SUNDAY, FEBRUARY 25, 2024 --
I freely admit that this week's question-and-answer column is inherently unfair. I ask the questions--and answer them, too. Hardly a paragon of participation.
Still, I think you'll find the questions compelling. And I hope you'll find the answers useful.
Question: Why does the U.S. Government like airline baggage fees and hate Southwest Airlines?
You may not have known this was an existential travel question, but the query raised its metaphoric head this week when American Airlines, followed almost immediately by United Airlines, raised domestic checked bag fees. American now charges $40 for the first bag--or $35 if you book it online--and $45 for a second bag. United jacked its second-bag fee to $50 or $45 if you book online. Other carriers charge more: JetBlue's second-bag fee is as high as $60. Spirit and Frontier, the disingenuous "drip pricing" specialists, now charge as much as $99 if you dare check a piece of luggage at the airport.
Southwest Airlines, as we all know, allows you to check two bags "free" with every ticket. At least that's Southwest's advertising pitch: Bags fly free. As we also know, however, the reality is more nuanced: The price of checking bags on Southwest already is included in the airline's quoted fares.
Therein lies the unfairness of it all. The feds levy a 7.5% tax on airfares and the excise levy is included in your ticket price. Whatever part of Southwest's fares covers its luggage-handling operations is taxed at 7.5%. Do you know what the other airlines pay in taxes on their baggage fees? Zero. Not a penny. That's because ancillary fees like bag charges are not subject to the federal excise levy.
And we're not talking about rounding-error amounts. American Airlines collected nearly $1.4 billion in luggage fees in 2022, the last year for which the government has complete figures
. United's haul was about $1.1 billion and Delta Air Lines collected just shy of $1 billion. Meanwhile, Spirit Airlines grabbed $933 million in bag fees. The Top 14 U.S. carriers generated $6.7 billion in bag fees yet paid not a cent in excise taxes on the booty.
Why does the government allow this outrageous two-tier system, which encourages airlines to jack up luggage and other fees rather than fold costs into their fares? And why is Southwest Airlines penalized for offering flyers an all-inclusive, transparently priced ride?
At a minimum, the government should tax ancillary revenue like bag fees at the same 7.5% as airfares. That would go a long way to ending the plague of "junk fees" that the Biden Administration so publicly opposes
. In a more perfect union, we'd tax baggage and other junk fees at double the base excise rate as a way to dissuade companies from deploying the "drip pricing" scam that makes the true retail price of a flight so opaque.
Question: Will there be deep-discount business class fares to Europe for Thanksgiving and the end-of-the-year holidays?
Sadly, my guess is no. Those of us who fondly remember Continental Airlines' blow-out pricing to fill the front of its planes over the holidays may have to accept that those days are gone forever ... or at least gone for now. Continental's successor, United Airlines, has shown little interest in recent years. Delta is convinced that it holds the pricing hammer. Even with the joint-venture arrangement with IAG, parent of British Airways, Iberia and Aer Lingus, American Airlines is so inconsequential across the Atlantic that AA pricing moves rarely drag along competitors. Worst of all, load factors at the front of the plane continue to be phenomenal. Conditions just don't seem ripe for big bargains.
Question: Is the American Express Platinum Card worth the $695 annual fee?
Amex Platinum stands squarely at the center of the endless price/value debate surrounding credit cards aimed at high-yield travelers. Ever since its introduction in 1984, Amex Platinum has cost more than any other general-purpose card and American Express unapologetically raises the annual fee even as competitive cards such as Chase Sapphire Reserve and Capital One Venture X nip at its heels. The current annual charge, $695, is now so high that even the freest spenders among us no longer consider the fee de minimis. Robert McGarvey regularly reviews his value proposition
. Will Allen is bailing
after Amex cut Platinum airport-club perks for Delta flyers. And I've told you that Amex's pricing gods must be crazy
for their pre- and post-pandemic machinations.
I honestly don't know if Platinum works for you. I'm not even sure it works for me. So let's do my math here. Amex Platinum comes with $200 annually in Uber statement credits. I use all of it. It also offers $240 annually in what it calls "digital entertainment credit." I use about $180 to cover subscriptions to SiriusXM, The New York Times
and The Wall Street Journal
. Platinum covers Walmart+ membership, which saves me shipping charges when I order from the big-box behemoth. That's another $155. I also get extra value because Walmart+ comes with free Paramount+ streaming. I'd otherwise purchase it, so that's another $60 Platinum saves me. I've dropped my Amex-funded membership in Clear--I went an entire year without encountering an airport terminal where there was a Clear facility--so I won't count that. I used half of the $200 annual airline-fee rebate last year, so there is my $695 annual fee covered. Which means I get airport-club access (Priority Pass, Plaza Premium, Amex Centurion Lounge, some others) free. And free use of the card itself.
So for me, right now, the answer is: Yes, the Amex Platinum is worth the $695 annual fee. Your mileage will certainly vary, but at least do the math. You may be surprised by the answer. (By the way, Amex is offering an 80,000-point bonus to take the card, so factor that in your first-year cost calculations.)
Question: Will Capital One's purchase of Discover matter to travelers?
Let's be honest: Discover never amounted to a fraction of what Sears predicted when it created the card in 1985. Of course, Sears itself is almost gone and Discover has passed through several financial hands over the intervening decades. If it's approved, Capital One's $35 billion purchase could further consolidate the shrinking credit card market. And while Discover isn't often perceived as a key player, it's not small. In fact, it has a slightly larger share of the U.S. card market than American Express. This merger will be a political hot potato, especially in an election year. What travelers want won't be high on the list as politicians and regulators wrangle. We're going to be bystanders on this one.