American and United Overhead Bin Fees: A ripple effect ?

New York Senator  Charles Schumer has threatened legislation if airlines continue to monetize every atom, Senate minority leader said Sunday.

His target: Overhead bin fees. American Airlines recently announced that it would join United Airlines in instituting such a policy and Schumer feared of the ripple effect the move will have on other carriers.

American Airlines recently announced that it would join United Airlines in instituting such a policy and Schumer feared of the ripple effect the move will have on other carriers.

United announced late last year that it would adopt an overhead bin fee as part of the company’s change in pricing model. Under the new “Basic Economy” fare, travelers will be allowed to store a carry-on that fits below the seat, but will be charged extra if they want to lay claim to overhead real estate on their flights. More expensive Economy tickets still provide bin storage without additional charges.

The company has argued that, in creating a “new tier” of ticket, it has made airfare more affordable for flyers willing to travel lightly. Several weeks later, American Airlines unveiled a similar new policy with the same framing.

American Airlines liked the idea and argued it will now have something to offer to every passenger, from those who want simple low price transportation to those who want ultra premium First Class.

“American Airlines now has something to offer every customer, from those who want simple, low-price travel to those who want an ultra-premium experience via First Class,” said American Airlines President Robert Isom in statement announcing the news. “Importantly, this new fare product also gives American the ability to compete more effectively with the growing number of ultra low-cost carriers.”

“I’m announcing that in the upcoming FAA bill, which regulates the airlines, I’m going to lead a push to expand the airline passenger bill of rights…to add provisions so they don’t allow these extra fees for the overhead and for some other things—because enough is enough,” Senator Schumer said at a press conference in New York.

“Jet fuel prices are low; competition is narrow because there are so few airlines,” continued Schumer. “Profits are way up and they’re gouging the consumer.”

United Will Not Allow Lowest-Fare Passengers To Use Overhead Bins

Charging passengers more to use the overhead bin is one step too far.

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Jeffrey Dastin

United will become the first big U.S. airline to limit low-fare customers to one carry-on bag that fits under a seat.

The announcement on Tuesday could frustrate flyers who already feel burdened with airline travel restrictions and fees.

United, the No. 3 U.S. airline by passengers carried, said customers who bought its cheapest fares would not be assigned seats until the day of departure, meaning people on the same ticket may be split apart.

United will also prohibit these travelers from carrying on bags that can only fit in overhead bins, and they will not accrue miles toward elite status.

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The company expects the moves to add $4.8 billion to its annual operating income by 2020, although the figure does not include rising wages.

Fare initiatives such as “basic economy” will account for $1 billion of this, as more customers pay to check bags or select higher fares that give them two “free” carry-ons.

United’s announcement follows Delta Air Lines’ decision to sell cheap tickets that prohibit itinerary changes and seat selection.

“This action clearly shows how airline consolidation is eliminating choice,” Charlie Leocha, chairman of consumer advocacy group Travelers United, said in an email. “Simply stated, this is an example of airline consolidation gone too far, with choice and transparency being wrung out of the system.”

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Delta and United hope to lure customers with cheap fares and upsell them once they reveal the conditions of the ticket. It’s a practice they are using to compete with low-cost carriers Spirit Airlines and Frontier Airlines, which charge for add-ons including carry-on bags.

“Customers have told us that they want more choice and Basic Economy delivers just that,” Julia Haywood, United’s chief commercial officer, said in a news release.

The boarding process will also be faster because fewer customers will be searching for overhead bin space, United said.

Chicago-based United said it would begin selling the no-frills fares in the first quarter of 2017 for travel starting in the second quarter. Prices will be comparable to low fares it now charges for the economy cabin, but with more restrictions.

The initiative is part of United’s long-promised plan to rival Delta, which is more profitable and cancels fewer flights.

(Reporting by Jeffrey Dastin in New York, additional reporting by Ankit Ajmera in Bengaluru; Editing by Lisa Shumaker, Sai Sachin Ravikumar and Ted Kerr)