The Fees Airlines Are Counting on You Not to Notice

Scott Reeves  Jul 30, 2009 1:35 pm

The Fees Airlines Are Counting on You Not to Notice
 
Penalties have increased 150% -- and could go higher still.
 

 
Fares are falling, but airlines will slap passengers with about $2 billion this year in fees for ticket changes and cancellations.

Average domestic ticket prices declined 9.1% in the first quarter of 2009 from the fourth quarter of 2008 -- the largest quarter-to-quarter drop on record, the US Department of Transportation reports.

You don’t have to be a grassy knoll conspiracy buff or even one questioning President Obama’s place of birth to see that the higher change and cancellation fees are a clever way to boost revenue in a downbeat travel market.

But don’t cry for the airlines even as fuel prices increase, because revenue generated from ticket changes and cancellation orders help established airlines remain competitive with the posted fares of discount carriers, expanding the pool of potential suckers who will get slapped with the higher fees.

Many passengers have griped about new fees for a second suitcase, pillows, blankets, and in some cases, something approaching edible food. But the higher fees for ticket changes or cancellations have gone largely unnoticed so far.

Last winter, the Department of Transportation sharpened rules on how ticket-change penalties are reported. The result: Numbers from the first quarter of 2009 provide the first accurate gauge of the fees, which totaled about 3.2% of US airline passenger revenue, or $527.6 million in the first quarter. Business travelers took the biggest hit.

It appears revenue from higher change fees will generate a larger percentage of total revenue because fewer people are traveling in the recession. Here’s betting the higher fees will go higher still in the immediate future.

No one knows what the breaking point will be, but so far yowls haven’t coalesced into a chorus of concerted gripes from travelers. JetBlue Airways (JBLU) boosted its change fee to $100 from $40 for tickets booked online -- a 150% increase. The good news: Southwest Airlines (LUV) doesn’t charge a penalty for ticket changes.

In some cases, travelers can pay a higher price up front to avoid change penalties charged to those who buy cheaper tickets. The premium could evolve into an insurance policy for possible ticket changes because the higher price doesn’t move travelers out of cattle class. Picking your poison is smart marketing, even if it’s not exactly blowing a wet kiss to customers.

Overall, American Airlines (AMR) led all airlines with about $115.9 million in change fees, followed by United Airlines (UAUA) with about $78 million and US Airways (LCC) with $66.5 million. Delta (DAL) estimated that change fees generated about $100 million in the first quarter.

Ticket change and cancellation fees aren’t a stupidity tax like late penalties added to a credit card bill, but they take advantage of an immutable fact of life: Things change. Airline reservation systems are computerized, so it’s hard to argue that the higher fees are needed to cover increased costs.

Boosting change fees follows the decision by many airlines to add more seats to existing planes, forcing passengers to wedge their bovine butts into smaller spaces on the red-eye. In addition, the size of many food products, such as candy bars, continue to shrink as the price increases.

Some airlines have removed the galley to install extra seats. This may mean that semi-edible airline meals can no longer be microwaved. Only a sociologist could crack the profound implications of that tactic, but here’s a guess: Cold airline food won’t taste any worse than warm airline food. In fact, no taste probably beats any taste.

Note: The American Meat Institute requires that every hog on its way to Bacon-land get at least 6 square feet of space. A 150-pound sheep must be given 5 square feet.

Your average interstate commuter? 31 inches is more than enough, says the FAA.

Higher fees to change or cancel a ticket are almost enough to make you drink. But before you pour one of those little bottles of airline booze down your gizzard, check the price. Hip flask, anyone?
16 of 30 (53%) found this helpful
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Comments (3) See All Comments »
07-30-2009, 1:45 pm
make sure your flask(s) are no larger than 3oz
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07-30-2009, 7:36 pm
or you fill it up at the bar before boarding
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08-03-2009, 2:41 pm
Actually, the FAA doesn't allow anyone to serve themselves alcohol on an airplane. So serving yourself alcohol on the plane can lead to an arrest when you land....
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