Dec. 13, 2010 -- It looks like the airline industry has found a new fee to squeeze some extra cash out of the flying public: the rate lock fee.
Continental Airlines this afternoon announced "FareLock" a new service which allows passengers to pay fees starting at $5, and rising to $9 or more, to hold a seat at a given price as a hedge against rising airfare. The price can vary depending on the itinerary and other factors.
Continental, which merged with United Airlines but is still operating as a separate airline, is the first carrier to offer such a service but, as with baggage fees, expect the rest of the industry to soon follow Continental's lead.
"I think it's a great idea, so I think others will follow," said Ray Neidl an airline specialist with the Maxim Group. "It's still one more thing they figured out how to get a fee."
But Neidl points out that many savvy travelers were already able to lock in prices without paying a fee.
"They're spinning it as something we're doing that is great for you, but it was free before," he said.
Continental, Delta, United and other airlines currently allow customers to get a full refund on any ticket within 24 hours of purchase. Some travelers game the system by booking, canceling the next day and then rebooking to ensure the best fare. American Airlines currently allows customers to hold a ticket -- and the fare -- for 24 hours for free.
Continental said that, for now, it won't abandon its 24-hour cancelation policy and that its new FareLock just gives travelers more options and more time to decide.
Neidl said he isn't sure how much money it is going to raise but that it will probably be less than the revenue for onboard food and surely "nothing close to baggage fees."
Latest Airline Fee: Continental Offers a 'FareLock'
"I think it's a brilliant," said John DiScala, a blogger known as Johnny Jet. "You don't have to feel rushed about the purchase. "It's a gamble, but I think it's a win-win for everybody."
DiScala said airlines create an environment where travelers have no clue which way airfares are going to go and try to push you, through fear, into impulse buys. This new feature gives people time to check with spouses or employers without worried about the price shooting up $100.
"I think it's worth it for the security of knowing you have a good airfare," he added.
Customers may choose FareLock when booking reservations at continental.com and opt for a 72-hour or a seven-day hold. They may return to complete the transaction at any time between purchasing the lock and its expiration, or they may choose an auto-ticketing feature which tickets at the end of the lock period, the company said. FareLock fees, beginning at $5 for a 72-hour hold and $9 for a seven-day hold, will vary based on a number of factors such as the itinerary, number of days to departure and the length of the hold. While tickets can still be canceled with 24 hours, the FareLock fee is non-refundable.
Fees are big business for the airlines. The Department of Transportation today revealed that Delta Air Lines collected the most fees of any of the U.S. carriers hauling in $1.26 billion in fees so far this year, Neidl noted. United/Continental was second with $922 million followed by $784 million collected by American. Neidl said that even though Southwest does not charge for the first two checked bags, it still collected $22.5 million in fees for third bags and overweight bags.
"This is the latest in a series of airline fees responsive -- at a price -- to customer needs," said Robert Mann, an airline consultant and president of R.W. Mann & Company. "The question is who will use this option, given fare shopping engines' unparalleled degree of availability and pricing transparency."