The airline fees you won't see on the internet

Denver-based Frontier Airlines has become the first in America to announce its customers will be subject to higher fees and fewer benefits unless they book directly through the airline's website.
Denver-based Frontier Airlines has become the first in America to announce its customers will be subject to higher fees and fewer benefits unless they book directly through the airline's website. Photo: AP

In the 1960s, they seemed like one of the best inventions in the history of technology: so-called global distribution systems (GDS) to simplify and speed up the process of booking an airline ticket.

So it was in the airlines' self-interest to put their money into developing GDS networks that have been behind the world air travel revolution in the past three decades.

In the 1990s, with the internet revolution overtaking the GDS revolution and allowing consumers to book directly with airlines and eliminate costly "middlemen”, the airlines sold off their interest in GDS.

The GDS networks, however, have become the monster created by one of the least viable industries on earth, which is simply handing on its profits to a bank-like oligopoly that is rolling in money.

The airlines can't kick their addiction to the GDS network because it has sucked up their most valuable customers, business travellers, who sub-contract their travel buying to specialist travel managment companies that use GDS.

The GDS companies – those that operate fare comparison sites such as Expedia and Orbitz – are now charging airlines fees per booking of up to $US25 per return trip. And the airlines are fighting back.

American low-cost carrier Southwest puts a priority on direct sales and has long refused to pay the fees demanded by fare comparison websites, yet it has flourished to become the biggest domestic airline in the USA.

Now Denver-based Frontier Airlines – only a tenth of the size of Southwest – has become the first in America to announce its customers will be subject to higher fees and fewer benefits if they buy fares through a comparison site or travel agent instead of its website, FlyFrontier.com.

"We've really focused on further improving our website, adding features that will enhance the overall customer travel experience – including some features that are now only available to customers who book their travel at FlyFrontier.com,” chief executive David Siegel told business news website IBTimes.com. "Booking at FlyFrontier.com is the best choice as it's the only place you can book Frontier travel where you'll get an advanced seat assignment, earn more EarlyReturns (frequent flyer) miles, and enjoy more choice in your overall travel experience.”

FlyFrontier.com will also be the only place customers can book Frontier's Classic and Classic Plus fares, which include two complimentary checked bags and free access to premium seating options. Direct bookers can access curbside baggage drop at selected airports.

The airline will penalise anyone who buys a flight through an outside booking channel: they'll get their seat assigned at check-in, earn only 50 per cent of their frequent-flyer miles and pay higher fees.

"For a lot of people, there is a lack of understanding that the airline loses some control of your booking when you use third-party sites,” says Frontier Airlines spokeswoman Lindsey Carpenter.

Airlines once simply trumpeted the convenience of booking direct; now it's likely that web bookings will be come with more incentives, though there haven't been any of these types of initiatives in Australia so far and consumers advocates are wary of the consequences if airlines try to suddenly ditch comparison websites.

Only about 50 per cent of airline bookings are made directly with airlines via the internet worldwide, although that figure is much higher at budget carriers like Jetstar and Tiger.

"Airlines are trying and have been trying for many years to move the needle in their direction, but the reason people book directly with Expedia and so forth is the vast majority of consumers only care about price,” says George Hobica, founder and chief executive of Airfarewatchdog.com in the US.

But the game has changed as the airline industry copes with ferocious price competition and forks out an estimated $US7 billion worldwide per year in GDS fees, while the airline industry globally this year will make a cumulative total profit of just $US3 billion.

"Airlines are wonderful generators of profits — for everyone, except themselves,” The Economist observed last month in a treatise on the subject. "Even in good times their margins are as thin as a boarding pass, and, in recent years, they have more often lost money.”

In fact, the industry folklore is that the airline business has lost more money than it has ever made, while it has enriched airline suppliers like GDS companies and privatised airports such as those in Australia.

Do you use comparison websites when booking flights or do you book direct with the airline? What has your experience been? Is price king - it doesn't matter how it is delivered? Have you seen evidence in your travels of airlines using financial incentives to use their website?

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