Customers
Did you manage to outsmart the airlines before they outsmarted all of us on Saturday? Travelers had about 17 hours to book tickets without paying most government taxes, because of Congress’ failure to authorize funding for the Federal Aviation Administration (FAA) by midnight on Friday. Most carriers started pocketing that money at the very first opportunity they had.
I did book a ticket and saved about $50, but I must admit I didn’t expect the airlines to raise fares so quickly and deprive customers of any savings.
So what exactly happened? Shortly after midnight Eastern time (ET) on Friday, when the FAA lost its prerogative to collect taxes, airline reservation systems began dropping those taxes from ticket prices. I issued a $164 one-segment ticket on Friday — on Saturday, that same ticket was being offered for $150, with everything else the same, including the fare bases. I bought the ticket on Friday, because I wasn’t sure that taxes wouldn’t be charged the next day.
When I found out that they were indeed excluded, I decided to book another ticket — this one with seven segments, hence the $50 savings.
If you’ve read my book, “Decoding Air Travel,” you know that domestic fares are filed three times a day on weekdays, and once a day on weekends. That weekend feed at 5 p.m. ET was the first chance the airlines had to change fares — and they did, except for Alaska Airlines and Spirit Airlines. They seem to have refiled most fares to include the amounts they previously charged as taxes.
In other words, for 17 hours on Saturday, consumers were the beneficiaries of tax-free tickets. After that, the airlines hijacked the opportunity created by the FAA situation and have been making lots of money since. I’m actually rather impressed by the speed and scope by which they did it.
I should note that some smaller government taxes, such as those collected by the Transportation Security Administration (TSA), are still being charged.
Is it fair for the airlines to exploit a government fiasco for their financial benefit? At this point, it doesn’t appear that anyone can stop them.
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Did you know that hundreds of fictitious flights inhabit airline schedules every day? They don’t exist in real life — just on paper. They are meant to make more money for the airlines by tricking customers and perverting a practice that was actually started to help travelers. In fact, they spell nothing but trouble for passengers.
Those fictitious flights are labeled “direct” by the airlines, which years ago decided to rewrite the dictionary and use that term for flights that weren’t nonstop but made at least one stop on the way to their destination. First, those flights were operated by the same aircraft, but later a “plane change” was introduced. The Department of Transportation has allowed the airlines to abuse the practice any way they like.
On my way back home from Boston last weekend, I was on United Airlines Flight 897, which the purser announced repeatedly was “a nonstop service to Washington Dulles, with continuing service to Beijing.”
I immediately cringed, because there is nothing “continuing” about the two flights, except for their number. The plane I was on was a two-cabin Boeing 757 and arrived at gate C19 at Dulles. The plane destined for Beijing was a three-cabin Boeing 777 and departed from gate C3. So the passengers connecting to Beijing did exactly what others did connecting to Flight 803 to Tokyo at gate C1 — or any other flight for that matter. They left the first plane and walked to their new gate.
Did the Beijing-bound travelers benefit in any way from the fact that their tickets had one flight from Boston to Beijing? Absolutely not. In fact, many of them were probably surprised to discover they were on two separate flights.
Then why does United even have that fictitious “direct” flight? Because it wants customers to think that they can fly from Boston to Beijing without the hassle of a connection — a competitive advantage no other carrier offers.
Have you tried to upgrade a “direct” flight? That can be a nightmare — not just for passengers but also for those who work in inventory management. They have to create inventory for a flight that doesn’t exist and to balance the load of two separate flights on different aircraft types with a different number of cabins and hugely different number of seats. As a result, the lowest booking classes and upgrades are often unavailable on “direct” flights. Some travelers are willing to pay more to avoid the hassle of transfers, not realizing there is a hidden connection.
Almost every international United flight has a domestic tag attached to it, but United is by no means the only U.S. airline abusing the system. All major carriers do it. Delta pretends to fly “directly” from Minneapolis to Moscow, Continental from Amsterdam to Denver, US Airways from Los Angeles to Zurich and American from Tokyo to Boston.
As I wrote two years ago, United and Delta are the biggest abusers, while American seems to be the most prudent in that most of its “direct” flights are operated by the same aircraft. American is also the only one whose website displays a “direct” flight as two separate segments at the very beginning of the booking process.
In the rare cases when foreign carriers, such as Lufthansa and Singapore Airlines, operate “direct” flights, they are flown on the same plane, so there is no danger you will miss your “continuation,” which happens regularly on U.S. airlines. If my flight from Boston to Washington had been late, United wouldn’t have held the plane for Beijing just because the two flights share the same number.
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Airlines abuse ‘direct’ flights
The management teams of United Airlines and Continental Airlines have never seen eye to eye when it comes to customer loyalty, and that seems to be causing trouble during their merger preparations. My inside sources tell me that Continental executives don’t quite understand United’s big emphasis on loyalty in recent years.
It also appears that Jeff Foland, who last week was named head of the combined carrier’s frequent-flier program, Mileage Plus, will have a tough job selling United’s current philosophy to his new bosses in the Continental team, which will run the company once the merger is completed, most likely around year’s end.
Even though Foland, who has been United’s senior vice president for worldwide sales and marketing since 2006, didn’t have a direct formal role in Mileage Plus’ decision-making, he is said to be greatly influenced by the way his current superiors and colleagues do business. After all, his entire short career in the airline industry has been spent at United.
In addition, all United call centers, including the only remaining Mileage Plus center in Rapid City, SD, reported to Foland, so he is no stranger to the recent drive to turn the program into a profitable business.
Foland will succeed Graham Atkinson, the current Mileage Plus president, who used to have Foland’s present job. As I wrote in February, Atkinson is responsible for changing United’s overall approach to loyalty by proving that what’s good for customers doesn’t necessarily have to be bad for the company.
Most of the changes he made in less than two years on the job have been welcomed as major improvements by Mileage Plus members, including the introduction of one-way awards and eliminating so-called close-in fees, charged when an award ticket is issued less than three weeks before a trip. The attention Atkinson has paid to customer feedback and the degree to which he has acted on that feedback are extremely rare, if not unprecedented, in any customer-service-driven industry.
The bottom line for the company is that, by making and keeping its most loyal customers happy, Atkinson turned Mileage Plus into a money-making business. The bottom line for customers is that Mileage Plus today is probably the best program in the industry, with the notable exception of StarNet blocking. Hopefully, the practice of massively blocking award seats otherwise made available for mileage redemption by United’s partners in the global Star Alliance will soon be on its way out.
It’s no secret that Continental’s priorities have lied elsewhere under Jeff Smisek, its chairman, president and CEO, who will be CEO of the combined airline. Smisek has won much praise for his management style, which has helped the company’s finances during a tough period and significantly improved both its hard and soft products. Continental has chosen to lure passengers in its premium cabins by lowering business-class fares, while United has kept those fares high, resulting in more upgrades for elite customers.
Although that choice has its merits, Continental’s OnePass is hardly a leading loyalty program. There is nothing wrong with trying to attract more paying business-class passengers, but in the current environment, a strong upgrade product would go a long way to securing long-term customers.
United has that product, and so does American Airlines, United’s main competitor. Even though Mileage Plus and OnePass have aligned some of their features, they remain apart in many respects — and most importantly, in their business philosophies. Hopefully, the unpleasant prospect of losing customers to American will prevent the merged carrier’s management from curtailing the more significant benefits in Mileage Plus compared to OnePass.
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Continue reading about United, Continental execs at odds over loyalty program
Is there an inherent conflict between the desires of loyal customers and a travel company’s interests? For years, executives have been acting as if there is, despite of what they might say in public. One of them, however, has actually shown that what’s good for travelers doesn’t have to be bad for business.
Graham Atkinson has been president of United Airlines’ frequent-flier program, Mileage Plus, for only 16 months, but while some questionable policies remain in place, he has made a big difference for the better. His approach is not simply to please the carrier’s best customers — it’s to listen to them carefully and find ways to benefit the company at the same time.
Mr. Atkinson, who is also United’s executive vice president and was previously chief customer officer, hasn’t sought much credit for his achievements…
Fierce competition in the hospitality business is nothing new, but last week one of the world’s largest hotel companies took the game to a new level with a bold move aimed at enticing customers of a major competitor.
The InterContinental Hotels Group took advantage of many frequent travelers’ anger with Hilton Worldwide for devaluing its loyalty program, HHonors, last month and offered them bonus points if they also have an account with InterContinental’s scheme, Priority Club.
As I reported in November, Hilton decided to increase the number of points required for “award” stays at many of its hotels. It added a new Category 7 to its chart, and for a night at most of its high-end properties it now charges 50,000 points instead of the previous 40,000. Redemption levels at many other hotels jumped by 5,000 points…
Continue reading about Hilton, InterContinental cross swords
