Southwest’s recent ad campaigns aimed directly at the booming ancillary fee market that has created net positive margins for airlines has for the most part accurately portrayed the truth: Southwest has, as stated by this scribe many times, the lowest overall fees in the US aviation market. But their latest claims, shown here sequentially on theboardingarea.com, make some pretty blunt statements that may come back to haunt that airline. Why? As always, I’m pleased as punch you asked.
Due to such factors as increasing prices for crude oil, ancillary fees such as peak travel, round-trip and fuel surcharges are expected to either appear or increase in 2011 and could result in the most profitable year for airlines in greater than a decade, according to a news story by WSOC-TV in Charlotte.
Some economists are concerned that rising oil prices, which is expected to cause increases in other goods and services throughout the economy, could slow down and hamper current economic recovery efforts. The travel industry is especially vulnerable to volatile crude oil prices, which are only expected to increase further in the foreseeable future.
According to an article in the Atlanta Journal-Constitution, customers are no longer able to purchase flights on Delta Air Lines through on-line travel agencies CheapOAir.com, OneTravel.com and BookIt.com as of December 17, 2010.
It is the latest in an attempt by airlines to refrain from paying commissions to Internet travel agencies by attempting to direct traffic to their own Internet web sites. Talks and negotiations are still in progress pertaining to American Airlines and their ongoing contract disputes between Internet travel agencies Orbitz and Expedia.
If airlines are successful at cutting out Internet travel agencies and meta-search travel engines who act as “middlemen,” then not only will customers no longer be able to purchase flights on those airlines at those third-party Internet web sites, but they will also no longer be able to access such information as flight schedules, seat availability — and ancillary fees.
Years ago, a similar situation occurred between airlines and “brick-and-mortar” travel agencies where the airlines reduced the commissions paid out at first and then stopped them altogether. As a result, travel agencies either started charging their customers for services that were formerly complimentary, or they went out of business altogether.
Could the airlines successfully collude and deliver a similar fate to on-line travel agencies, which have dropped a nominal fee for their booking services a few years ago, or could the potential strategy backfire and result in a significant drop in revenue for the airlines by not providing its customers with multiple ways to book a flight? Is there a possibility that this war will be done before it gains additional momentum?
The following commercials regarding “fee-court matter” by Southwest Airlines are entertaining as they imply how airlines charging their passengers ancillary fees can be downright — well — criminal:
You may have noticed that activity at TruPri¢e has been in a lull during this holiday season — purposefully and with good reason.
We at TruPri¢e are working diligently during this holiday break, as we are in the process of:
- Creating a new Internet web site
- Adding more data
- Increasing functionality and, most importantly,
- Significantly improving our technology
In fact, our beta Internet web site is currently down and under construction, and we are in the process of securing funding at TruPri¢e to implement the aforementioned improvements.
We have some big plans in the works for TruPri¢e coming in 2011 and — with your valuable support — our plans will become reality. However, we cannot do it without you. Please continue to communicate with us your thoughts, suggestions, ideas, comments and constructive criticism. We are listening.
Thank you for your support of TruPri¢e in 2010. We wish you a joyous holiday season and a happy new year. May 2011 be the best year yet for all!
The following is from the Continental Airlines Internet web site regarding FareLock:
“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 and confirm your travel plans. Your FareLock will guarantee an available seat and the fare you were quoted at the time you booked your reservations.
“Choose FareLock when booking reservations at continental.com or with Continental Reservations and opt for a 72-hour or a seven-day hold. Then, return to complete your transaction at any time before the FareLock expires, or choose the auto-ticketing feature which tickets at the end of the FareLock period. FareLock fees, beginning at $5 for a 72-hour hold and $9 for a seven-day hold, will vary based on a number of factors such as the itinerary, number of days to departure and the length of the hold.”
This may actually be a beneficial fee, if booked properly. For example, if one finds a low airfare but is still not sure about booking it definitively, one can use FareLock to reserve that airfare for as low as $5.00 for a 72-hour hold. If the fare is not booked after all, the FareLock fee is lost. Compared to a $150.00 cancellation fee, this new fee can be a bargain.
It can also be a gamble: let us say that FareLock guarantees an airfare, but the airfare drops in price afterwards. One can book another reservation with or without using FareLock, but then must forfeit the FareLock fee on the original reservation. However, if the airfare decreases enough, one can still save money on the true price of the airfare while Continental Airlines profits on the FareLock fee it would otherwise not have obtained.
The bottom line is that although additional airline fees are usually not welcomed, FareLock could be advantageous to passengers if used wisely by saving passengers money and allowing more flexibility when booking a reservation.
With various outlets reporting that airlines raked in over $4B in ancillary fees through the third quarter ending in September, 2010, the calls from legislators and consumer advocates are once again reaching a crescendo. Demands for “transparent” pricing and full travel cost disclosure are pervasive both in DoT rulemaking drafts and legislation being pushed by a consortium led by US Senator Robert Menendez, D-NJ. Despite the intentions of lawmakers, rulemakers, and consumer advocates, any regulatory movement is running into stiff opposition from the Air Transport Association (ATA) whose members, according to David Castelveter, vice president of the ATA, claim that ancillary fees are already transparent and that airlines “are working on ways to increase levels of transparency.” Could it be that both sides are right but that the now de rigeur application of the term “transparent” has caused as much confusion as the fees themselves and, unbeknownst to fee disclosure advocates, provided cover to airline executives reluctant to contribute willingly to a repeat of the lessons learned from actual “transparency?” Continue reading