Column: Airlines say they may have been money-grubbing fee junkies before, but no longer
For anyone who believes airlines ding passengers with gratuitous fees for no better reason than because they can, America’s biggest carriers have an answer:
That appears to be the inescapable conclusion after United Airlines, Delta Air Lines and American Airlines this week announced they’re permanently doing away with the whopping $200 fees they charged to change many bookings.
The carriers say they’re doing people a favor during the COVID-19 pandemic. They say they feel your pain.
Let’s overlook for the moment that they’re all struggling financially because relatively few people are flying, and each company is desperate to lure passengers back.
Let’s overlook that the airline industry is now seeking another $25 billion in taxpayer-funded assistance from the federal government, so a little PR goodwill can’t hurt.
Instead, let’s ask the obvious questions.
If we had to pay these dumb fees during a time of prosperity, when airlines were rolling in cash and spending millions on self-serving stock buybacks, why are these levies no longer needed during a time of financial hardship?
Isn’t the implication that these fees were always little more than a money grab, and now that times are tough, airlines are forced to do the unthinkable and treat customers fairly?
“Consumer advocates have told the airlines time and again that these fees are excessive, bear no relationship to actual costs, prey on consumers whose plans may change through no fault of their own, and serve to line the pockets of the airline industry at consumers’ expense,” said Sally Greenberg, executive director of the National Consumers League.
“Many billions of dollars later, the airlines are now all-in for consumer flexibility,” she told me.
Industry analysts say doing away with change fees underlines the challenge carriers face at a time when the close quarters of an airline cabin would appear to be something to be avoided at all costs.
“You’re seeing just how desperate airlines have become to entice passengers back on planes,” said Arnold Barnett, professor of management science at Massachusetts Institute of Technology.
“Leisure passengers who might book are worried that the pandemic will make travel unwise,” he said. “Thus, offering some solace to leisure travelers might increase bookings.”
Dawna Rhoades, professor of management at Florida’s Embry-Riddle Aeronautical University, said airlines long felt comfortable nickel-and-diming passengers when demand for air travel was high and people had little choice but to take whatever they got.
“This is the nature of business and aviation,” she said. “During times of high demand, companies — in this case airlines — can and do place restrictions and fees on many actions that customers might want.”
Part of the story here is that, for years, airlines have tried to mislead passengers into thinking fares are lower than they actually are.
The ruse was to promote attractive baseline fares and then hit you with extra charges for scheduling, baggage, seat assignments, food, pillows, blankets and anything else that was once part of the overall ticket cost but now was being offered as an optional add-on.
“With demand slack because of COVID, they must offer flexibility to get people to fly at all,” observed David Driesen, law professor at Syracuse University. “In other words, these fees are not raising revenue now, they are lowering it.”
To me, this week’s developments, while undeniably welcome for consumers, call into question not just the validity of other airline fees but also pricing transparency.
I reached out to United, Delta and American to ask why we shouldn’t view their dropping of change fees as proof that the charge was never warranted. I asked why we shouldn’t be suspicious about the economic rationale for most other airline fees.
A spokeswoman for American declined to answer. The others didn’t respond.
But the airlines didn’t hesitate to offer their own spin on things.
“When we hear from customers about where we can improve, getting rid of this fee is often the top request,” Scott Kirby, chief executive of United, said in a statement. United was the first of the big three to drop the change fee this week.
“Following previous tough times, airlines made difficult decisions to survive, sometimes at the expense of customer service,” Kirby said. “United Airlines won’t be following that same playbook as we come out of this crisis.”
Translation: Yes, we might have hustled you in the past, but we’ve changed.
Delta’s CEO, Ed Bastian, said the company now recognizes that “we need to approach flexibility differently than this industry has in the past.”
American’s chief revenue officer, Vasu Raja, said the airline “is resolute to our purpose of caring for customers at all points of their travel journey.”
The reality is that U.S. airlines collected $5.8 billion in baggage fees last year, up nearly $1 billion from 2018, according to the federal Bureau of Transportation Statistics.
The carriers reaped $2.8 billion in ticket change and cancellation fees.
That’s $8.6 billion in fees that look more dubious than ever. It represents nearly half the $14.8 billion in profit reported by the industry last year.
And now that the airlines’ livelihoods are on the line, they want us to think they’ve turned over a new leaf.
Look, I’m not complaining. Props to the companies for treating customers more fairly.
But don’t go telling us that you’re suddenly our buddies when, in the past, you didn’t hesitate to push us around.
And don’t tell us these fees are gone for good when there’s nothing stopping you from bringing them back once the pandemic is over. (I dare each CEO to promise in writing that he’ll forgo his salary for a year if the change fee returns.)
United said Wednesday it will furlough more than 16,000 workers next month. Delta and American have similarly warned of looming cutbacks in October, when restrictions imposed as part of the last $25-billion bailout expire.
Seems to me this is an industry that needs to seriously rethink how it does business.
Here’s a good place to start: No more weaselly fees. Instead, offer passengers all-inclusive fares that truly reflect the cost of traveling.
Not only is this a more honest way of treating customers but it also facilitates comparison shopping, which is something most consumers try to do — and fail at when it comes to airlines because of the way costs are spread all over the place.
United, Delta and American each said this week they’ve seen the light and they’re no longer the money-grubbing businesses you may recall from prior to the pandemic.
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