American Airlines - $15 for FIRST bag now

[shoturtle]

Why is everyone jumping all over the airlines. They have very little choice, they can simply raise fares to compensate for the higher fuel cost and affect everyone. Of just add fee for bags. If you fly with just carry on, they you do not need to pay the fees. If they raise fares, the ones flying only with carry ones will be paying more no check bags.

Oil will hit $200. Do the math 300 million in the US, 450 million in western Europe, 1.2 abillion in india, 1.5 billion in china. And the Asian eco power houses can buy more oil and increasing the demand on a finite product. So oil will get higher. The war borrowing does not help either.

And the weak dollar does not help. If the Dollar was on par with the Euro. Oil would be closer to $85 a barrel not $137.

For all that say they will find other airline, good luck. There are not to many left. The price of operation and the demand for super low fairs are slowly pushing the budget airline out of business. AA has no choice, you can not maintain low prices when the cost of doing business is going to bankrupt you.

If you want to blame anyone, you need to look at all that buy cheap Chinese and Asian goods that driving the Asian power houses eco. Those that brought homes that they could not afford and want the government to bail them out. For congress for not getting us out of iraq when they promise it during the midterm election two years ago.

It is not the airlines fault for higher prices, it is the hugh economic errors the the US as a whole did over the past 20 years. And the failure to develop a national energy policy that lighten our dependency on foreign oil. This has been foreseen for a while by the military planners. But as a whole, everyone pay a blind eye to it.

 

[ArcticDiver]

Why pick on the airline? Simple; I don't believe they are in the desparate straights they claim. Sure oil prices have increased on the futures market. How does that translate into increased current fuel costs? We don't know.

If they were compensating for increased fuel costs only, the most cost effective way would be to increase fares. This would be akin to what is happening in other industries with fuel surcharges and the like.

Instead they appear to have other motives. Their behaviour looks suspicously like they are continuing the pattern of seeing just how much they can trim service. The more they can cut service the higher profits.

At the same time their actions bias Cost of Living and Inflation analysis. The models used by the govt don't handle this kind of de facto inflation very well.

We lose all the way around.

 

[deco_martini]

Why is everyone jumping all over the airlines.

Because adding bag service fees is a dumb way to raise more money because it adds to the wait times at the counters. If they need money, raise fares. Its not like most people outside of Chicago and New York have much choice about which airline they use because of the hub system.

 

[Otter]

That may be true according to their financial statements. But, most any accountant will be quick to point out that such number only relates to cash is a rubbery way. When all the rather arcane accrual accounting priciples are applied it is very common for income to be presented as a startlingly low number. Guess it all depends on what your reality is; cash, or arcane accrual accounting.

One example was given me: The airline(unamed deliberately) shows they lost money; but they never missed a payroll, or a lease payment on their airplanes, or a CEO or Director payment and their cash position improved.

I don't think the concept of capitalizing your equipment as arcane. From a cash basis, you pay $20M for an airplane and use it for 20 years. It makes sense to allocate the $20M over the 20 years it is being used to produce income. From a cash basis, there is an 'extra' $1M each year available to make payroll, but its not really profit.

Airlines are an incredibly capital intensive business. Every minute the plane sits on the the ground is lost revenue. Every seat that is not sold is lost revenue -- like hotel rooms, you can't inventory that. Every airline except for Southwest is facing huge increases in fuel costs. Why not Southwest? Because they were smart enough to lock in fuel prices (buy futures contracts far enough out) at lower prices. I don't know how far out, but at some point they will have to pay more as well.

 

[Otter]

Why pick on the airline? Simple; I don't believe they are in the desparate straights they claim. Sure oil prices have increased on the futures market. How does that translate into increased current fuel costs? We don't know.

If they were compensating for increased fuel costs only, the most cost effective way would be to increase fares. This would be akin to what is happening in other industries with fuel surcharges and the like.

Instead they appear to have other motives. Their behaviour looks suspicously like they are continuing the pattern of seeing just how much they can trim service. The more they can cut service the higher profits.

At the same time their actions bias Cost of Living and Inflation analysis. The models used by the govt don't handle this kind of de facto inflation very well.

We lose all the way around.

How does charging $15 for a bag 'cut service'. What is 'cost effective' about increasing fares. While I don't agree with the approach they are taking, their motives are quite clear -- generate more revenue to offset higher fuel costs. This isn't rocket science.

 

[Eileentk]

How does charging $15 for a bag 'cut service'.

Consider this likely scenario: long ticket lines as folks express their discontent at being charged for checking baggage or argueing that their bag is small enough for a carry on, or just due to the extra time that it takes to process the credit cards/take cash for the baggage fee. Then consider the long slow boarding lines as folks try to get on with an overstuffed carry on and cram it into an already full overhead bin while folks who are sitting in the aisle seat have to wait patiently while the window seat passenger tries to fit their carryon into the space under the seat in front (because there was no more room in the overhead bin). Then consider the delay in take-off because some passengers could not fit their bags into either place and now there's a row of bags that have to be checked after all and fees that have to be collected and processed....

 

[tstormdiver]

Personally I agree with just a straight across the board fair increase. Instead of charging more for those who have bags, raise the fairs to cover the fuel costs & then give a refund (say $20 or what ever) for those who don't carry bags. I want to know what my costs are up front & pay for them up front. Then there's no confusion. What they are doing almost amounts to "bait & switch".

 

[Saltwater Junky]

I read in another thread Air-Tran is doing something similar with sporting goods. The fuel costs are seeping into all aspects of our lives. Have you noticed the price of food. What we spent of groceries 2 yrs ago now buys half of what we used to. Air traveling to destinations is nice, but since 9/11 it has been miserable with the bottle necking and delays and don't forget your commute to the airport schlepping your luggage hours before your flight. I'm more concerned with how expensive our lives in general are becoming and what is our government doing to lessen our dependence on oil.

 

[ArcticDiver]

How does charging $15 for a bag 'cut service'. What is 'cost effective' about increasing fares. While I don't agree with the approach they are taking, their motives are quite clear -- generate more revenue to offset higher fuel costs. This isn't rocket science.

Charging for the checked luggage that was previously free is a cut in service. It is akin to a restaurant that had previously given you free plates from which to eat your food now instituting a "plate charge". Or, another example, now charging for the lettuce in your hamburger.

It is more cost effective to simply change the fare data in the computer than to charge, collect, secure, and account for the new bag charge. For many people the money will need to be paid at the check in counter thus adding to employee workload and customer lines and frustration.

I agree however that their motives are quite clear. They are using the Frog Cooking Method. You remember that old chestnut don't you? In response to the question: "How do you cook a frog?" The answer is: "Raise the temperature very gradually. By the time the frog realizes it is being cooked it is too late." They have been gradually reducing services and raising cost to the customer. Customers have not only accepted the reductions they have helped the airlines rationalize them.

 

[ArcticDiver]

I don't think the concept of capitalizing your equipment as arcane. From a cash basis, you pay $20M for an airplane and use it for 20 years. It makes sense to allocate the $20M over the 20 years it is being used to produce income. From a cash basis, there is an 'extra' $1M each year available to make payroll, but its not really profit.

...

Agree the concept is just fine, in concept.

But there are several problems involved. First, the way financial data s presented to a public that in general operates on a cash basis violates one of the primary rules of accounting. It misleads them since the fact this is "accrual" is not disclosed.

Further, the way the concept is implemented has little to do with actual life of the asset and much to do with tax code and arcane accounting rules that are obtuse even to many accountants.

"...not really profit"? Sure it is; read your definitions again. Remember, many corporations keep multiple accounting records to be able to present their financial data to different audiences to gain most favorable treatment from that audience. Gee, even us humans do that on occasion. Ever compare someone's bank records with their tax return?

Whether examining a person's Signs and Symptoms or a corporation's Financial Statements one has to really dig below the surface to arrive at a correct assessment.