BOYD: Bag Fees: Southwest Better Hire More Staff

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From: http://www.aviationplanning.com/HotFlash.htm

At $15 It Was A Pain. At $25, It May Be A Revolt
Bag Fees: Southwest Better Hire More Staff

The airline industry might want to start considering that there is a lim=
it to what passengers will tolerate.

In the last month, at least one major carrier has "enhanced" its frequen=
t flyer program by raising the miles for upgrades and implementing a "co=
-pay" fee. That upgrade for a party of three to Europe went from 90,000 =
miles to 110,000 miles plus a $1,200 (yes, over a grand) co-pay. The car=
rier's high-level exalted spent-uranium-level frequent flyers must feel =
real valued right now. Great idea: tick off your most frequent customers=
.

Then the announcement came that carriers are raising first-bag fees to b=
etween $23 and $25, depending on airline. Toss in things like periodic b=
ut major security failures that have shut down airport terminals over th=
e past month, the threat of more intrusive pat-downs, the stories of ful=
l-body scanners, rumors of no movement in the last hour of the flight, a=
nd the whole concept of air travel takes on a visual reminiscent of the =
Spanish Inquisition.

But it's the baggage thing that's liable to cause the natives in the coa=
ch cabin to exhibit unrest.

The rationale behind baggage fees really isn't out of line, but the airl=
ine industry has failed miserably to articulate it. They've abandoned th=
e PR field to consumerist twits and vapor-brained politicians.

 The airline industry seems to be taking the Marie Antoinette approach: =
let 'em eat cake. Passengers have no choice. Take it or leave it. We don=
't have to 'splane nothin' to them. But the industry may want to conside=
r what happened to the lovely and gracious Ms. Antoinette. There are mor=
e than a few loons on Capitol Hill that are willing to make airline head=
s roll to get some cheap political points, not to mention the "consumeri=
sts" and their running-dog talk-show supporters. (They're not airline ex=
perts, but they play one on TV.)

Even With Fees, Airlines Are Taking In Less. Both on the surface and in =
hard economic reality, bag fees make sense. First, unit revenues were do=
wn around 10% for the year 2009. Even with travel-specific ancillary fee=
s (baggage charges, which are an intrinsic part of the consumer's trip, =
as opposed to the option of buying stale potato chips on-board) passenge=
rs were actually paying less to travel than the year before.

Second, with internet booking, ticketing, and check in, the functionalit=
y of airport facilities has fundamentally changed to one that's baggage-=
centric, and less passenger-centric. That ten-position ticket counter is=
n't needed when there aren't any tickets anymore, and passengers process=
 themselves at home or at a check-in kiosk. Airport facilities are more =
into bag-processing than passenger processing.

Finally, charging bag fees is essentially a selective fare increase: No =
bag for the carrier to handle, no fee.

But none of that is registering with the flying public. All they see is =
a minimum of a $50 hit round trip just to give their Samsonite to somebo=
dy at the airport they don't know. They don't see any of the rationale. =
They don't care if, even with the bag fee, they may be paying no more th=
an last year's trip to Tucson. They don't have any idea of the complex n=
ature of airline pricing. All they know, read, and hear is that those gr=
eedy airlines are hiking fees. And we hear nothing from the airline indu=
stry.

They May Not Really LUV Bags, But Passengers Are Noticing. So, we have a=
 situation where carriers really do need the revenue those fees bring in=
. But in the process they've created a golden market opportunity for Sou=
thwest to look like the knight in shining 737s.

Consumers are taking notice that Southwest isn't charging for baggage. T=
hey hear Southwest isn't clipping them another $25 bucks for that change=
 of underwear that won't fit in the carry-on. In short, for consumers th=
at do have luggage, Southwest, right out of the box has a perceived $50 =
round-trip "fare" advantage. With savvy yield management, the airline ca=
n engineer that into both more revenue for it and lower costs for the co=
nsumer. And, at some point, frequent flyer loyalty goes away at fee-char=
ging carriers. That family vacation to Florida is getting pretty pricy w=
hen it's another $100 or more just for luggage.

It's true that Southwest is leaving millions on the table by not chargin=
g for luggage. But they may be putting millions more in the passenger ca=
bins of their airplanes. One additional WN fare on average is the equiva=
lent of almost five first-bag fees. Do the math.

Consumers probably are. And there's not much other carriers can do about=
 it. 

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