Airline Fees: The Next Generation

Airlines spent 2008 adding fees for seemingly every imaginable item or service, from checked bags to antlers. But with the recession causing a sharp drop in demand, carriers are now trying to strike a reasonable balance between revenue and realism. Let’s take a look at the major fee developments of the past three months and examine the ways customers have been or will be affected this year.

New Fees Are Still Being Added

Reuters recently reported airlines may have actually reached the limit on new fees, but they may have spoken too soon. Virgin America recently added a first-checked-bag fee, though it did reduce the fees for the second-through-tenth checked bag. All bags now cost $15 to check, whereas the second used to be $25 and the third through 10th were $50—in fact, someone checking three or more bags will save money under the new fee structure. With Virgin’s latest development, this leaves JetBlue, Southwest, and Alaska as the only domestic carriers that don’t charge for the first checked bag. (With Southwest, you’ll also get your second bag free.)

How This Affects You:

Besides throwing a bucketful of cold water on any hopes that the airlines may be done with new fees, Virgin’s move leaves Southwest, JetBlue, and Alaska as the only major U.S. carriers without a first-checked-bag fee. This fee is perhaps the most lucrative of all, and by not charging it these three airlines are potentially leaving money on the table. Southwest in particular would have a tough sell on its hands, however, considering its “Fees Don’t Fly With Us” campaign.

To keep up with the airlines, check out our Ultimate Guide to Airline Fees. We update it as soon as a new or changed fee crosses our desk.

Second-Tier Fees

Some airlines are looking to second-tier fees (e.g., fees few passengers pay) as a source of revenue. No airline embodies this approach better than Spirit, which raised its fees for pets in the cabin ($100, up from $85), unaccompanied minors ($100, up from $75), and ticket changes ($100 online, and $110 otherwise, up from $80). Spirit also reinstated its mysterious $5 passenger usage fee, which is nothing more than a gouge charged to customers booking online or on the phone. At least Spirit doesn’t pretend to be anything more than an a-la-carte carrier.

United, for its part, reduced its pet-in-cabin fee by $50 each way. It now costs $125 to transport a pet in the cabin, which is still among the highest fees for pets in the industry.

How This Affects You:

No mystery here. In Spirit’s case you’ll get stuck with the passenger usage fee, and you’re going to pay more to use any services. The takeaway is that you have to be diligent and compare fares down to the most minor fee. Our sister site, TripAdvisor, incorporated a Fees Estimator with its new flight search tool, and I’d recommend using it so you know who charges what.

New Idea? Charge for it!

Some airlines are getting creative and coming up with new perks and initiatives to bring in revenue. Southwest and JetBlue recently caused a stir when they hinted at potential onboard food sales in the near future. In Southwest’s case this seems more like a rumor, but JetBlue is already months into a test of onboard meals, and could begin selling food in May (on long-haul flights only). Both ideas have been received positively, as neither airline would eliminate its free snack service if onboard meals were added. The lesson for airlines here is that customers respond well when they’re not forced to pay a fee. Shocking, right?

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Another popular new feature is in-flight Internet. Multiple carriers began testing and implementing in-flight Wi-Fi last year, and this year Southwest announced it will add the service to its planes. Virgin America debuted its own Wi-Fi service when the carrier began flights from Boston in February.

Also in February, US Airways took a page from JetBlue’s book and replaced free pillows and blankets with a $7 set passengers can take home with them. Ironically, passengers weren’t that annoyed with either carrier, as most people prefer a new, clean pillow (or no pillow) to the old, used ones airlines traditionally offer. Both US Airways and JetBlue took a free perk and put a price tag on it, but it seems both airlines chose the right perk in this case.

And who could forget Ryanair CEO Michael O’Leary wondering aloud if his airline should charge passengers to use the restroom. While this was never a serious suggestion, it does demonstrate that airlines will have to think creatively for ways to bring in new revenue.

How This Affects You:

These fees don’t affect you unless you want them to. And in the event you do, at least you’ll get a sandwich or blanket out of it. Kidding aside, these types of fees may very well reflect the future of air travel, as airlines look to add value to their product (and charge for it) rather than devalue their service by taking away complimentary features. The end product is a better traveling experience overall, because travelers don’t feel nickel-and-dimed to death but have the option of purchasing amenities that will improve their flight.

Backtracking

Perhaps the biggest fee news so far this year is US Airways’ decision to take back its $2 beverage charge. This was among the most egregious fees to launch last year (especially since the airline charged for water) and clearly wasn’t worth the trouble no matter how much money it brought in. In retrospect, no one should have been surprised when US Airways reneged on the fee, since no other carriers moved to match it. CEO Doug Parker cited this in the announcement, saying when no other airlines added a beverage fee, US Airways found itself at a “disadvantage.” No kidding!

How This Affects You:

If you’re a US Airways flyer, it’s great! For the rest of us, the picture isn’t so clear. Does this move portend more fee cuts to come? Possibly. The fees most likely to be eliminated include those, like the beverage fee, that were small in nature, highly unpopular, and never gained any ground or were copied by competitors. Surcharges that quickly became industry standards, like checked baggage fees, may be here to stay, especially if business doesn’t pick up any time soon.

More Airlines Going Cashless

While not a fee exactly, airlines are switching to cashless cabins at a rapid pace, with United and American joining Southwest, Virgin America, JetBlue, AirTran, and Frontier in accepting only credit cards onboard. The fact is that passengers these days are more likely to carry a credit card than cash, so when that sandwich cart comes down the aisle and the guy in 14B suddenly gets hungry, there’s no risk of losing the sale to an empty wallet. (Plus, it spares flight attendants the hassle of fumbling with change.)

How This Affects You:

If you’re a cash-only person, your time is running out. But for most people, this should be a convenient change, though it does make it easier to indulge in that $10 snack box.

As passenger demand continues its swift decline, airlines have no choice but to scramble for more ways to bring in revenue. Does this mean we’ll see more fees down the line? Probably. We’ll keep our eyes open, and hopefully you will as well. If you see a fee we haven’t covered, please send it in by adding a comment below.