Airfare A La Carte: Has the airline ticket become a loss leader?


As airlines continually try to boost their revenue in this down economy, Southwest Airlines has announced that they plan to raise certain fees for baggage (third bags and overweight ones) and “early-bird” check-in. This is significant because Southwest has always billed itself as the airline without hidden or additional fees – yet now even they see the benefits from charging for add-ons on top of airfare (their AirTran subsidiary is also raising its existing fees for baggage and other items).

More surprising, however, is that they also are planning a “no-show” fee for passengers who fail to cancel a ticket prior to flight time – a first-of-its-kind fee in the industry. This is from an airline where flight costs were fully reusable, with no change or cancellation fees. They say that this will only apply to the lowest fare classes and is only meant to encourage passengers to release space that can then be resold.

Southwest certainly is not the first to charge ancillary fees – most major airlines started doing so in 2008, when American started charging $15 for the first bag checked. Over time, fees jumped higher and broader, to offer things like lounge access, extra legroom, priority security lines and earlier boarding – perks and services previously only available to frequent fliers or via membership. And, lest we think these fees are ridiculous, there are airlines out there that have built their model on selling the extras. Spirit Airlines charged for bags, beverages, and food well before 2008, and currently offers 8 pages of extras on their website; Ryan Air (a European budget airline) not only charges for literally everything, they have removed seatback pockets and window shades and covered headrests and tray tables with advertisements. They have even “joked” that they would charge for the bathroom if they could find a way.

It seems likely that the cost of airfare may soon become just the minimum cost of entry, with airlines barely breaking even (or losing money) on the ticket price itself just to sell all of the upgrades and extras. The true cost of traveling by air may become more like buying a car: sure, you can just pay the base price for a seat, but don’t you want the extra legroom and the rustproofing? A number of articles even discuss airlines installing premium and/or extra-legroom seats in the front to increase revenue, while squeezing smaller seats and reducing seat pitch in regular economy in the back. However, while the airlines have enjoyed the added revenue (indeed, it has kept some of them in business), they have lost big in customer satisfaction. Proponents of the fees claim that it allows travelers more choice in customizing their experience; it also keeps the base ticket price affordable than the ‘true cost’ of a flight.

As a leisure or occasional traveler, how do all the additional fees affect your choices? Do you prefer the choices of the “a la carte” approach, or would you rather pay a higher all-inclusive fare? For the frequent fliers out there, how do you feel about regular fliers being able to purchase the perks that were once only available to the elite?


Southwest Raises Fees, Adds ‘No-Show’ Penalty:

Add-On Airline Fees: Good or Bad?

Spirit Airlines defends $100 carry-on bag fee,0,5442837.story

Like American, More Airlines Add Fees

Airlines shrink seats

17 thoughts on “Airfare A La Carte: Has the airline ticket become a loss leader?

  1. I find your comments about Southwest Airlines and others mentioned in this post to be rather interesting. I would give consideration to some other alternatives as well. For example, maybe the new baggage fees are simply a way for Southwest Airlines to earn additional revenue. After all, haven’t baggage fees become the norm for most other airlines? I also think changes in passanger demands over time have allowed for airlines to capitalize on new revenues, such as lounge access, more legroom and priority security lines.

    However, I get what you’re saying about some of these fees, such as this new “no-show” fee for passengers. From the airline perspective I can see why they would want to keep their base rates to fly as low as possible, and then earn supplemental revenues at the time of service. It’s of my opinion that there should be some form of balance in the charges. I think the standard flying costs should be built into the base ticket price (i.e. baggage fees, cancellation/re-booking fees). I think there is a place in the market to charge additional fees for value added services (i.e. additional legroom, lounge access).

    1. Ultimately, the airlines can only get away with whatever their customers will let them. If people stopped flying American when it introduced bag fees, no other airline would have followed suit. One post mentioned that the current state of air travel is mainly the fault of consumers, who are primarily concerned with cost; as long as the price of a ticket is low it seems that the airlines can get away with all sorts of other things in order to turn a profit.

  2. I’m a frequent flyer, and I can’t say that I’m really impacted by regular fliers being able to purchase the perks that were once only available to the “elite” 😉

    The reason I say this is because most of my flights are very early Monday morning and then Thursday evenings, and they’re to places to such as Dallas, Houston, Atlanta, Pittsburgh, etc. Looking around at my fellow passengers I notice that we’re pretty much all business travelers. I am always able to get an Economy Plus seat (United’s extra legroom seating area).

    I would say that the only slightly annoying thing is when non-frequent flyers are in the Premier security line and they’re not aware of the security rules. Sometimes they don’t know they have to take off their belt or take everythingn out of their pockets. This is kind of frustrating.

    However, if charging for these perks helps the airlines stay in business then I guess it’s just what they have to do. I’d be interested in learning why the airlines have such difficulty being profitable in the first place. I used to think it was Management inefficiences in certain airlines but as more and more airlines have to start charging for all these perks I’m starting to believe that there’s a bigger industry-wide issue.

  3. I too am an “elite” flyer on United and I have noticed that more often, Economy Plus is sold out (or middle-seat only) when I have to book a flight just a few days out. I see more non-business travelers and large families clogging the Priority security lines. And the scramble for getting on the plane early had also become a bit crazier until United went from 4 to 8 boarding groups.

    More importantly, I feel like flying was annoying and difficult enough, did the process have to become more complex as well?

  4. Well, you have hit a sore spot with me on this one.

    Traveling over the past couple of years has gotten worse and worse. As a frequent flier, I usually had no issues grabbing a seat with extra legroom. (Let’s be honest – I want to work on my laptop) I usually have to make last minute arrangements so I am already paying an inflated price, but now I have to sit back near the bathrooms. (Always an exciting time during a 4-hour trip)

    Since bag fees have gone up, people are trying to carry everything on-board. This is causing longer waits through security and for boarding. It is irritating that a person with a carry-on cannot find room and now things have to be taken back to the front of the plane so they can be checked.

    I was on a flight the other day and I didn’t even have an option to watch a movie. Each seat had a monitor and the only way it would work is if you paid the fee.
    Planes have become extremely crowded and the chance of flying stand-by is much less these days. I can accept the scheduling and the tight time windows if it means a company can continue to operate in a competitive environment, but these fees have become a joke.

    I am starting to wonder if there is really an advantage to a frequent flier these days.

  5. As someone who travels a lot for work and leisure I am torn on the battle over extra fees. In general I like to customize my product or service to me directly, however I also dislike feeling like a company is trying to squeeze every last penny out of me. From everything I have read in the past Southwest has done a very nice job with their free bag campaign and if I were on their management team I would be very hesitant to insitute fees that will go agains that type of campaign.

  6. I too travel every week for work; typically on the first flight out on Monday morning and returning Thursday evening. Airlines make the majority of their money off of business travelers who are less price sensitive and more focused on flight schedules and routes. As a result, the airlines have not had to focus on customer service, and I think it is interesting to note that none of them sell themselves on providing the best customer service. A typical passenger who may have a bad experience on a flight with a certain airline, will most likely book with that same airline again because at the end of the day, getting to your destination at the right amount of time is the most important factor a business traveler takes into consideration. Airlines know this as well, which is why all the airline ads that you see emphasize network size, fleet age, loyalty programs, hub cities, etc. Raising the ancillary fees is a smart way to raise revenue, because business travelers typically only have restrictions on the actual fare itself, but have the ability to expense any bag fees that they run across. The customer who gets hurt the most with these fee increases are the leisure traveler who is typically more price sensitive. Unfortunately because of the mob mentality that airlines run their business by, the leisure traveler is going to be squeezed even harder going forward, and those fees are only going to go up over time.

  7. I am considered a leisure or occasionally business traveler and the fees are a barrier when deciding between air or car travel. I make several trips to Pittsburgh a year and I often do the 8 hour trip rather than fly because of the flight and additional fees…a girl can never take just one bag.  That said I do appreciate the creativity in identifying new revenue streams for the airlines. It is one industry that the service is worse and prices are higher but they are struggling to make a profit. I question if the incremental revenue streams are really enough to keep the airline alive.

  8. Most of the additional fees they charge do not bother me – I often don’t even notice since most of my travel is for work, and the additional fees are simply expensed. However, the one that irks me the most is the ridiculous baggage fees because then everyone tries to carry everything on to the plane. It makes the boarding process longer, an already “snug” flight tighter, and is generally annoying when non-business travelers expect to fit three bags under their seat. It’s even more annoying when I get asked about my tiny purse (essentially, a wallet with a shoulder strap) in addition to my laptop bag, but somehow people make it onto the plane with well over 2 bags for which there is no room.

  9. I am always a budget traveler and very cost conscious as well as environmentally conscious and my preference is to have the least expensive base airfare possible and only pay for the extras that I think are worth the extra cost, therefore, the “a la carte” approach is my pick.
    As long as the airline provides a seat that is comfortable and with enough leg room and allows for at least one checked bag within the weight limit it should be ok. Options are always welcome and should be only sold to the ones who want to buy them and pay for them.
    I also agree that travelers that do not show up at the airport and that did not canceled or changed their tickets should be charged a no show fee as hotels do for example.

  10. I am by no means a frequent flyer, but when I do I try to not let the airline industry get me down. Generally when I am booking a ticket I look for an aisle seat near the front of the plane. This allows one of my legs to have additional room, and it makes it much easier to get up to stretch if needed. While we look at the airlines as a service provider we must keep in mind they are running a business. As gas prices rise so does the cost of operation for an airliner. Making some of the luxuries available to non-frequent flyers has allowed them to generate additional revenue and only place a portion of the cost on the ticket. Overall I can deal with the increased security, no leg room, and expensive food for a couple hours if it means I leave Chicago at 3pm and arrive in San Diego at 6pm.

  11. I agree that it is not right that Southwest Airlines is going against what they have said for years, but many people can hardly blame them. As the gas pinch and inflation has pushed up everyone else’s prices, Southwest has started to feel it too because they have new flights so they need more fuel to get from place to place. Also, they do offer more rewards now even though they are pushing up some of their prices. Most importantly, these are small and there is no hidden fees. This is what they have told people for years. Also, most importantly, they are significantly cheaper than what most other airlines charge.

  12. I believe that airlines should use the all-inclusive approach. By using the all-inclusive approach, airlines would have greater customer satisfaction. Customers would be able to get a pillow during a flight without having to giving a credit card to the flight attendant. I have no problem with airlines raising prices slightly to cover all the amenities that used to be “free”. Customers love to think that they are receiving something for free, even though they are really paying for it in higher ticket prices. Using the all-inclusive approach would also give flight attendants more time to take care of other flyers because they would not have to be swiping credit cards all the time.

  13. I watched a documentary on Netflix regarding low cost airlines and it followed mostly Southwest. What I found out was that Southwest signed a 10 year contract to obtain Jetfuel at prices of the market at the time they signed. That contract recently expired which is why some (including myself) may have noticed a jump in ticket prices. I feel that Southwest is now trying to raise certain fees that may not apply to the everyday passenger in order to make up the profits that have diminished since they are now paying todays prices for fuel. I recently flew Southwest for the very first time over spring break and was pleased with the service I received. The fact they STILL offer 2 checked bags to fly free is astonishing!

  14. As a customer I appreciate Southwest standing alone in the aviation industry on their free baggage policy. It is one of the reasons that I book with them. I do see the benefit of customizing a travelers experience due to the fact that we all have our own preferences and we tolerate different comfort levels. Southwest’s management team should consider keeping this intact as it has become apart of their identity and it definitely draws my loyalty. The psychological aspect of having an all inclusive ticket is far more inviting than buying a ticket and adding 4 or 5 additional fees. Even if the price is the same at least make me “feel” like I’m not being duped out of my money.

  15. Being from Minnesota, the quick hour flight back and forth has always been a treat. Southwest absolutely does it the best. It’s simple, I don’t have to worry about fees, or not printing out my boarding pass, Southwest is very user friendly. I don’t need a luxury plane to fly an hour nor do I want to pay the outrageous baggage fees other airlines have. Lately, Southwest is all over the place; they have a great commercial now, they’re featured on television networks, they are doing a lot to market themselves as I have not seen previously. Southwest was easily seen as the inferior airline because everyone gets the same thing, there is no distinction between the “elite” and the economy class with Southwest and that bothers those who like to flaunt their money. Now, people are more concerned with price and convenience and Southwest provides that, which in the long run will ensure profitability.

Leave a Reply

Your email address will not be published. Required fields are marked *