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Flying the unfriendly — and pricey — skies

(Thinkstock Image)

(Thinkstock Image)

When I was 33,000 feet above the ground recently, being served dinner on a flight from Amsterdam to New York, I cheerfully informed the flight attendant I’d like white, not red wine with my chicken a la king.

“Wine?” she chuckled. “Oh sweetie, we haven’t served complimentary wine since 2001.”

As a jittery flier who calms her nerves with a small amount of Chardonnay, I knew this flight was going to cost me.

Things got even worse when I transferred to the domestic leg of my journey: entertainment that had to be purchased (despite the paid adverts that scrolled across the screen for the duration of the flight), and not a crumb of food to be consumed without a credit card transaction.

In short, all the amenities I used to take for granted were now strictly paid-for affairs. Where’s the outrage, I wondered?

“The changes have been introduced gradually,” said Paul Hudson, president of the American non-profit airline consumer organisation FlyersRights.org, of airline travelers’ acceptance of the fees, disallowances and more. “It’s like the frog in hot water. First the water is cold, than it’s warm and then it boils. But the frog doesn’t jump out.”

And apparently, neither do airline passengers. “Initially there was some backlash,” said airlines analyst Savanthi Syth of Raymond James, a financial advising company in the US. “It is always hard to start charging for something you have offered for free in the past, like with online news. But people got used to it.”

Industry turmoil

Why have so many services we took for granted — pillows, magazines, free wine on international flights — disappeared? Rewind to 2008, when the price of oil reached $147 a barrel. For the legacy carriers that had already struggled through the post-September 11, 2001, collapse in air travel, it was another do-or-die situation.

“How are we going to survive?” analyst Bob McAdoo of the investment bank Imperial Capital recalls was the industry question of the day. He recounted how American Airlines’ leadership team gathered to brainstorm solutions to offset the high costs of fuel. One employee suggested the airline start charging for checked bags. The expected revenue from that change was in the hundreds of millions of dollars.

“I don’t know if it’s going to work,” McAdoo recalled American’s CEO saying at the time during a conference call describing the changes, “but how can I not try it? It’s the only thing that comes close to making up for the $147 barrel of oil.”

Other airlines soon followed American’s lead.

United Airlines, too, began charging for checked bags on domestic flights after the airline merged with Continental in 2008. “This change enables us to continue offering customers competitive fares, and it fits with our overall strategy to tailor our products and services around what our customers value most and are willing to pay for,” John Tague, executive vice president and chief revenue officer, said at the time.

The trend spread to airlines outside the US, though much more slowly.  It was only in May, 2013, that Dutch carrier KLM announced it will start charging for checked bags on all its European flights. Even their previously-exempt frequent flier members will be charged beginning in October.

Other revenue-generating measures that have fallen into place in the last five years or so: higher fees for changing flight reservations and in-flight entertainment that sometimes must be paid for.

The plan worked. In 2013, says McAdoo, US airlines reported $7bn in earnings from baggage fees and charges for changing reservations.

Hudson of FlyersRights.org said such charges have increased by a factor of 10 since being introduced. 

“In the US, these fees produce more revenue than the profit margin,” of ticket sales, said Hudson. “And because they are not taxed, they really caught on.”

The devil in the details

It’s also a way to raise revenue without scaring off passengers, said McAdoo. “People would rather pay for bags than increased fares.”

This “a la carte” model of legacy carriers, said analyst Syth, allows consumers to “put a value on what’s important to them. It’s also a way to change consumer behaviour. People have the option of packing lighter and bringing a carry-on instead.”

Surprising to many, this approach had actually been standard for low-cost airlines, said Murdo Morrison, editor of the aviation industry magazine Flight International.

“(Budget carriers) came in with a blank slate and wrote their own business model,” said Morrison. “You pay only for your seat and everything else is extra. It’s the reverse of traditional airlines, which had lots of perks and had to take them away.”  

It depends on the carrier of course, and you may want to check before booking your next ticket. In the US, discount carriers like JetBlue and Southwest still allow one free checked bag, for instance.

Healthier than ever?

The ancillary fee revolution has mostly taken place on short-haul flights, which include those within Europe. Still, for long-haul fliers like myself, the distinct lack of budget options, partially due to a lack of bilateral agreements between countries, means I’m paying what seems like top dollar for my flights. At the same time, some simple pleasures and expected benefits are eroding.

Yet as I started researching the industry, I found, to my great surprise, that my Chardonnay cost more but I’m likely saving 100s of dollars on my ticket.

The aviation industry is healthier now than it’s been in years. While prices for fliers have increased over the past few years, the US Bureau of Transportation Statistics found that adjusted airfares today are still lower than they were in 1995.

For Syth, it’s all good news for consumers. “At the end of the day,” she said, “if the industry is healthy, the product will improve. Theoretically, it should benefit everybody.” Those benefits include revamped terminals and more modern aircraft fleets.

That’s something the expat in me will try to keep in mind the next time I am carting my belongings across the Atlantic, using airlines as more of a moving service than a mode of transportation.

Morrison reminded me that I can still buy a small glass of wine for a few dollars — while my ticket price is probably $100 or $200 less in real value.  Or maybe it’s time to find a more economical — and healthy — way to deal with my fear of flying.

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