BBC to start charging for seat pre-selection

[JF Mezei]

BBC reports:

British Airways is to start charging for seat pre-selection prior to
check-in for both coach and business class passengers.

Fees between £10 and £60.

BBC has an article on various fees out of London airport:

http://news.bbc.co.uk/2/hi/business/8291323.stm

With airlines searching to continue to advertise low fares, but increase
revenues, one has to wonder how far they will go in splitting the flight
into a gazillion different fees.
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[Roland Perry]

Post by JF Mezei
British Airways is to start charging for seat pre-selection prior to
check-in for both coach and business class passengers.
Fees between £10 and £60.
http://news.bbc.co.uk/2/hi/business/8291323.stm
With airlines searching to continue to advertise low fares, but increase
revenues, one has to wonder how far they will go in splitting the flight
into a gazillion different fees.

You don't have to wonder, look at Ryanair, Easyjet or BMIBaby for
examples.

[matt weber]

Post by JF Mezei
British Airways is to start charging for seat pre-selection prior to
check-in for both coach and business class passengers.
Fees between £10 and £60.
http://news.bbc.co.uk/2/hi/business/8291323.stm
With airlines searching to continue to advertise low fares, but increase
revenues, one has to wonder how far they will go in splitting the flight
into a gazillion different fees.

However what is missing from the press article is the long list of
exemptions from the fee. From www.ba.com
"The following customers will still continue to be able to choose
their seat for free at the time of booking:

Gold Executive Club members (and oneworld® equivalents).
Customers travelling in First.
Customers with additional needs (this includes those with disabilities
or other special requirements).
Silver Executive Club members (and oneworld equivalents).
Customers travelling with infants.
Customers holding a fully flexible ticket booked in J/C/W/Y booking
classes"

In other words, these charges are to be applied on the lowest fares
and to passengers who don't fly very often.
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[Roland Perry]

Post by matt weber
However what is missing from the press article is the long list of
exemptions from the fee. From www.ba.com
"The following customers will still continue to be able to choose
Gold Executive Club members (and oneworld® equivalents).
Customers travelling in First.
Customers with additional needs (this includes those with disabilities
or other special requirements).
Silver Executive Club members (and oneworld equivalents).
Customers travelling with infants.
Customers holding a fully flexible ticket booked in J/C/W/Y booking
classes"
In other words, these charges are to be applied on the lowest fares
and to passengers who don't fly very often.

... who don't fly with BA very often. They have one of the most
difficult programmes to get Silver/Gold status, and I think it expires
at the end of the year. As a humble Blue EC Member I fly a lot (normally
with other airlines) and have never had a hope of gaining status.

I applaud the extra transparency of mentioning J/C/W/Y ticket classes,
demystifying this slightly, and look forward to being told what class of
ticket I'm buying, at the time of booking (so I know what benefits my
dollars are buying). Which also means having an accessible "ticket
class" glossary, perhaps.

[JF Mezei]

Question:

Accountants claim that these new "nickel and dime" *will* raise hundreds
of millions in additional revenues. But in reality, do those measure
really increase total revenues ? Sure, they can claim that they
collected 50 million in seat selection fees. But if the measure has
turned away enough customers to reduce base fare revenues by 100
million, that new measue will end up costing the airline 50 million
instead of additional 50 million in revenues.


And when travel demand is low and airlines are hurting, will adding
extra charges (essentially raising fares) generate additional demand, or
will it further hurt airlines because people will be less motivated to
travel by air ?

In the specific case of BA, if its base price is higher than that of its
competitors (Ryannair and Easyjet and others), won't adding these extra
charges/hassles further increase the price difference with the low costs
and hence hurt BA ?


If BA had announced an across the board £20 reduction in all fares along
with the £20 for seat pre-selection, then this would have made BA more
competitive. But they are just tagging on a new charge/tax/fee to theior
existing base fares, so this is a net price incrtease to customers.
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[Roland Perry]

Post by JF Mezei
Accountants claim that these new "nickel and dime" *will* raise hundreds
of millions in additional revenues. But in reality, do those measure
really increase total revenues ?

Wasn't it AA who saved a fortune by putting one less pretzel in every
packet (or something like that)?

The average profit of a well-run airline is apparently about $5 per
flight. That's assuming you are making a profit (BA turned in a loss of
about $600m last year). If you can make everyone pay $5 for booking a
seat (or some other "extra" like buying a sandwich), you've doubled your
profit!

Post by JF Mezei
Sure, they can claim that they collected 50 million in seat selection
fees. But if the measure has turned away enough customers to reduce
base fare revenues by 100 million, that new measue will end up costing
the airline 50 million instead of additional 50 million in revenues.

The low-cost carriers in Europe make charges like this, and are
expanding even in this economic downturn.

Post by JF Mezei
And when travel demand is low and airlines are hurting, will adding
extra charges (essentially raising fares) generate additional demand, or
will it further hurt airlines because people will be less motivated to
travel by air ?

The price elasticity of air fares is around 0.3 for long haul business
class - in other words putting up prices always increases revenue.

Post by JF Mezei
In the specific case of BA, if its base price is higher than that of its
competitors (Ryannair and Easyjet and others), won't adding these extra
charges/hassles further increase the price difference with the low costs
and hence hurt BA ?

No, because people are choosing their flights just as much on the
timetable as price - if they are flying BA. Adding a small amount to the
BA price won't cause travellers to substitute by using a small regional
airport at unsocial hours, they are paying specifically to use Heathrow
at convenient times.

Post by JF Mezei
If BA had announced an across the board £20 reduction in all fares along
with the £20 for seat pre-selection, then this would have made BA more
competitive.

Not really, because the competition isn't mainly on price. And with the
aforementioned elasticity, putting down prices always means less
revenue.

Post by JF Mezei
But they are just tagging on a new charge/tax/fee to theior
existing base fares, so this is a net price incrtease to customers.

Which the customers will grumble about, but probably pay. Unless
something really bad happens with the elasticity (and airlines are
experts in this area). The amounts they are talking about are tiny
compared to Govt "green" departure tax, and the extra cost of reaching
and/or parking at the airports BA serves (compared to the lowcosts).

[John Levine]

Post by JF Mezei
Accountants claim that these new "nickel and dime" *will* raise hundreds
of millions in additional revenues.

I read an interesting blog post a few days ago pointing out that the
only US airlines that aren't hemorraging money are Southwest and
Jetblue, which are also the ones with the fewest nuisance fees.

R's,
John
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[Jeff Hacker]

Post by John Levine

Post by JF Mezei
Accountants claim that these new "nickel and dime" *will* raise hundreds
of millions in additional revenues.

I read an interesting blog post a few days ago pointing out that the
only US airlines that aren't hemorraging money are Southwest and
Jetblue, which are also the ones with the fewest nuisance fees.
R's,
John
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Makes sense. Some of the "full service" airlines have removed value from
their product. They have discovered their passengers will desert them to
save $5 per ticket, so they have to come up with some way to have what
appear to be low fares, but allow them to make it up.

Personally, I'm a fan of some form of bundling. Maybe offer a premium
economy service akin to what some of the international (non U.S. based)
carriers offer, but provide luggage, food, etc. included. Advantage for the
airline is they could predict their costs, but they could also offer a
better grade of service. I've flown Virgin transatlantic in Premium Economy
and it was quite nice and well worth the extra fare - and the section was
full. I think on a 3 hour domestic flight would be quite popular. I can
remember years ago when Continental introduced a 3 class service between
Hawaii and the West Coast (1969), the middle class (coach) had meal service
while the economy class had no meals but sold snacks, within a year or so
there was no more economy as most passengers paid $10 more for the higher
class level. Allowing that inflation has made the $10 probably $40 or $50,
I still think it would sell well. And the advantage would be at least a bit
of differentiation between carriers. Right now they're pretty much all
flying bus lines, with the only reasons to choose one airline over another
are fares and frequent flyer program.

jeff
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[John Levine]

Post by Jeff Hacker
Personally, I'm a fan of some form of bundling.

Take a look at Air Canada, which offers five fare bands, three coach
and two biz, with different bundles of stuff. Some of the stuff the
lower bands leave out can be bought back, e.g., if you want advance
seat selection on the lowest fare, that's another $15. It seems to
work pretty well. Notably, everyone gets at least two free checked
bags, so that's one issue off the table.

Conversely, look at Ryanair, the worlds most annoying airline, in
which everything, and I mean everything, is extra. Say I want to fly
from London to Spain, look at the web site, wow the fare is only £5
out and £9.99 coming back. Oh, wait there's £22.57 taxes and fees and
a £5 web checkin fee, but it's still only £42.56, which is still quite
cheap for a trip that's a 2.5 hr flight each way. Oh, wait, if you
want to check any baggage (keeping in mind that they are utterly
inflexible about their briefcase sized carryon limit) that's £30 for
the first bag, £70 for the second, so we'll make do with one. Do you
want to go to the front of the line for the race to the plane, which
is the only way to reliably score an exit or bulkhead seat with decent
knee room? That's £6. Now we're up to £78.56, still pretty decent.
OK, ready to pay. That will be an extra £10 payment fee if you pay
any way other than with an obscure Visa Electron debit card, total
£88.56. That's STILL dirt cheap for a flight that's 860mi each way,
about the same as BOS-ORD, but, man, what a pain. Don't forget to
print your boarding pass at home, because it'll cost you, a lot, if
you need to get it at the airport. Nonetheless, way more people fly
Ryanair than BA, because they fly on time and never lose the bags you
paid so much to check.

Go figure.

R's,
John
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[Roland Perry]

Right now they're pretty much all flying bus lines, with the only
reasons to choose one airline over another are fares and frequent flyer
program.

And flying direct between the two places you need.