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Report: Fees to Remain, Even as Fuel Prices Drop


When United doubled its second-checked-bag fee from $25 to $50, I was a bit skeptical. The airline cited "volatile" jet fuel prices as justification for the fee hike, even though prices have dropped over the past month. Well, turns out there's reason for skepticism, because the Wall Street Journal's Scott McCartney reports fees are here to stay, no matter what jet fuel costs.

According to McCartney, airlines have sought after revenue opportunities besides fares for quite some time, and this year's spike in fuel prices finally provided a good reason to add and raise fees. The result has been a total paradigm shift within the industry, from an all-inclusive pricing strategy (at least among the legacy lines) to an a la carte model with numerous fees—or, as far as the airlines are concerned, "revenue streams." Since customers are more or less resigned to the new model at this point, the airlines see no need to return to the old days. According to an American spokesperson, "The concept of charging for what people use or don't use is something that will probably continue," while a US Airways spokesperson says, "We have no plans to change any of these [fees]."

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And with many airlines already looking ahead to a profitable 2009, why would they want to return to the old days? Continental suggested last week that its new first-checked-bag fee could add $100 million in revenue. United's baggage fee hike is part of an expected $700 million in merchandising efforts for 2009. No, there's little doubt the combination of new revenue and falling fuel prices could result in extremely healthy bottom lines across the industry.

So where does that leave customers? Thanks to airlines drastically cutting back on capacity, airfare stands to go up and up as more people compete for fewer seats. Throw all these fees onto that fire and, quite simply, we are left with very expensive air travel for the foreseeable future. For my part, I'm unwilling to resign myself to paying a fortune for a flight, but I'd be a fool to think anything beyond very strong market forces (for example, if huge multitudes of people stop flying altogether) will reverse the industry trend. What about you?

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