Archive: December, 2010
The dispute between American Airlines and one of the major online travel agencies, Orbitz, has escalated. The two sides wound up in court in Chicago over it, and American won a round yesterday (Tuesday). The airline stopped giving its ticket inventory to Orbitz as part of an effort to drive more business to the American Web site and save money that it now pays other sites, such as Orbitz, Expedia and Travelocity, and the big global distribution systems that serve traditional travel agencies, to sell its tickets. Read more about it here, with some analysis and reaction from those representing American's best customers.
UPDATE: A complete story, explaining the background of what's going on and including more reaction from the travel business, was published Thursday in the trade paper Aviation Week. Find the story here.
This is another example of the truly remarkable job the major airlines have made in the last two years to shift costs that were always borne by all customers, also known as ticketed passengers, onto each individual customer or to the travel agents that sold the tickets. They've succeeded beautifully in doing it with fees for baggage and to sit in your preferred seat and a host of other services -- so much so that ancillary revenue is becoming a larger portion of the total than ticket revenue is. Now the campaign has turned to the ticket-distribution system. Let me know what your experience is if you wind up searching for American's inventory on its own Web site, after you've comparison shopped all airlines on Orbitz.
Airlines are in one of those periods, which have occurred at least half a dozen times in the 25-plus years I've written about them, when profits soar and the money appears to be pouring in. Yes, they will say, we've lost more money than they made since people starting flying in airplanes, so please leave us alone, don't complain about what we're charging you. But do you as a customer care what the historical profit-and-loss has been, in more than an abstract sort of way? At those airlines that have lost money the losses have been borne mostly by investors who voluntarily put money into airlines, or in many cases by employees whose jobs have at times been uncertain and less than remunerative.
The Department of Transportation reported today just how good the airlines did financially in the third quarter (short answer: as well as any quarter since 2002). Analysts now expect that for the full year, the industry's 2010 net income from ticket sales will be about the same as it gets in fee revenue, in the $5 billion range.
The fee-revenue issue, and how consumers know what they will pay in fees before they push the button to buy a ticket, are the subject of a DOT proposed rule-making. The airlines have generally portrayed the issue as a dispute between various elements of the travel business, but two consumer groups mentioned here before, the Business Travel Coalition and the Consumer Travel Alliance say no, it's really a traveler issue, and a question of simple fairness and transparency in pricing. Read what the groups told DOT about the isue here.
Airline executives from the major carriers spent time in New York last week, talking to Wall Street analysts about what they're been doing recently, and plans they're making for 2011 and beyond. Southwest was talking about fuel prices and new airplanes that will soon be flying; Delta execs noted how it's increasing its offering of first-class seats (in part to distinguish itself from Southwest and other low-cost carriers); and American's leaders also lamented rising oil prices and how they will be affected.
In what's become a tradition at PHL, the airport once again is offering holiday entertainment, from today through next Friday, in the form pianists, carolers and other musicians at various places. To see a schedule, look at the "top news" feature on the airport's Web site, www.phl.org. Or just click on this link.
Three groups that represent airline customers have thanked President Obama in a letter for his administration doing more for their interests than any in recent years. The groups, including the Radnor-based Business Travel Coalition, led a petition drive sent to the Department of Transportation in support of a proposed rule requiring airlines to provide better information to customers about all the fees they charge and what the full, true cost of a trip is going to be, before they buy a ticket. The petitition drive, under the banner www.MadAsHellAboutHiddenFees.com, generated 64,000 signatures. Read a little more, with a link to the letter, here.
In related news, support for greater transparency in airline pricing also came from U.S. Sen. Bob Menendez, who is sponsor of legislation that would require much the same as what the DOT rule would.Read about that, and other support for the idea from former American Airlines CEO Robert Crandall, at this link.
The cost of flying is going up again. The major airlines all have matched a fare increase started by American.Read more here.
Travelers from central and north Jersey who have been coming to PHL to find low-priced air fares on Southwest or airlines that match them now can go north to Newark for some of the same flights. Southwest said it will fly nonstop between EWR and Chicago, Houston and Phoenix, three heavy business and leisure routes to other airlines' hubs, as well as to BWI, when it starts flights in March.
Southwest also says it's placed its expected order with Boeing for 737-800s, with more seats, more flight attendants and longer range than an jets it has now, so it can fly to Hawaii or other long-haul, over-the-water destinations.
Airline fees are in the news again this week, with U.S. DOT issuing a quarterly report on the revenue the larger carriers took in from charging for bags, changing tickets and a few other sources. The figures -- and the totals are north of $3 billion just from those two categories in the first nine months of the year -- show clearly that fee revenue is as important as ticket revenue for the airlines that depend on them. How fortunate airlines are: With just a few exceptions they all tend to mimic each other, so one is not at a terrible competitive disadvantage compared with the others as they adopted various fees, and they have found a way to supplement ticket sales at the same time.
As most travelers know, this doesn't apply to Southwest because it doesn't charge for checked bags or making ticket changes. Besides those categories, all the airlines also have found a variety of other things to attach fees to, as this article from Farecompare.com's Rick Seaney points out.