An Airline Profit Plan

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Watch out, travelers. Airlines have a new profit plan: surcharges.

Late last month, AMR's (NYSE: AMR) American Airlines added a "miscellaneous" surcharge of $10 each way for domestic travel on the Sunday following Thanksgiving, and the weekend of Jan. 2-3, 2010. UAL's (Nasdaq: UAUA) United Airlines, US Airways (NYSE: LCC), and Delta Air Lines (NYSE: DAL) have not only copied American in imposing the surcharge, but upped the ante, adding 10 more travel dates.

Why? Sean O'Neill, editor of the Budget Travel blog, says it best:

A surcharge is a lazy way to make sure airlines rake in big bucks this year. It's easier to slap a $10 surcharge onto every ticket than doing the complex calculations needed to raise prices by various amounts on thousands of routes ($8 more on one route, $18 on another, and so forth).

Keep in mind that unlike a fee, a surcharge isn't optional or avoidable. No airline employee -- no matter how friendly -- can reduce it. Common surcharges cover fuel, airport usage, and other operating expenses. They're sort of like the city and convenience taxes levied on you when you stay at a hotel.

So even if this airline-initiated surcharge isn't technically a fee -- or, more accurately, a fare hike -- it smells like one. Southwest Airlines (NYSE: LUV) knows this scent all too well, which could explain why I've been seeing more of its "bags fly free" ads recently. Potential coincidence aside, a Southwest spokesman said the company doesn't "have any plans to match that holiday surcharge," and I wouldn't be surprised to see the airline capitalize on that.

Simplicity is Southwest's competitive advantage as a carrier. Yet simplicity also makes this new surcharge attractive for all of its legacy competitors. Announce it, add a few lines to advertising fine print, and then start collecting the extra revenue.

Passengers won't like this profit plan. I can't blame them; a fare increase is still a fare increase, whatever the carriers call it. Yet this surcharge may be the most effective earnings-booster we've seen in years.

Taxi toward related Foolishness:

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