“Unbundling” is a brazen lie and it’s time for the travel industry to come clean

By | September 28th, 2013

It’s been five short years since the airline industry, led by an ailing American Airlines, quietly stripped the ability to check your first bag at no extra cost from the price of an airline ticket — an act given the antiseptic name “unbundling.”

At about this time in 2008, passengers were beginning to adjust to a new reality, as other airlines eagerly joined in separating their luggage fees from base fares. Now, they’ve finally accepted the fee revolution, according to most experts.

An airline ticket doesn’t have to include a “free” bag or a meal, no more than a hotel room should come with the ability to use the hotel’s exercise facilities, or your rental should cover the cost of a license plate. And that’s the way it should be, they say.

Well, the experts are full of it.

It’s time to call unbundling by its proper name: misleading. Separating anything that was historically a part of the product is problematic, in and of itself, because it confuses consumers.

And the travel industry pulled a fast one on top of it. Some companies, notably airlines, promised customers that unbundling offered the “flexibility” to pay for only what they use — and nothing more.

But there’s no convincing evidence that they lowered their prices when they unbundled, which is what should have happened. Instead, they just added new fees to their rates, undermining their argument that they were helping you. Helping themselves to more of your money is more like it.

The numbers are truly staggering: Airlines collected $27.1 billion in fees and other “ancillary” revenue last year, up nearly 20% from 2011. Other sectors of travel are doing their darnedest to emulate this so-called success.

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Truth is, there’s a growing sense that unbundling, at least the way the travel industry has done it, isn’t right. Not only did the airlines implement these extras in a dishonest way and then resort to telling half-truths when explaining them to their customers, but they also often fail to adequately disclose unbundled fees before a purchase.

“People want fair,” says Sally Greenberg, executive director of the Washington-based National Consumers League, “and many of these fees aren’t fair.”

That’s not how travel companies see it, and they’ve done a masterful job convincing some customers that travelers want it this way. Toni Vitanza, a flight attendant for a major airline and a regular reader of this column, sums up the argument as a question: “Why should I pay, built into my base fare, for your headphones, cocktail, meal or, for that matter, for your checked bag when I actually know how to pack a real carry-on that fits under the seat in front of me?”

Of course, there are degrees of deception. Convincing travelers that their seat shouldn’t include an unpalatable airline meal is fairly easy. A confirmed seat reservation? That’s a little harder. Convincing them, when they check into a hotel, that they should pay a mandatory “resort” fee to use the pool or get “free” Wi-Fi? Good luck.

“Resort fees are a major scourge,” says Glenn Haussman, who works for a hotel industry trade publication. “I hate them with a passion, and they will not take them off even if you never use the pool or gym, which I usually can’t because I am attending a conference and working too hard.”

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When does unbundling go too far? When common sense tells you it’s wrong, say travelers. “It’s like a restaurant charging you for the use of glasses, plates and the table,” says Lillian Mizrahi, a talent consultant from Los Angeles. “Where does it end?”

Jay Sorensen doesn’t think it will end, and says we’re partly to blame. And he ought to know. His consultancy, IdeaWorks, advises airlines on how to maximize ancillary revenue.

“The trouble actually lies with the consumer,” he says. “Everyone says they will pay more for better service. But this rarely occurs in actual practice. I’d guess 75% of consumers today look for price first and last, 20% consider other product attributes and the final 5% always go with the best product regardless of price. If you are an airline, that’s a challenge, and it explains why most simply go the route of price.”

Sorensen is right. Actually, we’d rather not pay anything for travel, which partially explains why it’s so easy to be seduced by loyalty programs and the promise of a “free” ticket or hotel room. But that doesn’t necessarily mean we expect an airline seat to come without the ability to carry a bag on board (sorry, Allegiant and Spirit) or that we have to pay an extra fee so our car rental company can dispose of its tires.

The unbundling games must end. Travel companies have to clearly disclose fees up front when they’ve engaged in this creative and lucrative product-parsing exercise. In the end, it’s probably up to the government to define what is — and isn’t — included in an airline ticket, a hotel room and a rental car. Too bad it had to come to this.

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  • Richard

    In the end, the total amount collected by the airlines equals what their bean-counters, and the market analysts say they need to take in to keep their stock price stable and their investors happy. The problem is not the price per-se, it is the devious manner in which they make the price look lower than it actually is. Unfortunately, if they were to be up-front about the real price of a ticket, they would probably have fewer passengers – the discretionary travelers who would probably be scared away by seeing the real price clearly stated.

  • EdB

    “or that we have to pay an extra fee so our car rental company can dispose of its tires.”

    That is one of the many “fees” on car rentals that have always bothered me. Tire disposal fee. License recovery fee. etc. These are all known costs with maintaining a vehicle and should be built into the cost of the rental. Personally, I equate them with resort fees. You can’t opt out of them yet they don’t advertise them in the price

    Fees associated with getting a rental car at the airport I can somewhat understand. There are extra expenses associated with renting at the airport that you don’t have if you rented from a remote location. I don’t have as much problem with those fees as long as they are clearly presented ahead of time instead of a small blurb on the final rental screen where you could easily miss it.

  • Charlie Funk

    How many travelers stopped flying on AA when it implemented bag fees? Precious few. Other airlines saw there was absolutely no economic penalty to AA and implemented their own fees. Unless and until travelers decide not to be victims this silliness will continue. Don’t like a policy or practice of any supplier – VOTE WITH YOUR WALLET. Patronize merchants that don’t have onerous practices. Punish offending suppliers by denying them revenue and make sure the supplier knows exactly why you don’t do business with them anymore.

  • backprop

    I don’t care for unbundling in most scenarios, but the article misleadingly characterizes certain behaviors and fees as ‘unbundling’ when in reality they’re entirely different animals.

    Resort fees is one example. The difference between unbundling and resort fees is easy to see: resort fees are mandatory.

    The other hyperbolic examples are made-up things like restaurants charging for the optional use of dinnerware, and rental cars giving you the option of having license plates (at least I hope they’re made up). Those are not unbundling, and neither is the example of paying a fee so rental car companies can dispose of tires. Those are junk fees, and worthy of a separate article and readers’ scorn.

    I think unbundling is a totally legit topic to debate (I personally do not like it in most cases), but poisoning the pot by lumping in junk fees does not help.

  • SoBeSparky

    Factual error: The low-cost carriers started this, not American, in 2007. According to “Baggage Fees A Game Theory Perspective,” Spirit and Allegiant began the fees and highly advertised the lowest prices in their particular markets. Bowing to competitive pressures, as most casual flyers pick an airline on lowest price, almost every airline instituted fees in 2008 to lower their “sticker price,” so to speak.

    As others point out, given inflation and cost pressures, we still are paying far less for air travel in including baggage in most competitive markets that we did years ago.

    If you want to solve this advertising and pricing problem, get it legislated. No one owes anyone a refund.

  • Not really. Unbundling on a large scale didn’t happen until American Airlines added a fee for the first checked bag.

    By the way, this column, which first appeared in USA Today, isn’t written for the aviation geeks and insiders — it’s for the average passenger who knows there’s something wrong with the way travel is sold, but can’t quite understand why.

    I’m here to help them see the deception.

    I know there were one or two obscure airline bloggers who didn’t like this column when it first appeared. If they want a debate, maybe they should get their own column on a high-circulation news site and write an ode to airline fees. I think that would be fun.

  • Jeanne_in_NE

    “It’s like a restaurant charging you for the use of glasses, plates and the table,”

    Well, that’s rather normal in places I’ve gone in Europe, especially Italy – a table charge. But I wasn’t required to tip, there, either. I see it as a fair trade.

  • Extramail

    Before I take a “vacation” I weigh the drive vs. fly costs and then choose. I did it before fares were “unbundled” and I’ve done it after. But, it is true that it has become much more difficult given the lack of straight forward pricing strategies with all segments of that vacation expense. Two things really piss me off: flyers have learned, especially with delta, that they can bring a bag to the gate and gate check it for free and resort fee add-ons that I never use (who goes to the exercise room on a vacation?). Just give me the bottom line price: tax, tag and title before I have to hit the purchase button!

  • BillCCC

    There is no chance of any refunds being delivered so don’t hold your breath. The only way to get rid of these fees is to stop paying them. Either by travelling light or refusing to fly on airlines or not frequenting a business that has these fees. As a consumer your only power is the pocketbook. If you don’t use it you lose.

  • Alan Gore

    There’s nothing wrong with unbundling, so long as it applies to services that are truly optional. Resort fees are evil because they are a mandatory, non-separable part of the hotel rate, and should be included in the room quotation. We don’t all want the airline meal or to check bags, so those can be considered options. So if a checked bag fee causes everyone to carry too much onboard, whet’s next? If you charge for carry-ons AND the first checked bag, that may solve your cabin cram problem, but you’re back in mandatory ripoff territory again.

  • jherrmannmt

    When it is possible, I ship my stuff UPS. The cost is the same but I am denying the airline the money and I feel good about that. I try to take Southwest whenever I can that doesn’t charge for bags. (I don’t travel for business). And I would rather walk to my destination that pay one of those ripoff airlines that now charge for a carry-on.

  • Travelnut

    Yeah, I was never quite convinced that “unbundling” of the baggage fees actually reduced the base fare by any substantial amount, nor that the $30-$50 charge was a fair unit price for the activities associated with baggage handling – airline employee processes at check-in (about a minute of their time), transportation costs (gasoline and vehicle costs) from the terminal to the aircraft, loading the bag into the plane, transfer to other flights, tracking the bag, unloading at the final destination. These do take time, but not that much time per bag and $50 doesn’t feel right to me. Plus, maybe Rick Steves can pack three weeks’ worth of clothing into a teeny carryall, but as a woman I find that not realistic. I can usually pack a carryon but I definitely make some sacrifices and hard choices for what I can’t bring along. Also, depending on where you live your choice of airlines can be limited. I am flying SAT to MIA in January. Southwest doesn’t fly there, and in San Antonio your main choices are Southwest, American (ugh) and United (double ugh) because of the hubs in Dallas and Houston. So it’s easy to say vote with your feet but it limits your choice of airfare and schedules quite a bit.

  • Charles

    ““Everyone says they will pay more for better service. But this rarely occurs in actual practice. I’d guess 75% of consumers today look for price first and last, 20% consider other product attributes and the final 5% always go with the best product regardless of price.”

    That is absolute total nonsense. Spirit Airlines has the worst service in the industry (maybe on the planet) and lots of really egregious extra fees. And, they have a 1% market share. If 75% of customers purchased ONLY on price, why would they pay extra to fly Delta or United over Spirit? Yet, most people do. There are tons of cheaper Ketchup brands, yet Heinz has a 60% market share. If price were all that mattered, there would be no Hiltons or Weston’s, just Days Inn and maybe Ramadas. Given the same product, price will win most of the time, but you are not telling me that 75% of consumers will consider Spirit and American Airlines to be comparable products when shopping for airfare.

  • EdB

    Just as a general comment to all the posts about not seeing the fares go down when the baggage fees were added, the argument from the airlines and apologists I heard was of course the fares didn’t go down. The new fees were added to keep them from going up more than they were.

    I can understand some merits to that argument, but not sure I buy it completely.

  • Helio

    Several years ago, one of the miraculous economic plans of Brazilian government ordered to frozen all consumer prices. In order to survive, the businesses became creative in find ways to increase their prices. At least one restaurant replaced its linen napkins by paper napkins. If you want linen napkins, they charged you for it.

    Fortunately, it didn’t last long.

  • EdB

    But what size of the market is the routes they cover? You can’t compare their market share to the entire market because they don’t cover the entire market. A more meaningful number would be their market share of passenger miles traveled in comparison to the routes shared by the larger airlines. I’m sure it would be greater than 1% but I’m also sure it isn’t anywhere near 75%.

  • Bill___A

    I really really hate these unrealistic poll questions. Rather a completely pointless proposition. What would it do to the industry if they were to “refund” these fees? Nothing good. The unbundling is bad. The fuel surcharges are bad. Tipping is bad, and resort fees, criminal. The reason I said the resort fees are criminal is that they are forcing you to pay extra for something whether you use it or not.
    The reason that we are influenced by consumers stupidly going for the lowest price is because the industry decided to lure customers by the lowest price. If everyone included what’s supposed to be included and did it consistently and fairly, we wouldn’t have a problem. Consumers became fickle over this stuff and the industry were the enablers.
    Businesses constantly create problems and then have to find solutions to them.
    At the end of the day, we need profitable, safe airlines. And people who can’t afford to pay the price to support that shouldn’t be flying.

  • NE

    I don’t begrudge the airlines their fees. After years of billion-dollar losses, they clearly needed to raise their fares. When I was a college senior in 1979, I flew UAL on a job-hunting trip from EWR to SFO. The fare was $269 (and the inbound was a red-eye!). With
    inflation, that ticket should be well over $800 now, but you can still fly that same route
    today for about $350. I’d rather have to pay an extra $50 to $100 for
    services that I decide are important to me if it helps keep the base fare from climbing.

    Furthermore, I think the issue of “disclosure” is a red herring. Every ticket I’ve bought recently on a an airline’s own site has been very clear about the fees. Not sure about the third-party sites, but I don’t typically use them.

    (But I draw the line at “mandatory resort fees”…. that’s a total scam).

  • Judy Serie Nagy

    You and Jay Sorenson are right, Chris … most American travellers look at price first, it’s in our genes. For instance, we’d all like to support family businesses but we buy a new TV at WalMart for 40% less. I’m pretty much against “regulations”, but airlines and hotels should be required to publish a clear list of the extra charges adjacent to the price quoted. People can make up their own minds. I always refuse to pay a resort fee at checkout unless I’ve used some of the services, there’s no way to do this with an airline, since you pay up front. Learning the system ahead of time is the only solution; ie free bag or priority boarding with an affinity credit card.

  • EdB

    “but airlines and hotels should be required to publish a clear list of the extra charges adjacent to the price quoted.”

    That should be required of *ALL* businesses, not just airlines and hotels.

  • Carver Clark Farrow

    Comparing mandatory, unavoidable fees like resort fees with baggage fees is disingenuous at best.

    But it does bring an interesting point. Suppose an airline is about to raise its prices. What’s the best way? Do we raise the price across the board for all customers, or give customers an opportunity to avoid the price increase by making choices?

    That’s the real question.

  • Carver Clark Farrow


    In college I paid $450-$500 to fly home to the Caribbean. That was almost 30 years ago. I paid $350 a couple years ago.

    And resort fees have no business justification whatsoever. Not even a little bit.

  • Carver Clark Farrow

    Its about commoditization with a comparable space. If consumers perceive an item to be undifferentiated between brands then price becomes the over riding concern. That’s why produce is almost never sold by brands.

    People perceive Heinz to be better than others and as such they have prevented the commoditization of ketchup to some degree.

    Many consumers do not distinguish between American, Delta, United, etc. But many consumers do distinguish between Spirit and other airlines.

  • Cybrsk8r

    Yea, I guess that’s true. AA was such a horrible airline already, anyone who was going to bail on them already had.

  • MarkKelling

    It is true that where you are and where you want to go determines which airlines you can use, but it is possible to work around those issues in some cases.

    I fly into Houston a lot. Southwest (WN) uses HOU while most of the other airlines fly into IAH. There are many advantages to flying into HOU (lower rental car taxes, lower parking costs if you leave your car at the airport, much smaller airport so easy to make connections, etc.). Unfortunately if you are making international connections, you have to go into IAH which WN doesn’t do.

    Using your example. Is there some reason you must fly into MIA and can’t use FLL? They are only about 30 miles apart and WN does fly to FLL from SAT. Picking random dates in January, all three airlines (UA, AA, & WN) have fares of approximately $400 for a round trip. Adding in baggage fees, Southwest wins this one on price.

  • SoBeSparky

    If you feel I am a geek or insider, you do not win readers by insulting them.

    You say, “Not really.” I say,you are deceptive, ignoring two upstarts which got a lot of free publicity by unbundling in 2007 and advertising the lowest possible fares.. Spirit and Allegiant are “really.”

    Economics 101 is not geeky. It is what we live with every day. The above noted Berkeley (faculty.haas.berkeley.edu/rjmorgan/…/Garde%20Final%20V%205.0.pdf) paper notes: “With almost no growth in average ticket prices on the revenue side and sky-rocketing costs of fuel on the cost side, airlines have been forced to look at alternate sources of revenue. This section summarizes the different ways in which airlines have gone about achieving this.” Legacy airlines, under severe pricing pressures, followed, not led, the transition to “unbundling.”

  • joannep2bc

    Chris, as always, you hit the nail on the head. The only way we are going to extinguish the gouging is by not participating. As a principle, I will NOT stay at a hotel with a resort fee, even if the “advertised” price is enticing. If I am booking direct with a hotel, I will ask the reservationist to tell their management that this is the reason I am choosing not to stay at their property. As for the airlines, I am tired of “a la carte” fees too and for that reason, I will not be flying with Allegiant again, despite their low advertised “pre” a la carte fees. I am so sick and tired of the greed and deception and I feel the same about grocery items that continue to get smaller in volume while disguised in packaging with hidden space. (eg. a peanut butter jar with a concave bottom) To all of the CEO’s that may be reading this column, we are not as naive as you believe us all to be. If your costs are increasing and you need to increase your prices as result, do so and advertise your bottom line selling price.
    I will then make the decision to purchase or not but as soon as you deceive me, you have lost me as a customer for good.

  • I don’t see where I called you a geek or an insider. If you feel offended, please re-read my comment carefully.

    Unbundling dates further back than 2007, of course. The “discount” airlines like Ryanair and Spirit did it, but it was considered a fringe practice until American adopted the first-checked-bag fee. That’s when it really took off.

    Check the BTS charts for baggage fees and ticket change fees to get a good illustration of the fee revolution.

    Obviously, I’m looking at unbundling from a customer-service perspective, not an economics angle. And from a customer perspective, it is an unmitigated disaster. Airlines are lying to their customers — no two ways about it. (Parenthetically, the airlines industry’s bottom line is absolutely no concern to me as an advocate. I’m here to support customers, not airlines.)

    On a related note, I love the way some critics tell me that if I just took the time to “understand” the airline business, I would be less critical of lying … er, I mean, unbundling. What nonsense.

    If the airline industry is so complicated that it needs to be “explained” to passengers, then there’s something wrong with the industry, not passengers. We’re absolutely entitled to a straightforward, unambiguous price that covers the entire cost of air transportation.

    Looks as if most readers agree with me today. Two-thirds want their refund. Count me among them.

  • Douglas Rice

    This leaves out an important point. Airline fares, adjusted for inflation, have fallen approximately 50% over the last 30 years, and the fees make up only a tiny difference (The Atlantic has a good article with graphs on this at http://www.theatlantic.com/business/archive/2013/02/how-airline-ticket-prices-fell-50-in-30-years-and-why-nobody-noticed/273506/). Airlines lost tens of billions of dollars in recent years; no business can survive like that. I have no problem with paying for what I use, if I get what I want. If I don’t check a bag, I don’t pay, and that’s fine. If I do check one, it costs the airline more and I should pay more. There is nothing deceptive about this as long as it’s clearly disclosed. That hasn’t always been the case, but in my experience the airlines are now doing a pretty good job of disclosure. The price for keeping such historically low airfares is that not so much will still be included for free. I’m fine with that; in 1999 I was paying $1500 for a round-trip midweek economy class ticket from Chicago to New York, that is usually now around $250 to $400. Add $50 roundtrip for a bag and this is … somehow deceptive?

  • You’ve just articulated one of the airline industry’s most seductive arguments: that somehow, because we want lower prices, consumers are responsible for the industry’s inability to earn money.

    Riiiight. Name just one business on Earth where consumers want to pay more.

    You can’t blame passengers for desiring a low fare. But buying a cheap ticket is not a license to slam us with junk fees.

    For two generations — two generations! — we’ve been told that an airfare includes two checked bags, a meal, a drink and a confirmed seat reservation. From almost one day to the next, the major carriers eliminated all that with almost no disclosure. (And no, a link to a “fees” page is not adequate disclosure.)

    What’s the cost of a confirmed seat reservation? What’s that? Did someone say “nothing” How about the cost of a boarding pass? If it’s on your cell phone, it costs zip.

    I’d love to see an airline make a case that it actually costs $25 or $50 to fly your checked bag. If that were really true, then every airline would also charge us for carry-on bags. What’s the hold-up, guys?

    To consumers, these “gotchas” are no different from resort fees or tire recovery fees, and again, not to put too fine a point on it, I’m writing this for the consumer, not the aviation geeks who like to troll my site.

    No two ways about it — these are predatory, avaricious anti-consumer junk fees.

    I’m perplexed by this idea that somehow, we’re “subsidizing” the cost of someone else’s airfare when it’s bundled.

    When I think of subsidizing, I imagine a flight attendant coming down the aisle and saying, “OK folks, we’re flying with a few empty seats today. So everyone’s going to have to pay extra so we can make our revenue goals.”

    On a related note, where are the defenders of the car rental industry and hotel industry? Why do the airline apologists assume this story is about them?

  • TheScienceEnthusiast1130

    @Christopher Elliott

  • Douglas Rice

    I didn’t say anything about their costs. I said they couldn’t make money before, and that’s a fact, despite cost-cutting measures that were extreme. On leisure trips I’m paying about the same as I did (in inflation adjusted dollars), even with fees, as I did 20 years ago. On business trips I am paying far less. That is a simple fact, and evidence that the changes were not all bad. (Having said that, I would say that in terms of service, the changes WERE almost all bad.)

    You’re right, there’s no industry where consumers want to pay more. But there are many if not most industries where consumers pay based on the value of the goods or services TO THEM, not on (or at least not JUST on) the cost to the producer. Some consumers value lower airfares more than a good seat, other people want the good seat and are willing to pay a little more. Why should people who want cheap fares pay for services that only other people want?. This is pro-consumer?

    By your argument, when I eat in a great restaurant with unbelievable food and ambiance, I should be paying based on the cost of the food, not on the value (to me) of the experience. If I acted that way, I’d always eat at McDonald’s because their food costs the least. I actually enjoy good food and atmosphere, so McDonald’s is for me a last resort at 3am when I’m starving, but that’s all.

    I like having choice. I can fly cattle class, bring food from home, travel with carry-on only, and pay less, or I can pay an extra fee (which is often but not always quite reasonable) for a roomier seat, a meal, and a checked bag. You seem to think choice is bad. I think choice is pro-consumer. I usually agree with your stances, but on this issue you’re dead wrong.

  • TheScienceEnthusiast1130

    Agreed. :)

  • backprop

    “Why do the airline apologists assume this story is about them?”

    Because the only real example of unbundling you give are related to airlines. For the other industries, the only examples you give are either not true examples of unbunding – they’re “resort” or junk fees – or they’re imaginary.

  • AJPeabody

    This column is tilting at windmills. There is no way to rebundle airfares, just as there is no way I can get toothpaste back into the tube. Money talks louder than columns.

    What is really going to get us in the future is the extension of yield management from maximizing the fare at the instant of purchase for that particular traveler to maximizing the yield from the add on fees. The more passengers that have paid in advance for luggage, the “fewer” spots for luggage left, the higher the per bag fee. Traveling to a resort with 3 kids? You’re going to need luggage and be less willing to cancel your vacation? Increase the bag fee. High income home zip code? Up the fee. First time with us? Lower the fee and get them to fly us (with higher fees) next time. Apply this to “preferred seating” and carry-on bags as far as your level of paranoia allows.

    And when this actually happens, just google “I told you so.”

  • Jeanne_in_NE

    Riiiight. Name just one business on Earth where consumers want to pay more.

    Coach handbags. Neiman Marcus. Waldorf-Astoria. Good seats at a concert. Private schools vs. public schools. Oldsmobile vs. Chevrolet.

    I guess it’s all a matter of perceived value. What is of value to me may not be of value to my neighbor, my friends or my virtual friends on this blog.

  • Ed Lawrence

    One thing that everyone seems to have not included is how the airlines have gotten away with adding fees, but not adding the responsibility for taking care of your bags. They still use the old rules and treaties to limit their liability. I’m surprised the law has not changed at all to account for this. In any other business, if you pay someone to take care of or transport something, they are bound by a whole case history of law to actually take care of it. But not the airlines.

  • Jeanne_in_NE

    I only up-voted this because I thought it was funny.

    I think people are being just a tad too literal here. I think Chris Elliott’s point is valid: he didn’t write this article for people with lots of expertise or experience or knowledge, but for the audience that regularly reads USA Today. The tone of the article would be very different for another venue. I and others may not agree 100% with what he says, but I don’t see that he’s calling any particular person on this blog a geek or an outsider.

    In the immortal words of Raven, “Chill, dude.”

  • Jeanne_in_NE

    Oh, I LOVE Delta for that! Since I fly out of a dinky, non-hub airport, I get dinky regional jets and no normal-sized bag can fit in the overhead bins. Delta cheerfully gate-checks my carry-on bag for free. I keep all my important stuff in my under-the-seat bag and zip tie shut anything that’s gate checked.

  • Carver Clark Farrow

    I’m perplexed by this idea that somehow, we’re “subsidizing” the cost of someone else’s airfare when it’s bundled.

    That’s easy. If the costs of a good or service is increased because of a good or service that I am not using, then its a subsidy.

    Or to put numbers (completely made up for illustration rather than algebraic Xs and Ys) Suppose it costs $30 to transport a checked bag. The airline has two ways to recoup that expense. Charge $30 to the person who wants to check luggage or raise everyone’s ticket by say $10 to spread out the costs.

    Should the airline choose the $10 option, then everyone who doesn’t check a bag is giving a $10 subsidy to those who check bags.

    While the $30 option is clearly the fairer option, the $10 option “feels” better.

    Its the same thing with food on a plane. There is no reason to give “free” food. Its just another line item to increase the costs of tickets.

  • Carver Clark Farrow

    Obviously, I’m looking at unbundling from a customer-service perspective, not an economics angle.

    How can we ultimately create good policies which help the consumers if we ignore any relevant factors. For example, we’ve ignored fiscal realities within the industry resulting in a truly dismal deterioration of travel quality for most people.

  • The problem is, you’re looking to apply logic to airfares and prices where none can be found.

    Thanks to yield management, the price of an airfare bears to relation to the actual cost of transportation.

    Also, the cost of a checked bag doesn’t make any sense — zero for carry-on, $20 if the same bag is checked, and $50 if it’s the second bag. But “free” if you have the right credit card.

    So, to say you don’t want to “subsidize” someone else’s fare implies the actual cost of your ticket would be higher to the airline if you fly with a bag. But if that were true, then luggage fees would consistently reflect that. They don’t.

    One other point is that many of the junkiest airline fees, like confirmed seat reservations, ticket change fees and boarding pass printout charges, actually cost the airline nothing at all. So you really can’t make a subsidization argument for those rip-offs.

    Let’s just call unbundling what it is: a lie. The airlines are throwing junk fees at the ceiling and seeing what sticks. What’s more, they’re doing it with minimum disclosure. In the minds of consumers, it’s no different than a resort fee or a tire disposal fee.

    This notion that fees are good for passengers is utterly preposterous. It is like making the argument that the American-US Airways merger is good for consumers. It’s pure spin, straight from an airline marketing department.

    Passengers know better.

  • It’s a little funny – on the one hand, you say you don’t want to “subsidize” someone else’s fare, but you are concerned with the welfare of the airline industry. That seems inconsistent.

    The health of the airline industry is absolutely no concern of mine. When times get tough, the airlines can — and do — reach out to our government for loan guarantees. That’s what happened after 9/11. We subsidized an entire industry.

    Actually, this illustrates the difference between a consumer advocate and an airline advocate. The consumer advocate is protecting the interests of customers. The airline advocate — and by the way, I’m not calling you an airline advocate, so please don’t be offended — is representing the interests of the airline industry.

    A few weeks ago, I made the mistake of calling another blogger an “airline apologist” in a private Facebook conversation. It was a violation of my own rules, to not engage in any personal attacks, and I apologized for doing it.

    But that doesn’t change the fact that this online personality too often represents the perspective of airlines, probably because he is a former airline employee. He and other apologists make unimaginative anti-consumer arguments that were probably developed by the marketing departments of the airlines.

    There is a reason their arguments don’t resonate with customers and why they remain obscure — because they are wrong.

  • BillCCC

    You are probably right but what I have been noticing for the last while it that whenever Chris receives comments that go against his beliefs he pulls out the ‘apologist’ ‘insider’, ‘geek’ ‘troll’ terms to describe a group of people. While not directly using that term on an individual, his meaning is pretty clear.

  • I don’t understand why anyone would be offended by that.

    I am an apologist for consumers, and I’m proud of it. My National Geographic Traveler column is called “The Insider.” Engineers affectionally refer to each other as “geeks,” “nerds” and “dorks” — and they often publicly call themselves that, too.

    Trolls are people who start arguments for the sake of arguing, and who among us hasn’t done that? In fact, some might say my site is an elaborate trolling exercise. That’s an interesting point of view.

    So if you’re offended by my rhetoric, you shouldn’t be.

  • Guest

    I’m a dorky, nerdy, geek and proud of it. I even spent several years in college to earn that title.

  • Carver Clark Farrow

    So, to say you don’t want to “subsidize” someone else’s fare implies the actual cost of your ticket would be higher to the airline if you fly with a bag. But if that were true, then luggage fees would consistently reflect that. They don’t.

    No. not really. It costs money for an airline to transport checked bags. The fuel costs probably remains constant for checked v. carry on. But the checked bag has to get from the ticket agent to the plane, be routed through a distribution system, then get from the plane to the baggage claim. That infrastructure obviously costs money.

    Thus there is a combination of fixed and variable costs at work here. The fixed costs are not subsidized by other passengers as everyone benefits from having an infrastructure in place. But the variable costs, e.g. the number of workers, is directly impacted by people carrying luggage.

    The error I believe is that you are trying to reverse engineer the cost structure from the pricing structure. Not an easy task

    One other point is that many of the junkiest airline fees, like confirmed seat reservations, ticket change fees and boarding pass printout charges, actually cost the airline nothing at all. So you really can’t make a subsidization argument for those rip-offs.

    I agree. I didn’t and wouldn’t. I am on record here as stating that those fees are merely money grabs/punitive measures.

  • Carver Clark Farrow

    You’re misreading way too much into my post. The airlines don’t need me to be concerned for them. What I am saying is that we run afoul of the law of unintended consequences when we take a myopic look at an issue. It merely polarized us into a “who has the most power ” fight.

    Just the other day, you posted a colleague’s article about ultimatums. He correctly stated that things work out best when we see things in terms of a win-win scenario.

    I won’t presume to speak about your field, but in negotiation, you get far more for the client when you figure what the other side’s issues are. Give them something that is worth a lot to them, but costs you a little. That’s why airlines give vouchers out like tap water. It satisfies most consumers and costs them peanuts.

  • Carver Clark Farrow


  • Travelnut

    From MIA I am boarding a charter flight to Cuba. That’s the only reason, otherwise you are correct, FLL would work out just as well. (And not to worry, I’m flying in to MIA the day before we leave so I won’t risk missing the charter… but on the way back I probably wouldn’t want to mess with getting to another airport.)

    Thank you for the information anyway! Southwest wins in almost any scenario. :) I’m happily flying them to New Orleans in a few weeks.

  • Travelnut

    LOL! Those nutty airlines. I agree, probably true to a point but I’m not completely convinced.

  • There you go! Say it like you mean it!

    Favorite 80s movie: Revenge of the Nerds.

  • Taylor Michie

    I agree with both of you. Personally, I’m of the opinion that unbundling is a good thing, even though many travelers may not realize it. It keeps fares lower, and allows passengers to cherry-pick the services that are necessary for them.

    I think it’s mainly a matter of opinion. However, it is a much less deceptive practice than that of resort fees, and I think it’s deceptive and dishonest to try and connect the two.

  • No, it’s fair. In the minds of consumers, an unavoidable fee — like a baggage fee or a seat reservation fee — is mandatory, and no different from a resort fee. Similarly, the parsing of “policy” and “rule” is lost on the average passenger.

    You have an advantage, my friends. Some of you know the aviation industry very well. Maybe you work in the business.

    But to the average traveler, this is the way they see it. I’m not doing a disservice to anyone by framing the issues like this, except perhaps to those who like “a la carte” pricing and want it to continue for all the wrong reasons.

    I won’t apologize for writing the column like I did. It did exactly what I intended it to do.

  • pauletteb

    Toni Vitanza comes across as the type of snide flight attendant who gives the field a bad name. It must be a terrible burden to be so perfect . . . not! Anyone in coach was already paying for headphones and cocktails (at least on domestic flights) long before this “unbundling” BS, so those points are nonstarters. At least with hotels, I can usually find a property that doesn’t charge a resort fee, but your departure/destination point can severely limit your airline choices.

  • pauletteb

    My tire dealer charges me a disposal fee when I purchase new tires because the state charges them. I don’t have a problem with that; it’s not a significant amount. But when you multiply that fee by the many, many people who rent a particular vehicle before it needs new tires, it’s pure profit for the rental agency.

  • Lindabator

    But, its NOT really mandatory – going to a business meeting to Chicago for the day, I won’t be checking baggage, so definitely NOT mandatory. I personally HATE the unbundling, but some of those things are really NOT mandatory.

  • Lindabator

    True – the fact is most people want CHEAP – and then complain because it is ALL they got. Really???

  • Lindabator

    Market share is the answer – Spirit doesn’t FLY everywhere Delta or United does, which means they don’t get as many bookings. But 75% OVERALL is an accurate response from more than one source – and it is SAD but I see clients who travel HORRIBLE flights to save a couple dollars. So no, service isn’t what matters to most fliers. (sadly for the rest of us!)

  • Lindabator

    FABulous answer.

  • Lindabator

    Excellent point! :)

  • Charles

    I looked at just a few routes on a day I’ll be travelling later this fall. I looked only a non-stop flights. DTW to LAS, a major Spirit route, Delta has five flights a day, Spirit has three. DTW to MCO, another Spirit specialty, Delta has 6 flights a day and Spirit as 2. Even though the Spirit flight may be cheaper than the Delta flights, Delta must be outselling Spirit ON THE SAME ROUTE! Is there a single route where Spirit has more flights than United or Delta? (Probably, but I don’t know what it is).

    Yes, there are people who will choose whatever airline to save a few dollars. But, I know of NOBODY who will fly Spirit unless it is a significant savings (at least $50 after all fees). Yes, the Spirit market share is less, but in markets where they have peer service, usually for less money, they are still flying fewer flights than the major airlines. There is a lot that goes into that. Name recognition, advertising, brand loyalty, loyalty programs, service quality, bad PR (especially Spirit), etc. all play a role.

    This idea that 75% is due to price only is nonsense. Probably closer to 25%. I could not find research on airlines, but the insurance industry has studied this and found that only 30% of customers choose a product primarily based on price. The 75% number is true for some things such as household products, but the same survey will tell you that most consumers can’t tell the difference between the brands anyway, so, while price wins, it does not really have much competition. I dare you to show a survey where the majority of consumers could not tell the difference between Delta and Spirit.

  • Michael__K

    It depends on the route. On a long haul international trip, it’s really not optional for about 95% of passengers.

    A few carriers now charge for carry-on bags. Even most business travelers on a same-day round trip to a meeting won’t be able to fit everything they need for the day in a (maximum) 16″x14″x12″ laptop bag. And of course, they have to be prepared for the possibility that they won’t get back the same day, regardless of their same-day return ticket.

    Why would a carrier advertise fares without a fee that will apply to 95+% of their passengers other than because it fools many of those customers into underestimating the real costs of the itinerary? If they merely want to incentivize passengers to travel ultra-light — and pass along the savings — they could advertise the bag-inclusive fare and offer those few passengers without any bags a discount or rebate.

  • Michael__K

    You don’t quite need to reverse engineer cost structures to demonstrate that current baggage fees (which don’t vary by travel distance and which — as Chris points out — are usually higher for bag #2 and bag #3 than for bag #1) can’t be designed to truly reflect the variable costs.

    Maybe that’s still okay, but not on the grounds that this un-bundling is more equitable from a “subsidizing other passengers” standpoint.

    (Personally, my main beef is that the improved disclosures are still subpar. You should be able to see and compare fares with all your fees for all your requirements baked in.)

  • Guest

    I use the “exercise room” (gym) on every vacation. Now chargingin for Wi-Fi- that really sticks in my craw!

  • E_Woman

    I use the “exercise room” (gym) on every vacation. Now charging for Wi-Fi- that really sticks in my craw!

  • Carver Clark Farrow

    Yes, you really do need to reverse engineer the fee structure to come to useful conclusions.

    I too was initially seduced and mislead by the fact that checked baggage fees don’t vary by distance. But on closer analysis I realized that I was simply wrong. The idea behind checked baggage fees is that it costs the airlines more than carryon bags. (baggage handlers, distribution system, etc.)The main distance dependent cost of transporting bags, whether checked or carry on, is fuel. However, whether a bag is checked or carried on, the fuel costs remains the same. As such, there is no justification for distance based pricing.

    The second realization is that airlines generally don’t charge fares or fees based on distance anyway, so why should baggage fees be any different.

    You do post a good point about the increasing charges for subsequent bags. Fortunately, any number of economic theories resolves this question. The law of increasing relative costs would appear to be the most appropriate one.

    But the previous paragraphs all smoke and fury signifying nothing. The question of unbundling baggage fees isn’t about whether the specific implication of a fee is fair to the person carrying checked bags. Airlines are happy to make a money grab wherever they can. Its about fairness to the person who elects not to carry a bag.

    Fundamental fairness states if you choose to refrain from a behavior which reduces the variable costs to a vendor, you should be able to receive an appropriate reduction in fare.

    Its the same as hotels giving a $0.50 credit for refusing the paper or other compensation for refusing housekeeping.

  • Michael__K

    The average checked bag is considerably larger and heavier than the average carry-on bag. Even when there are no baggage fees, most passengers prefer to bring carry-on-eligible bags on board. Larger bags are always checked up front. So, while it’s true that fuel costs are the same for a particular bag regardless of which compartment it travels in, the checked bags use more fuel overall, and moreso on longer flights.

    I agree with you that “Airlines are happy to make a money grab wherever they can.” The corollary to that is that these fees reflect what the market will bear, not variable costs distributed equitably among passengers.

    “Fairness” is a subjective judgement call.

    The hotel analogy would work if the standard airfare presentation included bags and passengers could opt out of the service to receive a baggage credit. As it is, customers are lured in with low fares and the fees are imposed at the point of service.

  • Carver Clark Farrow

    I think you missed some of my points.

    The claim is that since baggage fees are not based upon distance traveled they are not correlated to airline expense. To the extent that we are discussing that issue, the weight of the average checked bag is largely irrelevant to the discussion. The issue is the same bag checked, costs the airline more money than the same bag as a carryon. And that additional cost is not distance dependent. Remember, the entire discussion is about encouraging and rewarding individual behaviors.

    Now, if the airlines wanted to charge per weight, like UPS, then perhaps we’d have a different conversation.

    The corollary to that is that these fees reflect what the market will bear, not variable costs distributed equitably among passengers.

    That’s not what I’m saying at all. This is not about the fees charged to the passenger checking luggage but the ultimate reduction in price to the passenger who doesn’t check luggage. Consider. Why should the price of a ticket include food. I’d rather have a lower ticket and eat elsewhere. Its the same thing.

    Yes, fairness is a judgment call, but I notice you aren’t challenging the fairness aspects, but rather whether the underlying economics which I present are accurate. Perhaps fairness isn’t that difficult to determine.

    The hotel analogy is spot on. You’re conflating two separate issues, specifically how the fares are presented with the underlying cost structure. Consider: If a seat costs $100 +$30 for one bag. You could just as easily say $130 for the seat, and if you forego checked bags you get a $30 discount. The presentation changes, the underlying cost structure hasn’t, i.e. $100 for a seat without checked bags, $130 for a seat with a checked bag.

    The presentation is an entirely different discussion (negative checkoff) and valid conversation.

    Here’s the funny thing. Airlines would love it if all seats where quoted with one checked bag with the option to get a discount for foregoing checked bags. That system would be a greater windfall for airlines. Its been shown that relatively few people actively check the box to get the discount. Negative check-off are generally considered an unethical business practice, relegated to porn, gambling, and other unsavory businesses.

  • Carver Clark Farrow

    I’d be curious to know where you got the $95% number.

  • Carver Clark Farrow

    Words depend on context. Here is Silicon Valley, being a geek is a good thing. In High School, not so much. Same word, same underlying meaning, different effect. Context.

  • Carver Clark Farrow

    Go to a high end steak house. They charge separately for the veggies and starch. One restaurant I went to recently charged for bread.

  • Jeanne_in_NE

    We have a few of those high end places nearby in Omaha. Most of the clientele are businessmen on an expense account. I’ve been to a few of them and am not impressed with either the service or the quality of the food. Guess it’s because the big families who ran/run steakhouses in Omaha used to sell an entire steak dinner for $11 up until about 25 years ago. That included bread, mostaccioli, salad, steak, baked potato, glass of wine and a slice of cheesecake and every bit of the experience was fantastic. Prices are a little higher these days and don’t include the wine nor the cheesecake, but you can still get the meal I described for $18 – $20.

    So everyone here thinks that the price of a steak dinner should include bread, salad and a potato side of some kind because of that family and their steakhouses. Some of the steak house chains that have come here have had to adapt their menus and pricing in order to compete. If I go to one of those chains outside of Nebraska, I’m always surprised to see a surcharge for bread, etc.

  • Michael__K

    I think you misconstrued my points. I wasn’t advocating for negative check-off. There is no reason a no-bags rebate/discount shouldn’t be applied automatically. What bothers me about the status quo is that sticker fares cannot be compared on an apples-to-apples basis. You have to read fine print for every single vendor and do the mental math or build your own spreadsheet. As a result, customers are often misled into believing that the itinerary with the lower sticker fare is cheaper when it really isn’t.

    Regarding baggage fees, bags that are carry-on eligible are not representative of bags that are checked. These are two slightly overlapping but mostly very distinct sets of bags. The collection of checked bags cost more per unit to transport than the collection of carry-on bags. And that cost differential is larger for longer trips.

    Consider a valet parking lot analogy. This parking lot has a free area for bicycles and motorcycles, and a paid area for cars. Let’s say all vehicles and cycles have to be raised in an elevator to reach the parking level. It would be a fallacy to argue that the lift costs are the same for the paid units (mostly cars) as for the unpaid units (100% cycles). Maybe some motorcycle owners will prefer to park their motorcycles with the cars in the paid valet area and they may have an argument that they should be charged less than car owners, but that’s besides the point — that would analogous to the argument that roll-aboards and smaller items should be charged a lower baggage fee. (And the fact that they aren’t demonstrates yet another dimension where the fees are not designed to mirror variable costs).

  • Carver Clark Farrow

    You’re hung up on the supposition that checked bags as a whole weigh less than carryon bags. Which is probably true (although anecdotally less true lately) But that is completely besides the point.

    There is an economic maxim that states that the best person to pay a cost is the person who incurs the costs. Unbundling effects that maxim. There are two separate issues here which once again should not be joined. The first is checked bags v carryon bags. The second issue is allocating the checked bagged fees amongst those who check bags.

    I don’t believe that you are disputing that the same bag costs more as checked than carryon. Thus, it is axiomatic that the airline would prefer to incentivize people to refrain from checking bags if possible.

    A better and simpler analogy would be a simple restaurant that has free self serve parking but paid valet parking in the same lot. The business has to pay for the lot regardless. So the price of the lot ownership (e.g. acquisition, maintenance, security, etc) is built into the price of the meal. However, some fancy folks prefer to valet park. The restaurant doesn’t want to absorb that additional cost, and other patrons don’t want their meal costs increased because someone wants to valet, so it is appropriate for the valet to be charged to the person who valets.

    Now, it is a separate issue, how and how much to charge people who valet. That’s a question of allocation within the group of people utilizing this additional service. You might charge a flat fee, an hourly fee, exempt people who meet certain spending or frequency thresholds, charge additional for large cars (thanks San Francisco). You may charge just costs, or even make a profit.

    But that is a completely separate issue from valet v. self service parking different charges.

    Within the travel arena, unbundling of baggage fees has caused some travelers, particularly infrequent non-status passengers to with smaller bags which do not require checking. The savings to the airlines is two fold, 1) smaller usually equates with less weight, and 2)less bags to be checked translates to less usage of the distribution system
    At the end of the day this is really simple. Next year I lose elite status with American Airlines and the attendant 2 free checked bags . So, at 9am when I am packing for my noon flight. Do I take the small 22 inch roller board which I can carryon for free or the large 45 incher which will cost me $30. Today, I pack purely on convenience to me. Come next year, I will take the 22 incher whenever possible.
    The fee worked.

  • Michael__K

    The simple valet parking analogy fails because only labor costs (and capacity) matters in that example — heavier vehicles don’t cost more to valet park than lighter ones. As you point out yourself, encouraging smaller, lighter bags for fuel savings is a significant motivation behind checked baggage fees.

    I’m not sure what we’re disagreeing on. Yes, the fee works, crudely, in some scenarios (as you’ve described); there are also inequitable / perverse scenarios (as Chris and I have highlighted) where the fee doesn’t work so well.

    That’s why I agree with Chris that it’s misleading to use the subsidization argument. That argument requires you to selectively highlight some scenarios and dismiss others.

    You’ve argued that regardless, the fee is still fundamentally fair to the passenger with no bags. That doesn’t dispute anything I’ve written, and if the disclosures were adequate I’d be inclined to agree.

    But as it is, I completely agree with Chris that “a link to a “fees” page is not adequate disclosure.

  • Carver Clark Farrow

    If you don’t buy the subsidy argument, then why is it appropriate to only charge people who bring bags instead of including it in the price and spreading it out among all passengers and raising everyone’s price accordingly?

  • Michael__K

    Adequate disclosure is what I consider paramount and non-negotiable.

    It’s nice if the fee makes logical sense too, but that’s not strictly necessary. I can appreciate that sometimes there are benefits to simplicity, even if that has some perverse-unintended effects.

  • Carver Clark Farrow

    That we agree 110%. Adequate disclosure in consumer contracts is a nonnegotiable cornerstone of ethical business.

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