Updated Thursday, November 15, 2012 at 10:04 AM
Air travel is full of surprises, some good, many not.
Steven Allen says he got a bad one recently when he called to change a United Airlines ticket from San Francisco to Puerto Vallarta, Mexico. To move his return date from Oct. 25 to Oct. 27, the airline wanted him to pay another $300, nearly half the $686 airfare.
Allen, a college instructor in Berkeley, Calif., who like a lot of leisure travelers isn’t fully aware of all the fees that airlines now impose on passengers, says that the surcharge was unreasonable. “It’s disappointing,” he said.
Other passengers are also frustrated by airline fees — specifically, by the fact that fees are often poorly disclosed until it’s time to pay them. (United’s website indicates that a fee “may apply” for ticket changes, but it offers no details.)
The domestic airline industry as a whole is in the process of re-imagining its business model, moving away from one in which the price of a ticket covers the basic cost of air transportation to one in which optional fees account for much of its profits.
A new survey underscores air travelers’ dissatisfaction with the change. The poll, conducted by Harris Interactive on behalf of Open Allies for Airfare Transparency, a coalition of online travel agencies and electronic travel distribution companies, suggests that many air travelers are clueless about fees. It found that 94 percent of Americans who’d recently used an online travel company to book their travel said that all airline fee information should be available to travel agents and online travel websites, which isn’t the case now.
David Kelly, Open Allies’ executive director, called the results a “wake-up call” and said they prove that passengers want to know exactly what they’ll have to pay before they open their wallets. “The survey data demonstrates that consumers expect airlines to share fees in a transparent and purchasable format in all the channels where they sell their fares,” he added.
Open Allies didn’t order up the survey because it’s opposed to fees. On the contrary, it’s pushing the government to force airlines to disclose fees so that its members can sell the optional extras, sharing in the air carriers’ windfall.
Airlines say that the current rules are sufficient. Transportation Department regulations that took effect earlier this year require air carriers to prominently disclose all optional surcharges on their websites and to include any mandatory fees and taxes in quoted fares. “United’s fees are clearly disclosed online, in accordance with federal regulations,” says Charles Hobart, a United spokesman. He adds that United also discloses ticket change fees in the individual reservation, because those fees can vary.
It isn’t just ticket-change fees that irk travelers. Legacy airlines have added a variety of charges, for extras such as the first checked bag and seat reservations. Some discount carriers are more aggressive, charging fees for carry-on bags and for the “convenience” of booking through their websites.
Together, those fees generated more than $10 billion for the airline industry worldwide in 2011, according to a recent study by the airline consultancy firm IdeaWorks. For many airlines, the fees made the difference between a profit and a loss, and in a few instances, they might have made the difference between survival and liquidation.
But at what cost? “From the passenger’s perspective, the price of that $10-plus billion is the truth,” says Charles Leocha, president of the Consumer Travel Alliance and the consumer representative to the DOT’s Advisory Committee for Aviation Consumer Protection. “Somewhere during the booking process, the passengers weren’t told the full cost of air travel.” (Disclosure: I co-founded the Consumer Travel Alliance and serve as its volunteer ombudsman.)
It’s easy to mislead customers, even when you’re complying with government regulations. Airlines do it by not including all charges in the price of a ticket, making the fare seem less than it is. And history lends a hand. Traditionally, making a seat reservation, paying for a ticket by credit card or printing a boarding pass at the airport has been included in the fare price. But now, the airlines have quietly “unbundled” those services while doing little or nothing to inform the public that tickets now don’t include them.
Leocha says that regulators are struggling with how to address what he sees as unfair and deceptive pricing practices. Strictly speaking, the fees now being charged by airlines are completely legal, and their disclosure meets all government standards. Yet many passengers still feel duped when they unexpectedly have to pay extra for something while they’re flying. More than half of the passengers surveyed by Harris said that they’re still being surprised by fees after they buy their airline tickets.
The problem is simple: In deciding to shift to a fee-based system for airline tickets, airlines did their homework, making sure that every step they took was legal, though not necessarily transparent.
The solution won’t be so easy. It will take creative regulations or new legislation to overcome misleading airline ticket prices. And both of those routes mean that consumers won’t see solutions for more than a year.
But a little pressure from the flying public could bring a fix closer. That’s what happened to Allen when he was faced with the change fee from United. He sent a polite email to the airline’s director of customer care and copied me, explaining that he thought the charge was absurd. “Surely,” he wrote, “you can’t believe that anyone who has been charged such a fee would ever fly with United again.”
To his surprise, he received a call a few days later. A United representative reiterated the company’s position that the fee was correct but then added that, as a goodwill gesture, it would waive it.
That decision, as I noted a few days ago on my customer-service blog, gives me hope that airlines will see that fees — and the way they’re being charged — are not an effective long-term business model. And it makes me think that airlines can find a smarter way of making money long before any government action is taken.