AccuConferenceAccuConference

Aug
18
2010
Airlines Surge on Surcharges, Fees Chilton Tippin

Airlines are trying to make the most out of the surge in travel demand, and in many cases, the travelers are the ones paying.

First, travelers can expect to pay as much as $60 in surcharges when booking certain flights in the U.S. in the course of summer and holiday travel.

According to Bloomberg, industry experts say that there are 49 days with surcharges in the five months from August to Dec.31.

Surcharges will be seen Aug.1 to Aug. 22; Sept. 2 and 3; the two days before Labor Day weekend; Nov. 19 to Nov. 29, which are Thanksgiving travel days, and Dec. 17 to Dec. 31, except for Christmas Day, according to the Bloomberg article.

Surcharges began in 2009 when carriers like Delta Air Lines Inc. and American Airlines figured out they could boost fares on peak travel days to skim greater profits. Airlines have traditionally boosted rates on peak demand days, but carriers switched to surcharges because they could levy separate charges to make more money rather than change the actual base rates. So, with surcharges, the price to fly goes up, but the base rate stays the same. It’s basically a simplification process for the airlines, saving them the burden of raising millions of base prices on certain days only to change them back to the original rate on other days.

Also, pricing rules did not allow the extra amount to be added onto certain days until 2009, according to the Bloomberg article.

The problem is, it results in less transparency for the passengers, and the fares are often hidden in the transaction.

For example, to find surcharges, passengers must look up their total ticket price, realize a disconnect between the base fare and the surcharge, then scroll through the fine print on the “fare rules.”

Carriers Southwest, JetBlue Airways Corp., and AirTran Holdings Inc. and Virgin America Inc. don’t use surcharges.

In addition passengers will incur more traveling costs through ancillary fees.

Airlines found these fees—checked baggage, Internet, in-flight Wi-Fi—to be great mechanisms for boosting profit during the economic slump beginning in 2007. In 2009 these fees amounted to $7.8 billion in revenues.

They aren’t going anywhere. The International Air Transport Association says the global airline industry is poised to make $58 million through 2010.

These fees, too, pose transparency difficulties, as many passengers are realizing that air travel cost is going up, but not only because of surcharges.

So, when the Bureau of Transportation Statistics released its 1st-quarter 2010 air fare data, saying that fares increased 4.7 percent from the previous year, they were correct; base fares did go up. But, this number did not account for baggage check fees or in-flight meals or, in some cases, charges for extra leg room—services that airlines used to include in their airfares.

So, it appears that caveat emptor couldn’t be more relevant when it comes to traveling via the skies through the rest of 2010.

 

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