Business Travel
Airlines To Package Fees
Into Annual Subscriptions
As add-on fees proliferate, the major carriers are offering deals to lock in customer loyalty.
By Martha Lynn Craver, Associate Editor, The Kiplinger Letter
December 28, 2009
- Comments
- Email This Article
- Print This Article
- Order a Reprint
Advertisement
A new twist on those extra airline fees: They’re being sold as subscriptions. United Airlines is the first to try it, letting travelers buy Premier Baggage. For an annual cost of $249, passengers can check two standard-size bags free whenever they fly. Coverage includes up to eight companions on the same confirmation number. Without a subscription, the cost of checking two bags on United is up to $50 each way, so the program makes sense for anyone who flies several times a year with checked baggage.
Other carriers will soon follow United’s lead. “American Airlines will come on strong with subscriptions early in 2010,” says Kevin Mitchell, chairman of the Business Travel Coalition. They will be targeted to frequent fliers.
Initially, these subscriptions will be for a single service, such as baggage checking, but later on, services may be packaged based on market research and demographics. For example, one package may be targeted with the business traveler in mind, says Mitchell. Such a package could include automatic seat upgrades, priority boarding and expedited security clearance -- all for an annual fee. Lounge access, food and concierge services also could be included as subscription benefits, says Ann Mack, director of trendspotting for advertising agency JWT (formerly known as J. Walter Thompson).
Airlines believe subscriptions will boost revenue and customer loyalty. Anyone who signs up with one carrier will be reluctant to buy a ticket on another and pay the extra fees. “It has the potential to be a win-win for the airlines,” says Mitchell.
The development of these fees into subscription products is driven by their revenue potential, especially given that the industry is still bleeding red ink. Such fees are expected to add $4 billion to the industry’s coffers in the U.S. and $10 billion worldwide. “The airlines are willing to try anything to make a profit. Besides, people are becoming accustomed to paying these fees,” says Mack.
For weekly updates on topics to improve your business decisionmaking, click here.
Topics:
- Comments
- RSS
Permission to post your comment is assumed when you submit it. The name you provide will be used to identify your post, and NOT your e-mail address. We reserve the right to excerpt or edit any posted comments for clarity, appropriateness, civility, and relevance to the topic.
View our full privacy policy
Reader Comments (3)
Posted by: Sharon at 12/28/2009 03:34:55 PM
Personally I think I'd rather take a couple of extra days and start taking the train again. A nice compartment with good sized window, a bed at night and a small personal bathroom sounds very nice to me. As a bonus I would have time to read or quilt and watch the countryside without any interruptions of phones, kids screaming or kicking my seat or people climbing over me to get to the aisle. Also the service was much better without all the add on fee's the airlines are tacking on now. Planning a trip in the spring and quite seriously planning on taking the train.
Posted by: Chris Reich at 12/29/2009 02:07:37 PM
As a United Airlines frequent flier, I'd recommend they work on their customer service before they work on squeezing more out of their customer's wallets. I've seen some very lousy service during my past two flights with United. What is striking to me is that the poor service is all attitude. United people made various situations bad by their actions. Little things, easy things, quickly flared up into tense confrontations over nasty comments from United people to customers. Of course, this starts the top. Tilton is no master of customer service. It's a shame because United is throwing away millions of dollars daily through rotten service and coming up with schemes like this to get their hands on more money. A sagging business can approach revenue building in two ways. They can squeeze more per customer or they attract more customers. Which do you suppose this plan attempts? Chris Reich www.TeachU.com
Posted by: Chris Reich at 12/30/2009 01:01:37 PM
Now UAL wants to offer a subscription. Pay $250 per year and you get bring along your luggage at no additional charge. Wow, neat. Having just completed 2 RT trips with UAL, I see customer service deteriorating badly. I saw horrible behavior at every terminal and on many flight segments. What is striking to me is that the poor service is all attitude. United people made various situations bad by their actions. Little things, easy things, quickly flared up into tense confrontations over nasty comments from United's people to customers. Of course, this starts the top. Tilton is no master of customer service. It's a shame because United is throwing away millions of dollars daily through rotten service while coming up with schemes like this to get their hands on more money. A sagging business can approach revenue building in two ways. They can squeeze more per customer or they attract more customers. Which do you suppose this plan attempts? Chris Reich www.TeachU.com