The Hidden Cost of Flying: Mike Platt reveals the creative and hard to spot ways airlines use to increase their revenues
Air travellers are a fickle bunch. Although secretly they would like nothing better than to sit in first class on an airline that offers triple frequent flyer points, most of their complaints are about cost. Clearly this is all to do with personal income, travel budgets, company policy and the economy - and quite understandable too. The problem is that they are forcing ticket prices down to such an extent that airlines cannot operate cost effectively, unless they become ‘creative' when applying extra, sometimes hard to spot, charges.
Nobody should be surprised about extras. Surely these are charged in most other industries where competition is hot and low entry price is customer critical. The airline industry is certainly that since the arrival of no frills airlines. Take for example Ryanair which frequently offers millions of ‘free' seats or, as currently, one way fares of £15 yet still makes a profit. How does it do that? Can its overheads be so low that free or very cheap tickets can keep it profitable? Most of its aircraft have 189 seats so if everyone paid say £15, the total customer contribution would be £2,835.
Could anyone buy an aircraft, buy fuel, pay crew, pay airports etc and then operate between two points for £2,835 or even double/triple that? I do not think so. Do you?
I suspect the way no frills airlines make money is based on the tried and tested business model of maximum loads, pricing against expected demand, low marketed entry fares, third party sales and finally add-ons, extras, or whatever more justifiable description they can find for increasing end price. The customer-base loves it and approval seems to grow with every price aggressive campaign that such airlines launch. It is the greatest form of travel masochism I have ever observed when, the worse some such carriers behave, the higher their rating in the eyes of those abused!
So what are the mainstream airlines doing about it? They have seen their short-haul market savaged by these techniques and, whilst their products are clearly superior in most cases, they struggle to make the price differential for this superiority acceptable to Joe Traveller. As a result they have grabbed onto the age old strategy of ‘if you cannot beat them then join them'. They too have entered the twilight world of mark-ups and ‘cost plus'. How does this manifest itself? Here are some to take your pick from as they all feature somewhere in the world:
- - Fuel surcharges. Some of which remain after the fuel cost has dropped.
- - Checked bag charges. Frequently in weight, numbers or size.
- - Express check-in/priority charge for those who do not have hold baggage.
- - Meals and refreshments on board.
- - Airport lounge charges.
- - Airport taxes and duty, although most of this gets passed on.
- - Pushed to online check-in to reduce airline cost.
- - Certain premium or more comfortable seats.
- - Credit card fees that are above the rate they actually pay.
- - Cancellation fees or no refunds.
- - No flight changes unless you pay more.
- - Cancellation of non profitable flights.
- - Premium phone lines at reservations centres.
- - Reduced manual check in facilities.
- - Reduced capacity and flights to some destinations.
- - Promotion and sale of third party services such as hotels and that are sometimes against policy.
- - Mandatory insurance.
Unfortunately for them and unlike their no frills colleagues, this initiative is becoming unpopular and generating bad publicity which is as clear a demonstration of double standards that you are likely to see. Or maybe it is because the global public actually believes that the no frills airlines can operate for next to nothing. Have they never questioned those £15 fares? Do they realise that for every rock bottom price there is a corresponding higher one? Have they never read these airlines terms and conditions?
If they had they would have found my favourite which is an airline that says that if it considers you ‘fat' it will charge for ‘two seats'. However it ‘cannot guarantee' they will be next to each other! The mind boggles.
Where is this trend of extras taking us? Will we soon be charged to use the toilet? Maybe an extra surcharge on that depending on time spent in there?! Well if you believe what comes out of Brussels, there will be a new law in Europe next year insisting that airlines publish all extras in advance and hopefully explain again at time of booking before total commitment is made. This to me is eminently reasonable and fair but it will certainly turn airline pricing upside down again in this part of the world. Maybe it will bring clarity to all those travellers who assume no frills airlines are some kind of benign charity. At least it will create a far more level playing field.
We will see!