How many nickels in $2.3 billion?<< Musing about TravelMuse | Main | Orbitz's "Price Assurance" >> Diane Clarkson | June 12, 2008, 08:36 PM United Airlines announced today that they will follow American Airlines and introduce $15 baggage fees for each direction for the first checked bag. Not to be left behind, US Airways followed suit hours later. You can link here to United’s statement about rising oil prices (self-evident) and how they are trying to meet what consumer value most (somewhat less evident). The airline industry is in crisis. That fact is increasingly apparent with the seemingly daily reports of reduced capacity, layoffs, fare increases, and fees fees fees. Today US Airways also announced a $2 charge for soda and non-alcoholic beverages (now we all knew the free pop couldn’t last forever). At its simplest, airlines need to raise fares dramatically. AA went first on the $15 baggage fee. But no one wants to go first on a major fare hike. Instead, the airline industry will continue to nickel and dime in the hopes of staying alive longer then their competitors, thereby surviving to a day when there will be less capacity and fares can be raised. According to IATA, the airline industry will lose $2.3 billion this year. That’s a lot of nickels and dimes. |
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