Air Canada's fare model puts positive spin on fees

Air travelers might remember 2008 as the Year of the Fee.

Most major carriers decided checking bags was a privilege and started charging $15 for one, up to $50 for the second. US Airways said it wanted $2 for coffee or bottled water. Delta ticked off surfer dudes everywhere by jacking up the fee for carrying their boards to $300 each way.

Airlines call it "unbundling" and say fliers should be happy to pay only for the services they want. Travelers prefer a different term: nickel-and-diming. Either way, the fees aren't likely to go away.

But a new pricing model could arrive soon from north of the border. Air Canada sells four fare categories — from bare bones to deluxe — each with a menu of services.

Business travelers who need flexibility in their schedules might choose a Latitude fare, which is fully refundable and includes free standby privileges and no fee for changing flights or checking sports equipment.

Fliers on a budget can pick a Tango fare. Extras cost extra, such as advance seat selection ($15 to $22) and booking through a reservations agent ($25). The airline knocks $3 off if you don't check a bag, $3 off if you don't get frequent flier miles and $5 off if you agree not to change or cancel a flight.

Air Canada was exiting a bankruptcy reorganization and under pressure from discounters when it switched to the new fare system in 2004. The carrier stopped erosion of its domestic market share, and 49 percent of passengers now buy a ticket more expensive than the basic Tango fare.

Air Canada's Web site has a grid that spells out what services come with each price level, says Robert W. Mann Jr., an airline consultant in Port Washington, N.Y. Offering discounts puts a positive spin on fees.

"Instead of making everything a negative, with Air Canada it's like horse trading,'' Mann says. "They've done the best job of merchandising … an unbundled model."

Will it fly over here? American Airlines, the first major U.S. airline to impose a first-bag fee, has looked at Air Canada's system as a possible model for tweaking its fee model, officials say.

Steve Huettel can be reached at huettel@sptimes.com or (813) 226-3384.