The Sun Sentinel reports (here) the latest data from the U.S. Department of Transportation that shows U.S. airlines tallied over $1.45B in passenger baggage and change fees…in the first three months of 2012! Delta was the number one fee collector, followed by: United, American, US Airways, and Spirit. What’s interesting is that Southwest Airlines which touts no bag fees (and did place last) still managed to take in $7.7 million. Yes, airlines make a fortune on airline fees, but is it not even a little bit justifiable?
Putting It In Perspective
This is a lot of money. But is it truly unjustified? It seems that the default answer among travellers is “of course it is!’ The Sun Sentinel above even has a section devoted to it (http://databases.sun-sentinel.com/news/broward/ftlaudairlinefees/ftlaudairfees_list.php) as a ‘watch dog’ type of service where the fees are listed.
While the general public may be unhappy about fees, the margins on airline profit over the past three years have been razor thin (most were not profitable for the majority of the past 10 years), with an average net profit of just 3%.
So it seems that the entire profit margin of an average U.S. airline (excluding Southwest) comes mostly from fees. Meanwhile, the public still expects the airlines to have a perfect safety record, luxurious new planes (with lots of room), be always on time, have in-flight service, and then still have incredibly low fares.
So where does an airline give? Perhaps the fees look high, but if they make up the bulk of an airline’s low profit, would you want it any other way?
Like brain surgery, I would NOT want a cut-rate surgeon who offered incredible discounts to do an operation when my life was in the balance. Airlines also have our lives in the balance (for some reason most people seem to overlook this), yet we are perfectly happy to low-ball and discount airlines at our personal convenience.
Now one might argue (correctly) that a consumer wouldn’t ‘elect’ to have brain surgery, but one can easily opt out of flying. That would put the onus on airlines to be competitive. But in either case, you’d still expect high quality without cut corners. When you’ve already made the decision and you’re in the moment, whether your cranium is cut open on a table, or your butt is 38,000 feet above the earth (over 7 miles) and moving over 500mph, each situation would seem rather similar.
Alternative Courses of Treatment
Airlines have obviously incorporated these fees because they can. It seems that the market voted loudly that high fares are despised while high fees are tolerated (people still fly and the market is even growing). So the airlines will continue. And if fees help contribute to the expectations that passengers have by providing ‘services’ like safety, then what’s the complaint? Sure, fees should not approach usurious levels, but if they did what would happen? The total price would be prohibitive and people would stop flying.
There are, of course, alternative models: 1) people stop paying higher fares and higher fees and fly less, causing more of the airlines to merge or go bankrupt. That would create less competition, and allow the surviving companies to raise their prices; or 2) we go back to regulated airlines where the government plays a big role (meaning even more tax dollars are used).
There is a third option: airlines could start getting into other areas of business that are more profitable or help them cut costs in some way. And that’s happened. Delta bought an oil refinery from ConocoPhillips. Hopefully that’s not a distraction to them from their core business of flying people around safely. We shall see…
Either way, some price, somewhere, would go up. In the first case it would be fares, in the second it would be more government imposed fees (or taxes). And while the government plays a vital role currently by subsidizing expensive (and necessary) public services like air traffic control (no private company owns the airspace), I don’t think anyone wants to see them running an airline.
Delta Airlines Tries Hot Oil
The subtext of this post is really about how surprised I am at such an obvious thing: fuel expenses are high for airlines. Call me naive, but with all of the hundreds of complex and no doubt expensive things that airlines must contend with on a daily basis, the fact that fuel is 36% of Delta’s operating costs is pretty amazing. Therefore it really shouldn’t have surprised me that Delta Airlines has acquired an oil refinery in Trainer Pa, from ConocoPhillips. But they did. An airline in the oil business? Really? Continue reading
It seems that each spring birds and bees fly around in harmony doing their things, being happy-happy, until there is the sudden sound of ‘whoosh-thwack-boom!’ as a bird is ingested by a turbofan. According to ABC News and the FAA, bird strikes happen about 20 times per day. This week was especially notable because three high profile strikes all happened last Thursday. Well, two were high profile (Joe Biden and Hillary Clinton) and another just happened to some common folks flying on Delta.
First up was a strike from a flock of birds on a Delta passenger plane out of JFK. I’m putting it first because it happened to non-heads-of-state, and sometimes we like to put the common man first here at Flyopia.com. Flight #1063 departed New York for Los Angeles when it struck what appears to be a flock or crows, or vultures (but probably not seagulls). Here’s video of the strike via ABC News. (NOTE: This video is what all the media outlets have been advertising as video of the strike. It does not show the strike, merely the flock just before the strike. So basically nothing to see here…move along. But I’ll put it anyway because everyone else did.) Apparently the strike was bad enough to cause the engine to shut down, which forced he pilots to declare an emergency and return to the airport.
Here’s a link to passenger Grant Cardone explaining the experience. I kind of get the feeling in hindsight he’s happy to have a video of himself posted on the Internet. But that’s another story.
(Update) And Again The Next Week…
And now the following week brings news of another commoner strike from the Washington Post. Luckily no one was hurt in this incident, and it wasn’t out of JFK. This one was a JetBlue flight, #571 out of Westchester County Airport in White Plains. It was heading to West Palm Beach Fl0rida, when it was forced to make an emergency landing after a strike. It apparently landed safely at a small unnamed regional airport in New York.
Next up was a bird strike on Vice President Joe Biden’s Air Force Two. The Veep’s 757 struck a bird in flight, but no emergency was declared, and it was reported no one inside the plane even realized it. It was however considered serious enough to ground the plane, and the VP took a Gulfstream III out of California.
ABC News has already made the Angry Birds reference jokes, but A bird strike also occurred on the Secretary of State Hillary Clinton’s trip to Paris. Again, no emergency was declared as it was with the Delta flight, but it was enough to make news, so we’ll include it. Birds do not like Obama Officials it seems. Below are photos obtained by Flyopia.com depicting what Biden and Clinton were probably doing at the time of their respective bird strikes:
Heres, a summary video of these stories in case you feel like watching. Notice the opening graphic which I find amusing, showing computer generated birds flying into a computer generated jet engine. In case you couldn’t imagine what a bird flying into an engine looks like.
Photo Credits: First photo textsfromhillary.tmblr.com and John Palminteri/KEYT Santa Barbara