Sun July 14, 2013
Baggage Fees Turn Five Years Old; Passengers Turn Blase
Originally published on Sun July 21, 2013 9:41 am
Hey, baggage fees — happy fifth birthday!
Even if passengers aren't eager to celebrate, airlines are. The fees, born in 2008, helped financially desperate carriers stay aloft as the U.S. economy was spiraling down.
"That was a watershed year that scared the bejeezus out of the airline industry," said Mark Gerchick, an aviation consultant who has just released a book, Full Upright and Locked Position. Even as ticket sales were sliding, jet fuel prices were shooting to historic highs.
"Suddenly, everyone's thinking changed in the industry," he said. Rather than try to provide a single price for comprehensive service, airlines started charging fees — typically $15 per bag — to boost revenues.
Today, fees are not only the norm; they are heading higher still. Checking a bag now costs $25 to $35 on most domestic flights, and roughly three times that amount on many overseas flights. And on any given flight, just about everything comes with a price tag — from 2 more inches of legroom to a can of Coke.
One carrier, Denver-based Frontier Airlines, has announced it soon will begin charging up to $100 for a single carry-on bag for any customer who fails to book through the company's own website.
Having people book directly online eliminates payments to travel agents and "is a big cost saver for us," Frontier spokeswoman Kate O'Malley said. And, of course, it also generates yet another stream of revenues.
Now United Airlines is trying a new approach, offering annual "subscription" fees to allow customers to prepay a year's worth of baggage fees, seat upgrades or airport club access. The plans start at $349 and allow you and your family to check up to two bags per flight.
Gerchick said the ever-onward march of fees reflects the impact of a single idea that took hold in the summer of 2008. Carriers realized they would have to "unbundle" the air travel experience — charging passengers for each service, such as checking bags, changing tickets, getting a snack box and so on, he said.
Fees have allowed the airline industry to reshape its business model. According to the Bureau of Transportation Statistics, in 2012, U.S. passenger airlines collected $3.5 billion in bag fees and an additional $2.6 billion in reservation-change fees. That totals $6.1 billion in fees — and as luck would have it, airlines made a profit of roughly $6 billion. In other words, airlines just break even on flying their customers; they make money by dreaming up fees.
In this age of fees for everything, nudists may feel their lifestyle now makes more sense than ever; they're comfortable traveling light. But most people do need to bring along some clothes when they head out of town.
Gerchick says that need has set off a game between travelers and airlines. "It's like the 'Spy vs. Spy' cartoon in Mad magazine," he said. Passengers attempt to cram everything into carry-on bags, and airlines use sharp-eyed gate attendants to watch for "non-complying" bags.
The typical size allowed onboard is no more than 45 "linear" inches, that is, 22 X 14 X 9 inches in size, and no more than 40 pounds in weight. If a traveler tries to hoist a "non-complying" bag into the plane's overhead bin, she might be forced to pay a "gate bag fee" for having to check it belatedly.
That has a few people trying out "wearable luggage," i.e., loose jackets and vests that feature huge pockets. Rather than pack a bag, a traveler can stuff clothes, makeup, an electronic tablet and whatnot into the pockets of the puffy outfit and get onboard — without having to pay any bag fees.
However, a recent test of wearable luggage at Washington's Reagan National Airport taught one NPR journalist this lesson: Security guards will look very hard at anyone trying to get into the gate area while sporting a bulging vest.
Doesn't this sort of fee-avoidance effort — to say nothing of the fashion statement — take the fun out of traveling?
For some, yes, but most people seem to understand that they and the airlines are trying to outsmart each other, and they have come to accept the fees game as part of today's traveling experience, Gerchick said.
The latest customer polls reflect that acceptance. Passengers' overall satisfaction with air travel has risen to the highest level since 2006, according to the J.D. Power & Associates airline satisfaction study for 2013.
"With each year, passengers are increasingly more accepting of carriers unbundling baggage and other fees," Ramez Faza, a senior manager at J.D. Power & Associates, said in a statement.
Another recently released survey, called the American Customer Satisfaction Index, shows customers hate airlines' cramped seats but are adjusting to the other realities of today's air travel experience. In fact, satisfaction has risen for two straight years — a time when fees were sharply increasing.
Ironically, the improvement in customer satisfaction — to some degree — reflects the positive impact of higher fees on baggage handling, Gerchick said. Over the past five years, passengers have been cutting back on checked bags, which means airline employees are better able to handle their workloads, he said.
And since 2008, the biggest carriers have merged, leaving the airline industry more financially stable. That means carriers can afford to invest in new services that customers want, such as better luggage-tracking technology and more Wi-Fi on flights.
"It was considered outlandish when the airlines started charging fees five years ago," Gerchick said. "But now, it's a matter of routine — people have started to accept that it's the new normal. And for airlines, fees are a key component of revenues."
RACHEL MARTIN, HOST:
This is WEEKEND EDITION from NPR News. I'm Rachel Martin. It's been five years since U.S. airlines starting charging extra for checked luggage. And now there's a chance that passengers may start getting charged for carry-on bags. This week on Winging It, our new travel series, we dig into the whys and hows of baggage fees. Joining me now to talk more about this is Mark Gerchick. He is the author of "Full Upright and Locked Position." He's also former chief counsel of the Federal Aviation Administration. Mark, welcome to the program.
MARK GERCHICK: I'm glad to be here. Thank you for having me.
MARTIN: So, I assume that airlines started baggage fees to increase revenue. But walk us back to 2008 when this whole thing kicked into gear. Were the airlines under a lot of financial pressure at the time?
GERCHICK: You know, the airlines were virtually panicked in 2008. The fuel prices had gone up about 100 percent in just a year and had gone for about a dollar a gallon in the early 2000s to four dollars a gallon around the Fourth of July, 2008. And this fuel is what accounts for 40 percent of the cost of operating an airline at that time. So, it was a huge hit. And there was a concern even that some airlines would go out of business entirely and have to liquidate. So, there was a tremendous pressure on the airlines to do something financially. You know, you couldn't lower the price of fuel. There - really, that's a world market-set price, and so this was the solution.
MARTIN: And then it seemed like there were fees for everything. I mean, very quickly there were no more freebies; no more free food, no more free headphones. Did they just assume customers would stick with them through this?
GERCHICK: Well, you know, their thinking, look, we know we're going to get a reaction to this but it's either that or go out of business. And in a way, they said we're going to take the reaction. The reaction was probably more muted than the airlines themselves expected. I think part of it had to do with the price of fuel at the pump. If you're putting very expensive gasoline in your car, you have a little bit of sympathy maybe for the airlines, believe it or not.
MARTIN: Is there a way to estimate how this has changed the way airlines do business? I mean, are they...
MARTIN: ...back making money?
GERCHICK: They are, and they're making fairly decent money now - not great but they are in the black. They are making $6 billion a year from these fees. And the fees themselves probably make the difference between profit and loss right now. So they're not going anywhere.
MARTIN: Oh, does that mean we could expect more? I mean, you talked about the escalation in these fees. You know, first they start out at $15 per bag to $25. Are they going to get higher?
GERCHICK: Well, they are getting higher. The key change fee - you want to change your itinerary - has gone up from $150 to $200 at most major airlines just within the last couple of weeks, which, of course, a change fee at that price makes it almost impossible to change your ticket economically.
MARTIN: Yeah. That's the price of a ticket sometimes.
GERCHICK: Right. So, why not just say they're not refundable, you know? And they're looking at other fees. There are three airlines now that are charging folks in certain circumstances to put their own carry-on bag in the overhead bin.
MARTIN: Is this is already happening?
GERCHICK: It's already happening, yes.
MARTIN: Any indications as to whether other airlines might follow that?
GERCHICK: I think we're at a point where they're looking but I sense that they're going to be a little hesitant. There is a line beyond which passengers may say no, enough is enough. We're not quite there perhaps, but we're getting there.
MARTIN: Mark Gerchick. He's the author of "Full Upright and Locked Position." He joined us in our Washington studios. Hey, Mark. Thanks so much.
GERCHICK: It's my pleasure. Thank you.
MARILYN GEEWAX, BYLINE: It's about what I would take for a Friday afternoon through Sunday afternoon visit back to Ohio to see my mom. So, here's what I've got and I'll see if it fits.
MARTIN: If you want to avoid some of those annoying baggage fees, listen up, because you could glean some valuable advice from NPR senior business editor Marilyn Geewax. Marilyn, like a lot of us, is not keen on paying a fee to check a bag. What do we do to avoid this? We, of course, try to downsize into a carry-on. But Marilyn, being the clever woman she is, is all about maximizing space. So, she wears her extra stuff. Marilyn went to Reagan National Airport to see if she could outsmart the system with the help of one really big vest.
GEEWAX: All right. I've got one extra pair of sandals, a pair of shorts, a pair of long pants, two T-shirts - and I want the record to reflect they are NPR T-shirts.
(SOUNDBITE OF MUSIC)
GEEWAX: Wait - can't forget the all-important sleep shirt, little silky thing there. Some, shall we say, unmentionables can go into this pocket.
(SOUNDBITE OF MUSIC)
GEEWAX: Let's hope my mom's iron works because when I get there I'm going to have a lot of ironing to do. I'm going to zip my pockets and win the prize for nerdiest, worst-dressed person at the airport. All right. This is bad. I look ridiculous. But I have in fact fit an entire suitcase into a vest. And I'm ready to go through the TSA line.
(SOUNDBITE OF MUSIC)
GEEWAX: There's a big silver table that stretches in front of you and you know there's all those plastic bins. And I'm already feeling pretty awkward. So, I think I'm going to unzip my jacket and put it in the grey bin. It's not light - maybe 15 pounds. I didn't think I packed that much but I did.
(SOUNDBITE OF MUSIC)
GEEWAX: My loaded-up wearable jacket is going through and there goes my bag.
(SOUNDBITE OF BEEPING)
(SOUNDBITE OF MUSIC)
GEEWAX: Well, I got through TSA just fine, no problems, except I guess I did get extra dirty looks from people wondering why on a 90-plus-degree day someone is wearing a big, heavy vest.
UNIDENTIFIED MAN: You look a little weird. It kind of looks like a flotation device.
(SOUNDBITE OF MUSIC)
MARTIN: You just hear airport employee Tony Reed commenting on Marilyn Geewax's airline attire. If you'd like to see a photo of Marilyn wearing her luggage, go to our website, npr.org. Transcript provided by NPR, Copyright NPR.