Raising Fees Versus Raising Fares

rattlog.jpgHere snakey snakey, come on snakey snakey, give us a little rattle. Come “say hello to my lil friend”, Mr. .22 long rifle. Oh, sorry. In between trips taking Skydog to the vet I’ve been hunting for a rattler in my back yard. My walled in, sealed up, and supposedly snake-proof back yard, at least until this week. We’ve had snakes before in the walled in dog run, which is down in the wash behind the house, but never in back of the house. Ms. Skydog isn’t feeling that well, but we’re hoping to nurse her back to health. Meanwhile Nikko and I have been patrolling the back looking for revenge.
In between sorties to the backyard today I was reading some press releases by several airlines announcing the inevitable fare increases made necessary by you know what. (I am committed to write at least one post without using the “O” word).
United announced a $10 – $60 roundtrip fare increase (I hope it’s closer to $60 than $10). Midwest Airlines announced it would begin charging $20 for the second checked bag. I know people in Wisconsin are nice, but that boat already sailed. Airlines are begining to charge for the First checked bag now, if the recent American Airlines initiative sticks.
One announcement that was relatively amusing was that Frontier had raised a whole host of their service fees, including raising the fee to check antlers from $75 to $100. Their baggage fees will obviously have the biggest positive revenue impact, since presumably more passengers check bags than animal parts, but I could be wrong.
Of the three announcements I think the United initiative will generate the most revenue for the least additional cost. Ocean.jpgA fare increase is the most logical and equitable way to recoup costs that are caused by the rising cost of you-know-what; although baggage (and antlers) do add more weight and consequently incrementally increase the cost of flying the airplane, it’s like urinating in the ocean. Not much of a difference to the ocean whether you do, or whether you don’t.
However, unless the airline is set up to force those fees into the initial transaction while the customer is buying their ticket, or at least provide the flexibility for the customer to pay the baggage fee while checking in at the kiosk, I think the revenue benefit will be mitigated. Maybe a lot. Down in the FAQ section of the Frontier announcement is a statement that says “You must pay the baggage fees at the ticket counter only.” That doesn’t sound to me like it is available at a kiosk. This will force lots of additional people to check in with a live person, and those are sometimes at a premium while at an airport. Head count is usually the first cost to eliminate when it is time to cut costs, so implementing a fee that requires a passenger is manually processed by a person is counter-productive, or ticket counter-non-productive, if you will.
Most traditional airlines have traditional distribution systems, meaning they are pretty good at collecting fares and not-so-good at collecting ancillary fees. Airlines like Allegiant or Air Canada, who have gone to great lengths to commodotize their products can more easily charge for each feature. Airlines with more traditional distribution who try and match this flexibility without corresponding flexibility in how they collect the fees, will be increasing their costs to collect the fees.Godzilla.jpg
In addition to the hard costs of personnel, the boarding process becomes more complex. It will be interesting to see how airlines will handle checking those carry-ons that don’t fit on the airplane. That there will not be enough room for carry on bags doesn’t usually become apparent until towards the end of the boarding process. The usual drill is for the bag to be tagged at the jetway and then put in the baggage compartment – will that be cash or credit card sir?
Just raise the stupid fares.