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Innovations in Exploitation

Gouged While Flying

by CHRISTOPHER BRAUCHLI

Herewith an explanation of what might appear to the casual traveler to be nothing more than the kind of corporate greed to which we have become accustomed. It is an explanation for the reason for changes that airlines have introduced to the traveler that significantly increase the cost of travel while not affecting the price of tickets. This apparent anomaly has a simple explanation that is often overlooked. Before offering the explanation, however, it is helpful to look at some examples of increases in the cost of travel. For purposes of this piece we focus on the Friendly Skies of United Airlines (UAL) although the changes described and the motives as well, are equally applicable to those less friendly airlines.

Among the first of recent changes was one affecting passengers’ suitcases that was announced in about 2008. For many years the suitcase accompanied the traveler as a matter of right without additional cost. Today the charge for the first suitcase at UAL is $25 and for the second $35. In order to lessen the resentment many travelers felt at this additional charge, UAL came up with a solution. It sent customers an e-mail announcing that “United is the first airline to save you time and money with this simple and convenient service.” The simple and convenient service required the passenger to pack a suitcase a couple days before travelling and then call FedEx to pick up the suitcase and ship it to the traveler’s destination. Travelers who took advantage of this service did not have to pay UAL $25 for checking the suitcase. Instead they paid FedEx somewhere between $149 and $250, depending on where the suitcase was going, a figure that according to UAL’s website, has now dropped to $99 per bag.

Ever looking for new ways to improve the convenience for suitcases’ travels, UAL has added a new luggage service for those who don’t want to use FedEx. According to its website the traveler can pay the airline $349 for the one year privilege of checking two bags each time the traveler flies. That is much cheaper for the frequent flyer than paying FedEx and more convenient than having to pack a couple days before travelling. Having taken care of suitcases, UAL came up with another new idea. This improvement involved travelers’ comfort.

In the cheap seat section of the airplane it installed a few rows of seats where what would have been considered intolerable leg space 20 years ago became highly desirable. At first the seats were given at no cost to those who had attained privileged status with the airline. Then it occurred to someone that the company could make them available to others by charging an additional amount. To make the offer attractive, those seats were advertised for sale with pictures of a flyer with legs stretching into infinity which, of course, is no reflection on how much space is actually between those seats. Travelers flying from Chicago to Madison pay $9 for the better seats. Those flying from Denver to Seattle pay $49.

Now, UAL has come up with the newest, most exciting innovation yet. For years it has encouraged people to become members of their Mileage Plus Program because of all the good things that accompany the accumulation of great numbers of miles. One of the best was using the miles to remove oneself from the cheap seats into the business class seats. The number of miles required to accomplish this feat depended on the distance travelled and required the purchase of a more expensive coach class ticket than the least expensive one being advertised. Realizing that travelers didn’t like to have to buy a more expensive ticket in order to upgrade, UAL changed the rules. Anyone wishing to upgrade can now buy the cheapest ticket being advertised and use miles to upgrade. There is, however, a catch. It had the catchy name of “co-pay.” With the new program, a member of Mileage Plus who wants to use miles to upgrade from coach to business class when going to Europe, buys the cheapest coach ticket, takes miles from the mileage plus account and then participates with UAL in the “co-pay.” The co-pay for those travelling to Europe is $900 for round trip travel in addition to the price of the ticket. Those travelling to the Far East pay $1,000. And now, the reason for these additional charges that have helped the airlines keep ticket prices low. The answer can be found in taxes.

A 7.5% excise tax is imposed on passenger fares. The excise tax is not imposed on the assorted fees charged passengers described above including, presumably, the co-pays. No one likes paying taxes. UAL and other airlines have figured out ways of avoiding them. No one likes being gouged. Airline passengers have not yet figured out how to avoid that.

CHRISTOPHER BRAUCHLI is a lawyer in Boulder, Colorado. He can be e-mailed at brauchli.56@post.harvard.edu.