Church of the Customer Blog
« Fees and customer loyalty | Main | The $3 fill-up »
May 21, 2008
Fees and customer loyalty
American Airlines announced today it will charge $15 for many passengers to check their first bag. I can imagine the word-of-mouth griping that's spreading from airport to airport.
Since American is the largest domestic carrier, this new fee may lead others to do the same and usher in an entirely new, fee-driven flying experience.
The question for you is: Will American's new fee cause you to question your loyalty and switch? Or, is this fee akin to bank ATM fees which, according to research by Forrester, most people pay little attention?
Update: In the comments, Craig points us toward the many fees of European carrier RyanAir, a model which American and other carriers may be migrating toward.
Virginia had a different take on the new fee: "I would happily pay $15 for the flight staff NOT to come on the PA and interrupt my nap/book/movie. This is not the Improv, people."
Finally, my friend Rick emailed with this note:
I used to fly primarily on American and was Platinum status. Now I fly United all the time, mainly because of the Asia routes. They're the only non-stop to Hong Kong. Nevertheless, I haven't been happy with United and am thinking about switching to Cathay Pacific. I would fly American on all my US domestic and Europe flights. I was actually looking into the logistics of making the switch yesterday, and contacting American to see if they'll immediately match my 1K status on United.
Then I saw this $15 for first bag story on CNN. Even though it wouldn't even apply to me, the very idea that they're sinking to this level brought back bad memories, like in November 2006 when I used the remainder of my old frequent flier miles to fly our family to Philadelphia, and the flight service was miserable and the bags took an hour to come out when we got home (with Ricky already way past his bedtime). I'd thought back then that I used to really like American, but they went way downhill. I'd forgot about that until this morning.So, United has their problems, but they're not bad enough to risk a change.
Other blogs that reference Fees and customer loyalty:
It's going to be hell in the cabin, with more and more people bringing bigger carry ons.
They should also charge us for each minute spent in the air, or weigh passengers before boarding...
People will notice. Like Seth said in a post a while back, "if you want people to notice, charge something." But I don't know that many people will switch airlines because of it. They just won't check a bag. Like Jacques already pointed out, it will just make the overall experience even more dreadful.
I've always thought that they should do the OPPOSITE and make it mandatory to check bags. It would speed up the passenger loading times tremendously. I don't know much about airline scheduling, but couldn't this help reduce delays?
Nah. I switched over to mostly United Airlines after a previous trivial but irritating American Airlines stunt. Good luck to them. This stuff is cumulative. And it will hurt. (Of course United ain't much better.)
I have a lot of dead miles sitting at American Airlines in the frequent flyer program. It's not bringing me back to them. Hmmm. You think they care?
Well,
Over in europe here, we are used to being charged for all sorts of things on budget airlines. They may charge low money for the tickets but there are fees for:
Checking baggage
Sports equipment
Kids booster/cot/car seat
Priority checkin
Taking a child
etc. etc.
You can see some of the charges for Ryanair here (http://www.ryanair.com/site/EN/faqs.php?sect=CHARGES)
Goodness sake - if you are a keen golfer, skier, have small children and pack heavy luggage, it is going to cost you.
The main change in behaviour I have seen is that people take less stuff now on these flights and generally don't grumble too much about the charges - they just try and avoid them by taking only carr-on luggage.
Since this carry on luggage can only be a certain size and weight, this means that the fear of the other person commenting (that it would disrupt flights with lots of people carrying huge luggage on board) has not come to pass.
I really don't get this. It seems like it is driving the wrong type of behavior. Don't they increase on-time departures when people check more stuff and carry on as little as possible? Won't this slow down check-in lines because people will be doing cash/credit card transactions in addition to trying to figure out the self serve kiosk and waiting for their luggage to be checked? This feels like a penalizing passengers who are doing something for the good of the rest of the passengers on the plane.
On the flip side, I would happily pay $15 for the flight staff NOT to come on the PA and interrupt my nap/book/movie. This is not the Improv, people.
It will be a deciding factor when the more important ones are about equal. I will always go for convenience of the flight (non-stop, certain times) and price. But many times, several airlines will fit the bill. And this will deter me from American--not only because I don't want to pay the fee, because I usually try to just carry on, but because like others said above it's going to seriously slow the boarding process.
Of course, where one goes, the others soon follow so there may not be a choice in another week or two.
Tracy
The only thing that would make it ok for them to charge me $15 for my first checked back is if the price of the tickets goes down, which isn't going to happen.
SkyBus had a modle similar to Ryan Air, charging for baggage, priority check in, in-flight snacks an the like, but the ticket prices were at least a hundred bucks cheaper than standard air rates. But that lead to bankrupcy, so...
I might make wings and give that a shot.
As an Executive Platinum customer of American (DFW is my home airport), I will not be switching, but this is an example of a terrible pricing.
As is pointed out in the comments Ryanair is a discount flyer, the model is absolutly correct for them. American is not, this is a "bad profit" idea if I ever saw one.
I had heard about charging for a second piece of checked baggage and then about the weigh limits on the first bag. That was somehow acceptable but still didn't feel too good.
Then this - charging for any checked baggage. I'm not going to fly American as a result. This is too much. If the service was better - like guarantee that my bags would arrive on time or I get more money back plus more - ok. But, with the service and experience on most airlines being so poor as it is (no food, treated like cattle, seats that often don't work, I can't use the first class bathroom, etc) this is noticeable and annoying and it will affect my travel plans.
Even with government subsidies airlines can't make their business model work. Why is that the customers problem? When the early crazy dot coms didn't have a business model they just closed.
What is Southwest doing? That is what I'd like to know -- as they are the only airline to make money for decades consecutively. Doubt they are going to charge for bags.
@Jacques: I think you could be right. The residual effects of the new fee may well be slower boarding and pushback times as people try to bring more stuff with them into the cabin.
@Chris: I've had more than a few occasions of endless waiting for a checked bag to drop down the chute. Whether that's the airline or the airport to blame is a matter of happenstance.
@Phil: "Cumulative" is an apt way to describe what's happening.
@Craig: Thanks for pointing out the RyanAir example. I updated the post to point them out.
@Virginia: LOL. Seriously.
@Tracy: So true. And it's not as if a couple of people in Silicon Valley can just decide one day to start an airline and up the stakes for service.
@Jess: My reaction is: Why don't they just raise fares instead? Of course, a fee is easier to collect once the ticket has been purchased.
@Ed: I bet some people in Texas are wishing now the project to link Dallas, Austin and Houston with high-speed rail would have gone through. At least there'd be viable competition (and less traffic jams on the interstates linking those three cities).
@Kim: You can be sure Southwest and all of the other airlines are very, very carefully monitoring the checked bag fee and deciding if it's at all like ATM fees.
People wlll grumble, but if American has the right flight and fare, I doubt someone is going to pay $100 more for a different airline to avoid a $15 bag fee.
But... they are adding to the general sense that flying is an unpleasant experience. Which ultimately drives customers away from all the airlines. Do you pick the vacation that requires flying or taking the train? Do you take the shuttle from DC to NY, or the train? Do you go to that meeting on the west coast, or send half the team and use videoconferencing?
I flew from Houston to Newark earlier this week; the flight was packed and everybody had brought luggage on board, even without a fee (this was Continental), and at one point eight people had to back up off of the plane because people were scurrying in the wrong direction to find somewhere to stash their bags. The smart thing to do would be to charge people for a second carry-on, and speed up boarding and aircraft turnarounds.
Air Canada has adopted a similar policy on its lowest fares, but has gone about it in a different way: checked bags, meals and pre-selected seats are all included in the regular fare, but you can opt out and reduce your fare by a few dollars for each one.
They may have increased fares to accommodate this, but I just checked my email archives and it seems that Air Canada's fares to most US cities have actually decreased compared to two years ago.
Which brings me to Jess' point - does anyone actually know whether American Airlines is charging any more or less on the base fares?
Nobody has noticed (since they did not publicize it) that there is no fee if you are an AA Gold level frequent flyer.
So if you're already an AA lover it won't matter, and if you're not they don't want you anyway!
I don't think it's the fee itself so much--I mean, getting ripped off by an airline is pretty much standard operating procedure--as it is the principle of the thing. It's just one more example of a company (which is symptomatic of most of the airline industry) saying, "You're only worth as much as we can possibly squeeze out of you."
It's the principle of the thing that irks me, not the reality.
Can I just say a good word for Houston hometown airline Continental? They still give you some food - not a ton and it's not gourmet, but it's nice to have - and the seats are crazy small and all of that, I find them to be consistently decent. Whenever they talk about merging with someone else, I shudder, because I can't imagine it would result in anything but degradation of service.
Most of us who don't fly often for business go through an online travel agency like Orbitz or Expedia. For me, thanks to their new fees, when the price comparisons come up, i'll choose another airline over American. After all, most of the flights listed are pretty equal in price, so i choose the airline i am happier with.
As for bank fees, they do actually make a difference. Recently i got to spend nearly a month in Thailand with the Navy. During that time i was charged $5 for each time i withdrew money from my Wells Fargo account (non-WF ATM fees). It added up and the bank wouldn't waive those fees, even though there was no WF within 1,000 miles. Trust me, i won't be with WF much longer!
Fees matter, especially when there are choices that don't have them.
Well, good luck finding any US bank that lets you make free ATM withdrawals in Thailand.
However, a tip: When I spent a bunch of time in Europe two years ago, I discovered that Bank of America has a deal with BNC Paribas (an European bank) that lets you make free withdrawals at Paribas ATMs, so I was able to take out money in France and Germany without a fee. BoA customers heading abroad take note.
now, if they could do something about the exchange rate....
