Friday, July 16, 2010

Grumbling Over Unbundling: Transparency Needed

Several years back, when the global economy went south, U.S. airlines started unbundling fees - that is, they began charging separate fees for things that used to be included in basic air fares, such as fees for checked baggage, fees for meals and so on. The airlines were losing billions but consumers got so used to cheap air fares - thanks to the emergence of low-cost carriers - major legacy airlines were not able to raise fares enough to recover costs, let alone make money.

Commercial airlines are just that - commercial, which is to say they are businesses. They need to make money. Problem is - as travel agents, corporate travel planners and just plain travelers have discovered - finding out what those fees are and how much they cost has proven to be complicated. Thus, the report this week from the U.S. Government Accountability Office (GAO), concluding that the federal government should step in and require airlines to be more transparent about fees.

The airlines hate this prospect and don't think it's necessary. A spokesman for the trade group the Air Transport Association responded to complaints by saying plenty of information is listed on airlines' own Web sites. Maybe so, but many people are finding the pertinent information difficult to, er, find. Which is to say, the sites are not sufficiently user-friendly.

The consequences are not small.

A Consumer Travel Alliance study released July 13 found that hidden fees can raise the cost of an airline ticket by as much as 54 percent. This was the highest of a number of estimates in the report that tracked fares and fees on selected U.S. routes for hypothetical travelers flying with one checked bag, two checked bags, etc.

Last week, Kevin Mitchell, head of the Business Travel Coalition, said that "100 percent of corporate travel managers indicated (in a BTC member survey) that unbundling and extra fees have caused serious problems for their managed travel programs,'' adding that "86 percent believe that airlines, absent government rules, will not make fair, adequate and readily accessible disclosure of their add-on fees and charges ...''

The upshot: it looks like new rules forcing airlines to be more transparent are coming.

Many critics, including the BTC, emphasize that they are not against unbundled fees per se, recognizing that airlines need to generate more revenue. They just want to know what the fees are without poring through arcane fine-print and spending inordinate amounts of time doing it. "That's why a reasonable measure of government support is needed,'' the BTC concluded, "to ensure that all airlines jump in together for the benefit of consumers.''

Industry lobbyists may yet halt transparency rules. The more traveler-friendly approach would be to sit down with regulators and determine what will work best for all stakeholders: airlines, agents, planners and, not least, business and leisure travelers. If information is power - as we are often reminded - travelers need to be empowered. And they deserve to be.