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Chris Zagorski Posts Tagged ‘airline fees’
Fees are not the answer to profitability
Nothing annoys consumers more than paying for things that used to be free or feeling that they are being nickel and dimed. As the banking industry struggles with how to recoup money lost to overdraft fee income, they are wise to take some lessons from the airline industry.
The airline industry attempted to stem huge financial losses by charging a wide variety of fees. Flyers now pay to book the ticket, redeem frequent flyer miles, make a particular seat choice, change a ticket, check bags, obtain a pillow or blanket, and for food and drinks.
Unfortunately, added fees haven’t propelled the travel industry into profitability. AMR, parent of American Airlines, posted a $1.5 billion loss. US Air, Continental, United and Delta also posted losses. Combined, the industry lost $3.4 billion in 2009.
Southwest, however, was one airline to post a sizeable profit. The company heavily advertised “Bags Fly Free,” and that strategy may have paid off. The company’s Chairman and Chief Executive Gary Kelly attributes the success, in part, to the fees that its competitors are assessing. In a January conference call with Wall Street analysts, he was quoted as saying, “I hope they charge $100 a bag. That would be terrific. We’ll have 100 percent load factors.”
Going beyond the fee
With customer satisfaction, loyalty, and brand image on the decline over the past few years, banks can hardly afford to alienate customers. Rather than focusing on what fees to charge, the industry should focus instead on innovating services and products that give people confidence. It’s not that fees are never justified – it just might not be wise to assess fees on previously free services. In fact, a recent JD Power study indicates that high customer satisfaction rates are possible to maintain as long as consumers perceive that they are receiving sufficient value in exchange.
At the end of the day, customers know that it’s their deposits that fund the banks other, more profitable, activities. So while consumers need a place to bank, the banks need consumers just as much. Shouldn’t there be recognition of the mutual need from both parties?
Travel news that’ll pinch your pocketbook
Spirit airlines begins charging for carry-on luggage
Spirit announced recently that it will become the first airline to charge for carry-on luggage. You read that right…a charge for carry-on luggage. The airline is set to charge up to $45 for individuals who bring carry-on luggage that needs to be stored in overhead bins. A reduced fee of $30 could be paid in advance by those who already know they will be bringing luggage that is too large to be stored under the seat.
But with the announcement comes spin. The company has said that it reduced fares across the board, meaning that most passengers who pay a carry-on fee will not see an increase in their total flight price. The company also stated that this move will help the airline empty the plane faster, which would make passengers happier, right?
I don’t know if I buy that. It seems like the itemization of costs will only create a sense of being “nickel and dimed.” The company already charges for checked bags, and those fees are cheaper than the newly announced carry-on fee. I wonder if the company is really trying to increase revenue by encouraging individuals to save money by checking a bag over passengers bringing bags on the plane. What do you think? Will this influence your decision to fly Spirit?
Ryan Air contemplates charge for in-flight restrooms
Be sure to have some change handy next time you fly. Ryan Air, a popular budget airline in Europe, is considering charging passengers to use the restroom.
The company is pondering a small charge (currently equivalent to US $1-$2) for using the bathroom on flights that last less than one hour. Passengers would insert money into a coin-operated bathroom door to gain access. Although the company has announced the consideration, no decision has yet been made.
I could see how this concept might be more accepted in Europe than the US, since many public restrooms are not free. But, do you think this would “fly” in the United States?