Airplanes don't run on pixie dust; they run on fuel. And the cost of that fuel is going up. That means airlines either have to accept a decline in profits or figure out a way to make up the additional cost. Understandably they're not keen to lose money, so most are responding with fare increases.
They're just not calling them that. Instead, the Wall Street Journal reports, everyone from United to JetBlue is attempting to disguise fare hikes as new fees for "special: services like, you know, actually bringing luggage with you when you travel.
While pretending the changes are aimed at improving customer choice, the airlines "are going to look at every tool at their disposal to improve profitability," John Heimlich, chief economist for trade group Airlines for America, told the paper. Here specifically is what that looks like for travelers.
Air Canada is raising its bag fees to $30 Canadian.
Likewise, WestJet is also increasing the fee for a first checked bag to $30.
JetBlue raised its prices by $5 to $30 for a first bag and $40 for a second.
In addition, JetBlue will now charge $200 to switch a flight.
United will increase what you pay to sit in the front of the plane. The price for a checked bag will go up from $25 to $30.
Here's why these fee hikes are a dumb move.
Flyers are going to hate these new fees, of course, but on first glance they make economic sense for airlines. It might not be popular among customers, but if costs go up, it's not shocking that prices will too, right? But wait, responds Gary Leff, a travel blogger and industry expert, the move actually doesn't make sense for the airlines either. In fact, they may end up shooting themselves in the foot.
First, he notes, checked baggage and other fees are no longer a stealthy move. Everyone knows about and loathes them, so there's no surprising unsuspecting travelers at the airport, forcing them to spend more than they planned for their trip.
Second, customers are smarter than cynical airlines apparently calculated on. "There was a time when customers might not have been able to do the math, but the reason American Airlines is bringing back carry on bags to basic economy is because they discovered customers could do the math (or sites like Google could do it for them) and so they were losing business to Delta which offered similar fares but allowed carry on bags," Leff writes.
That means that what airlines gain in fees they often lose in business all around -- either because travelers opt for another airline, decide to skip the trip, or just drive. "Airlines didn't really make $4.5 billion in checked bag fees last year. They charged $4.5 billion in checked bag fees," he points out. Those two things aren't at all the same.
Not only do these fees push customers to less stingy competitors (assuming not all airlines follow suit), but they also "incentivize passengers to try to bring even more onboard the plane, further delay boardings, and create less efficient airline operations. That can cost an airline as much or more than they take in in bag fees," Leff highlights.
In the end, raising fees doesn't usually mean raising revenue for airlines (though it might briefly trick worried investors). It's just a cat-and-mouse game which enrages customers.
"The alternative here is to introduce new services they can charge for that passengers will actually value," he concludes. That would be the smart thing to do, which is obviously why dumb airlines are not doing it.