Northwest Airlines this morning discontinued its policy of absorbing Passenger Facility Charges, government-imposed fees that vary by airport and range upward to $18 on a roundtrip ticket. In a memo to corporate and travel agency clients, the airline said it previously shielded passengers from these charges by marking down base fares "to remain price competitive with connecting hubs that do not have PFCs." In addition, Northwest raised fares by as much as $4.50 each way for itineraries that connect through airports that do not levy PFCs.
Specifically, the airline said global distribution systems as of 12:01 a.m. this morning no longer absorbed PFCs of $4.50 on Northwest tickets for itineraries connecting through hubs in Detroit and Minneapolis.
"Northwest has also increased fares on many itineraries traveling through airports where PFCs are less than $4.50," the airline said in the agency memo. For example, airfares for itineraries connecting through Houston and Memphis--where PFCs are not levied--were raised $4.50 each way, while those connecting through Milwaukee and Newark--where PFCs of $3.00 are in place--were raised $1.50 each way. "Consequently, the total price is the same regardless of whether the connection is through Detroit, Minneapolis/St. Paul or Memphis, or on codeshare itineraries via Newark, Cleveland or Houston."
Northwest also said it increased by $4.50 prices on certain nonstop flights "to avoid underpricing connecting services." Government contract fares are excluded from all changes, which only affect itineraries within the United States.
The airline said that other carriers absorb PFCs, but "given the current economics of the industry, however, Northwest can no longer sustain the practice." The decision reverses a November 2003 policy in which Northwest "selectively reduced the cost of travel by $9 roundtrip for many passengers by paying some of the passenger facility charges, rather than adding the full amount of the fees to passenger tickets." The airline said the new policy would improve annual revenue by roughly 2 percent, or as much as $100 million.
Northwest noted that new automation deployed by GDSs enables accurate calculations of surcharges, allowing it "to equalize fares across all connecting hubs without the complicated absorption process."
Continental in late 2003 similarly ceased absorbing PFCs on connecting itineraries that generated more than $6 in government-imposed segment fees
(BTN, Oct. 20, 2003).