A worthwhile airline fee program? Don’t buy it

Dragon Images/Shutterstock
Dragon Images/Shutterstock
The introduction of a new airline fee program is reigniting an old debate about the true cost of air travel.

Earlier this month, United Airlines unveiled “subscriptions” that let you prepay for a year’s worth of baggage fees, seat upgrades or airport club access. The plans start at $349, for which you and up to eight companions traveling on the same reservation may check up to two bags per flight, and cost up to $500 or more for annual access to United’s 45 airport club locations and other select partner lounges worldwide.

“Our customers tell us that they value comfort and convenience, and our subscriptions enable us to provide both year-round,” said United spokeswoman Karen May. “We intend for these subscriptions to be long-term offers.”

The timing of United’s announcement might have been better. Just a few weeks before it introduced the subscription plan, the Transportation Department had quietly released its 2012 report on baggage fees collected by airlines. The report showed that United earned $705 million for the year, second only to Delta Air Lines’ $865 million. All told, the domestic airlines raked in a record $3.5 billion in luggage fees.

If you’re a little confused about how much air transportation will cost after factoring in baggage charges as well as any other extras, then the subscription-based fee program is unlikely to help.

Airfares are rising — that much we know. For 2012, the average airfare cost a record $356, up from $343 a year before. Fees are also rising. Passengers spent an average of $10 in change fees and $13 in baggage fees (also records). But we don’t know precisely how much prices have jumped overall, once you factor in all the fees, because airlines aren’t required to report all this revenue to the government as separate numbers.

Since 2008, the major airlines have aggressively “unbundled” such items as luggage fees and seat reservation fees from their ticket prices, a clever marketing strategy designed to make the cost of air travel appear lower. At the same time, they’ve often failed to clearly disclose those costs at the point of purchase, leaving passengers with the impression that they were getting a deal. The resulting confusion has been a windfall for most airlines, which collected billions of dollars in fee revenue over the past five years.

Having a luggage-fee subscription injects yet another layer of complexity, making it harder to determine the actual price of air transportation.

Interestingly, this appears to be a recycled idea. United shelved a similar program in March 2012, after its merger with Continental Airlines, for technical reasons. But that didn’t seem to dampen the reaction to its reemergence from airline watchers.

“I think this will be very successful,” predicted Jay Sorensen, whose IdeaWorks consultancy advises airlines on fees. “From the airline’s perspective, it’s a home run. The consumer pays for the benefits up front, so of course they’ll return as a consumer whenever they’re shopping for air travel.”

Sorensen, who estimates that United earned a total of $5.3 billion from all fees last year, or about $38 per passenger, also notes that the airline raised some of its rates when it reintroduced the subscriptions. For example, an annual pass that gives you a space-available upgrade to United’s Economy Plus section, where seats have about as much legroom as they did in coach sections before airline deregulation in the 1970s, jumped from $349 to $499. That’s likely to further help the bottom line of the world’s largest airline.

But passengers are skeptical. Some are even hostile to the idea.

“I have two words for United,” says John McNeal, a retired financial crimes and fraud prosecutor who lives in Chicago. “And they are not ‘Happy Birthday.’ ”

Nora Graves, a software programmer in Purcellville who flies infrequently, says that the numbers don’t make sense to her. She would have to take a total of 14 flights to break even on a $349 subscription. Even if she checked two bags, it would still require six flights. “I find it very discouraging that airlines think that making travel more miserable is going to improve their customer base,” she says. “They need to fly anonymously, back in steerage with the rest of us. Then they might understand why their business models aren’t working well. Maybe it can become a new reality TV show?”

Some frequent business travelers scoff at the subscription idea, too.

“The thing everyone keeps saying is ‘If I flew enough for it to be worth it, I’d buy it,’ ” says Ann Wolfer, a frequent traveler who works for the military in Wilmington, Del. “Well, if you fly enough for it to be worth it, like I do, you would get free bags and Economy Plus access. You don’t get club access, but with connections down to 30 to 40 minutes, I rarely would even have an opportunity to use it.”

But others like the concept of a subscription model for fees and are open to trying it.

“I think that is a great value,” says Nick Prewett, a college administrator in Lawrence, Kan. “If you travel enough.”

For example, a family of four on vacation checking four bags could break even if it checked five bags each way, he says. The only trick would be to fly enough to check the 14 bags that would be required to recoup your investment, he says.

But loyalty program expert Tim Winship says that it’s probably not worth the risk. He crunched the numbers and concluded that subscribers would probably fall into one of two categories: “mathematically challenged” or in denial about how much they travel. And he urges passengers to take a closer look at United’s subscriptions before buying one. “Do the math,” he says. “Volume discounts only yield savings if you actually use the product often.”

For me, the most troubling part of United’s subscriptions is the way the airline brushed off my detailed questions about the program.

Several passengers raised concerns about the fine print on the subscriptions, which gives United broad permission to “amend, cancel, or modify these terms, conditions, and pricing at any time with or without notice.” The airline refused to answer specific queries about the program contract, instead e-mailing me a vague statement from a spokeswoman, which I included at the top of this story. I guess we’ll have to take the airline at its word when it says that it won’t cancel the program again.

Add it all up, and it makes the benefits of United’s subscriptions dubious, at best. Air travelers may find them useful if they fly enough, but they probably won’t if they already have elite status, because they already get most of these perks. Why pay twice for the same thing?

But the rewards to United are undeniable. It gets to collect money from you upfront, can further obfuscate the real cost of its product, and best of all, if it changes its mind, it doesn’t even have to give you what it promised.

Is United "subscriptions" a good investment?

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Christopher Elliott

Christopher Elliott is an author, journalist and consumer advocate. You can read more about him on his personal website or contact him at . Got a question or comment? You can post it on the new forum.

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  • MarkKelling

    Yep. And I agree.

  • John Baker

    I’m an elite and I agree with both of you. Elites can be some of the biggest babies when things go wrong or they don’t get x,y,z.

  • Stereoknob

    United is a horrible airline to begin with so no issues with this program. I fervently work to avoid this airline as it stands.

    I would be interested to see which airlines best accomodate passengers over 6 feet tall. (United does not do this well)

  • Carver Clark Farrow

    Airlines apparently disagree with you. Much of the revenue generated by airlines is from the business travelers who travels between the heavily traveled cities. Crummy airline 1 wants to steal as many of those high revenue travelers from Crummy airline 2. As a result each airline is increasing its high revenue offerings to attract those customers.
    For the business travelers, while cost is always an issue, its not necessarily the sole determining factor.

    For example, I have a trial in 2 weeks, in one of those heavily traveled cities. I purchased a one way ticket at a cheap price because I know when the trial starts. But my return ticket is a fully refundable ticket because I don’t know when the trial will conclude. The return ticket will cost almost three times the cheap advance purchase ticket. But the flexibility to change tickets and avoid worrying about standby issues is worth it.

  • Carver Clark Farrow

    if you flew enough to equal or exceed the costs of these programs, you probably would be at the Silver Elite level where you get all this free anyway
    —————————————————
    Unless your flights are commuter flights in which case you have a lot of small flights and may not generate the miles required to qualify for elite status

  • PolishKnightUSA

    I also doubt the brady bunch scenario for this reason: families now consolidate their stuff into a single bag or at most, two bags at 50 back-breaking pounds each and then everyone, even a 2 year old, gets a 23lb roller bag. This is why the gate area looks like a bus station.

    I’m a contrarian rebel so I like to have NOTHING if possible when I get on a plane. It confuses everyone around me when I have my hands totally free. I wonder if I’m going to get profiled by security…

  • PolishKnightUSA

    Here’s a wicked idea: Request an elite challenge and get temporary status. Then fly, fly, fly and burn, burn, burn your miles while you’re elite. Then walk away.

  • PolishKnightUSA

    When I flew with United a few years ago international to Europe, I don’t think the first bag was free but, to their credit, the online checkin was great because I could register my checkin bags for a buck, yes, a buck each! So my wife had us register 2. However, after getting on board I found out that alcohol wasn’t complimentary in economy class. I’ve largely avoided US legacy carriers on international flights since then although I have read that United relented on the first bag and alcohol fees for economy class.

    And that’s tale reveals a lot of the problem with this anecdotal information: United eventually came around but the bad taste they left in customers’ mouths (in my case, literally not being able to justify to my wife spending $10 to have a champagne toast for a trip to Europe) earns them a bad reputation.

    I read about the CEO’s for these legacy carriers getting monstrous packages such as million dollar bonuses and lifetime (yes, lifetime) free first class flights. It offends me and makes me ashamed to be an American. I could rationalize these robber barons if they were improving service and price, but that doesn’t seem to be the case. It’s not been terribly difficult for me to find competitive prices from carriers with free bags.

  • Citizentraveller

    A variation on this idea has been launched by Tiger Airways (based in Singapore) and Jetstar (Qantas subsidiary). You join their “club” for about $40 per year and hear about cheap deals earlier than the general public or are offered “exclusive” sales. Is it worth it? Probably not unless you are certain that you want to travel with those airlines.

  • http://www.bidabooking.com/contents/booking-a-villa-in-the-usa Bidabooking

    Its a shame to see such airlines doing this. European low cost carriers already charge for everything under the sun, you end up spending the flight feeling like you are caught in a never ending sales pitch and what you thought was a good fare in reality ends up more expensive then some of the leading airlines by the time you factor in all the additional charges.

  • PolishKnightUSA

    For the places my wife and I fly domestic, we have a choice of three regional carriers (Jetblue, Spirit, Southwest) and the legacies. We flew Delta once because I was buying tickets “last minute” and they were the best priced. We then packed our carryons to the limit and checked at the gate for free. The rest of the time, we’re with Jetblue or SouthWest (I would avoid flying Spirit unless it was a ridiculously low fare, so far, I have never flown with them.) Since we’ve had different travel needs for where we were going, we have largely flown a variety of carriers and couldn’t accumulate loyalty. It makes no sense to work on a loyalty program and spend more for a legacy airline when qualifying requirements have been so tightened. So ironically, the legacies discouraged me from caring about their business BECAUSE of their loyalty programs!

  • Crissy

    I’m sure there is a small segment of the population who could benefit from this program. Sadly, I think United is hoping that more people are stupid enough to sign up for it then those who would actually benefit from it.

  • bayareascott

    Well, now it is Continental.

    Don’t get me wrong. I’m not saying your feelings are not justified, nor was that comment directed at you alone. But when you say, “At least on Lufthansa I can checked one bag for free,” you are implying that you cannot even get that on United, which is false. That is “bad information.” That’s all I am saying on that.

  • bayareascott

    That wasn’t in your first comment. :)

  • Ellie Hogan

    Netrate Concepts -airline fee program AMEX

    Recently, American Express sent out a letter to cardmembers with this
    information. The letter also asked cardholders to review their
    accounts and advise if any credits had been missed. Tips for using
    American Express’ website search tools to look for airline charges and
    related credits were enclosed as well.

    Purchases eligible for the $200 credit include checked baggage fees,
    overweight and oversized baggage fees, itinerary change fees, phone
    reservation fees, seat assignment fees, and in-flight purchases such as
    beverages, food, headphones, entertainment, and pillows and blankets.
    Also included are airline lounge day passes and annual memberships as
    well as fees for pets.

    Purchases that are excluded from the program include in-flight Internet
    charges, fees charged by partners of the enrolled airline, airline
    tickets, upgrades, purchases of miles, fees to transfer miles and
    points, gift cards, duty-free purchases, and fees related to award
    ticketing.

    .