up to seven days, for a fee.

FareLock allows you to hold your itinerary and fare for 72 hours or seven days, for a fee, and is available for Continental-operated flights only.

So go ahead and book your flight while you complete your other travel plans. Your FareLock will guarantee an available seat at the fare you were quoted at the time you booked your reservations.

The nonrefundable fee for a 72-hour lock-in period is $5 and $9 for the seven-day option. Several European airlines already offer this service, but United is the first to do it in the States.

FareLock follows the “good fee” formula: It adds a service that didn’t exist before and gives passengers something they want — in this case, peace of mind about an airfare. (Think of it as buying an option on an airline ticket.)

United could have done this the wrong way. It might have installed 30-second timers on it site, forcing customers to either make a quick decision on purchasing an airline ticket or buying a FareLock option. But I can see no “down” side to this latest airline fee, except maybe one.

Will this kill the 24-hour courtesy “hold”?

My friends over at Flight Wisdom mused about that yesterday, noting, “We’re not sure how long the 24-hour courtesy hold will stand if other airlines follow Continental.”

If FareLock ends the 24-hour courtesy hold, then I’ll put this new fee into the “bad” category. But if they keep it, then United and Continental have made a customer-friendly choice by introducing FareLock.

  • BillC

    I have no problem with this fee. At times I have wanted to lock in a price while I shopped elsewhere or was still deciding if I was travelling or not. This will be a good thing but it wouldn’t surprise me if somehow the airlines managed to make screw it up by adding some type of restriction to the lock.

  • Eric

    Correct me if I’m wrong, but doesn’t the 24 hour courtesy hold just hold the seat? Isn’t the price subject to change say if you start the hold in the evening and decide to book the following afternoon?

  • MarkieA

    What happens if the fare goes down during your hold period? Are you stuck with the higher, reserved, price? Or do you simply negate your hold and pick up the new fare? It would be nice if FareLock automatically defaulted to the lower fare.

  • Monica

    I think this fee is reasonable. For less than $10 I can have up to a week to decided if the flight times, dates, and prices are what I’m willing to spend and works with my schedule. It gives me a chance to search other sites to see if I can find something better.

  • Carol

    It’s great to read that UA has done something customer friendly, though I have similar questions as above. I flew with them round trip this past week and both times their customer service failed miserably. I paid for everything way too much (the checking of the bags, the food due to hunger from a 3-hr delay on tarmac), and yet, service was shameful. I think al of these fees will simply result in a new kind of traveler, a more financially-savvy one anyway.

  • Michelle

    If it’s such a good idea, why did United limit it to only Continental flights?

  • Raven

    I would like to know when the airlines are going to return all the taxpayer money they took after 9/11. It seems they are making more than enough these days off the baggage fees alone.

  • Michelle

    Oh and 1 more thing. You can get burned by doing a hold. I did a 24 hour courtesy hold recently on AA. Then decide to leave 1 day earlier. The cost of the outbound was cheaper than original, but same return flight now was more expensive because I held the last seat at the lower rate.

    I had to call AA and after much rudeness and back and forth she ultimately was able to rebook my original itinerary but leaving the previous day as desired. I had to pay the “talking to an agent fee” but that was still overall less than what I was able to do online to leave the previous day.

    I can see with 7 day holds that lots of cheaper seats will be taken out of inventory as people hold them really making for a crap shoot of what’s really available.

  • Arizona Road Warrior

    @ Eric – “Correct me if I’m wrong, but doesn’t the 24 hour courtesy hold just hold the seat? Isn’t the price subject to change say if you start the hold in the evening and decide to book the following afternoon?”
    - – - – - – - -
    I have same question.

    This was reported in article about this new Continental feature, FareLock: “Continental said it will continue to offer its 24-hour booking policy that allows reservation changes and cancellations with full refund without a fee within 24 hours of booking.” Nothing about locking in a fare for 24 hours.

    I have held some reservations at Alaska Airlines (it has been three to five years ago) but I think that the fares were recalculated when I purchased the tickets.

    When I have been required to purchase my tickets through Egencia (Expedia, Inc’s unit for corporate travel), I have made 2 or 3 holds but the fares were recalculated every time.

    If someone holds a ticket with a 7-day fare class on the 7th day then purchase it the following day (6 days before travel), the airline is losing money. This is true for fares that requires a 14-day advance purchase and 21-day advance purchase. I did some quick Google searches but I couldn’t find anything if the fare is lock on a 24-hour courtesy hold…just the seat is hold…maybe one of the travel agents that reads this blog can comment.

    By the way, in June 2009, United removed the ability to hold an itinerary without purchasing on its website (Source: http://www.bnet.com/blog/airline-business/united-removes-website-hold-feature/810).

  • Bruce InCharlotte

    It would be useful to see these fees against PSM’s. I would expect Delta to be at the top – they’re the largest airline and therefore have the most tickets at stake.

  • Arizona Road Warrior

    “Airlines continue to insult my intelligence,”
    - – - – - – - – -
    Travelers who expects airlines to provide the services (i.e. hot meals, no fees, first-rate service, etc.) from the pre-deregulation period at dollar-store prices insult my intelligence.

    I don’t like these fees but I understand why the airlines are charging these fees because the base fares are too low. The fact is that fares today are lower than fares 5, 10, 15, 20 and 25 years ago. The fare for my first flight (1984) is 46% lower than the actual inflation rate for that time frame.

    If you don’t like the fees, fly an airline without fees like Southwest, JetBlue, etc. “but these discounters don’t fly everywhere.” Absolutely, they fly the popular routes and that is why they make their money by volume. Southwest currently flies to 68 cities; whereas, Delta flies to 245 cities in the US and another 95 cities around the globe on their metal.

    If the public wants low fares and no fees, the solution is simple: 1) The legacy airlines will just fly the same routes as Southwest and the travelers in the 177 cities (in the case of Delta) will have to drive to one of these 68 cities. 2) Increase the fares on these less traveled routes to small and medium airports; etc. since fares on the popular routes subsides these less popular routes.

    The bottom line is reduced\eliminated airline service (i.e. flights\routes) or higher fares if you live in or going to visit small and medium cities.

    If the public wants airline transportation to the small and medium cities at affordable fares, low fares on the popular routes and no fees, another option is to regulate the industry so there is a level playing field between the discounters and legacy airlines…which means higher fares but at least every airline will have the same fares.

  • http://www.thetravelinggiraffe.com Crissy

    I’ve actually taken advantage of the 24 hour change fee with Continental twice on the same itinerary.

    First, I booked a pair of tickets. When the price went down the next day I canceled the tickets and booked new ones. No problem, except that both purchases showed up on one CC statement but the cancelation was on the next billing statement.

    The day after I booked the flights again the price went down again. I called Continental and they reimbursed me the difference in the dropped price. That was in 2009.

  • Ali

    I love your blog, but I’ve got some beef with this post. Sure, Delta brought in $4.2 billion in luggage and change fees. You mock them with the comment, “Ironically, the airline industry is still complaining about its profits, which it calls “pathetic.”” But that statistic and comment hold no water unless they’re followed up with Delta’s operating expenses for the same time period.
    I’m hardly an advocate for the airline industry, but I can’t ignore how much this post reeks of bias. (For what it’s worth, the “other side” of this story may well back up how exorbitant these fees are, but without showing those stats, this is just another sensational article that conveniently leaves out half the facts.)

  • Joel Wechsler

    @Arizona Road Warrior As a travel agent I can’t comment on how the airlines operate on their own websites but what I can say is that when an agent holds a reservation for 24 hours only the seat is held. The fare is not guaranteed so that if it goes up overnight the passenger will have to pay or cancel (with no fee). In your example, if a 7 day advance fare is held until the 6th day before travel, the passenger would no longer be eligible for the 7 day advance fare.
    I agree wholeheartedly about those who want low fares plus all the goodies. They do indeed insult our intelligence. That being said, however, I do think that the baggage fees have gotten to the point where they bear no relation to reality but are actually nothing but a thinly diasguised fare increase.

  • Joe Farrell

    The easiest way to make a small fortune in aviation is to start with a large one . . . . the airlines are proof positive that flying people is a money losing proposition but like Fedex and UPS, have learned that flying stuff around makes money. . .

  • Joe Farrell

    @Joel – the way around the fare increase problem when holding a res is to MAKE the reservation, then cancel without penalty within 24 hours – I’ve done that alot -

  • buster

    Airline fees really don’t bother me, especially luggage fees. Hidden fees are annoying, but everyone knows about luggage fees and ways to get around them (ie, fly Southwest, get a Delta AMEX gold card, etc.) Besides, there are websites out there now that allow you to compare fares inclusive all fees, so you really can make an informed choice.

    Besides, the airlines have lost billions. And now they seem to have found a formula that lets them make money, and people complain. Listen folks, no business can lose money forever. So quit complaining and if you don’t like it, take your business to Southwest.

  • Steve

    I’m sorry, but the only people who are insulting anyone’s intelligence are the ones saying things like “If this had been a legitimate ‘unbundling’ action, then airlines would have lowered their fares when they added baggage and change fees.” It’s a fallacy to insist that unbundling saves no one money just because base fares have not decreased; to do so is to ignore the possibility that without unbundling, base fares could have increased. Is paying an extra $60 per trip better than keeping the fare the same and adding a $60 fee if you want to check two bags? I say no way; if you’re a traveler who does want to check bags, the fact that the fee is separate doesn’t cost you anything and if you’re a traveler who does not need to check bags, you’re saving money compared to if the base fare increased.

    Honestly, while it’s exactly what I do not want as a consumer, I’m so sick of hearing about how unbundling is evil that I wish the airlines would eliminate the bag fees and hike base fares significantly, like $100-200 a ticket. That way, all the whining about unbundling would stop.

  • Joel Wechsler

    @Joe Farrell I think you may be confusing making a reservation, which only holds the seat, and actually issuing a ticket, which is the only way to guarantee the fare. Perhpas some or all of the airlines will do this without penalty but in my specific case, while I can void the transaction, thus avoiding airline-imposed penalties, I will not waive my ticketing fee, so it is not a completely free hold.

  • David Z

    If it’s such a good idea, why did United limit it to only Continental flights?

    Probably to test the waters if Continental Airlines especially has that system only.

  • cjr

    “Besides, the airlines have lost billions.”

    Who’s fault is that?

    They didn’t have to drop fares and add routes and all the other things that have supposedly cost them money over the years. They don’t listen to customers and the government is another thorn in their side.

    But supposedly it’s all the customer’s fault that the service is garbage and flying is now a chore best avoided if at all possible. Whatever.

  • MVFlyer

    My problem with unbundling is that the airlines are doing this mainly to be borderline dishonest–they don’t want you to know the total fare including mandatory ‘fees’ for comparison purposes (and I include baggage in mandatory fees, since you do need some luggage). Anything that’s mandatory is not a fee, but part of the overall fare that you shouldn’t have to go through six screens to find–this includes things like taxes, surcharges (e.g. fuel), landing fees, and anything else the airline must charge you for you to fly.

    And while I certainly don’t begrudge the airlines making money, I do have problem with fees that are completely out of whack with reality. For example, does it really cost the airline $150 to make a schedule or a name change? No, of course not–this is a money grab, plain and simple.

  • DJP

    24 hr hold MUST STAY IN PLACE because there are chances for errors in processing because what you see on your computer screen may not be what you get emailed. This can take 12 hrs for an email to come up.

    There is a chance after you hit click …you picked the wrong day of what you intended to travel because you didnt have dates straight but you knew you wanted to leave on Thursday instead of Friday.

  • Christine Austin

    You know what fee would be a “good” fee? A refund if the price goes down after I’ve purchased the ticket, especially if I’ve paid a “lock” fee. Why is a “lock” fee a good fee? Why shouldn’t I be able to take at least 72 hours to book my other travel, especially if I’m planning a family vacation? I can’t say it enough – I will do everything possible to keep from having to fly. I’m going to visit family for Christmas and it is a 12 hour drive. Guess what – I’m taking two days to drive and one hotel stay to drive because I find that preferable to playing the airline game. I would drive even if I found a $1.00 flight because who knows what the final fare would be after all of the “add-ons” much less the hassle of pat-downs, etc.

  • Mark K

    The FareLock that Continental offers (not all of United, just the Continental part) allows you to put in a hold on a seat AND a fare for the 3 to 7 day window you select and pay for. This is a good thing say if your credit card is due to cycle in the next couple days and you want the full fare charged on the next billing cycle. You hold the ticket today and are guaranteed you will get the same price when you actually purchase it later. The existing 24 hour full refund with no questions asked still exists (for now) at Continental.

    This is a big change because Continental eliminated the ability to “hold” a ticket several years ago and you had to buy tickets at booking time. I think it will work for many travelers who are booking complex arrangements for themselves and need the abillity to possibly switch their plane trips. Where I think it will not be so great is with people holding 1st class seats for the small charge that will free up at flight time so they get upgraded.

    A concern is that on the CO website the details of this program state that “all advance purchase requirements apply.” So if you book a ticket 10 days in advance, which is in the more than 7 days before flight window, and request the 7 day hold, can you? If you do, it puts you into the less than 7 days advance purchase window where prices are higher. I guess most people using the FareLock option will be buying tickets much further in advance.

    I doubt I will be using this option. I usually buy either 1st class (discounted) or coach tickets that are fully refundable anyway. And since I usually book only for myself, I am fairly certain of my travel plans before hand anyway.

    I actually see this is another revenue generating plan that Continental is trying out on us before the name disappears. Like the option to purchase Elite qualifying miles recently introduced. If it works and generates the desired revenue boost, great. If not, nothing lost.

  • Carrie Charney

    The 24-hour period following a buy is not a “hold” on Continental. You have bought and paid for that ticket; the fare will not go up. You have 24 hours in which to ask for a refund without penalty, should you change your mind for any reason. Continental reserves the right not to refund your money right away. I used the 24-hour window only once, because I had accidentally input the wrong date. My money was not held.

  • Aaron

    @Steve:
    >Is paying an extra $60 per trip better than keeping the fare the same and adding a $60 fee if you want to check two bags?

    Yes, it is better.

    Who are the people who don’t check bags? Mostly business travelers. Many of whom have elite status on one airline or another. And therefore do not pay baggage fees.

    The policy of exempting elites from baggage fees is proof (to me, at least) that baggage fees are aimed directly at leisure travelers — the exact people who WILL pay baggage fees. The people who would reasonably expect that the price of an airline ticket would include their bags.

    Don’t buy into the airline’s BS, Steve. Baggage fees are nothing but bait and switch, and a way to get around those who click “Sort by price low -> high” on Expedia.

    To put it another way: Baggage fees are a way that American or Delta can appear to have flights as inexpensive as Southwest, when in fact they really don’t.

    I say cut the baggage fees and charge enough for the ticket to cover costs.

    Aaron

  • Steve

    @MVFlyer: “My problem with unbundling is that the airlines are doing this mainly to be borderline dishonest–they don’t want you to know the total fare including mandatory ‘fees’ for comparison purposes (and I include baggage in mandatory fees, since you do need some luggage).” I completely disagree unless you’re talking about charging for a carry-on as well as checked luggage. It is *not* mandatory to check a bag or two; of the flights I’ve taken, I’ve only checked two bags once and I often do not check any bags. This goes for both leisure and business travel (I never check a bag for business travel, but I also frequently do not check a bag for leisure travel, either, if I’m only staying a few days).

    @Aaron: again, I disagree with the assertion that only business travelers don’t check any luggage. BTW, I think there are plenty of business travelers who don’t have elite status – my company doesn’t book exclusively with one airline and based on our location, there’s about a 25% chance each of choosing four different airlines (before the United/Continental and Delta/NW mergers, there were six possible airlines). At my company, one could travel twice per month and still never make elite status on any airline.

    Checking baggage is a choice, and I don’t want legislators to demand that the price of my airline ticket reflect a choice I often do not make.

  • BucksterSF

    “Airlines continue to insult my intelligence”

    I hope I never get that stupid. LOL

  • David Z

    Don’t look now:

    http://aviationblog.dallasnews.com/archives/2010/12/us-airways-kirby-says-all-of-2.html

    “And so, a la carte revenues represent 100 percent of that profitability,” Kirby said, calling it “a structural change that we can’t overstate how important that has been to US Airways and to the industry.”

    Pardon if this was mentioned around here before. Just thought I’d post this, albeit a bit late into the discussion.