The next big fight around airline fees isn’t about how much a window seat costs—it’s about where you’ll see its price and how you purchase it.
In the six years that U.S. carriers have been feverishly unbundling various elements of air travel into separate products and services, passengers have been paying for all of these—bag fees, assigned seats, priority boarding, Wi-Fi access—directly to airlines. Now travel agencies want a piece of that action, too. They’re pressing federal regulators to require airlines to make their ancillary products available for sale through third-party vendors alongside air tickets.
“Consumers have that fundamental right to know the upfront cost of their entire trip and not be surprised at the airport by extra fees charged by the airlines,” says Philip Minardi, a spokesman for the Travel Technology Association, which represents online travel agencies such as Expedia (EXPE) and the Priceline (PCLN), and the three major global distribution systems (GDS), which publish fares to travel agents.
The U.S. Department of Transportation is already considering a rule that would make airlines disclose baggage fees and seat assignments through travel agents and websites that sell airline tickets. But travel agents says that’s not enough.
“If consumers can see a fee but not purchase it, they really haven’t solved a problem,” says Andrew Weinstein, executive director of Open Allies for Airfare Transparency, which represents about 400 corporate travel managers and travel agencies. And, he adds, it doesn’t make sense for airlines not to let others process bag fees and other optional charges. “We think airlines are actually leaving cash on the table by not pursuing all these distribution channels.”
Some carriers have made tentative forays into expanding the sales channels for their extra products, with United Airlines (UAL) selling its extra-legroom seats and Air New Zealand (AIR:NZ) its three-seat Economy Skycouch through travel agents.
One reason airlines have resisted wider distribution of these extra products and services is because of their painful experience with the Internet. Airfares took a steep hit when comparison shopping online became quick and easy, forcing carriers to match fares on most competitive routes, down to the penny. To battle that type of commodification, airlines now seek to differentiate their products and services, such as early boarding and seats with extra legroom, in the hope that travelers won’t always shop strictly on price.
“We believe this proposal overreaches and limits how free markets work and will needlessly inhibit market innovations that are developing to meet customer demand for customized information,” Victoria Day, a spokeswoman for Airlines for America, the U.S. carriers’ trade group, wrote in an e-mail.
But the strategy has also prevented any real competitive pressure on fees for those extras, because travelers have no easy way to compare them before they buy their tickets. “The common theme,” says Paul Ruden, a lobbyist for the American Society of Travel Agents, “is reduced competition, keep a lid on capacity by fighting foreign carriers that want to come in here … and do everything you can to cause consumer confusion, because that leads to profits, as we have seen over the last several years.”