Posted by Seth on April 2, 2012 under News | 
This shouldn’t come as much of a surprise. After all, the company has previously stated that they were looking in to the possibility and that they might do it. Still, seeing it actually happen is news. And the news is that Allegiant will be charging for carry-on bags starting with tickets purchased on April 4, 2012. The company has not published this update to their website listing of fees yet but they have confirmed through a number of sources, including AirlineReporter.com, that the change is coming. They will be posting full details online late Tuesday night when the change actually goes into effect. Similar to Spirit Air the fees will apply to any bag larger than 7″ x 15″ x 16″ and it will be discounted online in advance with the fee at the airport expected to be $35.
With cost increases out-pacing revenue in many cases still (see Pinnacle’s bankruptcy filing this morning as yet another example) the airlines are struggling to find revenue anywhere they can, and bags is an easy target. Plus, bag fees are exempt from some taxes that other costs aren’t so the companies love them even more. Still, they risk frustrating customers with all the add-ons and losing the business in the long run. Then again, with their route network and often offering the only service in some point-to-point markets perhaps they think they can afford it.
This will definitely be another interesting development to watch.
Posted by Seth on March 30, 2012 under News |
There was an interesting piece in USA Today this week about seat assignments and the ever increasing difficulty for many passengers in actually choosing seats, even on carriers which have traditionally had assigned seats for all customers. The basic premise of the piece is this:
Are some carriers intentionally holding back seat assignments, in the hope we’ll all pay for "premium" seats? It’s a fair question, and the evidence is intriguing.
It is an interesting question, to be certain. It is also somewhat surprising that it took this long to be asked, though I suppose there is something of a lag in the effects of any policy shift and the impact being felt by customers in great enough volume to rate actual reporting on the issue. The short of it is that airlines have realized that being able to have a seat assigned in advance is something that they don’t necessarily have to provide (Southwest simply doesn’t, while most other carriers do). And if it isn’t a critical component of the service then there is no real reason to give it away for free. Hello, incremental revenue!
There are two comments in the piece that I found quite surprising. The first is that it advocates simply budgeting to pay the fee rather than offering up alternative solutions. Not my approach, but I suppose for some folks it makes sense enough. More surprising, however, was the quote from Kevin Mitchell, Chairman of the Business Travel Coalition:
With yield management, consumers are aware and they know that airlines are constantly changing prices on seats. But if this is true, it is unethical—they’re grossly misleading us. The thing that I find so offensive is conveying to me that I have no options, but if I wait a week or two then I do have options.
Sorry, but I have a hard time understanding the unethical component here. Annoying? Maybe. But unethical? I think not. All passengers can still get a seat on the plane for free if they’re willing to wait. The difference is whether they are going to get the seat they want or just whatever others haven’t bought. I struggle to find an ethics argument that makes any sense in this one.
Airlines have been moving this direction for a long time. The most recent to jump in on the seat assignment fee scheme was American Airlines, back in August. United Airlines has offered a paid option for extra leg room (EconomyPlus) for years now, while US Airways charges for choosing an aisle or window seat in many cases.
Even without paying for it I got a window seat on US Airways recently, though I suppose I could have been equally unlucky and ended up in a middle; the guy sitting next to me certainly did. I don’t agree that one should necessarily budget to spend the money no matter what, but it is definitely worth at least knowing what the options are when booking a flight.
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Posted by Seth on March 24, 2012 under Flying, Trip Reports |
I’m sitting in the budget terminal of Singapore’s Changi airport this morning, getting ready to board a flight for a day trip up to Kuala Lampur. There are plenty of reasons I decided to do this as a last minute getaway – mostly because there are some fun airports and airlines to be had – and one of them was because it figured to be a pretty cheap trip.
Pricing out the flights my go-to tool was the website www.utiket.com. It is pretty much a Kayak of SE Asian airlines, scraping their websites and compiling the results, but it also includes the LCCs, which is particularly useful in this part of the world. Even better, it knows about all the LCCs, not just the ones I’ve previously heard of, and it knows alternate airports, too. So when it returned the option to fly on FireFly Airlines to Sultan Abdul Aziz Shah airport in Subang rather than KLIA, I jumped on that opportunity.
The booking for FireFly was a bit of a challenge because I was inside 24 hours from the scheduled departure; they shut down online booking at that point. And the internet connection in my hotel was craptacular so Skype wasn’t working. I took a gamble and just headed out to the airport, booking it as a walk-up fare. The price was the same as what I was quoted via Skype when I sortof was able to chat with them so in the end no complaints there.
For the return I’m booked on Tiger Airways from KLIA back to Singapore. That trip is the one where the pricing got all sorts of wonky. I’ll blame or credit that in large part to the fact that the Tiger Airways website is reasonably modern and functional, able to offer all the up-sells that airlines love for ancillary revenue. The base fare for my ticket is only 33 Malaysian Ringits (about USD$10). No surprise, really, that they are looking to make some extra cash, though some of the methods are less than reasonable to me.
First up, the MYR33 fare advertised excludes MYR32 in taxes and fees. These are real taxes and fees so it isn’t that the airline is hiding additional fare components from the customer, but it is a bit annoying that the numbers are not reflected in the initial quote.
After selecting the flight there are a couple up-sells offered. First up is the ability to switch to a flexible ticket. That would increase my fare about 15x so I’m not interested, but the up-sell is offered.
Next up is the ability to assign a seat in advance. Row 1 costs the most, then rows 2-5, then the rest through the exit row. With basically the whole seat map open I wasn’t worried about it, even though the prices are pretty low.
After passing on the seat assignment charge I got the option to buy pre-boarding service from the airline. Only $5 to get to the front of the line. Once again, I decided to pass.
I was given the option for checked baggage, with various price points depending on the weight of the bag. There was also an option for excess baggage. With this just being a day trip for me up from Singapore that wasn’t an issue so again I passed.
And then I finally got to the check-out screen, where the final price was displayed: MYR85. Huh!?!? Where did the extra MYR20 come from?
Apparently there is a "Convenience fee" for the luxury of booking online with a credit card. I thought that maybe booking at the airport would avoid that (similar to Spirit Air) but at the airport this morning the base fare was triple the online rate and there was still a booking penalty at the airport. And it was more than the CC fee online.
So I did what cam naturally, rolled my eyes and then sat down in the food court to take out my laptop and book the online fare. No sense it wasting an extra $35 on the bargain fare.
Just another fun experience with the random vagaries that are airline pricing models around the world.
Posted by Seth on March 22, 2012 under News |
It wasn’t too long ago that the concept of the fuel surcharge in the context of airline tickets simply didn’t exist. The full price of the transaction was simply the ticket cost and the mandated airport and government taxes or fees and that was that. A few years ago airlines realized that they could manipulate the pricing systems a bit, charging a fuel surcharge rather than just raising fares and an ugly trend began. In theory the fuel surcharges would be relative to the actual costs of fuel and would decrease when those costs decrease, but that sort of behavior has not been particularly common.
Perhaps the most adversely affected group from these fees are those traveling on corporate contracts. Those deals allow for discounts on the fare paid but the taxes and fees are not subject to discount. By shifting the cost to the fuel surcharge the airlines have effectively killed a chunk of those discounts. The US government has finally caught on, however, and they don’t seem too impressed.
In a notice published in the Federal Register two weeks ago the Department of Transportation put the airlines on notice that they consider the current practice to be a violation of the unfair or deceptive trade clauses which they have the power to enforce. To that end, they are proposing that the airlines must change their behavior in two significant ways.
First, all fuel surcharges and any other fees which the airlines keep for themselves must be identified separately from fees which are paid to the government or airport authorities.
We have found, in reviewing airline Web sites, that many Web sites which detailed additional fees labeled all additional charges, government and carrier-imposed, as taxes when in fact carrier-imposed fees were often the major portion of these fees. Such displays were deceptive and in violation of section 41712.
This should help clear up the fact that a $100 base fare plus $650 in "taxes & fees" for a NYC-London flight is actually $550ish to the airline and $200 in real taxes (still obscene, but way better than the old way it was shown). Interestingly, they do indicate that it would be acceptable to have a single entry called "Taxes and carrier-imposed fees" rather than just "Taxes and fees"
Second, the airlines will be required to align the fuel surcharge component with the actual cost of fuel to provide the service, or at least a near approximation.
When a cost component is described as a fuel surcharge, for example, that amount must actually reflect a reasonable estimate of the per-passenger fuel costs incurred by the carrier above some baseline calculated based on such factors as the length of the trip, varying costs of fuel, and number of flight segments involved.
…
Therefore, the “fuel surcharge” of $476 in the above example, which is associated with a transatlantic trip originating in New York City, must be an accurate reflection of the fuel cost over some reasonable baseline for an individual passenger for that trip and the carrier should be prepared to detail the services and costs per passenger associated with its “Passenger service charge international.”
In other words, the numbers have to actually line up with something that vaguely resembles the cost of the service being offered. Take, for example, the fuel surcharges levied by United Airlines for non-stop flights from Newark to four nearby destinations in Europe (all rates are one-way for travel in late March 2012):
- Dublin – $101
- London – $219
- Paris – $248
- Amsterdam – $248
With a spread of less than 500 miles from the shortest to the longest, it is clear that the numbers do not reflect the actual costs of the fuel. According to the company’s 2011 10-K filing the cost for fuel averaged 4.77 cents per ASM. That puts the actual fuel cost per seat for the above flights somewhere around $150. And that assumes that there is a direct correlation from the fuel costs to the miles flown, something that doesn’t actually work out quite so directly. Plus, the DoT seems to think that the "surcharge" should actually reflect the difference over some acceptable baseline, not the entire fuel cost.
This might mean that base fares go up while fuel surcharges go down, leaving the final fare the same for most folks. Not a huge deal in the end if the number is the same, but at least the fares will more properly reflect the reality of what is being offered.
Posted by Seth on January 31, 2012 under frequent flyer, News, points |
Citibank caused quite a stir a week ago when they started sending out 1099s to folks who had received large quantities of bonus miles for opening accounts. Needless to say, there was quite the uproar, with various opinions being shared, ranging from Congress to bloggers. Well, a week has passed and the IRS have finally clarified its position. Sortof. Things are still not incredibly clear, though it is readily apparent that the IRS sees some miles as taxable and not at a particularly favorable rate.
Michelle Elridge, an IRS spokeswoman is quoted in that LA Times column as offering up three very specific bits of information about points and their taxability:
When frequent-flier miles are provided as a premium for opening a financial account, it can be a taxable situation subject to reporting under current law.
This part is pretty clear, though not necessarily what most folks want to hear. It suggests that Citi was correct to be sending out the 1099s and reporting the tax liability. The particularly interesting bit is the use of the term "financial account." Not only would this apply to bank accounts, but it could also be reasonably interpreted to apply to credit card and investment accounts as well. After all, those are financial accounts and the points are provided as a premium for opening the account. Not particularly good news for folks who are accustomed to churning CCs and Fidelity/Ameritrade accounts for the huge sign-up bonuses.
As for taxing "regular" levels of mileage earning on CC spend or the actual flying, that’s still safe. The IRS continues to see that as a rebate and not income, so no tax liability there.
A common analogy is buying a $500 television at a retail store and receiving a $50 manufacturer’s rebate. It’s not income, just a deemed reduction of the cost of the television.
The most complicated (and oft-debated) part of the debate might be the valuation of the miles. Many insist that the liability should be the fraction of a cent that the banks pay to buy the points from the airlines. The banks disagree, reporting the value at the full retail price as reported by the airlines. And the IRS is somewhere in the middle.
Under the income tax law the amount of income to the taxpayer is the value of the property received, not the cost that the business paid to acquire the property.
The real gray area there is "value of the property received" which is, by the nature of the property in this case, variable. And it could even be argued that the recipient actually never receives property since the T&Cs of the programs say that the points are the property of the programs. There are others who have explained how to dispute the value reported on the 1099s.
Whatever the approach consumers take, it is clear that the IRS sees these sign-up bonuses as a very different beast from the regular spend earning. And the use of the term "financial account" is very open-ended. The CC churn boondoggle may be coming to an end sooner than we all hoped.
Posted by Seth on January 30, 2012 under Flying, News |
I love when our elected representatives decide to speak up and express just how idiotic their thoughts are. I’ve heard a Representative state for the record that she thought Adobe Acrobat should be outlawed, for example, but I’m not so convinced that her view there is more ridiculous than that put forth today by Representative Tom Graves of Georgia. Graves, who represents Georgia’s 9th Congressional District (North of Atlanta, up to the Tennessee, North Carolina and Alabama borders), has announced that he will be introducing legislation which will repeal the DoT rule requiring airlines to list the full price of tickets, including all taxes, when they advertise.
This rule, put forth as part of the DoT’s consumer protection efforts, has come under attack from such legendary consumer advocates as Sprit Airlines, who is complaining the rule violates their first amendment rights because they cannot advertise one number and then charge a completely different number when the customer goes to actually make the purchase. Seems like just the sort of actions that should be protected, right?
The Congressman has a very simple premise for why the rule is bad: It prevents the airlines from indicating what part of the fare is actually the fare and what part is taxes and fees.
The federal government should not be inserting itself in the private sector to limit consumers’ ability to see how much they’re getting taxed. If the American people can’t see these costs clearly, I fear it will be easier these fees and taxes to be raised without their knowledge.
There’s just one problem with this line of thought (two, really, but I’m ignoring that the second line there isn’t a complete sentence): it is completely unfounded in reality. There is absolutely nothing in the rule that prevents the airlines from explaining in excruciating detail how much the taxes are and how much the fare is. There is nothing preventing them from reminding the consumer that there are a dozen or so different taxes and fees on the average airfare and way more on international itineraries. What the rule does, however, is prevent an airline from advertising a $9 fare which cannot be purchased for less than $20, no matter how hard you try. And that’s a good thing for consumers.
Fare listings like these, which are fully compliant with the rules, make it quite clear what the taxes and fees are, without violating the DoT rules:
And, yet, somehow apparently it is actually impossible for the airlines and OTAs to actually publish the information this way, as they are inhibited by the DoT rules. Strange, isn’t it, how they’ve managed to do it anyways??
I understand the complaint that nothing else in the USA is required to be marketed with the all-in price rather than allowing for customers to be surprised at the cash register. Let’s not use the examples of things that are bad for us as citizens as examples of why progress shouldn’t be made. Let’s got the other direction instead. Let’s hold hotels and rental car companies accountable, too. Let’s stop rental car companies from hiding the 50%+ surcharges until the final page of the check-out process. Let’s stop hotels from adding on $15-30 or more, per guest, per night, as a "resort fee" rather than actually including those charges in the fine print. After all, you cannot avoid paying them.
There is nothing wrong with calling attention to the fact that the average airfare has so many taxes associated with it. But pretending that there is some unwritten rule out there which is somehow preventing airlines from actually doing so is just plain lying.
Time to step up and face the facts, Congressman Graves: you’re full of it. Step up and do something that actually helps your constituents rather than lying to them. I’m sure they’ll appreciate it when elections roll around.
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Posted by Seth on January 24, 2012 under Flying, News |
Spirit Airlines is protesting the new fare rules requiring full disclosure of all costs for a flight, claiming that the government is requiring them to hide the taxes from their customers. And they’re doing it in style. Their main homepage now shows this when you visit:
If you click the link offered you get this:
Thanks to the U.S. Department of Transportation’s latest fare rules, Spirit must now HIDE the government’s taxes and fees in your fares.
If the government can hide taxes in your airfares, then they can carry out their hidden agenda and quietly increase their taxes. (Yes, such talks are already underway.)
And if they can do it to the airline industry, what’s next?
As the transparency leader and most consumer-friendly airline, Spirit DOES NOT support this new USDOT mandate. We believe the better form of transparency is to break out costs so customers know exactly what they’re buying.
The scary thing here is that I almost actually agree with them.
It is true that, by requiring the big, final price number to be displayed to the customer the actual tax burden is obfuscated. So they’re not really wrong there. But that obfuscation also prevents all sorts of other fees from being hidden, the sorts of fees that Spirit is famous for. And that’s a good thing.
Plus, at the end of the day, most customers care much less about how much of the fare is for taxes and how much is for the airline. A $300 ticket is a $300 debit on my credit card. Whether the airline keeps $150 or $250 of that doesn’t skew whether I think it is a good price for the trip.
Besides, there is nothing stopping Spirit from showing the full breakdown underneath the all-in price. That way they can continue to be a "transparency leader and most consumer-friendly airline" as they always have.
Posted by Seth on November 11, 2011 under Trip Reports |
For a few years now the United States government has been gouging potential visitors with high fees to apply for visas to visit. No guarantee that you’ll be admitted but you pay anyways. A number of countries responded in kind, either requiring a visa with a comparable fee or, in some cases, just charging the fee. Argentina is one of these countries, charging a "reciprocity fee" for visitors.
The fee is comparable to what is charged to Argentinians visiting the United States, $140. Rather than applying in advance for a visa, however, one simply pays the fee in a separate line at the airport before heading through the immigration line. But it turns out there’s a way to avoid this fee, if you happen to be a bit crazy like me.
The fee only applies for folks staying in Argentina. If you’re just connecting then you don’t pay the fee. And, much like the airlines, the definition of a connection is pretty liberal: 23 hours 59 minutes. If you over-stay you get hit with the fee on departure and it can be a bit of a mess, but so long as you have proof of onward travel departing in <24 hours you’re good to go. Rather than getting a stamp in your passport you get a stamp on the immigration form. And if you lose that you get hit with the fee. But so long as you can hold on to that piece of paper for 24 hours the transit is free of reciprocity fees.
I strongly recommend having a paper print-out of your itinerary showing the onward flight out of the country. I managed to get by with showing the immigration officer the itinerary on my phone but I got the impression he wasn’t too impressed but that performance. Show them the itinerary and explain that you are in transit and you should be good to go. I would imagine that this is an easier conversation if you speak Spanish but I managed to get by in English so it is definitely possible. It is possible that this only works for passengers in transit between countries, not folks returning to the same country from which they arrived (similar to China’s policy on transit) but it definitely worked at least twice I can vouch for.
Once you’re past the immigration folks for your day trip to Argentina head into town and spend some of that $140 saved on supporting their economy. And expanding your waistline:
That was a great steak. And I was much happier spending the money there than on the reciprocity fee.
And a special thanks to Grahm for tipping me off to this benefit in the first place.
Posted by Seth on November 9, 2011 under frequent flyer, News, points |
Following on the heels of this summer’s award chart adjustments that saw many awards increase in cost it appears that Aeroplan, the loyalty program associated with Air Canada, is also adjusting the surcharges they levy on certain award redemptions. Specifically, it appears that the YQ fuel surcharge, to date only levied against redemptions on Air Canada flights, is now applying to flights operated by Lufthansa, Austrian and a few others.
This trend is not a new one. Recently American Airlines began charging the YQ surcharge on flights operated by partner British Airways. Delta charges a similar fee for flights originating outside the USA, even if flown on Delta airplanes, while not charging where the flights originate in the USA. Needless to say, the development is a costly one for customers.
With Aeroplan as one of the last great redemption options for the American Express Membership Rewards program this move also devalues those points a bit. Not great news at any level.
More over at View From the Wing.
Posted by Seth on October 25, 2011 under News |
United Airlines and Amadeus, one of the major Global Distribution Systems, signed an agreement to extend the availability of United fare and inventory data for Amadeus subscribers into 2013. This deal will allow travel agents using the Amadeus system to continue to sell seats to their customers.
Of particular note in the announcement, however, is not simply that the partnership was extended but that it was improved as well. Starting in mid-2012 Amadeus-based agents will not only be able to sell regular inventory on United flights but they will also be able to sell the company’s Economy Plus seating. Economy Plus is one of many ancillary services that United makes available for purchase and this deal represents the airline working with the GDS company to make such an ancillary purchase available via the GDS rather than solely directly via a Direct sales model.
With more and more airlines making the push to bring such ancillary sales wholly into the Direct model it is rather refreshing to see at least one company bucking that trend and working with their GDS partners to make the options available in a centralized and transparent manner. It will be interesting to see what other options flow into this relationship over the coming months and years.
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Posted by Seth on October 24, 2011 under News |
It is quite clear that the airlines wish it were not, and there are a number of people offering up suggestions on how to break the trend we’ve seen of pricing and marketing air travel as a commodity. But is that really in our best interests as passengers? I’m not so convinced.
The most recent claim on this front comes from Evan Konwiser via tnooz.com. The crux of Evan’s claim appears to be that:
We refuse to reward airlines by paying more for things like good service, nicer planes, quieter terminals, or shorter lines…. [B]ut then feeling indignant and wronged when the service inevitably fails to meet expectations.
I cannot argue this part of Konwiser’s claim. As travelers we do, indeed, shop based almost solely on price and ignore the rest of the details. Why? Because at the end of the day the products actually are, quite frankly, a lot like a commodity. The seat is going to be between 17-18 inches wide and have between 29-34 inches of pitch. It is going to be in a tube where you fly some hundreds of miles per hour and eventually probably get where you’re going. So where is the differentiation?
The airlines are pushing Direct Distribution architectures where they interact directly with the customer rather than using the legacy GDS systems for their fare and inventory distribution. The theory is that such means will allow the carriers to differentiate their product offerings versus competitors and tailor the sales pitch on more than just the price. As stated in the article:
Direct Connect offers some hope by differentiating the shopping experience and tying more tangible product enhancements to the purchasing decision.
By being able to connect directly with consumers at OTAs or metasearch engines via an API (or directly via the carrier web-site), airlines can in theory provide a customized experience.
They can change pricing, amenities, and features depending on who you are and what kind of trip you’re looking for.
While price is still a primary concern, it might allow airlines to throw in other “value” items that shift the decision away from pure price to a value trade-off. The more consumers actively make those choices, the more they can link the purchasing experience to the flying experience.
But the Direct approach still doesn’t address the largest issue – that the travel experience is decoupled from the purchase point. Yes, an airline can advertise that they only charge $6 on board for booze instead of $7 or that they sell fresh food rather than just snack boxes. They can even integrate the purchase process at the time of the transaction to get you a discount (and there is ample evidence of many airlines doing this today with bag fees). But that’s not going to drive purchase behavior. Certainly not enough to offset a $20 difference in price in most cases.
I am afraid that I must concede that the trend towards the Direct model – where the airline can "tailor" the offering to the known customer, including skewing the price if they so choose with little to no transparency – is one that seems unlikely to be stopped any time soon. Such a trend will, for the near term, make it more difficult for customers to effectively compare the total cost of a journey, just as is the case today due to variations in bag fees for most customers on most airlines. It is hard to see how this is good for the consumer, especially when the product is essentially the same other than schedules.
If an airline were to offer some distinct difference and market on that then perhaps they’d beat the price comparison pressures. Midwest did so for quite some time with their larger seats and cookies in flight. But they couldn’t maintain that difference as they expanded to compete with the larger carriers. And there is scant evidence that any other carriers would be able to either.
I’ve written previously, railing somewhat against the Direct model and the potential impact it can have on customers. I’ve got nothing against the airlines offering up more data about the services and associated costs of the various bits of the travel experience. Far from it, actually, I’m hugely in favor of the airlines sharing that data in a consistent, indexed and searchable manner. The difference is that I want to see the data shared across a common platform so that everyone can see all the bits and compare them rather than the airlines only showing some parts to some customers and other parts to others.
Becoming a market leader should come from actually having the best product, not from obfuscating the details and hoping no one notices that you’re toying with them on the cost side of the equation. Maybe it is a chicken and egg game where no one is willing to pay for the better product because no one knows about the better product. But if that were really the case then it seems unlikely that United Airlines would have committed to keeping EconomyPlus in their fleet post-merger or that Delta would have matched the product with their deployment of Economy Comfort fleet-wide which was announced yesterday. And those airlines seem quite content to keep offering the product, knowing that they’ve monetized and commoditized it.
Blame the GDS companies if you must for not adapting quickly enough, but the airlines are still mostly to blame for not actually offering a substantially different product from each other. And why should they when consumers have demonstrated time and again that they are rarely going to pay for it?
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