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sep 26 2009

There is no "holiday travel fee," no matter what you've heard

Some news organizations are saying that airlines are going to charge a fee for traveling on the most popular travel days this winter.

Pay no attention.

The airlines aren't charging "a holiday travel fee." If they did, they would violate federal regulations. An airline isn't allowed to offer a fare for $500 and then, when you book it, surprise you and say, "Gotcha! Because you're traveling on Sunday November 29, you have to pay an extra $10 each way." In other words, an airline can't slap on a fee for traveling on a particular day the same way it charges a fee for checking a bag or upgrading your seat.

So what are reporters and bloggers squawking about?

Several days ago, American Airlines added a "miscellaneous surcharge" of $10 each way for domestic flights on the Sunday following Thanksgiving and on the weekend of Jan. 2-3, 2010. In other words, American began including in its base fare a surcharge that's just like a fuel surcharge. When American advertises its fares for holiday travel, the fares you see in newspaper advertisements or on travel websites will already include this surcharge.

United, US Airways, and Delta (plus its Northwest division) added the surcharge, too.

UPDATE Oct. 6: This fee has spread to 10 days total during the holidays, reports The Motley Fool. (Nov. 30, Dec. 19, Dec. 26, Dec. 27, March 14, 20, 21, 28, April 11, and May 28.)

They might as well just have raised their fares as they usually do: Same difference to you. All you need to know is that airfares will be higher during the holidays this year than they were last year. The reason is simple: More people will be traveling but there will be fewer planes to carry them as the airlines try to regain profitability.

Why did airlines invent this confusing surcharge in the first place?

The simple answer: A surcharge is a lazy way to make sure airlines rake in big bucks this year. It's easier to slap a $10 surcharge onto every ticket than doing the complex calculations needed to raise prices by various amounts on thousands of routes ($8 more on one route, $18 on another, and so forth).

Rick Seaney at airline ticket comparison website FareCompare.com broke the news of this novel accounting maneuver. But when he used the phrase "Holiday travel fee" in the headline of his blog post, he confused some reporters, who then spread the confusion further. I wish he had spelled out in a clear sentence or two that This Is Not the Same Thing As a Baggage Fee.

Kudos to Kelly Yamanouchi of the Atlanta Journal Constitution for being one of the only reporters to point out this important nuance. A surcharge is something you have to pay whether you want to or not. A fee is something you can say no to.

On a side note: If I was a ticket-pricing analyst for an airline, I might be insulted. Or worried about keeping my high salary. The CEOs of the airlines just told me to take a flying leap. Airline execs seem to be betting that they'll net more money by slapping on a flat surcharge on every ticket more reliably by using fancy software to calculate thousands of different fare changes.

I predict that one day airline CEOs will act like Shakespeare's Henry VI. Instead of saying, "Let's kill all the lawyers," they'll say "Let's fire all of the pricing analysts."

Maybe they'll switch to an eBay model (or Google AdWords model), letting passengers bid for airfares in a rapid-fire way. They may say, how much would you be willing to pay to fly from Denver to Omaha on November 28th at 7 p.m., between a range of $300 and $800. And you could say what the lowest price is you'd hope to pay and what the maximum price is you'd like to pay, and then the computers would either accept or match your bid--sort of like Priceline, only you'd know exactly what flight and airline you're bidding to fly on.

Okay, maybe that's fantastical. Airlines can't be that innovative.

But fees and surcharges are here to stay, for sure. And prices aren't likely to drop between now and the holidays, so book as you soon as you can.

EARLIER

New seat-selection fee on British Airways

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Note:This story was accurate when it was published. Please be sure to confirm all rates and details directly with the companies in question before planning your trip.

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