Like paying to check bags? Just wait ...

Airlines planning a whole menu of fees

FORT WORTH, TEXAS -- The idea of paying a single, simple fare to fly on an airlplane is becoming as quaint as stewardesses in short skirts.

American Airlines is about to accelerate the trend of breaking the cost of a trip into an airfare plus many smaller fees.

Starting next year, American, which led a stampede by U.S. carriers to charge customers for checking even a single suitcase, plans to imitate the a la carte pricing structure pioneered by Air Canada, airline officials say. There are likely to be a few basic fare plans, and travelers can pick additional services -- for a fee.

Fans of "unbundling," as it's called, say it gives travelers lower base fares with the option of paying for extras that they really want, such as beverages or blankets.

Some travelers are wary and suspect the airlines are just trying to chisel them a few bucks at a time.

Phone and cable companies have been using this pricing approach for years to offer extras such as premium channels. Now airlines see unbundling as a way to boost revenue and defray prices for jet fuel.

There may be no going back.

"We as an industry have opted to not just raise [ticket] prices but to raise prices and change the fee structure," said Daniel Garton, American Airlines' executive vice president of marketing. Without fees to offset rising costs, "you're not going to be talking about fees -- you're going to be talking about lost service ... being able to have a flight to San Diego," he said.

United Airlines expects to raise $700 million a year from fees. Northwest Airlines estimates baggage charges will bring in $150 million to $200 million a year. Continental Airlines predicts it will generate $100 million just from a new $15 fee for checking one bag.

Airlines have grown more sophisticated at wringing every last dollar out of a flight, partly by lowering and raising fares based on supply and demand. Much of this magic, called "yield management," is invisible to passengers.

Executives at Air Canada, which revamped its fare structure five years ago, look down their noses a bit at the actions of their U.S. counterparts, saying a la carte pricing should be about transparency and customer choice, not simply revenue.

Air Canada went through bankruptcy this decade, and when it emerged in 2004 it was losing customers to low-cost rival WestJet Airlines. Air Canada fought back by creating a bare-bones service, with extra amenities for picking a fancier plan.

"We did this in the environment of Air Canada losing market share," said Ben Smith, executive vice president at Air Canada. "It was about gaining the confidence back from our customers and offering products we thought they wanted."

On Air Canada's Web site, travelers pick from four fare levels. The top tickets, called Latitude and Executive Class, are fully refundable and come with priority check-in.

The cheapest fare, called Tango, requires extra fees for upgrades such as a food voucher, advance seat selection, flight changes and airport lounge access. Tango passengers can save $3 by declining frequent-flier miles or not checking a bag.

Smith said simplified fares have helped Air Canada increase revenue. Half of passengers pick an option higher than Tango.

Air Canada passengers give the airline credit for making fares understandable -- "It's nice to know where I could save money," said Amanda Kruzich, a cosmetics rep.

Still, Kruzich said she would rather have an all-inclusive fare. "I feel nickel-and-dimed when I have to pay extra for everything," she said. "Just throw it all in and tell me what the fare is."