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 The Brancatelli File

joe COMPARTMENTALIZING YOUR RAGE
OVER DELTA'S NEW SURCHARGE


BY JOE BRANCATELLI

January 21, 1999 -- If the American body politic can countenance a Presidential impeachment trial in the afternoon and a State of the Union address in the evening, then I can compartmentalize my rage over Delta's new surcharge.

Delta's new policy, which essentially slaps a $2 fee on every roundtrip ticket not purchased via its Web site, needs to be examined with perspective. In one box, I store my rage over what the $2 surcharge means for travelers right now. In another compartment, I store my rage over what the fee represents for travelers in the very near future.

My right-now rage is simple enough: How dare those money-grubbers raise fares by $2. And make no mistake about it: The surcharge is a fare increase. Only about 2 percent of Delta's 105 million passengers last year booked their tickets at Delta.com. That means this surcharge will apply to 98 percent of its flyers.

And don't be fooled by the relatively niggling nature of the surcharge. Don't buy into a Delta spokeswoman's claim that Delta "didn't think $2 was that big a deal." Two dollars is a big deal. Do the math: If 2 percent of Delta's 105 million passengers use the Delta Web site, more than 100 million don't. Two bucks times 100 million passengers is a cool $200 million in surcharges, every dime of it dropping directly to Delta's bottom line.

What do we find at Delta's bottom line? A record-breaking 1998 calendar year that "was truly remarkable," boasts Delta chief executive Leo Mullin. No kidding. Operating income was $1.8 billion, up 11 percent over 1997. Net income was $1.1 billion, up 15 percent.

Now I'm a capitalist, not a socialist. Not for me the smarmy rhetoric of AAA executive Mark Brown, who questioned Delta's "need" for the surcharge revenue.

It ain't a matter of need. If Delta wants to earn an extra $200 million, I say more power to them. It's the American way.

But if Delta is going to start unbundling prices--Delta's rationale for the surcharge is the rising cost of computer-reservation service (CRS) fees--then it should work both ways.

I will give Delta the $2 surcharge to help it cover rising CRS fees. But where's my rebate for plummeting jet-fuel prices? The ten major U.S. carriers saved about $2 billion last year thanks to lower fuel prices. That's roughly $200 million per airline--or exactly what Delta will raise on its $2 non-Internet surcharge. So I deserve a $2 fuel-price rebate. And, you know, I don't eat on airplanes, but Delta spends about $3.50 per passenger on food. So where's my non-eating-passenger rebate? What's my rebate for not using my carry-on or checked-bag allowances? Where's my "I-didn't-use-the-lav" rebate for that Delta Shuttle flight to Boston when I didn't use the toilet?

But enough of the right-now rage. Let's open the near-future-rage compartment.

Do not be fooled by the fact that no other airline has yet matched Delta's surcharge. They will eventually. Privately, executives of other airlines criticize Delta's timing, not the surcharge. Six weeks or six months from now, every airline will charge you more if you don't buy your tickets directly from its proprietary Web site. The $2 fee will become $5, then $10, then $25.

And the end-game of the surcharge is simple: Control. The nation's airlines despise the fact that you now have the right to shop around. They hate the fact that you can compare every fare and every flight on your travel agent's CRS or via independent Web sites. Information is power and, armed with this information, you have the power to talk with your wallet and patronize the airline that gives you the best combination of low fares and good service.

The surcharge on non-Internet tickets is just part of the master plan to deprive you of information and the power of choice. By repeatedly slashing the commissions they pay to travel agents, airlines are driving hordes of agents out of business. Those who survive will no longer be honest brokers, but vassals of the carrier--or the airline alliance--that pays them higher commissions based on volume.

Even today, you have some degree of confidence that a travel agent will get you the best fare available. Not too long from now, however, travel agents that survive will steer you to an airline or alliance with whom they have a sweetheart deal. Try to book a different carrier and they'll hit you with a huge and punitive transaction fee as well as the non-Internet surcharge.

Disgruntled, you may indeed head to the Internet. But don't look to independent ticket-selling sites for help. They'll be out of the ticket-selling business because the airlines have slashed Internet commission rates so low that many independent Web sites already lose money on every seat they sell.

Frustrated, you will, finally, surf to an airline's proprietary Web site. It'll show you only the fares it wants you to see. It'll give you only the information the airline wants you to have. Exhausted, you won't even have the energy to surf to another airline's Web site to compare prices, flights and services. You'll book what the airline offers you at the price it demands of you.

And then, of course, the game will be lost. Airlines will control the product, the information, the pricing, the distribution--and your life.

This column originally appeared at biztravel.com.

Copyright 1993-2004 by Joe Brancatelli. All rights reserved.