Thanksgiving Flights Stuffed as Fees Bolster Airline Sales

Nov. 24 (Bloomberg) -- Americans will pack planes and struggle to stow carry-on bags as they fly over the Thanksgiving holiday. For U.S. airlines, that’s all good.

Record fees to check luggage and new charges of as much as $20 each way on peak travel days will make Thanksgiving a bright spot in a year when waning demand spurred the biggest capacity cuts since 1942 among carriers including Delta Air Lines Inc.

“Virtually all of them should make money,” said George Hamlin, president of Hamlin Transportation Consulting in Fairfax, Virginia. The number of seats sold will be “very high, fares are not at their lowest, and fuel is not exorbitant.”

For passengers, the rest of this month will magnify the 2009 squeeze of fewer flights, fuller cabins and added costs on top of their tickets. Travelers will pay extra on Nov. 29 and 30, the Sunday and Monday after the Nov. 26 holiday, as carriers apply the first seasonal surcharges for busy flying periods.

“Airlines are antagonizing customers to such an extent that I’m almost ready to tell my son to take the Greyhound bus, and that’s a 14-hour ride,” said biotech researcher David Lilienfeld, 52, whose son, Sam, will fly home to San Francisco from Reed College in Portland, Oregon.

The industry is counting on fees to help pare 2009 losses that totaled about $3 billion through September among the nine biggest U.S. carriers, led by Atlanta-based Delta and AMR Corp.’s American Airlines. In the second quarter, the latest period with available data, baggage fees tripled to $669.6 million, according to the U.S. Transportation Department.

New Approach

Adopting seasonal surcharges marks a break with airlines’ usual practice of increasing average holiday fares by dropping their cheapest tickets. Adding a surcharge is easier than boosting prices for select days, according to the carriers.

Airlines have said they lack the power to raise fares amid a 17-month slump in U.S. air traffic as consumers compare prices on the Web. Instead, carriers have focused on tacking on fees that kick in after passengers have booked their travel.

While the Washington-based Air Transport Association trade group projects a 4 percent drop in Thanksgiving travelers from a year earlier, consumers probably won’t feel much elbow room.

Big carriers have been eliminating flights all year, helping them put more people on each plane. Southwest Airlines Co., for example, filled 79.4 percent of its seats in October, up from 70.4 percent a year earlier.

Full Bins

“Airplanes are going to be chockablock full,” said David Swierenga, president of consultant AeroEcon in Round Rock, Texas. “Overhead storage space is going to be at a premium. It’s going to be hard to find a place for that rollie.”

Passengers checking bags this week will pay as much as $25 for the first one and $30 for the second, $5 more than in 2008. Paying in person rather than online may cost $5 more.

The seasonal surcharges that start Nov. 29 will apply to as many as 41 days through May 28 on some airlines, according to researcher Bestfares.com in Arlington, Texas. American and UAL Corp.’s United Airlines were among the carriers unveiling the fees in September.

Such charges “might not have made news or been any kind of issue at all for passengers if travelers hadn’t also had to swallow bag fees and more over the past year and a half,” said Rick Seaney, chief executive officer of Dallas-based travel Web site FareCompare.com.

Survival Strategy

Fees amount to a survival strategy for airlines struggling to raise ticket prices. Economic headwinds “are anything but behind us,” Jim May, CEO of the Air Transport Association, said in a Nov. 9 statement.

The Bloomberg U.S. Airlines Index of 13 carriers plunged 28 percent this year through yesterday, lagging behind a 22 percent surge for the Standard & Poor’s 500 Index. US Airways Group Inc. posted the worst decline, tumbling 60 percent.

Consumers who booked in advance for round-trip domestic flights for Thanksgiving paid an average of about $361, or 5 percent less than a year earlier, according to Web site Travelocity.com. Those savings vanish after adding on fees for luggage and other charges.

Reserving certain seats will cost as much as $30 on some carriers, and snacks or meals will be $3 to $10. There are fees for Wi-Fi access and, in some cases, entertainment such as movies or television. The charges could add $100 a person on round-trip flights.

‘Watch Out’

“There are a lot of fees that you’ve got to watch out for,” said Henry Harteveldt, a senior analyst at Forrester Research Inc. in San Francisco. “It’s not uncommon to see people getting very careful about pooling luggage to pay only one fee for one checked bag, bringing food onboard, and so on.”

Alice Berman, 79, and her husband, George, 82, a retired flutist, are adopting that strategy for their visit with their son’s family in Atlanta.

The Sarasota, Florida, couple will fly on Thanksgiving morning, a lighter travel day, to save on airfare and pack fewer clothes so they only have to check one piece of luggage.

“Everyone carries bags with them so they won’t have to pay the fees,” Alice Berman said. “It’s so hectic to even get on the plane.”

Flying at this time of year “has always been a hassle,” Harteveldt said. At the same time, airlines can count on passengers putting up with the indignities because Thanksgiving is “perhaps the ultimate home-and-hearth holiday,” he said.

That’s how Lilienfeld, the San Francisco father, sized up the trip for his son, a college freshman. The elder Lilienfeld estimated he’ll spend about $30 in luggage fees as well as pay for his son’s onboard snacks.

“You don’t have much choice if you want to see your family for Thanksgiving,” he said.

To contact the reporters on this story: Mary Schlangenstein in Dallas at maryc.s@bloomberg.net; Mary Jane Credeur in Atlanta at mcredeur@bloomberg.net.