July 9, 2008

High Fuel Costs Push Northwest to Add Fees, Cut Jobs

DETROIT _ Thanks to the rapid rise in jet fuel prices, Northwest Airlines announced Wednesday that it will start charging fees on customers' frequent flier award tickets and $15 for a passenger's first checked bag.

The company also will eliminate 2,500 jobs across its operations.

The airline also raised the fee for making changes to domestic, non refundable tickets from $100 to $150. The fee for changing an international ticket will increase between $50 and $150, depending on the class of service and other restrictions.

The moves illustrate how airlines are doing anything they can to cut costs and increase revenue as they struggle to cope with record jet fuel prices. The fee increases follow similar actions taken by other major carriers in recent months.

"Our fuel costs have more than doubled in the past year," Douglas Steenland, Northwest's chief executive and president, said in a statement. "In order to manage through this unprecedented fuel challenge, we have to take action to both control costs and increase our revenue."

Altogether, the new and increased fees are expected to generate $250 million to $300 million a year for the airline, which plans to merge with Delta Air Lines Inc. at year's end. Northwest emerged from bankruptcy protection earlier this year with significantly lower labor costs.

Industry expert Tom Parsons, chief executive of BestFares.com, said these and other fees will soon transform flying into an a la carte experience.

"It seems like in the future, all we are going to get is a reservation in the sky," he said. "You are going to end up paying for anything extra you want."

Parsons also warned that Northwest and other carriers charging new fees risk losing more business to low-cost carrier Southwest Airlines, which so far hasn't implemented anything similar.

"Northwest just put up a big billboard: Fly Southwest Airlines," he said.

To boost revenues, Northwest will begin charging customers $15 for their first checked bag for tickets sold starting today for U.S. travel starting Aug. 28. The fee also applies to flights between the United States and Canada.

Members of the airline's frequent flier elite program and passengers paying full fares are exempt from the charges. Earlier this year, Northwest began charging customers $25 for a second checked bag and $100 for three or more checked bags. Those fees will stay the same.

Free tickets on Northwest will also become a thing of the past, at least for now. For frequent flier award tickets issued in North America on or after Sept. 15, travelers must pay a $25 service fee on domestic tickets, $50 for transatlantic and $100 for transpacific tickets.

Steenland described the fees as temporary and said that Northwest will revisit this decision when jet fuel prices come down.

For travelers, the new fees elicited mixed reactions.

"I think that's sad that this has to happen. And especially if they're charging for extra baggage, it's ridiculous," said Naina Patel, 48, of Canton, Mich.

Higher airfares have already affected Lansing, Mich., residents Katie Corr and her husband, Ben Corr.

"With the prices as they are, I can't really afford to travel at all right now," said Katie Corr, 26. "We're supposed to be on our honeymoon right now. I have a friend getting married in France, and we were going to go on our honeymoon there, but we couldn't afford two tickets so I'm going, and he's staying behind."

Others expressed understanding of the airlines' plight.

"I'm thinking they're doing the best they can," said Tammy Kenner, 46, a real estate developer from Rochester, Mich. "The airlines are going through the same thing we are right now _ trying to survive."

Kate Hanni, executive director of the Coalition for an Airline Passengers' Bill of Rights, said the current environment for air travelers is the worst ever. Her organization is getting 400 calls a day from consumers complaining.

"Fees confuse the passenger," she said. "Airlines should figure out the real cost of a ticket and charge it."

For Northwest, the job reductions follow plans announced last month to shrink even further the number of seats it flies beginning in the fourth quarter. The airline has about 30,306 workers total.

Northwest said it hopes to achieve the job cuts through early-out programs, voluntary leaves and other measures, offered to both management and frontline workers.

But furloughs could occur if not enough workers decide to leave voluntarily, the carrier warned.


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