This is just another sign, airlines are moving towards an "a la carte" menu to extract additional dollars from their customers.
In business school, this approach involves extracting additional customer surplus to maximize company profits. By further segmenting the flying population, the airlines can extract additional surplus which it was giving away on a first come, first serve basis. With oil prices at a record high, airplanes are competing to stay in business, not steal away customers from other airlines. By cutting down on flight schedules, seat capacity is now in short supply so there is no concern about flying empty airplanes. In a market with limited competition, the customer will pay the price.
Just when you thought it was over…
Here’s a few choice quotes from the article:
"…the combination of reducing seating capacity within the airline’s fleet, moving toward an a la carte system of charging fliers for such things as checking bags, eating and drinking, along with expense reductions, will save the Tempe, Ariz.-based carrier $500 million annually."
"In addition to charges for baggage and refreshments, US Airways has raised the $15 charge to book flights through its call center to $25 for domestic flights and $35 for international flights. The $20 service fee to buy a ticket at an airport or city ticketing office increases to $35 for domestic travel and $45 for international travel."
"Most airlines except Southwest have announced capacity and personnel reductions, and a la carte charges."
"Fare-paying now looks like the customer is just paying the base price for the flight…You want doors – that’s going to cost you more."
"Right now, you’re dealing with a panicked industry which, after fuel costs, is making about 30 bucks a seat…If they can get an extra $10 out of a passenger, that’s a 33 percent increase. The industry already has sold most of its product for July and August below cost."
Don’t hold your breath - you can expect the other airlines to follow shortly.
This is good news. It’s better than Continental and United merging. It means your points can be used to get to more places (with the potential for less layovers) and you have access to more airport lounges all without the consolidation of flight segments that usually happen with a merger. It’s an unexpected gem amid all the cost cutting and ala carte pricing we’ve been pummeled with in the past 6 months.
If you fly either airline you will enjoy the flexibility of the many more airports available to you since every Continental hub can be considered a United hub and vice versa – assuming it gains regulatory approval.
The email follows in all its entirety. Have an excellent weekend!
Dear Mr. point man,
As a valued Mileage Plus member, we wanted you to be among the first to hear that Continental and United today announced plans to cooperate globally, linking our networks and services worldwide to deliver new benefits to you. In addition, Continental plans to join United in the Star Alliance®, the most comprehensive airline alliance in the world.
Once implemented, this new partnership, will easily enable you to take advantage of the resources of both airlines to enhance your overall travel experience, and receive more value from your Mileage Plus membership.First and foremost, this partnership will include new frequent flier reciprocity that will enable you to earn miles when flying on either airline and redeem awards on both carriers. Travel on either carrier will count toward earning elite status. Similarly, members of either airline’s airport lounge program will have access to both Continental’s Presidents Club network and United’s Red Carpet Club® lounges.
Second, together with Continental, we will be able to offer you a more comprehensive domestic route network and together with our Star Alliance partners, greater choice of service throughout the entire world.
Starting in the U.S., you are going to see United and Continental develop extensive code-sharing that will facilitate travel whenever your itinerary involves both carriers. We will be able to provide you with a coordinated process for reservations/ticketing, check-in, flight connections and baggage transfer.Internationally, Continental and United will establish joint ventures that will allow us to cooperate with each other and with other Star Alliance airlines throughout the world. These joint ventures will enable us to provide you with highly competitive flight schedules, fares and service to more destinations than we do today.
In short, once regulatory approval is obtained, this new partnership between United and Continental will expand your choice of flights and destinations, and improve your ability to earn both miles and elite status in Mileage Plus. Together we will offer you more value whenever you fly. We expect to bring you the benefits of our cooperation starting some time in 2009, and until then, we will keep you informed about our progress.
We appreciate you and your business, and we look forward to seeing you on your next flight.
Sincerely,
Robert Sahadevan
Vice President – Mileage Plus
USA TODAY has a very good read which highlights what to expect in the next year regarding flight schedules. It’s not pretty, especially for those of you who travel out of non-hub cities. Some tiny airports will lose the majority of their air service as smaller carriers such as Mesa Airlines fall victim to the high fuel prices (currently @$130/barrel). Regional jets, a popular choice for smaller cities and shorter routes are no longer profitable at these oil prices so many airlines are planning to ground these types of planes.
The fall-out for travelers:
- Higher fare prices as reduced competition allows airlines to raise prices on less profitable segments
- Higher travel times in the form of less non-stop flights and more required connections
- More crowded planes as people squeeze into the available flight schedules
- Less flexibility in travel times and dates, especially for vacation destinations
We may not see this immediately, but it will hit us at some point depending on where we are departing and where we are going. There’s not much we can do to prevent high oil prices, but you can minimize the impact to your travel plans by planning early.
As frequent travelers, sometimes our flight schedules are fixed so book out as far as possible. Southwest gives you an edge as there are no costs for applying unused tickets to other Southwest ticket purchases. The same cannot be said for all the other major airlines.
Plan your vacations and book early to get the dates which fit your schedule. If you wait too long, you may not have the option to get on the flight and if you do, you may be paying up the nose for the few seats remaining.
In any case, expect higher prices regardless of when you plan to fly in the future. Play it smart and don’t procrastinate. Have a good week.
A reader passed on an interesting article from CNN’s travel section which relays some confessions of an ex-airline agent.
There are a few interesting tidbits which give some transparency into the inner workings of airline travel. It appears the poor financial outlook for airlines is driving down the level of customer service (oh really?). Poor training, low wages and non-existent perks result in ill-equipped agents manning the front-lines. An antiquated hodge-podge of systems only add to the difficulties in servicing you - the customer.
The best thing to do is remain calm and have patience regardless of the situation. While "free" upgrades are a thing of the past, being friendly and courteous can be the difference between spending another night at the airport and getting home to see your family and friends.
And in case you were wondering, there is a way for agents to pass their experiences with you to other agents.
Ticket agents are always updating Passenger Name Records, or PNRs. These computer files, which contain basic details on passengers’ trips, are accessible to most agents at check-in counters and departure gates.
Agents generally use PNRs to record special requests by passengers, but sometimes they also comment on a person’s behavior.
A friend of mine discovered this after she had a heated argument with a ticket agent about getting an upgrade on a flight to London. When she reached her gate and inquired again, the agent remarked on her "inappropriate behavior" at check-in, and my friend was stuck with her economy-class seat.
Good to know. Safe travels.
Straight from my email box to your favorite frequent traveler blog. For those of you looking to rent cars for the weekend, you can use the following promotions to earn double award points and 50% off weekend rentals.
Non-airport locations: PC# 118510
Airport locations: PC# 118506
Details can be found here.
Drive safe.
United Airlines recently raised the fee imposed for a ticket change from $100 to $150. This is not good news for frequent flyers who end up changing flights quite often based on a dynamic schedule. United is only digging themselves deeper in a hole - short gains for long term pain. The majority of airlines out there play the”captive audience” game - they figure you have no choice but to fly with them because of your destination. They are missing the bigger picture - with frequent flyer points being de-valued everyday, the only reason you would stick with an airline, is so you can board first. That’s a sad state of affairs for airlines.
I’ve switched to Southwest and their customer service and operational efficiency is bar-none, the best in the industry. I am off the plane a minute after it reaches the gate. They almost always depart and arrive on time. They are that good.
Some of you won’t have that option based on the airports available to your travel schedule, but for those of you who have Southwest as an option, I implore you to look into it. For the business travelers who’ve tried it, there’s no turning back.
Reuters News Feed:
NEW YORK (Reuters) — United Airlines said Sunday it was hiking the fee it charges passengers to change tickets from $100 to $150 in an effort to combat high fuel costs.
A spokeswoman for the airline said in an e-mailed statement that the company this weekend made the change to its ticketing policy.
It also added a Saturday night stay requirement on all tickets where it competes head-to-head with other legacy carriers, which she said will affect 65% of all the markets it serves. That will have the most impact on business travelers, who typically don’t want to spend a Saturday night in their destination.
U.S. airlines have announced a number of fare hikes, fuel surcharges and fee increases recently as they battle higher fuel prices and a weakening economy.
United parent UAL said on April 10 it has raised fares in the United States and Canada by up to $30 round-trip. United has raised fares by $4 to $30 per round-trip depending on mileage and competition from low-cost carriers.
Unfortunately, it will only get worse as airlines look for additional ways to cut costs or pass those costs onto the customer.
Continental: Responds to Delta & Northwest Merger
More merger news, this time directly from Continental. Interestingly, they started their own website to provide their perspective on the current airline industry consolidation.
Statement from Continental’s website:
As we’ve said repeatedly for more than a year and a half, our preference has been to remain independent as long as the competitive landscape remained the same. However, the landscape is changing. We will review our strategic alternatives and make sure we remain a strong long-term competitor. As always, our goal is to do what is best for our co-workers, shareholders, customers and communities we serve.
Translation: We will be consolidating in the near future.
The Wall Street Journal has an article on what airline consolidation means for fliers such as yourself. The title, “What’s in a Merger? For Fliers, Not Much” may be enough of a summary, but feel free to check out the article for the details. I’ve included a few choice quotes for additional context.
A few choice quotes from the WSJ article:
The history of airline combinations shows that travelers face a couple of years of more frequent missed connections, vanished reservations and lost baggage, flight delays and unhappy employees. Equally daunting for the companies themselves, many airlines have ended up losing the assets they bought.
Hubs and routes that were able to generate profits before the merger typically survive, and air service that struggled to make money before a merger often disappears after a merger.
New contracts for employees can push costs higher. Different types of airplanes drive expenses up by requiring more spare parts, more training for pilots and mechanics, and refitting of cabins and cockpits, for example.
…airlines already share passengers and, in the case of alliance partners, already price and sell their product as if they were the same airline. That’s true in the case of Delta and Northwest; they’ve already merged their flight schedules as SkyTeam partners. Generating new revenue may be tough.
At the same time, history has shown that competitors can take away customers of the merged airlines when their flights run late or labor groups stage protests. Another pitfall: Losing alliance partners. Continental Airlines Inc. is currently partnered with Delta and Northwest, but could well enter into its own merger feeling the need to get bigger. That could result in the Delta-Northwest combination losing substantial presence in New York and Houston, two of the four biggest cities in the country.
Doesn’t look great for the frequent flyer, but with oil prices chasing $100 dollars a barrel and the current economic situation - what choice do they have?
From a co-worker: According to a United pilot, an in-place contract between Continental and either Northwest or Delta is no longer valid due to the announced Delta / Northwest merger. This opens the door for a merger between United and Continental.
Mergers reduce competition and choices for the customer. In most cases, this will result in higher prices. On the bright side, depending on your location, it could mean more choices to fly and more flexibility of your (constantly de-valued) frequent flyer points.
Let the courting process begin.
If you haven’t heard already, you’re probably not a Northwest or Delta flyer. Subject to regulatory review, Delta and Northwest Airlines are merging. The new (old) name will be called Delta Air Lines. The details can be read from the following email sent out to a Northwest WorldPerks member.
Letter to a Northwest WorldPerks Member:
Dear John Smith,
As a valued Northwest Airlines customer and WorldPerks® member, I wanted you to be among the first to hear that we have announced a merger with Delta Air Lines. Subject to regulatory review, our two airlines are joining forces to create America’s premier global airline which, upon closing of the merger, will be called Delta Air Lines.
By combining Northwest and Delta, we are building a stronger, more resilient airline that will be a leader in providing customer service and value. Our combined airline will offer unprecedented access to the world, enabling you to fly to more destinations, have more flight choices and more ways than ever to earn and redeem your WorldPerks miles.
You can be assured that your WorldPerks miles and Elite program status will be unaffected by this merger. In addition, you can continue to earn miles through use of partners like WorldPerks Visa®. And once the new Delta Air Lines emerges you can look forward to being a part of the world’s largest frequent flyer program with expanded benefits.
The combined Delta Air Lines will serve more U.S. communities and connect to more worldwide destinations than any global airline. Our hubs – both Delta’s and Northwest’s – will be retained and enhanced. We will be the only U.S. airline to offer direct service from the United States to all of the world’s major business centers in Asia, Latin America, Europe, Africa and around North America.
Both airlines bring tremendous strengths to this new partnership. Our complementary service networks form an end-to-end system that is truly greater than the sum of its parts. This is a merger by addition, not subtraction, which means all of our hubs – both Northwest’s and Delta’s – will be retained. In addition, building on both airlines’ proud, decades-long history of serving small communities, we plan to enhance global connections to small towns and cities across the U.S.
All of these positive benefits of our combination mean that we can: * Offer a true global network where our customers will be able to fly to more destinations, have more schedule options and more opportunities to earn and redeem frequent flyer miles in what will become the world’s best and most comprehensive frequent flyer program. * Continue to serve our current roster of destinations and to maintain our hubs in Atlanta, Cincinnati, Detroit, Memphis, Minneapolis/St. Paul, New York, Salt Lake City, Amsterdam and Tokyo. * Improve our customers’ travel experience, through new products and services including enhanced self-service tools, better bag-tracking technology, more onboard services, including more meal options, new seats and refurbished cabins. While we work to secure approval of our merger, which may take up to 6 to 8 months, it will be business-as-usual at both airlines. We will continue to operate as independent airlines and the people of Northwest will remain focused on providing you with the very best in safe, reliable and convenient air travel. At the same time, both airlines will be planning for a seamless integration of our two airlines, one that delivers to you the enhanced benefits that will earn – and retain – your preference.
As we work through this process, we will keep you informed at every step along the way. Thank you for your business and we look forward to serving you on your next Northwest flight.
Sincerely,
Bob Soukup Managing Director, WorldPerks
There you have it - straight from the horse’s mouth.
This is more evidence why you should be SPENDING your frequent flyer miles whenever possible. At the bottom of this post is an email from USAir. In a nutshell, USAir passengers will receive ONLY the miles that are actually flown. Before this change, the 500 miles floor ensured at least 500 miles per segment. In addition, a new fee will apply when booking flights within 14 days of departure. Remember the days when one of the benefits of frequent flyer miles was for use in emergency late bookings? Those days are long gone.
You just have to love the way they spin this:
As part of our continuing efforts to provide valuable benefits to our frequent flyers, US Airways is making a change to our Dividend Miles program. We’re making these changes to offset record fuel prices and rising airline related expenses while maintaining the benefits you’ve come to expect.
They are definitely doing something, but it’s not increasing your benefits as a frequent flyer.
Don’t fool yourself about the value of your points. They are the first to be de-valued when it comes to cutting costs. The complete text is below.
Beginning May 1, 2008, Dividend Miles will award the actual number of miles flown rather than a minimum number of miles flown for each segment. Also, members who redeem miles for award travel within 14-days of departure on usairways.com will be assessed a quick ticketing fee.
Here’s a summary of the policy changes:
Accrual * Tickets purchased on/after March 1, 2008 for travel on US Airways on/after May 1, 2008 will earn the actual number of miles flown and will no longer earn a minimum of 500 miles per segment. * Tickets flown on partner airlines after May 1, 2008 will earn the actual number of miles flown. Tickets purchased prior to March 1, 2008 will continue to earn the 500 mile minimum for travel after May 1, 2008. Accrual on flight segments greater than 500 miles in length are not impacted by this change. Redemption * Members redeeming miles for award travel online within 14-days of departure will be assessed a quick ticketing fee of $50 per ticket.
A quick ticketing fee of $75 per award ticket will continue to apply for award tickets purchased from US Airways Reservations. Chairman’s and Platinum Preferred members booking within 14-days (both online and by phone) are exempt from the fee.