Airlines are having trouble these days staying afloat amid higher jet fuel prices and tighter consumer spending. Some have grounded planes and cancelled routes, but the universal solution seems to be increasing fees. Many airlines are now charging for baggage and snacks while sodas, seating and clearning could be just over the horizon. Meanwhile, fares continue to rise as passengers continue to travel.
Fare Hikes on the Radar
During the past year, basic domestic fares have been nearly unchanged, but the fuel surcharge has at least doubled or tripled. Fares for non-stop service, for example, are up some 365% higher than a year ago. Companies like American Airlines have successfully hiked their prices more than 10 times in the past couple of months alone.
The hikes are disigned to help offset fuel-related losses. The Amex Airline Index is down nearly 47% since hte start of the year while airlines are expected to lose some $6.1 billion this year alone. Meanwhile, a dozen or so carriers have already folded in the past six months and many others could follow if income cannot be increased.
Nickel and Dimed to Death
Airlines have a captive audience and no real competition, so charging fees is a relatively easy proposition for them. So far, checked bags have been the primary driver of additional fees. American Airlines has even began to charge $15 for the first checked bag each way, and while nobody else is following suit it probably won’t be long.
Meanwhile, US Airways has said it would stop offering free snacks to domestic coach passengers while most of the major carriers are already charging for snacks and meals. Many airlines are also considering charging for beverages. Currently, Southwest charges $3 for energy drinks, but nobody charges yet for soda or juice.
Often times, one airline will start a practice and take all the bad press until the rest follow. To date, American Airlines has tended to take the lead before being followed by others like United, US Airways, Continental, Delta and Northwest. In the end, they all feed off of each other at the expense of captive consumers.
In the End
There is very little consumers can do about these problems as airlines clearly need to do something. In the meantime, investors and airline executives will have to wait and see just how much these hikes hurt consumer travel.