Imagine you are in your favorite supermarket, looking for a specific item, but find only one brand on each shelf. The overhead index says “Bread –Aisles 2, 5, 8, 11, 15,” or “Milk —Aisles 1, 4, 9, 13, 16.” The owner has the idea that if he makes it harder for shoppers to compare products and prices, more will buy the store-branded items, which are conveniently placed closer to the checkout, even if they cost more. This eliminates the shopperÂ’s’ ability to efficiently compare product qualities and prices. The only way to do that is to run all over the store taking notes and calculating the final cost of discounted items. While you were comparison shopping, other shoppers scooped up the products you wanted, and the shelf is now empty.
This concept of a not-so-super market is a fable, of course, but the idea behind it is a reality for consumers of air travel. About six years ago the major airlines began charging separately for services that used to be included in the airfare, a process called “unbundling.” While many travelers don’t like this approach, it permits each consumer to pay for the services she uses and these fees have resulted in billions of dollars of profits for the airlines.
But, like the not-so-super market in our fable, the airlines have separated some of the goods in a way that prevents more than half of consumers – those who need or want to use an independent intermediary (traditional travel agent or online agency) – from effectively comparing the total price of air fares and the unbundled services they want. The availability and pricing for most unbundled services are available only on individual airline websites. The travel agencies, traditional and online, whose greatest value was the ability to enable comparative shopping regarding the character and price of all available options in each market, are shut out from access to real-time, for-sale-now ancillary fee information. Such information is essential to help consumers complete their air travel purchases with the assurance that they have understood the options and made an optimal decision.
You may ask: how can this be? You may have thought that airlines were, as they often claim, vigorous competitors and that their need for revenue would lead them to help intermediaries sell services that earned revenues for the airlines. You may even have thought that since more than half of air travelers buy their fares from intermediaries, the airlines would be sure that these unbundled services were available for sale through them in the more than 143 million consumer transactions they make in a year. Well, if you thought any of that, you would have been wrong. The airline industry is not your grandmotherÂ’s supermarket.
The airline marketplace is simply not working for anyone but the airlines. For example, the airlinesÂ’ largest customers are corporations, many of whom have multi-million-dollar travel budgets. It is critical to these companies to manage their travel expenses by understanding what is being spent, by whom and for what. These large consumers of air travel typically turn to travel agencies called travel management companies (TMCs) to help them transact their travel purchases and manage their complex travel policies. These large corporate consumers of air travel have been demanding for years that the airlines make their unbundled services available for purchase and accounting through the TMCs they have chosen. The airlines have refused these demands from their largest customers.
Other groups of customers have expressed their concerns about these practices through a petition (more than 50,000 signatures) against “hidden fees” to the U.S. Department of Transportation (DOT) and groups that traditionally represent consumer interests before the government have called on the airlines to distribute the services and fees through intermediaries. The airlines response: fuggedaboudit.
These refusals to honor the demands of consumers for access to information and purchasing are indicators of a failing market. This situation has persisted for several years. Among the consequences are increased consumer search times trying to find and acquire unbundled services, consumers paying more than they should for services whose prices are not influenced by competition and many consumers being unable to buy the services they want. These are the natural result of consumers being unable to engage in robust comparison shopping.
To be sure, one or two airlines have recently made purchasable access to their upgraded economy class seats available through some independent sources, but even those airlines stop short of committing to robust and complete disclosure of the dozens of separate services and associated fees through independent retail sources.
So what is the solution? There is one: the DOT can adopt a regulation that compels the airlines to disclose the full array of unbundled services and fees in ways that enable consumers to see the total price of air travel, and pay for it, at any retail source where airlines choose to sell their tickets. DOT has in fact issued a notice of proposed rulemaking on the subject. But while moving toward greater transparency in the disclosure of ancillary services and fees, DOT has declined—at least in the opening proposal—to force airlines to let consumers buy ancillary services at the same time and place where they buy their airfares.
Unless DOT can be persuaded to move more boldly, those consumers who want or need the services of third party sellers, such as travel agents, will have to commit to their ticket in one place, then go to the airlineÂ’s website for the unbundled services they want to buy. This entails risk for every such consumer because even the short time between those events can result in missing the chance to book seats together.
Unless and until DOT acts to fix the situation, the not-so-super market for air travel is just going to get a lot more difficult for consumers.
