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Airlines Profit from Fees, But Will Travelers Put Up with It?

The numbers are in, and they're not surprising. According to the Department of Transportation, in 2010, U.S. airlines raked in nearly $5.7 billion in checked-bag and change fees alone ($3.4 billion in bag fees and $2.3 billion in ticket/reservation change fees.)

Here's the absurd part, which proves how ridiculous airline economics can be: On balance, the airlines profited more from checking your bags than they did from actually flying you anywhere.

The accountants are clearly running the asylum and are trying to generate as much revenue from as many sources as possible. And passengers are clearly forking over the money.

You can call it a la carte pricing if you want, but it's not positioned or offered by the airlines in a way that helps anyone truly budget their travel expenses. There's a lack of transparency, and many airline Web sites force travelers to opt out of some of these charges, not opt in. In some cases, it even gets worse,with airlines such as Spirit going so far as to charge passengers for carry-on bags!

For all the other airlines, it's created bedlam on board planes, as passengers try to bring everything on as a carry-on. This has actually delayed flights as airlines physically cannot stow the stuff in cabins.

It's only going to get worse. The latest figures don't include other fees (pillows, blankets, food, premium seating) which makes the airlines' take even higher on these ancillary items.

The airlines, of course, are crying economic crisis: "Without sustained profitability, airlines cannot add routes, add workers or buy new airplanes, all in the interest of airline customers and the global economy," Air Transport Association spokeswoman Jean Medina said in a statement Monday.

But here's the reality that puts that trade association statement in proper perspective.

  • Airlines are NOT adding routes, or workers.
  • They are, in fact, reducing capacity and consolidating.
  • There are fewer planes, fewer routes, and as a result, fewer seats.
  • The law of supply and demand then dictates that airfares are also going skyward.
Sadly, for business travelers, other parts of the travel industry are wanting to follow their example of charging for everything.

Will hotels now charge guests for soap in their bathrooms? If you rent a car, will there be an extra charge for putting luggage in the trunk? (I can't believe I even suggested someone will make it a policy!)

Predictions for Airlines
Sooner or later, the airlines will price themselves out of certain profitable areas, just like hotels did with telephone charges to business travelers. Hotels got so greedy hitting us with $2.50 per local call charges (for starters) that business travelers ultimately went to their cell phones, and hotel revenues for phone charges flatlined.

My prediction is that the same will happen to baggage fees, as business travelers either go to an all carry-on mode, or courier their bags ahead of them -- like I have done for years.

As business professionals, we recognize and support the notion of people making reasonable profits from their hard work. But when anyone crosses the threshold of good business practice and enthusiastically enters the brazen new world of nickel and diming, there is always the inevitable backlash.

My prediction is that backlash is coming -- there won't be protest marches or rallies. We'll just do what we've always done, and vote with our wallets.


Photo credit: Stock Exchange