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From American: Fares not Fees

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From American: Fares not Fees

Posted by George Hobica on Monday, December 17, 2012

Airline passengers hate all those extra fees for bags and flight changes, and according to my emails and twitter feed, many would like the extra perks to be "re-bundled" into fares (i.e., stop "nickel and diming us"). Well, American Airlines seems to be experimenting with fare bundling (as have Air Canada, Southwest and Frontier previously).

In brief, American's newest fare initiatives (and they are indeed "fares," not "fees") which they call "choice essential" and "choice plus," offer several packaged perks for a set price, and although the media has already piled on American for adding "new fees," for some travelers they may actually be a bargain.

For a $68 add on, Choice Essential fares include no change fee on domestic flights, which normally costs $150 per change; one roundtrip checked bag (normally $50), and "Group 1" priority boarding, which some airlines also charge for (Southwest charges $20 round-trip, for example, to board ahead of other customers).

For an $88 fare add on, Choice Plus gives you all of the above plus a free same-day flight change (normally $75) plus a premium beverage (which costs $7-$8 on American).

These fare add ons (and again, they are fares, which will be taxed at the 7.5% federal air transportation excise rate, whereas "fees" are not taxed), are optional, obviously, but for some people they may make sense. The "expectant grandmother" who isn't exactly sure when the baby will arrive and who normally checks a bag might be happy to pay just $18 for a "change fee insurance policy" rather than the onerous $150 fee (that fee is charged for each change, so presumably it would be $150 twice, or $300, if someone changes both the outbound and return flight or changes the outbound trip twice). And priority boarding is thrown in. Business travelers frequently change their plans, too, so if there's a good chance that the meeting will go shorter or longer than originally planned, paying $20 extra for same-day change flexibility plus a cocktail might be considered a "bargain."

There's no telling, of course, if American will keep these fares, or whether they will increase them later on. Also uncertain is whether American will end up losing money on change fees (in the first quarter of 2009, for example, customers paid American $116 million in change and cancellation penalties). It will also be interesting to see if other airlines follow suit.

American Airlines image via Shutterstock

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