Airlines test flier limits with ever-growing fees

Allison Linn Senior writer • Profile • E-mail

This is the conundrum airlines face as they head into the busy holiday season: How many previously free services can they force fliers to pay for without risking a revolt?

For most airlines, cash-strapped in recent years by a series of crises dating back to the 9/11 terrorist attacks in 2001, the growth in fees represents one of a very few potential bright spots.

But for fliers racked by the deep recession, paying for everything from checked luggage to a bag of chips on board can quickly become an aggravating wallet-buster.

“It’s very much a balance of what customers are asking for, in terms of entertainment, and what we need to do in terms of sustaining the airline,” said Paul Skrbec, spokesman for Delta Air Lines, the nation’s largest carrier since its merger with Northwest last year.

The push for new fees comes as many airlines continue to report deep losses and problems attracting fliers. The Air Transport Association of America said Monday that passenger revenue for U.S. airlines fell 21 percent in August as compared to a year earlier as passenger traffic fell 6 percent.

Hamstrung by high fuel prices, reduced customer demand and, most recently, the effect of swine flu on travel patterns, most major airlines are now charging passengers for services once considered part of the ticket price. In addition to meals, snacks and checked bags, depending on the airline customers might be charged for selecting a seat, booking a flight by phone, watching a movie or using a pillow, blanket or headset.

Other services that once might have commanded a small fee, if any, now might come with a considerable price tag. This category includes traveling with a pet, sending a child on a flight solo or transporting unwieldy gear.

For the frequent business traveler or family on vacation, the fees can easily add up to hundreds of extra dollars. For airlines, they are translating into millions of dollars in much-needed revenue.

Delta, for example, said "other net revenue" increased by 15 percent in the latest quarter, to more than $900 million, in part because of increased revenue from baggage fees.

Other airlines are seeing similar benefits, especially from the bag fees. American Airlines’ parent AMR Corp. said other revenue, which includes buy-on-board food and baggage fees, rose 7.4 percent to $565 million in the latest quarter, even as total operating revenue fell nearly 21 percent.

For many airlines, the potential pile of cash is just too hard to pass up. Alaska Airlines began charging customers a $15 fee for the first checked bag over the summer after previously charging only for the second bag. Spokeswoman Marianne Lindsey said the decision came after airline executives saw competitors add the fee and concluding it could bring the company an estimated $70 million a year.

“We just couldn’t continue to not charge,” Lindsey said.

‘No one’s getting rich’
The extra revenue offers a buffer, analysts say, but it is only one of the many cost-saving measures airlines need to take in order to avoid bankruptcy, consolidation or even liquidation.

“No one’s getting rich on these moves,” said Richard Aboulafia, a vice president with the aerospace and defense analysis firm Teal Group.

The International Air Transport Association is expecting airlines worldwide to lose $11 billion this year, and the trade group said the overall industry may not become profitable again until 2011 at the earliest.

While fliers have complained loudly about the additional fees, analysts say that, so far at least, they seem to be willing to accept the fees in return for keeping ticket prices down.

“Consumers love to bellyache and whine and then, of course, they go straight to the Web site and click on the lowest price,” Aboulafia said.

A few more seasoned travelers may even be growing sympathetic to the airlines, a number of which have been forced into bankruptcy court in recent years.

After Randy Petersen heard about United Airlines’ plan to let regular customers pay a fee to get the extra perks it provides free to its best customers, he hit the Web expecting to find irate travelers armed with virtual pitchforks.

There were some of those. But Petersen, founder of the popular discussion site FlyerTalk.com, also was extremely surprised to come across a number of comments grimly accepting or even lauding United for taking the money-making step.

In his more recent travels, Petersen said he’s also heard less grousing about things like paying for meals.

“I don’t know if it’s one of those (things where) we’ve all been beaten down so much with fees that we’ve lost our fight,” Petersen said. “It’s looking like there’s a new sense of understanding.”

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