Jun 13 2008

More airlines charging for bags

Great. Recently, American Airlines changed their baggage policy so that they’re now charging per checked bag.

United and US Airways seemed to think this was a good idea, and have followed suit, according to this article on CNN.com.

At $15 for the first bag and $25 for the second bag per way, a trip can get pretty expensive! The most bags Shane and I have ever checked were two each. So uh, at these prices, we would have to spend $160 in addition to our ticket prices to check all that luggage. Wow.

I understand that rising fuel prices are mostly to blame. If people try to pack less, the plane will have a lighter load and thus, a better fuel economy. I totally get that.

But isn’t there a better way?

Southwest seems to have a good idea. They’re slowing down a bit, like, three minutes, and in a year’s time, they expect to save $42M, according to this article.

I feel like the airline industry is going to get a lot worse before it gets better. I expect to see fewer flights, and more people on those flights. Some are already charging for in-flight snacks (fine by me. I think those pretzels are pretty tasteless). And perhaps they’ll start charging for carry-ons, too. Who knows?

In the meantime, I really hope if this law is approved, Amtrak goes full-speed ahead to get an efficient rail system in place nationwide.



7 Responses to “More airlines charging for bags”

  1. I agree, pretty sucky! And it will make the lines for security – with carry-on luggage – awful!

    In terms of the price, though, don’t you mean $80? Since 2(15+25) = 80.

  2. I think in terms of price, she did calculate right. Your math is right, but that would just be for each of them to check two bags one way. Same price would apply on the way home as well. Expensive!

    I booked my Christmas flights already so that I beat the deadline and hopefully won’t have to pay the extra baggage fee. Of course, I also booked with miles, so the flight cost me $10… however, as I put that to my mom, that would mean I would have to pay 150% more for one bag. :)

  3. I was actually reding in our local newspaper today that US Airways starting Aug. 1. 2008 will also start charging $2 for a non-alcoholic beverage too! This applies to coach seats only…(I am cheap , so that is the only way I fly!!)

    All these nominal fees really start to add up when your a traveling with your family….kinda stinks!!

    Miss Mommy’s last blog post..The Big ‘Ol Box of Bills……

  4. Big sigh.

    Even though gas is more expensive than it’s ever been, it seems like within reason, driving might be the way to go (unless you’re going coast to coast, I guess).

  5. Oh that’s not good news–just what we need, higher prices. THough I suppose the gas prices are hitting the airlines hard too.

    Michelle at Scribbit’s last blog post..A Mermaid Cake and A New Crush

  6. Great post, Kacie!

    It’s funny because as I was booking my US Airways flight YESTERDAY, I wondered if they were one of the airlines that started charging for baggage. And in my laziness, I shrugged it off and decided to check up on it later. Today, I was just browsing fellow finance blogs and I found this great post. I definitely agree that airlines need to find innovative ways to save money (like Southwest) in order to thrive!

    Brian @ beechin’s last blog post..5 Steps to Raise Your Credit Score

  7. Finding innovative ways to save, a la Southwest, will only get the airlines so far. The $42 million Southwest projects to save as a result of flying a little slower is a mere drop in the bucket compared to the fuel costs of the big airlines. United Airlines alone spent over $5 billion on fuel in 2007. According to a company press release, fuel costs represented 57% of the company’s operating expenses during the first quarter of 2008 – up from 26.2% during 2007. There are only two ways the airlines can cover the increase in expenses due to fuel – raise prices to increase revenue, or cut costs.

    The airlines have been slashing costs left and right. United recently announced plans to retire nearly 20% of its fleet (to include all of the company’s 737s, which are fuel hogs). If memory serves, the big airlines have turned baggage handling, jet service (cleaning, restocking, etc.), and even maintenance over to contractors as much as possible. Contractors, of course, cost less in the long run because the airline does not have to provide benefits such as health insurance or a pension/401(k)/whatever retirement package.

    The airlines are doing far more than outsourcing, of course. When an airline files for bankruptcy it doesn’t just restructure its debt, it can also file to have a judge force the unions representing company employees to accept pay and benefit cuts. This happened with United. I can’t remember if it happened with Northwest and Delta, but if it didn’t then only because the unions agreed to accept pay and benefit cuts under threat from management to seek a judge to force the cuts.

    Another way to slash costs is to reduce the number of hours your aircraft are flying. We’re seeing that now. All of the big airlines (and I would guess all of the little to midsize guys) are reducing the number of flights. Some airports in Alaska, and sparsely populated areas in the contiguous (sp?) 48 are losing airline service altogether as companies decide those routes are either not profitable, or that a federal subsidy intended to keep service to those airports does not provide enough money to offset dramatically increased costs.

    Cutting costs only gets you so far, however. Maintenance must be performed, landing fees paid, payrolls met, etc. The airlines have been cutting costs for decades. There is no way for them to cut enough costs to make up for a multi-billion dollar increase in fuel expenditures. The only option left is to raise prices. While I would personally prefer to see all surcharges and snack/meal charges rolled into the ticket price, I highly doubt that will happen anytime soon.

    While I enjoy flying Southwest, there is no magical formula that allows them to have lower costs than other airlines. It’s quite simple, really.
    1) they have a person, or group, who are very, very good at fuel hedging. Fuel hedging is when you buy fuel months ahead of its scheduled delivery at a cost you and the broker agree upon. Southwest has been able to lock in huge amounts of fuel at prices that ended up being significantly less than the market price at the time of delivery.
    2) Southwest only operates Boeing 737 aircraft. When you operate a single type of aircraft, it vastly simplifies maintenance. I do not know offhand, but I would guess (as a person who has grown up in aviation) that the 737-300, 737-500, and 737-700 (the three variations operated by Southwest) have a parts commonality of around 70%. This substantially lowers the amount of money they need to spend on spare parts. Furthermore, it takes less people, and less time, to maintain a 737 than a 747. That is X fewer people on the payroll, Y fewer hours worked per person per aircraft, which translates into Z fewer dollars in wages per aircraft.
    3) Southwest does not fly internationally as of yet. International destinations (with the exception of Canada, Mexico, and the Caribbean) require larger aircraft, capable of carrying more fuel. Even the 737-700HGW variant will only be capable of transatlantic flight. Further, pilots unions have generally required that pilots of larger aircraft be paid more than pilots of smaller aircraft and international pilots be paid more than domestic pilots.
    4) If memory serves, Southwest does not have pensions for its employees. Defined contribution plans such as 401(k)s are substantially less expensive for a company than a pension. According to one source I read online, pensions cost a company 2-8 times as much as a 401(k). Companies such as United, American, etc., have many retired employees receiving pensions – a cost that does not go away until those retired employees die off.
    5) Southwest avoids flying into a number of large airports, and flies into smaller airports close by. This saves them money in landing fees, infrastructure fees, and the myriad of other taxes and fees levied on airlines by the authorities who manage airports. Flying into smaller airports won’t work for the big boys. A 747 technically needs around 7,000 feet of runway (I think it’s closer to 6500 at standard temperature and pressure), but if memory serves, U.S. airlines want 9,000 feet for unrestricted operations (meaning no weight restriction) and to allow for the variables that increase takeoff and landing distance such as temperature, pressure, runway gradient (meaning how much friction the tires will ‘feel’ due to ice, rain, dry pavement, etc.), and emergencies which may arise such as loss of an engine. Not to mention most midsize airports don’t have the jetways and baggage infrastructure to handle jumbo jets.
    6)Southwest is a ‘no-frills’ airline. If you offer no frills, then you don’t have to shell out for said frills. No frills is fine for short flights, but can you imagine doing a no-frills flight from Newark, New Jersey, to Singapore (scheduled flight time: 18 hr 40 min)?

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Hey! I'm Kacie, wife to Shane and mother to Jonathan (7), Vivienne (5) and Amelia (2) . I write about my family's finance: how we save money, improve our spending, and plan for the future.

I hope I can inspire and encourage you to improve your situation. See disclosure.

I'm adopting a much slower-paced posting schedule, and treating this as a hobby blog now.

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