IE 11 is not supported. For an optimal experience visit our site on another browser.

Piecing together the true cost of flying

Figuring out the true costs of air travel has been baffling for business travelers as well as the corporate managers who pay the bills.
/ Source: The New York Times

For the last two weeks, I’ve been complaining about the fees and surcharges that some hotels add to the bill for things like maid service, bellhop availability and landscaping. But travelers have also been telling me to look harder at the fees the airlines are busily conjuring up.

John Carrick, for example, said he was recently surprised to discover that transferring some of his wife’s American Airlines frequent flier miles to a daughter resulted in charges of $250 for the transfer of the mileage points, $30 for a “processing fee” and $18.75 in taxes.

“I found the processing fee, which I had never heard of before, outrageous,” Mr. Carrick said.

For some time now, the airlines have been adding fees for all sorts of things that used to be part of the ticket price. So figuring out the true costs of air travel has been baffling for business travelers as well as the corporate managers who pay the bills. American Express estimates that business travel accounted for $242 billion in domestic spending last year.

Airlines, meanwhile, insist that they desperately need to increase revenue and control costs, especially as rising oil prices threaten to erase the recent but tentative gains in profits.

It has gotten to the point that the price of oil is the first thing any airline executive thinks about in the morning and the last thing at night. Crude oil in New York was trading at about $112 a barrel on Monday. As of April 15, according to data from the International Air Transport Association, jet fuel cost an average of $3.32 a gallon in North America, a 45 percent increase from this time last year.

What does this mean for business travel? Higher prices and less service, including more cuts in flight operations at airports that don’t generate enough revenue per passenger, said Michael Boyd, the president of the airline forecaster Boyd Group International.

“Wake up and smell the gas pump,” Mr. Boyd said. Looking ahead, he said, “it’s going to cost you more to fly because no airliner in the world is designed for $3-plus fuel.”

And as airlines adjust their fleet mix to maximize per-flight revenues, mothballing many less fuel-efficient 50-seat regional jets, service at many midsize and smaller airports will continue to shrink. Revenues are driving air travel strategy, Mr. Boyd said.

In a recent earnings call, Isabella D. Goren, the chief financial officer at American Airlines, told analysts that “we continue to diversify our revenue stream and focus on growing our revenues from optional products and services, such as offering express seats.”

That, of course, was an allusion to the complex puzzle of fees, which airlines have been assiduously adding onto base fares for about five years. In 2009, domestic airlines generated $7.8 billion in so-called ancillary revenue, according to the Transportation Department. Most of that revenue came from fees for checking bags and penalty fees for changing itineraries, but a good portion came from the extra charges for priority boarding, priority coach seating, in-flight food and even things like using frequent flier miles. The agency has not yet released data for fee revenue for 2010, but the Consumer Travel Alliance estimates the total will be around $9.2 billion.

In their reach for revenue, “airlines have been taking fees they already have and making them more complex,” said Charlie Leocha, the director of the consumer association. An example, he said, are sliding fees for seat reservations and priority boarding, based on the length of the trip.

Charges to use frequent flier miles for upgrades or for supposedly free trips are also proliferating. The airlines use the term “co-pays” to refer to those fees, “which didn’t even exist five years ago,” Mr. Leocha said.

In an online survey of more than 2,000 travelers announced last week, TripAdvisor.com found that nearly 75 percent think that fee charges will rise this year, especially for priority seating and seat selection. Uncomfortable seats and limited legroom, by the way, topped the list of complaints about airlines.

The annual survey helps TripAdvisor understand how its customers react to air travel costs and conditions, “and how they are changing behavior because of them,” said Bryan Salzburg, general manager of TripAdvisor Flights. He said many are driving, when possible, rather than flying.

Travel behaviors definitely are changing in this new, puzzling era of air transportation. Next, I would like to hear from readers on how they are changing theirs.

This story, "," originally appeared in The New York Times.