A BRIEFING FOR JUNE 12 TO JUNE 26, 2008
By Joe Brancatelli
· United, US Airways Add First Checked Bag Fee
· Continental Chops 15 Cities Off Its Route Map
· US Air Will Charge for Soft Drinks, Award Tickets
· Two Fare Bumps Fail, So Fuel Surcharges Rises
· No ID Means No Flying, Says the TSA
· Doing the Math on Those First-Bag Fees
· OnePass Introduces a Lifetime Elite Level
United, US Airways Join American and Add a First Checked Bag Fee
When American Airlines announced its domestic $15 first checked bag fee last month, it came on the day of its annual meeting. Three weeks passed before the first of the legacy carriers matched. That came today (June 12), when United said it would also impose the fee. Why today? It's the day United held its annual meeting. Hours later, US Airways lined up behind the first-bag fee, too. The potential spin scenarios are rich. The other legacy carriers, who dislike American's arrogance, let American absorb three weeks of horrendous publicity. On the other hand, American may have forced United's hand, too. How would you like to be United's bosses, who have insisted for years that they were pricing hawks, answering the shareholder questions about why they hadn't matched American's fee? United claims that its baggage fees--the $25 second-bag fee didn't even go into effect until last month--will raise about $275 million in the first year. (The dubious economics of that claim were not explained; see below for analysis of American's shaky financial logic.) Like American, United is exempting first- and business-class passengers, international travelers and elite-level frequent flyers. Unlike American, which launches its fee on tickets purchased beginning Sunday, United's $15 first-bag fee becomes effective on purchases tomorrow (June 13) for travel beginning August 18. Also unlike American and US Airways, United's full-fare coach passengers are not exempt. The US Airways first-bag fee is effective July 9.
Continental Chops 15 Cities Off Its Route Map
Continental Airlines announced deep service cuts last week and today (June 12) detailed the specifics. Beginning in September, Continental will chop 15 cities from its route map. The domestic cuts are Chattanooga, Tennessee; Green Bay, Wisconsin; Montgomery, Alabama; Oakland and Palm Springs, California; Reno, Nevada; Sarasota and Tallahassee, Florida; and Toledo, Ohio. Internationally, the destinations cut are Bali; Cali, Colombia; Cologne, Germany; Guayaquil, Ecuador; Monclova, Mexico; and Santiago, Dominican Republic. The wide-ranging reduction means that Continental's Cleveland hub will contract by 13 percent; its Houston/Intercontinental hub will be trimmed by 7.9 percent; and its Newark hub will shrink by 3.2 percent. Guam, the hub of Continental's Air Micronesia service, will contract by 21.5 percent. … The new fall schedule at American Airlines shows a sharp reduction of flight frequencies on routes at its Miami hub. United Airlines is also cutting back its once-robust Miami service. By the fall, all that will be left from the Pan Am hub United bought more than 15 years ago will be twice-daily regional-jet flights to its Washington/Dulles and Chicago/O'Hare hubs. … Thai Airlines drops its ultra-long-haul flights from New York/Kennedy and Bangkok at the end of the month. And Aer Lingus will drop its longest U.S. haul, Los Angeles-Dublin, at the end of October.
US Airways Will Charge for Soft Drinks, Award Tickets
Besides matching American and United airlines on the first-bag fee, US Airways invented some new fees. Beginning in August, It will charge coach passengers $2 for soft drinks and raise alcohol charges to $7. And on August 6, it will charge $25-$50 for the privilege of claiming an award ticket and drop bonus miles for elite travelers. ... The Big Six tried and failed twice this week to increase roundtrip domestic fares by as much as $20. So then American tried a fuel surcharge increase of $20 roundtrip and the other Big Six quickly matched. … Air Canada this week rolled back a fuel surcharge increase that it had imposed on domestic Canadian tickets. … Air France and Lufthansa both increased their fuel surcharges this week. … Virgin America apparently forgot to hedge fuel after it launched service last August, when oil was selling for about $75 a barrel. Now that it's north of $130 a barrel, Virgin American has been forced to add fuel surcharges of $10-$25 each way. … Hertz has changed the method it uses to charge you when you return a rental car with less than a full tank. Previously, it charged $7.50 or more a gallon to top off a tank. Now it will charge the market rate for gasoline (whatever that means) plus a $6.99 refueling fee.
No ID, No Flying, Says the TSA
The Transportation Security Administration (TSA) says a "secret" law allows it to require you to show government-issued identification before boarding a flight and the courts have agreed. Now the TSA says anyone who "willfully refuse[s]" to show ID will be denied boarding. In recent years, the TSA allowed travelers who refused to identify themselves to board flights after secondary, invasive and extra screening procedures. The agency says the no-ID, no-flight rule does not apply to travelers who have misplaced or lost their identification. … Singapore Airlines has opened a new lounge for premium customers in Bangkok. It is located on Level 3, Concourse A. … Tri-partite TSA "self-select lanes" have opened in Seattle-Tacoma. … The first hotel branded with the aloft name has opened at Montreal Airport. The 136-room property is another part of the Starwood group. ... US Airways will close its clubs at Baltimore-Washington and Raleigh-Durham airports and shutter its arrivals lounges in Munich, Rome and Zurich.
Doing the Math on the First-Bag Fees
Before United matched American's $15 first-bag fee today (see above), American had cooked up an amazingly lame defense of the new charge. The gist? The bag fee's no big deal because almost no one will pay it. In fact, says American, only 25 percent of travelers will pay. (United, by the way, said a third of its customers will be affected.) But let's do a little math on American's claim. American flew about 8.2 million people in May. So roughly 2 million travelers might have to pay. But I suspect that about 15 percent of those travelers will try to carry on instead. And I predict that a further 3 percent of the affected travelers will book away from American. (That's the same percentage of traffic that airlines claim they gain when they are the first to launch a fare sale.) Which means American's revenue haul from the remaining folks will be about $25 million. But since American loses 3 percent of flyers and claims its average fare is $298, that's about $15 million in lost revenue. There are some additional ancillary costs and savings I could detail, but let's call those a wash. So American's revenue gain is about $10 million. It could have gotten that by raising fares by $1.25 a passenger. But as we know, American's goal wasn't an immediate revenue burst. It was to establish the precedent that checked bags are no longer bundled into the fare you pay. And once airlines unbundle baggage from fares, they can raise bag fees as steadily as they have increased change fees, fuel surcharges and all of their other junk charges.
Business-Travel News You Need to Know
Silverjet, the all-business-class airline that operated between Newark and London/Luton before tanking last month, may fly again. The airline's British administrators have received a takeover offer from a Swiss investment fund. … Flights between Hawaii and the mainland have plummeted since the disappearance of Aloha and ATA airlines earlier this year. But United Airlines is offering 10 additional flights a week this summer. … Speaking of ATA Airlines, it has filed suit against FedEx. It wants damages because FedEx dropped it from a charter program. ATA claims the loss of the charter business was the cause of its bankruptcy. … Continental Airlines has created a lifetime program for OnePass members. Travelers who have a million lifetime flight miles receive Silver Elite status for life. Flyers with two million lifetime miles receive Gold Elite status for life. Four million lifetime miles earns Platinum Elite status for life. Travelers who qualify should begin receiving membership packets sometime this summer.
ABOUT JOE BRANCATELLI Joe Brancatelli is a publication consultant, which means that he helps media companies start, fix and reposition newspapers, magazines and Web sites. He's also the former executive editor of Frequent Flyer and has been a consultant to or columnist for more business-travel and leisure-travel publishing operations than he can remember. He started his career as a business journalist and created JoeSentMe in the dark days after 9/11 while he was stranded in a hotel room in San Francisco. He lives on the Hudson River in the tourist town of Cold Spring.
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