May 21 2008
Why AA’s $15 Checked Bag Fee Is Fair
The airline industry was not designed to work with oil at $130 a barrel and rising. In order for the airlines to stay in business, they are adding fees, left and right, which of course none of us likes. If any part of this isn’t clear, however, compare it with our recent experiences at the gas pump. We’re all having to pay more.
Fixed or menu pricing. Bottom line, airfares must rise in relation to fuel. With that in mind, would we still prefer to have everything related to air travel bundled together at a fixed price, or would we prefer to choose exactly which components we wish and pay for them separately?
Today’s prevalent model. What we as consumers have asked for and gotten is the menu option. It gives us an impression at least, that we are getting a better deal. We see it in virtually all consumer purchases we make. Therefore, it seems inappropriate to say that American Airlines is somehow unfair in assessing today’s fee, no matter how much we dislike it.
The buzz on other websites. I found this fee discussed on many other websites, among them Chris Elliott, Cheapest Destinations, and Gadling. Many seemed to put an oddly irate spin on these fees to create sympathy among readers. As American pointed out, however, with the ever-rising price of oil, they do not otherwise have a sustainable business model. With that I concur.
Conclusion. So the question that we the consumers, and the travel industry will have to decide, isn’t whether we want prices to move in relation to oil, but rather whether or not we want to have menu-driven pricing.
PS. As previously indicated in our luggage scale article, we predict that all carry-ons will be weighed in the near future.
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I read other discussion at forums and travel blogs about this newly introduced baggage fee by AA. Naturally, most everybody complaining. I don’t like it either but I agree with you we probably can anticipate it coming with the rest of the airlines as well. They got to find a way to survive! Look at Aloha Airlines and see what happens otherwise. Pua
I disagree. So what if the industry was not ‘designed’ to work at $130/bbl oil? The ’structure’ works just the same with higher fares.
If it costs more to make widget A, then the company making widget A charges more for the widget or goes out of business.
If it costs more to transport a passenger from point a to b then the company providing the transport just needs to RAISE PRICES. If it cannot raise prices, it is not because it costs more, but because competitive pressure means there are more seats from a to b than there there is demand.
If it costs $100 to transport one from a to b, and the fare is $80, then EVERYONE loses money until there is only enough of supply to create a fare of $100 plus profit. The business cannot lose money and remain in business.
If airlines cannot raise fare then there is too much supply. Raising ‘fees’ raises fares - it just does it differently. A $15 fee does NOT equal the cost of transporting a 30lb bag from point a to b - it costs more to transport that bag from chicago to LA than it does to move it from Moline to Chicago. Yet, the fee is the same.
The FARE reflects the cost to move a person, for the most part. The bag fees need to do the same.
What do you mean “We see it in virtually all consumer purchases we make.”??
The subscription or all-inclusive model is at least as prevalent as a menu one, whether that’s travel (cruises, all-inclusive hotels, tour packages) or the bills we pay every month: cell phone, cable, internet, the gym, etc., etc.
If they want to raise fees, why not charge for carry-on? That is competing for space in an already full cabin. That is slowing them down in turning flights around, which costs them. The baggage area is not very full, they have to keep paying people to put them on and off anyway.
First I want to say thanks for the comments. I really appreciate them. You guys raised some good issues.
Joe, I concur with your thoughts. I think the airlines are looking at ways of tinkering with consumer perception of price as much as anything. Do they have psychologists or just marketing people (or are those the same thing) who are advising them about this?
Joey, perhaps I over generalized. Even with the examples you gave, however, I still see the menu system (including gym membership options, which flavors of internet, cell and cable services I have, and travel). There is at least a better perception of some value being given for money paid in your examples.
Alan, the carry-on situation, as you point to, is about to be a nightmare for us and for the industry.
Aloha and mahalo,
Jeff
Has anyone given a thought to the fact that passengers are compelled to check bags because of security bans on carrying on supposedly dangerous items? Dangerous things like shampoo or hand lotion!!!
How does a family travel for a week’s vacation without checking bags? How do the elderly and/or handicapped lug their bags on board or up into the overhead?
The fee was created to deter passengers from bringing large amounts of luggage because the weight hurts the gas mileage, and like it was said before, the airline industry wasn’t created to operate off of 140 dollars for a barrel of fuel.
This fee was also created to remain competitive with other airlines.