Wednesday, September 26, 2012

Are You Feeling Lucky? Gambling on the Cost of Your Airplane Ticket

I suppose it shouldn't come as a surprise that this idea is being floated by the airline that calls Las Vegas its home city.

On September 17, at a meeting of aviation execs, Maurice Gallagher, Jr., the CEO of Allegiant Airlines, spoke of his new plan to let consumers shoulder the risks associated with fuel costs.

Under his proposal, fliers would have two options when paying for airfares. The cautious flyer would be able to lock in his fare; as with airfares today, it would not shift, even if oil prices surge. That unchanging rate, however, has an ugly downside: it will be much more expensive than fares tied to fuel costs.

Those flyers who model themselves after "Nick the Greek" would take the second option: buying a cheaper ticket and then paying more, right before the flight, if the cost of fuel increases. In the "win big" column, these Sky Mastersons would also get some money back if the cost of fuel drops.  The entire idea is explained in a recent Business Week article.

Beyond sounding incredibly complicated to administer, this new policy raises issues of trust. Most consumers don't obsessively track jet fuel costs. They may not know whether the airline is being honest about increases in cost, and could be angered at having to pay extra before boarding. Consumers are already enraged by many airline policies; this one just seems to add fuel to the fire.

The plan also runs afoul of the Department of Transportation's new (2011) consumer protections, which prohibit the airlines from raising prices after a fare has been purchased. (The one exception is when governmental fees increase.) Allegiant may be able to get around this speedbump by structuring the initial payment as one that's only a "partial payment" as some tour operators do.

Whatever happens, we won't see any changes for at least 6 months, the amount of time Gallagher says it will take, at minimum, to reconfigure Allegiant's website to reflect these new methods of payment.

You gotta give them points for creativity, I guess. It seems like every day, the basics of travel get more and more complicated (witness Frontiers plan last week to punish flyers who don't book directly on its website). Is it time to re-regulate the airlines? Maybe so. 

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