In case you missed it, the airline industry is a tough business. One of the few bright spots helping them stay afloat in the 2009 recession was baggage fees, which drove $2.7 billion in extra passenger revenue to U.S. airlines. Delta came out on top with $481.8 million from such fees — a vital solution, since at year’s end Delta still bottomed with a net loss of $1.2 billion. Without the added charges, Delta’s loss would have been 39% higher.
Sure, customers say they hate fees … but imagine the alternative. If Delta didn’t hide charges until you got to the airport, it would have to raise its ticket prices 2% across the board — about $10 on a $500 flight. And you, dear savvy consumer, planning your trip at Expedia or Travelocity or Kayak.com, would likely click on the nearest Delta competitor flight to Austin to save $10 in your rapid-fire, e-commerce fueled impulse decision. Because when you’re shopping, you want the best deal, brand loyalty be damned.
Run the math, and the 1-2% of customers who really take enough offense at baggage fee surcharges that they would not come back are offset by the 10-20% of air flights that Delta would lose if it had to make all its passenger fees completely visible on aggregator travel sites, a click away from lower-priced competition. Disguising fees to make front-end purchase decisions easier is nothing new: your cell phone, cable company, magazine subscriptions, and even children give you low starter costs that hide whopping fee increases later.
The customer has strong opinions, and businesses should listen. But believe us when we say again, the customer is not always right.