Etihad Airways charging a second bag fee? Bad idea for a brand trying to establish itself

As promised at the start of the year, SimpliFlying will be bringing you more Guest Columns from leading aviation practitioners around the world. Our second guest article of the year is written by Oussama Salah, who is an aviation expert based in Abu Dhabi, UAE. Being a Jordanian who flies around the region a lot and works in the sector, he shares with us his thoughts on why the proposed checked-in bag fee by Etihad is not a good idea.

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ETIHAD may charge for second piece of luggage

This  was a remark made by James Hogan Etihad’s CEO, otherwise I would have thought it was a joke. Why would an aspiring and highly branded airline with cash flushed owners want to do something like this?

Etihad operates in a highly competitive and well connected market, whether it is the UAE, MENA or the Indian subcontinent. The traveling public (both Arabs and Indians) in the region is traditionally price sensitive and is used to weight and not number of bags. It is basically a visit friends and relatives (VFR) market used to carrying gifts and shopping across continents, bags and sacks of them.

So price sensitive, just look at the number of LCCs and quasi LCCs in the GCC alone  (Air Arabia, FlyDubai, Jazzera Airways, nasair, SAMA and Bahrain Air) that have started in the last 5 years. There are rumors of another LCC in Abu Dhabi and Qatar Airways intimated that they may set up one to compete in that segment. Even legacy carriers compete on price, at the peak of the summer season an extra ten (10) kilos of free excess baggage may be the only price differentiator.

Currently and among legacy carriers, the least expensive tickets are probably on Qatar Airways. So as long as you are not in a hurry and do not mind transiting through Doha for a few hours, then you are in luck. And, this is a highly branded airline too.

At a time when carriers in the region are restructuring (Gulf Air) or have joined alliances (Royal Jordanian and Egypt Air) or are rebranding (Saudia and Oman Air), and faced with stiff competition from two of the most branded airlines in the world (Emirates and Qatar Airways), I fail to see what Etihad hopes to achieve.

It seems airline branding does not include economy class. And this is a sad situation indeed.

What do you think? Is it a good idea or a bad idea for a premium Middle East airline to charge a bag fee? Will they lose customers? Let’s hear your thoughts in the comments and on Twitter (@simpliflying)

Shashank Nigam

Shashank Nigam

Shashank Nigam is a globally sought-after consultant, speaker and thought leader on airline branding and customer engagement strategy. He is the Founder and CEO of SimpliFlying, one of the world’s largest aviation marketing firms working with over 85 aviation clients in the last ten years. Nigam is also the youngest winner of the Global Brand Leadership Award and has addressed senior executives globally, from Chile to China. Nigam’s impassioned and honest perspectives on airline marketing have found their way to over 100 leading media outlets, including the BBC, CNBC, Reuters and Bloomberg, and into leading publications such as The Wall Street Journal and the New York Times. He writes a dedicated monthly column in Flight’s Airline Business, challenging the typical assumptions about airline marketing. His new book on airline marketing, SOAR, is an Amazon bestseller that’s shaking up the industry and inspiring other industries to learn from the best airlines. Born in India, raised in Singapore, he now lives with his wife and two young daughters in Toronto.
Shashank Nigam
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Showing 22 comments
  • Thomas Fouché
    Reply

    Not fresh news: at least 2.5 weeks old…
    Now I hope it brings good traffic to your blog (sure does), because no serious airline managers I know of is going to comment such a simplistic statement.
    What about “for or against fuel price hike?”
    Let's elevate the debate please.
    Cheers,
    Thomas

    http://www.airbusiness-academy.com
    See http://topnews.ae/content/21246-etihad-charge-p

  • Peter de Waal
    Reply

    Extemely bad idea……they should offer a third bag free of charge for intercontinental flight……this revenue does not compensate the loss of pax revenue

  • Ken Hamilton
    Reply

    Actually, if you have ever flown Etihad or Emirates from North America to DXB or vice versa, you will understand the reasoning. One businessman travels in business class with one bag. A family of 2 adults & 2 children connecting thru DXB to Asia have 8 to 9 bags plus 3 to 4 carry ons. Think it is time the 'user pay' concept came to the Gulf region carriers. They have established themselves, they just need to sets some rules now.

  • Oussama Salah
    Reply

    It is not whether you are established or not as an airline it is more of what matters to your passengers. Passengers in MENA and the expat community in the GCC are price sensitive and airlines have to take that into account. The charge for bags rule in the USA have created a breed of respectable passengers who cheat the system. The FAA has fined American Eagle 2.5 million USD for not recording weights properly. I am not privy to the details but my guess is all these extra large and heavy so called carry on luggage. If I am correct we are looking at a potential safety hazard of incorrect weight and balance. I hope I am wrong

  • Steve Edwards
    Reply

    One of the best TV commercials of late is from SouthWest Airlines, (No charge for Second Bag) making fun of the other carriers. It is a very powerful and well done commercial that gets a very strong point across. With todays slumping economy, saving dollars for travel can decide who you spend your dollars with. So the question is, does it make them money or cost them money in reduced customer base?

  • Djordje Vukotic
    Reply

    I am not sure that was a good idea in terms of current growing process and future plans for long haul network. EY needs to bring more passengers as they introduce additional capacity very fast on overseas routes. Beside mentioned, strong competition in the Middle East region, that Etihad is facing with will have an advantage in free baggage allowance filed.

  • Marcellette Cloche
    Reply

    I just want to know, is the extra baggage fee because airlines are getting a better offer from cargo-type services instead of stocking up people's things? Why the extra baggage fee? As a customer it's just the most ridiculous annoying method of increasing a company's bottom line. Give great service and that should increase it 100 times better than a lame baggage fee! Don't do it – i think it damages a company's image. If you want to go low cost, charging for bags is the best way to help you join that club!

  • Homer Randle III
    Reply

    Being that the airline industry is volatile right now I think it would be disastrous
    especially for a start-up to be trying to charge a baggage fee. Don’t do it!!!!!!

  • Marcellette Cloche
    Reply

    Additional comment: when airllines start charging baggage fees, customers start bringing on bigger and bigger carry-ons (suitcase style), which takes up all the overhead space. Those with smaller carry-ons have to put those bags under the seat in front of them, reducing an already miniscule leg room to begin with which greatly decreases a person's comfort even more (I obviously speak from the economy class perspective!) and that diminishes the customer's experience (especially when you have 10-hour flights). Just a thought… but then again, the airline model is obviously built on packing everyone in and not on enjoying the experience. Stand out from the crowd. Go for service.

  • Julija Bentley
    Reply

    What is a second bag? It is weight… The increased consumption of fuel and increased emissions are directly related to the weight of the airplane is carrying. Fuel is one of the greatest costs in the airlines and some are going out of business. For example, if B717 carries 1 ton extra, in one hour it will consume aprox. 3% more fuel than it normally would. Is it a lot or little? The airplane will also have to carry more fuel in its tanks for this reason. Furthermore, airlines will have to pay for increased CO2 emissions, which will result from higher weight. All companies charge for a second bag implicitly or explicitly…
    Imagine, Julija is going on vacation maybe once a year and she really needs those 58 dresses, 23blouses and 35 pairs of shoes for wonderful experience during those 7 nights and 8 days..while Bob carrying his 4 kg handbag is traveling to deliver a presentation every week…Is it fair that Bob is paying the same ticket price as Julija does?

  • FRANCO IAVICOLI
    Reply

    Thank you Shashank!
    It's an enteresting question…

    In mktg language I would say it looks bad for a start up in the upper segment; from the point of view of fuel, costs saving and emissions it's surely a good move; furthermore like Julija said it's on line with new environmental policies and this in perspective could better qualify the brand.

    Today onother carrier has made the same operation IB (next IB-BA?):
    means nothing? New trend?

    Maybe or maybe not, but at the end in a strongly price sensitive mkt, could be a solution to use beside lower fares, obviously without touch business (30kg x2 free?) and first (40kg x2 free?) and full Y.

    It's an hazard? But what success without it…

  • Paul Sciacca
    Reply

    Bad, bad decision. Tickets on Ethiad are somewhat expensive BUT competitive in most markets. Granted you are paying for great service, but so do their competitors have excellent service.
    With the economy trying to get back on its feet and travel worldwide down, business travelers have been mandated by their employers to find the most economical airlines to get to their destinations. Airlines are fighting daily to gain market share in all markets. Charging for additional bags is not going to make me travel on a carrier. Why should I have to pay additional charges when I can go on other carriers and not have that added expense? Sounds like that move is lacking intelligence or good judgment.

  • Nikhil Datar
    Reply

    Personally, I have had a horrible experience as a customer with Etihad.

    About what you are asking Shashank, I believe its about what customers this airline is after. Its important to make sure that customers are loyal to the airline and not to the schemes of this kind, especially if that makes you a loss per departure. Customers like transparency – in this case, will they give lesser price for someone that does not have two bags? or someone that does not drink anything versus someone that finishes all the orange juice in the plane? As a customer I still wonder why an airline charges more money if i buy my ticket closer to the date of departure. Is there a logic that a customer can see? My suggestion is – As long as a business is transparent with its customers, there could be a WIN-WIN. And if you are saying that this is an age old habit of customers and a MUST HAVE to compete – then I think this airline needs to revist its business OUTSIDE-IN rather than INSIDE-OUT

  • Artem Velichko
    Reply

    Just like having to pay for your pair of white hotel slippers in a 5* hotel. Just does not sound right for Etihad. On the other hand Turkish have just increased their allowance to 30 kg on longhaul, just like for their international/domestic transfers. It was a very welcome differentiator for me as a passenger on the way back from HKG.

  • Raza A. A
    Reply

    In my opinion most of the middle eastern carriers exist and survive because of the labor traffic as well as huge expatriate movement. No matter some carriers put themselves in 'premier' caregory or whatever. Their real revenue source is expatriate 'working class' who seek opportunities to save money. So I do not believe it would be a good idea for any middle eastern carrier to try and follow US airlines' practices.

    I loved what Nikhil said. Basically, such policies should be implemented keeping mind the mutual interest of the company and the targeted customer segment. Otherwise for a traveler it is just another way to squeeze money..nothing else.

  • Nikhil Datar
    Reply

    Shashank, incidently I ran into a dated article that says Air Canada had launched an “a-la-carte” pricing model with base price and then customers could upgrade based on what they wanted” . This is a good example of what I refer to as Transparency. It makes you very credible.

  • Vimal Rai
    Reply

    Regardless of the business sense of doing this – are Etihaad's customers primarily choosing them becos of schedules, safety and price etc ? If schedules, then it might be not be such a shot in the foot. If price etc. then it's 'screwing' the customer but doing it quietly 🙂 (it's likely most pax will not realise they have to pay for the 2nd bag until they reach the airport to check in, which will make checkin a pain and leave an unpleasant taste in the mouth). As rightly pointed out, Arabs and Indians NEED baggage allowances – so maybe it's a stroke of genius to start charging the very people who you KNOW NEED the service you are charging for! From a branding perspective, a-la-carte and full-service do not fall into the same branding bucket.

    Unless… we're all missing something here which these guys have discovered – that you can be a premium carrier up front, but a no frills carrier back-end in EY. Can a brand be built around this novel concept ?

  • Aamer Quraishi
    Reply

    Will Etihad come up with a concept selling of Branded fares like some Malaysian carriers? What happens to their various configs of Pearl, Coral and Diamond, charging for 2nd piece of baggage sounds kind of vague for a carrier like Etihad who has established its aircraft cabin after a jewellery line. It should start renaming its cabin as 1bag, 2 bags and 3 bags instead of Pearl, Coral & Diamond. I think Etihad is getting lost in terms of what business model they intend to follow, is it the Emirates Class or the Air Arabia Class, may be the recent Fly Dubai has heated them up a bit.

  • Kenneth J. Goldstein
    Reply

    If you are a class carrier (which they believe themselves to be), you don't indulge in a classless act of charging for bags, nickel and diming the customer are NOT a good things as evidenced by the continued slide in overall financial performance and revenue by the legacy carriers in the US.

  • Salama Evans
    Reply

    The US and Canada are the only countries who allow two bags which can weigh over the normal 20kg or Business 30 kg limit, so doubt other countries will notice who are used to these luggage restrictions, What is important is if you can get an extra 20kg by paying for the extra bag at a minimal charge. Meaning with Economy ticket you can have 40kg without paying a high per kilo surcharge! That would sell it for me.

  • Tauseef Ahmed Siddiqui
    Reply

    I think it’s a smart move to some extent as the aviation industry has to nurse back itself to health and has to make its business equation a gainful one… These types of ancillary revenue lines can help them to do it sooner. Again, pricing would play an important role.

    Br, Tauseef Ahmed Siddiqui | Arzoo.com

  • Richard Ziskind
    Reply

    I feel unbundling has gone too far to impact the fundamentals of our airline service experience. We have to draw back and supply the basics when you buy a ticket. The simple equation for the customer buying a ticket. Seat + Luggage = Air Travel, this should be one price and airlines should set baggage limits and charge for anything over those limits. That is acceptable, but charging for all baggage is not acceptable in my mind. When have you ever travelled without checked luggage on a medium to long flight.

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