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Friday, August 8, 2008

Airlines Find a Way Around Ticket Price Competition

They compete in the business of asymmetric information: raising baggage / hidden fees.

"This isn't just annoying. It's an assault on capitalism. Companies with the best prices and the best products are supposed to win in our Darwinian economic system. Instead, sneaky charges and tack-on fees prop up poorly performing companies. Instead of rewarding the best performers, we are rewarding the members of the Gotcha Hall of Shame."

This is an ingenious way for companies like American Airlines and JetBlue etc. to show up as "cheap(est)" on sites like Travelocity.com, since such sites don't report fees specifically (how can they as they seem to be cropping up everywhere).

In fact, if you try to find a flight on Travelocity, here is what shows up (for American Airlines):

"Bag Fees May Apply more
Nonstop Service more"

When you click on the link, you get:

"Checked Baggage Fees May Apply

Some airlines have announced changes to their checked baggage policies and these fees may impact your trip.

Please review the link below for information regarding this airline's checked baggage policy.

http://www.aa.com/aa/viewPromotionDetails.do?itemDescriptor=PromotionContent&repositoryName=PromotionContentRepository&repositoryId=16075429&anchorLocation=index.jhtml"

One would hope savvy shoppers wouldn't be fooled, but my guess is that this added "search cost" to find out exactly what these fees are are too high for many shoppers - leading to huge gaps in information between traveler and airline.

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