Readers of this blog know that I am very — almost morbidly — interested in how airlines are using ancillary fees to shape customer behavior. An interesting story along those lines comes from Ryanair, the Irish discount airline that has never said no to a fee. They recently have run into a bit of trouble with a Spanish court over one of their policies. Specifically, the 40 pound fee they charge if they have to print your boarding pass at the airport. The Spanish court says that is illegal (Ryanair’s £40 charge for printing boarding passes is ruled illegal by Spanish court, Jan 17, Daily Mail).
Judge Barbara Maria Cordoba Ardao, sitting at a commercial court in Barcelona, said the fines were abusive because airlines are obliged to issue boarding passes under aviation law. …
Simon Evans, of the Air Transport Users Council, said: ‘You can’t board a flight without a boarding card, it is not an optional extra.
‘The idea of being hit with a charge of £40 or 40 euros if you don’t have your own is plainly horrible.
Ryanair’s position as explained by Deputy Chief Executive Michael Cawley in this BBC video amounts to “Hey, we’re all consenting adults.” Further, it is implicitly suggests that there is another alternative. Charging to print a boarding pass may be against the rules, but that leaves the possibility of refusing to print a pass at all.
This is a very interesting take on the whole fee issue. I have to admit that I kind of like Ryanair’s chutzpa on this point. There is a question here of what is a reasonable expectation of accommodation. If you had concert tickets, for example, and forgot them at home, you wouldn’t expect any recourse. The only reason that flying is different is that we have traditionally had to get the boarding pass at the airport. Now that we can get them before we hit the terminal, does the industry still have to meet the same expectations or can it begin to act line Broadway theaters or baseball teams?
There is another consideration. If as Mr Cawley asserts only a fraction of a percent need their boarding pass printed at the airport, then that becomes a very expensive service to provide. Ryanair execs have said in the past that they would prefer to have no ground staff at the airport. That means no checked bags and no boarding pass printing. But the infrastructure to print one pass a day or one bag per flight is pretty much the same as you would need to process many items. Yes, once it’s all set up, the marginal cost is pretty cheap but the average cost would be very, very high. 40 pounds might not be wholly divorced from the cost if they really are only printing a boarding pass every other day at a given airport.
And now the counterpoint.
Southwest is the polar opposite from Ryanair. It only charges fees for true extras (e.g., in flight WiFi). Fortune has just declared them the winner of the fee battle between airlines (How Southwest won the fee wars, Feb 3). Here’s the argument:
But what’s good for the income statement in the short-term could hurt long-term market share. Added fees, while an easy way to make quick cash, can damage an airline’s brand. “The vast majority of consumers don’t like surprises,” says Dave Hopkins CEO of airline consulting firm Air Transport Business Development. And they especially don’t like surprises in new fees.
There’s still one lone major carrier that hasn’t jumped aboard the fee bandwagon: Southwest Airlines (LUV, Fortune 500). While that means that Southwest misses out on low-hanging fruit, some analysts believe that it will be rewarded from resisting the fee frenzy. Southwest reported a net income of $131 million for the fourth quarter of 2010, compared to $116 million during the same time last year.
So enough people hate fees that you can win market share by eschewing them. But how then do you decide what fees are kosher? That is, how do you know that it’s OK to charge for WiFi access but not checked bags?
Southwest will still have to respond to increasing fuel prices. It already has. Earlier this month the airline upped prices on several flights throughout the Midwest. The airline acts on the mantra that it’s better to tell consumers upfront that a ticket will cost more than to wait for them to show up at the airport and demand more money.And Southwest does charge for certain services including in-flight Wi-Fi and an optional early check-in. But a company spokesperson says they carefully determine which services customers feel are integral to their flying experience and keep those free.
It’s curious to think that Southwest is now focused on what is integral to the flying experience when they have never conformed to assign seats or in-flight meals when those were offered by every competitor. Still I must admit that it is refreshing that one airline is approaching the question of fees from the customer’s perspective as opposed to assuming that we are all wallets to be opened. I guess that is why I like Ryanair and resent United. Ryanair aims to drive down costs. United aims to segment customers and extract rents. I respect the former and loathe the latter.