By unbundling, airlines make a bundle
What's an airline ticket?
Is it just an agreement to carry you from point A to point B? Or is there more to it?
Airline executives seem to think that a ticket is a seat on a plane, and that's all. Lately, the industry has been busy unbundling services that traditionally came with a seat, such as baggage checking, seat reservations and even the ability to pay by credit card.
The benefits to the carrier are clear: An airline can quote a low base fare and then add extras, dramatically boosting its profits.
Take luggage fees, for instance. During the first nine months of 2007, domestic airlines collected $340 million in baggage surcharges. The next year, most major airlines began charging passengers for the first checked bag, lifting the take to nearly $2 billion in the first nine months of 2009. Delta Air Lines led the flock with $550 million in collected baggage fees (when combined with now-merged Northwest Airlines), followed by American Airlines ($346 million) and US Airways ($309 million).
The benefits of those practices are less clear to the consumer. On the one hand, it's nice to pay only for what you use. So if you don't want to check a bag, don't need a confirmed seat assignment and pay with cash, your seat costs less. On the other hand, I know of no airline that lowered its fares after it unbundled its services; it just asked passengers to begin paying for something it used to include in a ticket.
In a way, airlines are also the beneficiaries of our collective assumptions about air travel. Many of us (hint: It's the ones who refer to flight attendants as stewardesses) remain in denial about airline deregulation. Most of us believe that an airline ticket should still include the ability to check a bag, reserve a seat and get a free drink. Increasingly, it does not.
So who's right? The airlines are, at least for now. The federal government doesn't define an airline ticket, and it buys the seductive airline argument that unbundling helps customers.
"The department does not believe that people should be required to pay for things they do not want or need," said Bill Mosley, a spokesman for the Department of Transportation (DOT). Which isn't to say that anything goes, he added. "If a carrier tried to charge for something that is essential to a passenger's air transportation -- for example, to check in or to have any seat or to use the jetway -- we would argue that the carrier was violating our full-fare advertising rule or was otherwise involved in a prohibited unfair practice."
Many passengers think that unbundling, as it's practiced now, is wrong.
Bonnie Roberts, who works for a nonprofit organization in West Palm Beach, Fla., recently booked a flight through the Spirit Airways site from Fort Lauderdale, Fla., to Washington. After she paid for the ticket, the airline hit her with a surprise surcharge: "Every seat -- including the middle seat -- had a cost of between $8 and $40 each way for a confirmed reservation," she said. There was also a luggage fee: $19 if she paid online, or $25 at the airport, for the first checked bag.
"When I called to complain about the deception, I was told I had purchased a nonrefundable ticket," she said.