Photo: Flickr/Digital Cat
Forget the volatile stock market. Everyone will be watching airfares today.That’s because late last week, the US Senate approved a bill that would extend the Federal Aviation Administration’s funding authority until next month. It means the 7.5 per cent tax is back, and fares could suddenly rise, which would anger many passengers.
The important thing is that by midnight today, most of the airlines will have to decide whether to raise their fares or return their prices to where they were before the tax expired. If they raise prices, then lawmakers have essentially helped the airline industry impose an across-the-board 7.5 per cent fare hike.
It wouldn’t be the first time the government has helped the airline industry, of course. And most are betting that the airlines won’t do it. It’s bad PR. Plus, it makes them look like piggies.
Then again, if the big airlines unilaterally raise their fares by 7.5 per cent, it wouldn’t be the stupidest thing they’ve done in regards to pricing. In fact, the airline business is a case study in how not to price a product.
Here are four other pricing mistakes the airlines make.
Not offering an “all-in” price. Sure, businesses often break out mandatory taxes and other required fees from their prices. But the airline industry has turned this into an art form. For example: Offering roundtrip ticket based on a one-way fare, even though there’s no way to buy a one-way ticket (makes the fare seem half as expensive). This is endlessly frustrating to air travellers, who often have to wait until they are at the end of their purchase to find out the true cost of their ticket.
Adding “gotcha” fees after the purchase. For years, the cost of a checked bag was included in the price of an airline ticket. But several years ago, airlines began a process called “unbundling,” which turned out to be quite profitable. (They collected $3.4 billion in baggage fees last year, according to a recent study by IdeaWorks.) But the fees are endlessly frustrating to air travellers, in part because of their inadequate disclosure, and in part because it’s difficult to know exactly how much air transportation will cost. (Wireless phone companies also practice this kind of deceptive pricing.)
Not leaving well enough alone. If you think you know what’s included in the price of a ticket, and what isn’t, just wait a week. Some airline, somewhere, will come up with a new mandatory fee. In Europe, Ryanair is known for its many annoying extras, from fees for seat reservations to fees for printing a boarding pass. In the US, rogue discount carrier Spirit Airlines isn’t far behind, charging for carry-on bags and printing a boarding pass. This constant change leads to confusion and hostility from customers (but alas, not enough to make people stop flying).
Bragging about it. It is one thing to practice the dark art of deceptive pricing behind closed doors. It is quite another to shout about it from the highest rooftops. But that is exactly what airline executives have done, much to the dismay of their customers. Earlier this year, a United Airlines executive talked about his airline’s status as a leader in “ancillary revenues and in innovation” and late last year, a US Airways executive told an investor conference that, were it not for fees, his airline wouldn’t have been profitable. Geez, you’d think they would keep that kind of nonsense to themselves, don’t you?
This isn’t a tirade against airline pricing. (Oh, alright, it kind of is.) But how many of these same pricing mistakes do you see other businesses make? This kind of corporate idiocy is widespread.
Tried to buy a concert ticket from Ticketmaster lately? Taken a look at your cellular phone bill? Heck, try to buy a car and just see how many price games are played with you, the unwitting customer.
But I think airlines set the standard when it comes to stupid pricing practices. And I have a feeling we’re about to find out just how stupid they really are. Midnight is only a few hours away.
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