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History does not repeat itself, but it has rhymes. Is it too clichéd to sum up the current gas price situation that way? That’s how it is. In this case, the reason for the price of runaway gas may be different than it used to be. However, the fear and insecurity surrounding today’s gas prices is strangely similar to 2008.
Back then, we were also worried about whether our 401 (k) account would turn into steam. Businesses have made quick decisions in response to the changing landscape.
Some of those decisions have led to long-term changes in travel. Today’s hasty decisions can lead to chaotic flights tomorrow and for quite some time.
High gas prices in 2008 started the travel trend that persists to this day
The last time gas prices were as high as this was definitely an exciting time for the travel industry and airlines in particular. Airlines have had to deal with rising jet fuel costs. The answer? Fees. You could say that the current apocalyptic pricing environment in the airline industry stems from the decisions that airlines are forced to make. It should also be reiterated that not all airlines are forced to make these kinds of decisions.
While major airlines take turns adding fees for services such as checked baggage, one airline applies a different way.
Due to an extremely successful fuel hedging program (at the time), Southwest Airlines actually chose to double down on its “money-free flight baggage” strategy while paying for significantly less fuel than all of its major competitors.
Southwest has taken a view of value while its competitors are looking to charge for many items that we often take for granted. Checked bags aren’t the only thing to get a price tag. US Airways, still years away from its merger with American Airlines, has decided to try charging for water and fresh water on flights. When they soon found out, there were some boundaries that should not be crossed. (But later, ultra-low-cost airlines like Spirit, Frontier, and Allegiant will eliminate those drink charges.)
As a result, the outcry from customers, along with no other airline choosing to impose this fee, caused it to disappear quite quickly. Unfortunately, it will only be a few years before Spirit Airlines breaks the other way and starts charging for carry-on baggage.
History has shown that these fees, originally seen as a way to help airlines in times of high fuel prices, are almost exclusively for staying. U.S. airlines charged $5.8 billion in baggage fees in 2019, the last year before the pandemic. The starting point was a modest $15 fee for baggage inspection that doubled compared to American Airlines’ first baggage and nearly tripled for second checked baggage.
Until recently, the current price of jet fuel was significantly lower than it was in 2008 and that was the price before adjusting for inflation for more than a decade. What started as a way to deal with difficulties has become a grave.
Gather the fees that customers accept as a new reality.
In fact, until United Airlines CEO Scott Kirby announced that the airline would permanently eliminate the change fee on most types of tickets, the game revolved around airlines copying each other for new fees. People with short memories may consider Kirby to be an advocate for consumers and a leader in eliminating change fees. However, Kirby served as president of US Airways in 2008 when it made the decision to charge customers who were thirsty for a glass of water.
Another strategy that gained popularity in the months after checked baggage fees became famous was the introduction of “co-payment” when exchanging miles under certain circumstances. No, this fee is not the same as the fees you pay when taking your 10-year-old to the doctor for a sore throat.
Instead, if you want to use air miles to upgrade your ticket revenue from economy class to first class, the airline will charge you an extra fee. Since there aren’t really any additional costs for airlines associated with many of these new fees, these fees have actually helped underpin their profits.
The increase of surcharges imposed by the carrier
Even the most optimistic and uninformed people see a term like “surcharge imposed by the carrier” and feel discomfort in the belly. The more accurate term is “fuel surcharge,”and this practice appeared before 2008. It’s no surprise that in the face of so high air fuel prices, charging extra fees for airfares has become more common.
Since these surcharges don’t correlate much with actual fuel prices, it becomes a game to figure out exactly how much for a “free” rewarded flight for some airlines based on surcharges. What started as an easy way for airlines to balance a rapidly changing fuel market has turned into another charge that airlines feel they can impose on customers.
Resort fees have entered the conversation
It is difficult to determine when the first hotel charges a resort fee for guests. However, there is no doubt that this practice began to be widespread around 2008. Hotels have suffered the consequences of airlines during the global recession. Many people have chosen to charge resort fees as a way to keep their advertising rates low while quietly increasing the total amount customers pay each night.
There are no laws that airlines face to show more overarching prices, resort fees are becoming increasingly popular and there are even new names. Hotel marketing groups have pivoted to compelling campaigns aimed at increasing room occupancy to come up with terms such as “urban destination fee,” “residence fee” and “sustainability fee.”
These fees have turned what was previously completely free (redeeming points for a free night) into a situation where guests may have to pay hundreds of dollars in fees when they check out at a so-called free hotel. This practice became so popular that many lawsuits emerged.
One hotel chain, Hyatt, chose to take a page from Southwest Airlines’ book and go the other way, free resorts and parking fees for award-winning bookings. Hilton has also chosen to create a path where “free” still means free, applying a resort-free policy to award-winning bookings.
In addition, potentially the first sign of legislation requiring some transparency about vacation fees, Marriott has signed a settlement agreement with the state of Pennsylvania to provide the necessary clarity about those fees during the booking process.
We have yet to see the final outcome of that settlement, but there is cautious optimism about the charges themselves that will have more light in the future.
This is followed by programs and promotions for customers who are horribly lucrative.
As travel prices go up and we fall into recession, tourism is still a way for people to forget about their problems. The use of points and miles to offset travel costs began to explode around this time. Prior to 2008, “free” travel strategies were discussed on bulletin boards such as FlyerTalk and on a handful of travel blogs, such as View From The Wing. Brian Kelly, founder of The Points Guy, will start thinking about setting up a website to share these strategies more broadly. Making money and burning frequent flyer miles will explode in popularity.
The myth of a guy buying thousands of cups of pudding to make money for miles will become a real-life story of consumers buying hundreds of stickers from a now-defunct company to earn thousands of Miles of US Airways dividends in its annual Grand Slam promotion.
While some people implement these strategies excessively (especially those who have contracted with armored vehicle services to transfer tens of thousands of dollars in coins), it has become much more common for consumers to carry cards in their wallets, Allow them to significantly reduce the cost of travel. For the first time in history, many of them are not issued with the logo of a particular airline or hotel chain on the card.
While the American Express Membership Reward has been around for some time, Chase is ready to change our wallet profoundly with the launch of the first Sapphire card. Flexible points and miles quickly became the gold standard, allowing customers to earn valuable points but have to wait to determine exactly how to use them. Equipped with this flexibility, consumers can shop around to find the best value at a time when they’re ready to redeem.
When an airline program increases the number of miles needed to pick up a prize or set a new fee, consumers can now be more flexible in finding value. In some cases, that means using strategies like switching to a loyalty program for an airline that you would never fly to redeem gifts on other airline flights (did someone say LifeMiles?). With the knowledge that fees have existed for a long time, Consumers are forced to adapt to keep travel affordable.
How to ‘protect’ your travel wallet
You may want to grab a refund card to help reduce fuel costs when you see attractive prices at the pumps. No one knows what gas prices will look like next week – let alone next month. While that may be the best strategy for some, it seems that credit cards with generous bonus portfolios and flexible currencies will be key for many. For example, earning 10 miles per dollar when booking a travel ticket with a Capital One Venture X Rewards Credit Card can help reduce some travel costs quite significantly. Even if a refund is something you want, you may need to consider another form of refund, such as Citi’s Costco Anywhere Visa® Card.
In the meantime, don’t fall asleep with serious ways to save money when the opportunity comes.
The announced merger of Spirit and Frontier could mean ultra-low-cost carriers will weather the current storm and deliver incredible value to travellers. Don’t be embarrassed to fly over the Frontier. Instead, celebrate airfares cheaper than a gas tank to beach getaways like The Confidante in Miami Beach, Florida (transfer those Chase Ultimate bonus points to hyatt for a free stay).
With gas prices in the United States hitting an all-time high, we don’t necessarily see new charges pop up from airlines. However, airfare will increase. Also, when you land on your next vacation, chances are the rent for a car, Uber, margarine and dinner will make your pocketbook a little harder. That could lead to even the most casual of us (including the author) having to consider renting a vacation or other nontraditional route for our next vacation.