Fees represent 100% of profitability

[Onestep2flt]

Not quite that close. Total ancillilary fees were about $8 miillion more than the net profit for the 1st 9 months of this year (which include some fees that have been around a long time) while the checked bag fees were about $100 less than the 9 month net profit.

Jim

That is why I said almost. I was actually quoting what an article reporting Mr. Kirby saying. I have not looked at the actual numbers yet. Guess I should not trust the media and US management for things of that importance. Of course that may be a management problem, they can't understand the big difference in a few MILLION Dollars.

Anyway, thank for keeping me honest Jim.

 

[IberiaMAL]

Well, I believe fee's will always be consistent so I don't see the problem with fee's representing the profit if it's $500,000,000...


It is a little odd that fee's represent 100% of the profit but it works.



I'm more curious as to know which stations are dragging US down, lifting US up, and which are just breaking even.

 

[Onestep2flt]

What's the point of this thread? Fees are only revenue. Fees were attached to ticket prices because customers are hyper-price sensitive after being conditioned to pay under operating cost for 20 years. The idea behind fees is you only pay for what you need. If you carry on a bag you don't pay, etc. Back to my point, fees are revenue. Revenue minus costs equal profit (Econ. 101).

I think because that conditioning was brought on by airlines themselves. It is not the customers fault that you were selling the product for less than it was worth. They just took advantage of the situation. The airlines were trying to undercut their competition for market share rather than just selling a good product at a realistic and reasonable rate.

I am not totally against some justifiable fees. Fees for changing a travel date or city pairs. These are for my convenience. They are making money from fees that most companies figure into the cost of doing business though. The baggage fee is a good example. You are penalizing people for having different needs than someone else. If I go away for a weekend to Miami a small bag is all I might need and it will fit into a carry-on. If I go for a weekend to Buffalo in winter I am not so sure. I think though that the rational person would expect that if I am going on a trip I am going to have some baggage. Look, even Southwest charges for more bags than two. I think that there does need to be a cutoff in order to accommodate everyone, but charging for the first bag just does not seem reasonable. First, if I could travel without bags I would. Too much hustle. But it is reasonable to expect someone to have a bag going to buffalo. Even US Airways does not charge for the first bag on international flights. What is the difference between a two week trip to Paris and a two week trip to Los Angeles? I know that some will say that international is different and it costs more. That is probably true because just maybe US already figured a bag into the cost of the trip. If it is just for the convenience of the international traveler then the fees are not being fairly distributed. It is after all, Pay for what you use isn't it? As pointed out before, this does not solve the problem of lost bags. If I pay an extra fee for a service that I "Choose" to use I expect that they should arrive at the same time and the same condition that I left them in your care. I know that every airline looses a bag here and there, but paying an extra fee also sets my expectation higher that it will never happen.

This still does not solve the core issue. US Airways is an airline. They are suppose to be in the transportation industry. The focus should be on a sustainable business plan to transport people. Depending solely on fees to achieve profit is a pretty short sided business plan.

Even things that I can agree that are fair US can't seem to get right. Say for instance, I am craving something chocolate and low and behold you have chocolate chip cookies. Great, I whip out my credit card and get "I am sorry, we only except cash." That is interesting, because US Airways had a big public announcement that they only except credit cards on board. Well this is Republic. O.k., does not mean a hill of beans to me. The ticket and the plane say US Airways on them so should not the service be the same? Someone told me that there flight to London they excepted cash or card. This is very confusing. Which is it? Does Us except just cash, cards or both? If you are going to implement something it needs to be system wide. In the US system I could potentially have three different ways of payment on the same trip. If I come from London to Charlotte I can pay however I please. My leg to Phoenix is card only. Oh, and my leg to Tucson I can only pay by cash. It might be said that it is "express" so it is different. Your legs are shorter. I beg to differ, I was on a flight from St. Louis to Charlotte once. It was I believe a Mesa flight. That is not a short flight. It is over 2 hours. Don't know where the word Express fits into that flight. Point is the public usually does not know until we are at the airport that our flight is not actually on US Airways. So, please fix this kind of stuff.

 

[Travelpro72]

Express still doesn't take cards. Hey US are you still "working" on that? 🙄 Could you imagine if management were blunt enough to just say, 'Ya know what, we just don't care WHAT you think.' It's how they feel anyway so just come out and say it.

 

[wench1]

this summer come contract neg with the CWA, the company HAD BETTER NOT ask for ANYTHING back..
We have all paid our dues..Period!

 

[rvolkcpa]

Well, I believe fee's will always be consistent so I don't see the problem with fee's representing the profit if it's $500,000,000...


It is a little odd that fee's represent 100% of the profit but it works.

The comments on this thread are strictly about US' reliance on fees. The other legacy carriers have the same dependence on fees. I tried to measure fees vs net income for Delta, AMR and UA/CO.

One report said that Delta had $1.3 billion in fee income for 9 months. Their net income for 9 months was $574 million.

AMR had $785 million in fee income for 9 months and a net loss of $373 million.

UA/CO had $922 million in fee income for 9 months and a net income of $578 million.

If these numbers are accurate, the larger legacy carriers would be in even worse shape than US without the ancillary fee income.

 

[john john]

Even US Airways does not charge for the first bag on international flights.

?

 

[Onestep2flt]

?

My wording may be a little confusing there. I was trying to point out that US Airways says they charge you for the services used. One of those services is for the baggage you choose to check. They seem to be inconsistent though as they do not charge for the first bag on international. They do charge $25.00 for the first bag each way domestically. I asked what the difference between going to Paris for a while and going to Los Angeles. It seems they actually consider one bag into the cost of the ticket for international flights. Why not just do that for the first bag on all routes? Be consistent with your service, which includes any fees you charge.

Just to give one example. Flying from Philly to Dublin Ireland on January 10th returning the 17th. You can purchase two tickets round trip for the lowest advertised rate of $766 round trip excluding tax. That includes the first bag checked for each person. Now let us fly on the very same date of January 10th returning on the the 17th. Flying Philly to Oakland, California. You can purchase two tickets for $704 excluding taxes. So far so good. Makes since that the international flight cost more. But wait, I bought two tickets for a weeks travel. We each check one bag. Two bags at $25 per bag each way. So that is $100 dollars more round trip for a grand total of $804 excluding tax.

Full disclosure; in order to get that fair to Dublin I did have to choose a flight that connected out of London on a star Alliance partner. I did make my selection with US and would pay for my ticket with them and my flight number would be a US flight number on my ticket. I also flew on US to London. The result should be the same regardless since the star Alliance "Provides seamless travel to our customers" or so says the brochure. Anyway, just another US inconsistency.

 

[SS255]

As long as the check clears, I guess it doesn't matter so much where the money comes from. But what worries me about this business model is the reliance upon ancillary fees to sustain profits.

As people get more savvy about the fees, they will more successfully avoid them. I believe this is what start to happen with checked bags. The airlines saw their revenue from checked bags drop due to customer savvy, so they increased the bag fees.

There is a tipping point. Eventually the airlines will reach a ceiling on each type of fee, and I think we are very close to that ceiling. Sure, they can think up new fees, but eventually they will hit the ceiling with those fees, as well. In the meantime, the cost of fuel is creeping up again.

It's far better in my opinion to charge rational fares and NOMINAL fees (i.e. $10/bag) than to rely on fees to stay in business.

 

[BoeingBoy]

If these numbers are accurate, the larger legacy carriers would be in even worse shape than US without the ancillary fee income.

Part of what you're seeing is that no 2 airlines are identical. Just take checked bag fees - US has the smallest proportional percentage of long-haul international flying where the first checked bag comes with no fee, so sees a higher percentage of passengers that do pay a checked bag fee. A much bigger airline, like DL, will collect more $$ in fees but also have higher absolute costs than a smaller carrier.

A more accurate comparison would be average fee paid by the average passenger or passenger mile, but even that doesn't make comparisons exact because it ignores the cost side of the ledger.

Jim