An interesting report from the airline analysts at IdeaWorks claims not everyone hates airline fees – some will even “happily” pay them. Why they will has to do with wealth, bang-for-your-buck and the perils of greed. Let’s take these in order.
Happy with Airline Fees
The happy passengers are people IdeaWorks calls high-value customers. Surprisingly, most are not business travelers since many road warriors are constrained by some company travel polices. High-value customers, on the other hand, “have a high expectation for luxury, comfort and personal service because they have a high level of disposable income.” In other words, they are rich. But they won’t pay for just anything – it has to be worthwhile.
How Fees can be Good for Consumers
IdeaWorks cites three major reasons for consumers to get behind fees (or at least, hate them a little less):
- Airlines need the revenue: As FareCompare CEO and travel analyst Rick Seaney has long said, bankrupt airlines can’t take anyone anywhere. And fees have helped airlines become financially healthy which means they can afford new and better planes.
- Fees are not mandatory: If you don’t like paying for a meal, bring your own. If you don’t like paying for a checked-bag, in most cases a carry-on is free (and yes, it can hold everything if you pack it right).
- You get what you pay for: The report says fee based services are often better than freebies: “A magical thing occurs when a service [makes money] – companies provide better service.”
When Airlines Get Greedy
Airlines must gauge customer acceptance of fees, and not start too high. When American introduced its checked-baggage fees in 2008, it began with a modest $15 per bag (which has since risen to $25). A few years ago, US Airways tried to follow the lead of Spirit by charging for soft drinks – an experiment that failed miserably as passengers got angry and other major carriers took note. The fee was soon dropped, and as IdeaWorks notes, “It’s easier to increase prices over time than to face the embarrassment of a price decrease if initial sales are a flop.”