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Coming: More Fees from United, Southwest

Coming: More Fees from United, Southwest

What are referred to as ancillary revenues by the airlines, and nickel-and-diming by consumers, accounted for around $36 billion in 2012, up more than 10 percent from the previous year.

If plans by United and Southwest are any indication, travelers are likely to see comparable increases during 2013.

United: Fee Growth

In his presentation at the J.P. Morgan Aviation, Transportation & Defense Conference earlier this week, United chief Jeff Smisek enthused about his company’s prospects for both increasing fees for current products and for creating new products and services that can be sold as independent add-ons to the basic price of airfare.

The relevant portion of his presentation:

And our goal this year is to grow our ancillary revenue by 9 percent. We’re going to do that in two different pieces. The first is we’re going to improve how we offer the existing products and services we have today. And the second piece is to offer new products and services to our customers.

In other words, more aggressive advertising of United’s current ancillary services, and more fees for services that are currently free.

Southwest: More Restrictions

Southwest’s strategy is a bit different, although the outcome is similar.

At that same J.P. Morgan conference, Southwest acknowledged plans to “tighten some of the restrictions on our lowest priced fares sometime in 2013.”

What that likely means is that Wanna Get Away fares will no longer allow fee-free ticket changes, for which most airlines charge between $50 and $150.

Less likely but also possible is that Southwest would begin charging Wanna Get Away customers to check bags, restricting its “Bags Fly Free” promise to more expensive tickets.

Here’s what Tammy Romo, Southwest’s CFO had to say about the airline’s commitment to maintaining its no-bag-fee policy:

I don’t think our brand is Bags Fly Free, that’s not who we are. As I mentioned, our brand is the affordable fares that you get with Southwest and the friendly, warm service that you get from our employees. So I don’t think — an advertising campaign is not your brand. So at least, that’s my belief. And we’ll continue to look at our plan and adjust as we need to meet our financial objectives.

Many of Southwest’s longtime customers would argue that the “friendly” aspect of the airline’s brand image includes, centrally, its relatively fee-free approach to pricing. Romo’s remarks confirm that the former and future faces of Southwest will be very different. In the months ahead, Southwest flyers will no longer be free from fees.

Reader Reality Check

Disappointing, or just business as usual?

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  • Sarfa33

    Not really surprised, even about Southwest. “Ancillary revenue” AKA “nickel & diming” has proven too successful in the past few years — the writing has been on the wall for a while.

  • ai2160

    I almost exclusively fly southwest because they don’t nickel and dime customers. That’s the reason why they are one of the most successful airlines in the country and why people overlook their open boarding policy and endure their short segment flights. I would like Mr. Romo to define friendly/warm service? Do they sit in your lap to make you cozy? He is wrong. They are the kings of commercial aviation. If they forget why they are at the top of the hill and make these changes, they have along way to go down.

  • kevincrumbs

    I fly WN occasionally OAK – PDX when it’s easier than driving across the Bay to fly UA SFO – PDX (Premier Gold with UA). I don’t mind it because I know I don’t have to pay to check a bag and put up with the boarding process. If WN starts charging bag fees, I’ll just fly AS/QX instead and actually have an assigned seat and a free glass of wine. I think for a good amount of people WN is chosen because of the lack of bag fees and they’ll definitely lose some business if they implement bag fees

  • http://twitter.com/blueliner17 Steve

    I think you mean Mrs. Romo

  • jj23

    I think what the ancillary fees that UA is talking about is that they brought back the Premier Line and Door to Door Baggage service that they cut when the merger happened, not really new. It seems that the new UA is becoming more like the old UA since the CO style of things arent working as well.

    The only thing I have to say is Credit cards: The New Loyalty Program

  • http://www.facebook.com/leonard.dreher.9 Leonard Dreher

    Southwest at one time was the low price leader, today not so much. If they start charging for bags, look for a mass exodus.

  • http://www.facebook.com/edgar.numrich Edgar Numrich

    At least for now, Southwest is losing turf to Virgin America where they compete. WN has already (except on a few rare sales occasions) raised the lowest fare category by a LOT, and are abandoning markets (PDX-GEG). Frankly, in the last year or so, I find their business model confusing, especially charging for something that’s really no bargain (“A” status, for example).

  • http://www.facebook.com/neil.moldafsky Neil Moldafsky

    I recenty flew AirTran because they had the lowest fare. However, after I was charged and paid an additional $75 for baggage, I vowed never to fly AirTran again. This should serve as a caution to SWA.

  • http://www.facebook.com/vicki.murphy.56 Vicki Murphy

    I recently broke down and paid for early boarding on Southwest because I knew the flight was going to be full. I ended up in the “B” line. Never again will I waste money for “Early Boarding”.

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