Oil Prices Down But Airline Fees Remain
Airlines have added all sorts of fees to compensate for their increased oil costs recently. Now that oil has dropped, the fees are gone, right? Nope. Now that we're all acclimated to a la carte pricing, which airlines have lusted to implement for ages, don't expect it to be going away anytime soon. $2 fee to have the window open, $4 to have it shut.
Oil Is Cheaper, But Airline Fees Are Here to Stay [WSJ via Consumer World Blog] (Photo: Maulleigh)
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price gouging so that the airlines can afford to pay their CEO $1337 million a year...
then next year, no one wants to fly, then airlines go bankrupt, government bails them out again... everyone happy but the taxpayers (us)
@taking_this_easy: I think you forgot a decimal somewhere.
@nyaz: Ditto on the futures.
It should be noted that this drop is due to reduced demand and strengthening dollar, and won't hit for a few months. Be annoyed if the surcharges exist in a month.
Funny this pops up here. I was hoping Consumerist might do a piece on how prices on most things (that have increased significantly over the year) are probably NOT likely to drop even with the declines in Oil.
I doubt major corps are going to want to drop their prices now that they have us conditioned to pay more.
@dragonfire81: Of course not. They will be making bigger profits that way. And who is to stop them? The consumers? HA! :\
Ah well it will make the shareholders happy and maybe these stupid companies will stop going bankrupt.
Or maybe not.
Also here to stay: my disinclination to fly. We have already eliminated one trip we would have taken by air by not going at all, and driven to two other locations we would have flown to before the TSA lunacy and a la carte pricing annoyances came together to make an unholy stew of flying nastiness.
I realize these changes have done nothing to business travel and the like, but people like me who can elect to either not travel or travel by car (sure, gas is expensive, but at least no one (hopefully) frisks me before I'm allowed into my car) will still be staying away from the airlines. So a la carte away, airlines, you just made a decision I wanted to make anyway even easier for me.
It's the same with taxes. Each war we increase taxes, but they don't go down after a war. There's always a justification to raise prices, but there's never a justification to lower them.
Uh...even if they were to lower prices, they would probably wait at least a quarter to do so so that they can look at their profits (or lack thereof).
Since this is a discussion about flying somewhat. Is anyone else afraid to fly because of the 'turrorists'? Or because you feel like you're in some sort of 1984/Facsist building of what is to come. I guess you could still like flying too... but the profits don't exactly reflect that.
They won't go away... They'll never go away until someone (meaning the government) steps in and regulates the industry.
This afternoon I was pricing some round-trip West Coast to Europe tickets for November '08. The base fare was only $200-- TWO HUNDRED DOLLARS! That's insane. Ten years ago, that would have mean that the total for the ticket would have been under $300. Know what that ticket came to, after the taxes and fuel surcharges were added in? $850. SIX HUNDRED AND FIFTY DOLLARS in taxes and fuel surcharges. Know how much of that was actual taxes? About $85. The rest? All fuel, baby, all fuel. Over $500 in FUEL surcharges. Hidden and tacked on at the end.
This sneaky little tactic allows airlines to advertise ri-freakin'-diculously low prices and then stick it to the consumer right as they're about to seal the deal. I've said it before and I'll say it again-- fuel surcharges should be ILLEGAL. If the cost of operating rises, so should the base fares.
Fuel costs are a pretty major part of the operating costs of an airline. If the price of water filters suddenly skyrocketed, should Coke be able to advertise Dasani at $1.00 per bottle and then, when you get to the cash register, smack on a $4.00 "Water Filtration Surcharge"? 'Cause that's exactly what the airlines are doing.
@Fly Girl: They'll never agree to be back under regulation willingly, so I would love to see the "genie forced back into the bottle" as a condition for a bailout.
Although oil has gone down, gasoline and jet fuel still remains high. All you have to do is walk to your nearest gas station to see that much. If the price of fuel goes down, then it will be time to harass the airlines.
As a side, I know FedEx sets their fuel surcharge about a month or two in advance, and it does fluctuate based on actual fuel costs. I haven't the slightest how passenger airlines do their surcharge.
@MercuryPDX: Can someone give me an example of the government lifting regulations that ended up being good for the consumer?
@Optimistic Prime: if you have gas. the Charlotte, NC region is out of gas at many stations - has been since last Friday.
The USAIR jets are taking off just fine, though.
I am still waiting to the day they make you get on the scale and weigh you buy the pound to determine your ticket price.
@nyaz: Nope. I just hate the fact that you loose your "person" status for the duration of the trip. I are a "suspect" from the moment you walk into the airport. Last weekend, I needed to travel from Cincinnati to Omaha. I could drive the 45 minutes to my local airport, wait 2 hours to get onto a plane, get frisked, not be able to take along a drink of water, take a 2 hour flight, wait 30-45 minutes on the ground be being able to get off, wait 30+ minutes for the baggage, wait 30-45 minutes for the droid at the car rental desk to be able to type in the novel that is needed for me to get a rental car, and then do all of that in reverse to go home. OR, I could (and did) drive ~10.5 hours there and the same back. AND I can see some of the countryside, AND, have a car that I enjoy driving while I am there. AND, I can extend my trip by a day if I want to.
p.s. For the 2 of us (me and my wife) it was cheaper to drive as well.
I agree: my disposition to not flying is still here. Sure, I'd love to fly to Florida for a few days, but the hassle and cost makes me stay put.
Oil is now less than $100 per barrel instead of $145, yet gas is still around $4. The same goes for the airline's fuel. It hasn't come down yet "at the pump" for numerous reasons; none of which, however, is that someone is gouging someone else. So how do we explain this? Well, one reason is oil futures. Oil futures is the reason Southwest was able to keep their prices so low through this whole debacle; they were still paying last year's fuel prices.
And true, the airlines probably won't remove those fees for a long time (if ever), but you can't blame them. If they quickly remove the fees, people are happy, but then the next time oil prices rise and they reinstate them, people will go bananas all over again. It's better for them to leave things alone.
And let's not mention the fact that it's not just a wave of a wand to make all these fees disappear overnight.
Air Canada just announced that because the cost of fuel has dropped, they are removing the additional fee of $25 for the second checked bag. They're also rolling the existing fuel-surcharge into the base advertised fare, so they're less misleading. Let's hope more airlines follow suit.
Well, I couldn't see that coming.
Funny, I just saw an excellent Southwest Airlines ad last night touting their flat-fee based pricing. They were gloating over the fact that their ticket prices are the actual cost of the ticket when the "other" airlines tack on insane fees.
Good marketing for a good airline.
On the radio this morning in Toronto they announced that because of the decrease in the price of oil, Air Canada would be canceling their fee for extra bags, and would start folding the fuel surcharge into the actual listed price for flights (instead of tacking it on later, given the false impression of a good price).
All of this bailout talk makes me wish for some real Republicans, instead of the douche-nozzles that we have. A strong fiscal conservative should be protecting the free market from both ends, producer AND consumer.
They shouldn't over-regulate business, except in the interests of consumer protection. One only has to look at the jokes that are the FDA and the USDA to know this precept isn't honored anymore.
They also should let weak businesses fail so that stronger businesses can succeed. Yes, this philosophy will let WalMart come into your town and close down all of the 50-year old knick-knack shops downtown. But it will also prevent the federal govt from wasting our tax dollars to save companies that have been milking us dry for a decade.
One thing to consider is a lot of these airlines saw the price constantly rising and purchased a ton of oil at 120 - 140 a barrel in fears that it would continue to increase in price. Now their supply of oil for a couple months at least will be at that higher price.
Since Southwest hasn't beaten us to death with fees and just raised their ticket prices instead, I hope this means lower ticket prices on their website in the next few months.
United has said that because it hedged on fuel prices they're going to have higher costs for fuel for a while.
What a bunch of doofusses that run United.
They didn't start hedging until it was too late & now they're stuck with the higher price while the market price drops.
They claim it's just "a bookkeeping charge", but they'll figure out a way to pass that on.
Probably make the toilets require a dollar to get out of.
Unfortunately, stories like this are very misleading. Just because oil
prices are down today doesn't mean the airlines are paying less.
Remember, they hedge their fuel at certain costs for certain amounts of
time.........which is why Southwest was doing so well for so long, they
had hedged a lot of fuel at a very low cost. So, don' t be misled!
@lincolnparadox: Yeah, but they've ALWAYS been about, Say one thing, do the opposite. Seriously: show me their smaller gov't, their less intrusive policies, their respect for individuals, their "free market". In their policies, they've shown they believe in the opposite of their perfumed, soothing words.
Can't blame PT Barnum because the rubes show up, again and again, and buy their circus ticket. If you don't like being suckered, stop believing their poll-tested bromides. (shrug)
I think the TSA was the first step in this process. They broke the script that passengers be treated as Americans. Once the TSA made it okay to be defecated on for whimsical, nonsense reasons, the airlines shrugged and said, "Let's see what we can get away with!"
@PageEris: that doesn't necessarily mean they're paying more either though. when the price of oil jumps the price of gas immediately jumps. when it falls, not so much. i mean oil closed under $100 or something near in the past few days. we've still got prices reflecting the $140/barrell at the gas station. that price drop has been going over several weeks now and the gas stations still haven't caught up with it. it's not necessarily because of a lag between purchase and use.
barrel* so glad i can spell...
Well of course those fees remain. Just like when presidents are awarded more powers they rarely give them up, airline customers have become 'accustomed' to additional fees, so the airlines have no reason to discontinue them.
OK, let's clear the smog and the grime off the monitor windows by saying two words; FUEL CONTRACTS.
The majority of the airline's fuel contracts were expiring around the time Jet-A was peaking around $4.95 - $5.00 a gallon. It still is around that price in some regions, some higher than others. They HAD to go into new contracts with little or no option at all. They are stuck right now at that rate for 2 years or maybe even one now.
This is the main reason why SW is running so cheap at the moment, they went into 5 year contracts and are in the middle of it at the moment.
I have to wish Southwest the best of luck. I'd go with them in a heartbeat, but I don't fly anywhere.
@lincolnparadox: Even as a Democrat, I could agree with what you said, up until the last paragraph. You lost me as to how that would help, seeing as how the big companies are failing left and right.
@mjschmidt: To add to mjschmidt's comment, things are starting to look up for Canadian air travellers. Besides the announcements by Air Canada eliminating the second bag fee and showing the fuel surcharges in advertising, Canada recently passed a version of an air travellers' Bill of Rights.
I originally sent the following to consumerist, but for some reason they decided not to post it:
As reported on the CBC [www.cbc.ca] airlines must:
- ensure terms and conditions of carriage are easily available to passengers
- ensure travelers are notified of delays or schedule changes
- find alternate seats (on their own or other aircraft) or refund unused portions of fares for overbooked or canceled flights
- provide meal vouchers for delays exceeding 4 hours, or hotel rooms (and transfers) for delays exceeding 8 hours
- provide drinks and snacks for passengers stranded on planes on the runway; if the delay exceeds 90 minutes, passengers must be given the option to disembark
- must deliver delayed baggage to passengers
- must provide overnight kits when luggage is delayed
These requirements do not come into effect if the delay is due to inclement weather or "acts of third parties".
The official government press release is at [www.tc.gc.ca]
This sounds like a great development for Canadian travelers. It sounds like it covers all carriers departing from Canadian airports, i.e. not just the Canadian carriers Air Canada, Westjet etc. Maybe this will add to the pressure to introduce a similar program in the U.S. (and elsewhere). There are some caveats (see the government link), such as the hotel stay will only be provided to passengers who did not originate their travel at that airport, but by and large they appear reasonable.
High prices and airline hassle are two reasons why a lot of east coast business travelers are taking Amtrak more often. Yeah, it may take longer, but it also may not. My boss has to occasionally travel to Boston from Philly. The last time he went, he chose the train instead, which actually took him less time because flights are always delayed out of Boston. Even if the flight wasn't delayed, considering the extra time involved in traveling to/from airports, security, baggage check, etc., the train was still only slightly longer time, but a hell of a lot cheaper, more convenient to his home and the place he visited in Boston, and as the poster above put it, he didn't feel like a suspect.
@Fly Girl: I wish this was getting more MSM attention. The reason for these fees is so they can list as less on sites like Travelocity and Expedia, etc. I wish those site would incorporate the taxes and surcharges etc. in their listings. If they did it the airlines wouldn't have to worry about hiding that info.
@The_Gas_Man: "And true, the airlines probably won't remove those fees for a long time (if ever), but you can't blame them. If they quickly remove the fees, people are happy, but then the next time oil prices rise and they reinstate them, people will go bananas all over again. It's better for them to leave things alone."
No, the realistic outcome would be holding the fees even though the oil prices come down, then kicking them up again the next time they shoot up. The only way those fees will come down is if they start actually competing for travellers. You know, that fabled "free market capitalism" we keep hearing about but don't really ever see?
These fees were thinly veiled, "standard" price raises the whole time. Perhaps flying would be more palatable if the windows DID open.
@Haltingpoint:
That's why you should use farecast.com instead. All costs are included, so the prices you see are the real final prices.
Since microsoft bought them up, some of the booking links lead to orbitz instead of directly to the airline's page, though.
For example: I just compared a jetblue flight for $456.99 on orbitz to the same exact flight on jetblue.com for $420.00
I always book with the airline directly.(:
I've been saying this for over 2 years now - let's boycott the stinking airlines! Too many people flying too many places for poorly thought out reasons just because we CAN? These assholes have made us into a nation of masochists who PAY to get their torture on. Pathetic.
@Fly Girl: seriously--it's pathetic! When I was buying tickets for an upcoming relocation to a Central American country, it was the same thing. Some airlines were worse than others, but don't tell me the ticket will be $300 and then suddenly triple it with add-ons. The least they could do is let us know up front to bend over, but then again I guess we should pretty much expect it by now.
*sigh*
I flew Southwest MDW-LAX last weekend and it was a total dream flight. Quick, efficient, free unlimited snacks and beverages, and the flight attendants were super nice. No additional fees of any sort.
This weekend I flew AA ORD-DFW and it was just disgusting. $4 for a cookie, $6 for some stale crackers and cheese!? I didn't partake, but those next to me did. It was rancid.
Hurrah for SWA and a swift kick in the pants for the idiotic fee-tacking-on airlines.
Totally unrelated, but this reminds me of my property taxes. They reassessed the value of houses in my neighborhood about 2+ years ago and my house jumped about 30k in value. This was at the height of the housing bubble. Now the bubble has burst, and houses are going for a lot less, but apparently I am permanently locked into a 30% property tax increase...
Well the Oil Prices on the market won't even hit till October, so maybe there should be a mass e-mail campaign for them to take off the price when it does. I mean this is the 'futures' part of the market we are talking about. Also I was a .10-.15 per day increase since last friday. Price gouging anyone?