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Ancillary Refunds And Guaranteed Seats. Ideas.

Sat Sep 27, 2014 12:10 pm

I've been thinking about these ideas lately so I'll throw them out and see what others think:

Ancillary Fees:

We all know that the airlines are making profits these days. Some of these profits, however, are based on what I would call deceptive pricing practices. For example, I go on line to look for a ticket from say Denver to Orlando and I find a fare for 300 dollars round trip. Sounds like a great deal, i'm all over it. But wait:

Do I want to check a bag? Yes. My 300 dollar round trip ticket is now 350 dollars.

Do I want a good seat right at the front of the plane? Yes. My 350 dollar round trip ticket is now 450 dollars.

So, why not instead charge me that 450 dollars up front, then, if I decide not to check a bag I get a 25 or 50 dollar refund back on my credit card after I complete my travel. Likewise, if i decide i can live without that seat at the front of the plane, i get a 50 dollar refund each way once I complete my travel. I still end up choosing what services I want to pay for, but I dont feel tricked at the end of the day and matter of factly, by not using services I've already paid for, I'm saving money.

Guaranteed Seats:
My idea here is simple. If there are more passengers booked on the flight than available free seats, the airline has to unblock an equal number of preferred seats as there are passengers who dont have seat assignments. The concept is that I, as a ticket holder, should not have to be forced to purchase a seat assignment just to get a guaranteed seat. This idea comes about mainly thanks to AA and their practice of blocking up to 75 percent of coach seats for preferred passengers, which means that as a travel agent looking for a seat for a passenger, there are often none available.

Finally, Change fees:
It never ceases to amaze me that the airlines can charge a change fee that is more than the actual value of the ticket itself. What the airlines dont seem to understand is that they're effectively cheating themselves out of revenue. For example. Passenger is on a 125 dollar ticket from LA to Phoenix, passenger wants to change to an earlier flight. If I change the existing ticket i have to charge that passenger an additional 200 dollars. Now, if there is a fare in the market for say 150 dollars one way then I'll offer the passenger the choice of either changing their existing ticket for 200 dollars or buying the new one way for 150. Nine times out of ten the passenger will opt to buy the new ticket rather than pay 200 dollars to change the existing one.

My solution: connect change fees to the actual price of the ticket. For tickets less than 200 dollars, lower the change fee to 50 dollars. For tickets between 200 and 400, lower change fees to 100 dollars and for tickets more than 400 dollars, then charge 200 dollars.

What do others think about these ideas, good? bad?
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RE: Ancillary Refunds And Guaranteed Seats. Ideas

Sat Sep 27, 2014 1:07 pm

When i started with my airline 20 years ago, fares from NYC to Florida were roughly 200-250 dollars. 20 years later the fare is still the same. So the revenue that makes up for everything else is the fees involved.

If we post fares of 450 dollars to go to FL, the family decides that is too much we will drive.

However at 250, +35 per bag, +50 Y+, heaven forbid you make a change + 200, sandwich +12, pet in cabin + 125, etc etc

Consumers are weird in that they for the most part are willing to pay the lower fare and then just pile on all the extras. I think a lot of it is they dont pay it all at once so they dont realize the true cost of the ticket.

I dont think it is deceptive at all. If Pizza Hut sells a large one topping pizza for 7.99 do you expect to get 6 toppings, a side of wings, and a 2 liter pepsi for 7.99?
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RE: Ancillary Refunds And Guaranteed Seats. Ideas

Sat Sep 27, 2014 3:23 pm

The $300 price isn't deceptive at all - that's how much the airline is charging to transport you to Orlando and back (and though I know that fare is hypothetical, it's a wonderful example of the value airlines provide - between the real costs and the opportunity costs involved with driving from DEN to Orlando and back instead of flying, $300 or even $400 or more would be a bargain). And even very infrequent flyers (and probably many non-flyers) are aware of bag fees, so for most people those charges are not a last-minute surprise. And of course Allegiant, etc encourage passengers to pay the bag fees up-front.

From a processing standpoint, I suspect your plan might be a bit cumbersome...
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RE: Ancillary Refunds And Guaranteed Seats. Ideas

Sat Sep 27, 2014 5:02 pm

EVERY airline would have to follow this pricing strategy in order for it to work for one airline. If the fare you're charging is $450 all inclusive and your competitors are charging $300 + applicable fees guess who end up on page 5 on Priceline, Expedia, etc. But I love it when my fellow anutters come on here with their ideas!!!
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RE: Ancillary Refunds And Guaranteed Seats. Ideas

Sat Sep 27, 2014 9:59 pm

Hi NorthstarBoy,

interesting ideas, they might make sense from a passenger point of view, but not for the airlines and their revenue management.

Regarding the fare: the idea of "luring" someone with the 300 USD fare in your example and then add the fees make sense because the 300 is more appealing. Passengers (private travellers at the lower priced segment) can be convinced to buy a ticket with the 300, but they might not buy right away with the 450, even if it is the more realistic fare in the end. The pricing elasticity is higher for the base fare (ergo the decision to go for it or not) than for the ancilliary fees. If you think about it, once you have bought the ticket the additional 50 dollars don´t really matter that much anymore. Also, in your refund option, it would basically mean you are giving away money you have convinced the customer to give to you already - why would any cmpany want to do that? Also, this would mean a lot of administration / handling resulting in higher costs,which airlines are desperately trying to cut back. And as BC77008 says, for the idea to work out it would be required that all airlines in the competitive landscape follow this strategy because passengers will walk away if they are not displayed in the front page of any CRS/GDS or booking homepage.

Regarding the lower change fee for lower booking classes; airlines actually don´t want that passengers in low booking classes (cheap fares) to be able to change around to the most convenient flights. If they want to do so, they should pay higher fares. Elsewise, what would be the motivation of a more high yield passenger to buy up into a higher booking class?

Hope these explanations make sense.

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RE: Ancillary Refunds And Guaranteed Seats. Ideas

Sun Sep 28, 2014 2:11 pm

How would your plan account for elite level flyers that are frequently exempt from many of these fees? Would those folks only pay $300 at booking? Could that cause a problem?
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RE: Ancillary Refunds And Guaranteed Seats. Ideas

Wed Oct 01, 2014 1:58 pm

Quoting NorthstarBoy (Thread starter):

In my expierence, change fees, checked bag fees, etc. are applied to restricted tickets, such as (let's say domestic US travel) fare buckets that are not full fare. The exception to this is discount first class fares (P/Z etc.) where fees such as checked bag fees are waived, but change fees remain.

I used to be thrilled by the concept of discounted domestic first class (and took many trips on it), until I wised up and realized that you can't refund most restricted fare classes more than a day after the purchase. So even though flexible tickets may be above (or below in rare cases) P/Z premium fare classes, the relief of being able to change your ticket at any time without fees is great. I now utilize F, A, J, and C classes on legacies and Y fare class on all-Y airlines (such as Silver Airways with its Saab 340Bs).

All of my views and posted content are mine alone, and should not be viewed as official communication from my employer, its subsidiaries thereof, or any other entities or airlines.
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RE: Ancillary Refunds And Guaranteed Seats. Ideas

Wed Oct 01, 2014 5:27 pm

Quoting NorthstarBoy (Thread starter):
My solution: connect change fees to the actual price of the ticket. For tickets less than 200 dollars, lower the change fee to 50 dollars. For tickets between 200 and 400, lower change fees to 100 dollars and for tickets more than 400 dollars, then charge 200 dollars.

Why would airlines reward travelers who pay the lowest fares with the lowest change fees and those that pay the highest fares with a higher change fee? What would be the incentive for travelers to buy higher airfares?

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