Airlines have found another way to make money on top of the base ticket price. Linda Wertheimer talks to Scott McCartney, the airline columnist for The Wall Street Journal, about a new trend in the airline industry.
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LINDA WERTHEIMER, HOST:
In a recent three-month period, U.S. airlines collected nearly a billion dollars just in baggage fees, and $650 million in fees from unfortunate passengers who had to change their reservations. Now airlines have still another way of making money on top of the base ticket price.
We asked Scott McCartney about it. He's The Wall Street Journal's airline columnist and he's been writing about these new bundles, which are the subject of today's Business Bottom-Line.
Scott, good morning.
SCOTT MCCARTNEY: Good to be with you, Linda.
WERTHEIMER: I wonder if you could give us some examples of bundles we might be offered.
MCCARTNEY: Well, American has started a new bundling where they include Group One boarding and a free checked bag round trip, in a waiver of that dastardly domestic change fee that makes everybody crazy. And that's $68 roundtrip, flat fee. Delta has a bundle that the call A Send that's priority boarding, plus 24-hour Wi-Fi. That's $42, a bit of a discount over what you would get if you buy those separately. Southwest has a new thing where they'll give you early boarding that they sell at the gate, and that's $40 for each flight.
WERTHEIMER: So then, after the airlines very successfully unbundled their services, I mean they just turn right around and bundle them up again? Is that where the idea came from?
MCCARTNEY: Yeah, that's right. And I think this was somewhat the intent all along. They unbundled services so you had to pay extra to get your bag checked. And now, that you have to pay extra to get your bag checked, maybe they can up sell you on, well, let's include that checked bag fee with something else and something else, and give you a little bit of a discount over what you would pay to buy all those legs separately.
It's not all that dissimilar from what car manufacturers do. Or, you know, if you go to buy a telephone company with a cell phone plan and television and Internet access.
MCCARTNEY: And pretty soon you've got the whole bundle.
WERTHEIMER: Well, are there any bundles out there that you think might be worth the money?
MCCARTNEY: I'm real pleased to see the extra legroom option. United started this with Economy Plus. Delta has really picked it up and run with it. American is now coming in with it. JetBlue offer's extra legroom rows for people who need it, for people who want to be able to work using a laptop computer or something like that - it's a good deal.
I'm also intrigued with what American has done with the change fee waiver. As you pointed out, airlines are taking more than $2 billion a year out of consumers in change fees. And it's really kind of outrageous.
And so, by bundling the option of change fee waiver with some other things that you might buy, normally - the check bag fee or early boarding - that's an attractive package to a lot of consumers. Because, you know, life intervenes and plans can change. If you can avoid the penalty for that, that's a good thing.
WERTHEIMER: Are people buying these things, these bundles?
MCCARTNEY: Yeah, I think they are. And I think the important thing here is airlines are really in the infancy in this. They're going to get much better at targeting consumers. And so, what you'll find is if you're a business traveler who occasionally buys Wi-Fi, airlines are going to be able to target you when you go to print your boarding pass, with the bundles that would include Wi-Fi service.
It's really interesting because one of the things that people have complained about with airlines is the nickel and dime-ing effect. So some of the airlines are now sort of bundling this into the fares itself - different classes of fares - to sort of avoid the ad-on effect. So you do it on the first screen. And maybe that makes a little bit less confusing, because buying an airline ticket is a complex purchase now. And it used to be pretty simple.
WERTHEIMER: Scott McCartney writes the Middle Seat column for The Wall Street Journal. Mr. McCartney, thank you.
MCCARTNEY: Good to be with you.
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