THIS WEEK'S DERVISH-LIKE PRICING GAME
By Joe Brancatelli
November 8, 2008 -- Oil is now selling for about $61 a barrel, down from a record high of $147 in the spring. That would normally call for a rousing chorus or two of Happy Days Are Here Again--if only the decline hadn't been caused by the widening economic crisis and attended by a plummet in business travel.
I mention those unhappy facts because they have everything to do with what follows: Substantive changes in how airlines charge for luggage, award frequent flyer miles and juggle their award charts. The entire concept of "à la carte" or unbundled ticket pricing is in flux again, just months after we all assumed that it was here forever. As airlines try to balance falling oil prices, falling airfares and falling demand, expect to see more dervish-like changes in the coming weeks.
This week, we have massive shifts by United Airlines, Delta Air Lines and its newly merged, but not yet digested, subsidiary, Northwest Airlines.
DELTA GIVETH, TAKETH AND CONFUSETH
Delta merged with Northwest just hours after it received Justice Department clearance last month and its first move infuriated its most frequent flyers: Delta adopted Northwest's execrable Coach Choice program. Although elite Delta SkyMiles members are exempt from the $5-$25 fee for selecting a supposedly "choice" coach seat--Talk about an oxymoron!--they have lost privileges: Their pool of automatically available "preferred coach" seats has been reduced and they can't score a choice-level seat until 24 hours before departure. Even the elites not annoyed by this turn of events are confused, partially because Coach Choice was instituted without advance notice and partially because there are now so many levels of coach seating assignments at Delta that you need an assistant just to keep track.
A new tranche of changes announced by Delta on Wednesday (November 5) has some better news for Delta and Northwest loyalists. Gone is the $25-$100 "fuel surcharge" on award tickets that the two carriers introduced earlier this year. Even though Delta, especially, had promised that these charges were totally dependent on the cost of fuel and would be eliminated if prices declined, travelers were skeptical. For starters, few people expected oil prices to drop and certainly no one predicted such a steep decline. And many travelers--cynical bastards that we have been taught to be--expected the charges to morph into some other flavor of fee if fuel costs did ever decline. So kudos for Delta for keeping its word and not inventing a new pretext for slapping a co-pay on all of its award tickets.
Delta also made a few other minor fee changes on Wednesday that affect both Delta and Northwest travelers: The telephone ticketing fee was reduced to $20 from $25; the curbside check-in fee of $3 disappears on December 5; and Delta's $50 charge to check a second bag has been reduced to $25, which matches the existing Northwest fee.
The trapdoor: Delta is the last of the Big Six to adopt a $15 fee for checking your first bag. Effective immediately for travel beginning December 5, you'll get hit with the $15 checked-bag fee unless you are a first- or business-class customer or a Northwest WorldPerks or Delta SkyMiles elite flyer.
Delta claims that passengers have lately been carrying on more bags, which indicated to management that flyers didn't know Delta wasn't charging a first-bag fee. That sounds like hogwash to me. What most likely is the case is that Delta couldn't identify an uptick in traffic due to its first-bag-free policy, so it decided not to leave money on the table. Hey, folks, the market has spoken. People apparently weren't fazed by the first-bag fee (initiated this spring by American Airlines), so why shouldn't Delta grab the fee, too. That's business.
UNITED IS, WELL, UNITED
United Airlines is so rudderless, so obsessed with driving prices up without justification, then retreating when a competitor does something different, that it's not even worth speculating on its processes and corporate thinking. Let's just report what they've done in the last few days and leave it at that…
Within 48 hours of Delta's decision to lower its second-bag fee to $25, United, the only carrier to match Delta's $50 fee, climbed down. It will now keep its second-bag fee at $25. Another retreat: United will restore the 500-mile minimum Mileage Plus earnings threshold for all flights--at least for elite members of the program. Another quirk: United is retroactively restoring the 500-mile minimum for all flights taken after July 1.
Now the news with mixed impact: United Mileage Plus is essentially adopting American AAdvantage's system for international upgrades claimed with miles. Beginning next July, just like American, all paid United international coach tickets qualify for mileage upgrades to first- or business-class. The trade-off: Just like American, United will now charge a co-pay of as much as $500 for the privilege of using miles to upgrade. The calculations here are difficult and personal. There's no question that making any paid coach fare eligible for upgrades is a good thing; previously, only the nearly full-fare coach fares qualified for mileage upgrades. But depending on the fare basis you have been booking, the cash co-pay that is now required to upgrade may erase all of the savings. And, in some cases, the total cost of upgrading using miles may increase.
Finally, the bad news: The price of United Mileage Plus awards is increasing again. Some awards will cost as much as 40 percent more. The hardest hit: transatlantic and transpacific business-class awards. Some teaser awards (25,000 for a restricted domestic coach roundtrip, for example) are unchanged. So are awards for some routes where United won't be installing their new business-class beds anytime soon. Since this is the second large increase in prices in as many years, Mileage Plus' generous award levels, which many frequent flyers had seen as the last reason to stay loyal to United, are now gone. By most objective measures, Mileage Plus is no longer notably richer than any other Big Six program.
ABOUT JOE BRANCATELLI Joe Brancatelli is a publication consultant, which means that he helps media companies start, fix and reposition newspapers, magazines and Web sites. He's also the former executive editor of Frequent Flyer and has been a consultant to or columnist for more business-travel and leisure-travel publishing operations than he can remember. He started his career as a business journalist and created JoeSentMe in the dark days after 9/11 while he was stranded in a hotel room in San Francisco. He lives on the Hudson River in the tourist town of Cold Spring.
THE FINE PRINT All of the opinions and material in this column are the sole property and responsibility of Joe Brancatelli. This material may not be reproduced in any form without his express written permission.
This column is Copyright © 2008 by Joe Brancatelli. JoeSentMe.com is Copyright © 2008 by Joe Brancatelli. All rights reserved.