Airlines worldwide expected to collect $32.5 billion in fees in 2011

The worldwide airline industry is expected to collect $32.5 billion in fees for checked bags, onboard entertainment and other extras this year, a 44% increase over 2010.

The projection for a huge revenue increase came in an annual estimate released Wednesday by IdeaWorks, an airline consultant in Wisconsin, and Amadeus IT Group, a technology company in Madrid.

IdeaWorks and Amadeus said U.S. airlines should collect the vast majority of fees worldwide, pocketing $12.5 billion this year, compared with $6.7 billion last year.

The study attributes the higher revenue to increasing passenger demand and greater efforts by airlines to push for the sale of extra services and products, such as wireless Internet access and food. 

The study said that about half of the extra revenues collected by the airlines would come from the sale of frequent flier miles to credit card companies. Baggage fees make up about 20% of the fees, with charges for other onboard services and products making up the balance, according to the study.

“Whatever the model, there is no doubt that the growth of ancillary sales is here to stay," said Julia Sattel, a vice president for Amadeus.

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-- Hugo Martin

Photo: A passenger talks with an airline representative at Ontario International Airport. Credit: Los Angeles Times.

 

 

 

 

 

 

 

Blaming Government More Than Wall Street

CATHERINE RAMPELL

Dollars to doughnuts.

Americans blame the federal government more than they blame Wall Street for the nation’s current economic distress, according to a new poll from Gallup. In fact, forced to declare j’accuse to just one culprit, twice as many chose the feds:

Dollars to doughnuts.

To be sure, Americans still say financial institutions deserve a lot of blame.

In a separate question in Gallup’s survey, which was conducted Oct. 15-16, respondents were asked how much they blamed Wall Street in general, and more than three-quarters said the banks deserved “a great deal” or “a fair amount” of blame.

Perhaps not surprisingly, in the question about apportioning blame between the two potential malefactors, Tea Party sympathizers were tremendously more likely to assign more blame to the government. What’s more, both Democrats and Republicans were more condemnatory of the government than finance, to varying degrees.

Occupy Wall Street supporters, as you might imagine, were indeed more likely to blame the financial services crowd, but the preference was still relatively small:

Given persistently high unemployment rates, and Washington’s insistence on arm-wrestling over the debt ceiling rather than focusing on the jobs crisis in recent months, it’s hardly surprising that there is so much anger at the federal government. A separate Gallup survey found that Americans’ confidence in their political leaders was at historic lows.

The question now is: Is there anything that the government will — or even can — do to help fix the economic wreckage that Americans blame them for? What do you think, readers?

Debit card users may switch banks over new fees: poll

Banks charging debit card users a monthly fee could lose 30% of those customers, according to a new report.

Bank of America Corp.’s monthly $5 debit card fee and Wells Fargo & Co.’s $3 monthly charge have consumers riled up. Three in 10 are threatening to leave their bank if similar policies are imposed, according to a poll from research firm The Research Intelligence Group.

The rate of departure is even higher among young people, West Coast residents and members of households with six-figure incomes, according to responses from 1,000 adults in early October.

The debit card fees have 43% of Americans contemplating a switch to a new payment method – 28% said they may start shelling out cash while 15% will rely more on credit cards.

Consumers Union, the publisher of Consumer Reports magazine, urged banks this week to withdraw their plans to charge debit card fees, arguing in a letter that the policy “appears to be arbitrary and designed to generate income to make up for … bad business decisions.”

“This debit card fee just adds insult to injury,” said Norma Garcia, director of the organization’s financial services program. “If Bank of America and other banks refuse to drop the debit card fee, consumers should consider dropping them.”

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-- Tiffany Hsu

Photo: Elaine Thompson / AP Photo

Why Murdoch will still be writing the script at News Corp

Rupert Murdoch will be missing at least one ally at Friday’s annual meeting  of News Corp shareholders in Los Angeles.

Evelyn Davis, an eccentric elderly investor who is a regular on the AGM circuit in New York, isn’t making the trip to the West Coast. Murdoch will, on balance, miss her.

More interested in her own publicity than the free food available at such meetings, Davis would have taken up valuable microphone time. Secondly, she’d have used it to back the media mogul over the phone-hacking scandal that threatened to unravel News Corp over the summer.

“No CEO can possibly know what all his flunkies are doing all the time,” she said when I caught her on the phone last week. “A lot of people are jealous of Rupert. He’s a genius.”

The shareholders who are travelling to Los Angeles will disagree. The past fortnight has seen an unprecedented number of News Corp investors demanding an overhaul of the company’s board, including the California Public Employees Retirement System (Calpers) and the California Teachers Retirement System (Calstrs) – America’s two biggest public pension funds – and Hermes, which manages BT’s pension fund.

For these investors, the scale of the phone hacking unearthed at the News of the World points to a system of corporate checks and balances that has badly broken down. There’s also scepticism that the committee News Corp has established to investigate the problem has sufficient independence from Murdoch. News Corp has defended the independence of its board, arguing last week that it's "acting decisively to get to the bottom of what happened."

But, one shareholder, Julie Tanner of Christian Brothers Investment Services, will take  to the floor to call for the appointment of an independent chairman. So befitting a meeting that will unfold in the grounds  of the Fox Film studios, it won’t lack for colour, drama, tension or plot lines.

But Tanner is the first to admit that  her call is a symbolic one. The only shareholders who will be able to vote on in it will be those crammed into the Zanuck Theatre. And it will take special effects beyond anything Hollywood can produce to prevent the re-election of the 13 existing board members, including Rupert Murdoch and his sons, James and Lachlan. The Murdoch family controls almost 40pc of News Corp’s B shares that carry voting rights and Saudi Prince Alwaleed bin Talal Alsaud, who has staunchly backed Murdoch, holds sway over more than 5pc. That’s already within touching distance of the 50.1pc any director needs.

So let’s assume that as the News Corp board sits down to lunch on Friday they’ve all been re-elected and the pay packages for Murdoch and Chase Carey, News Corp’s chief operating officer,  have been approved. How do those shareholders who have been insisting  on change react?

Much will depend on the scale of the vote against Murdoch & co. If it’s large, Calpers, Calstrs and Hermes will feel emboldened. Corporate governance experts who have long had News Corp

in their sights seem confident that shareholders’ likely defeat in the vote tomorrow will be an important staging post on the road to eventual change at News Corp. “Staying at a party when a lot of people aren’t happy to have you there isn’t much fun,” says Charles Elson, a professor of corporate governance at the University of Delaware.

There’s no disputing the events that cascaded from the News of the World’s Wapping office have left the naturally pugnacious Murdoch on the back foot. News Corp is under investigation by Parliament and the Met Police in the UK, while in the US, the Securities and Exchange Commission and the Department of Justice are examining one of the world’s biggest media and entertainment companies. Any of these inquiries, or further investigative reporting, could pull on a thread that would force Murdoch to relinquish his grip on the company he founded.

But, based on what we now know, is Prof Elson right? Will Murdoch be forced to leave his own party in the next year or so? The answer is no and the explanation again lies with News Corp’s shareholders.

For every Calpers that has voiced its concerns, there’s another shareholder  that hasn’t. They may have had private conversations with News Corp’s management. But given News Corp’s forceful defence of the independence of its board and the voting rights Murdoch already wields, it seems likely any shareholder who felt very strongly would have grabbed the leverage that speaking out publicly gives.

The scandal hasn’t dented News Corp’s profits, which are driven by its successful US cable television business. Wall Street’s greater concern is that Murdoch blows News Corp’s more than $10bn in cash on another newspaper or the next MySpace. Yes, pressure has increased on Murdoch, but he’s still writing the script at News Corp.

The banking crisis showed it’s a mistake to rely too heavily on shareholders to force fundamental change at companies. News Corp, so far at least, echoes that.

Wages of top 1% rise much faster than bottom 90%

Income growth for the top 1% of households has far outpaced that of all other households over the last two decades, bolstering the theory advanced by groups such as Occupy Wall Street that conditions are improving much more quickly for people outside the "99%."

An economic snapshot from the Economic Policy Institute shows that inflation-adjusted incomes of the top 1% of households increased 224% from 1979 to 2007, while incomes for the bottom 90% grew just 5% in the same time period. Those in the top 0.1% of income fared even better, with incomes growing 390% over that time period.

The top 1% of households still fare well from President Bush-era tax cuts and from a decrease in the estate tax, according to the EPI. Its authors argue, in a separate paper, that in light of these rising incomes, high-income households should be taxed more to reduce the deficit.

The average tax rate for the top 1% of households has fallen since 1979, even as their incomes rose. High-income households paid a tax rate of about 37% in 1979 and about 29.5% in 2007.

Taxes are a hot topic these days in light of proposals by Republican presidential candidates to change the tax code. Herman Cain would scrap the current progressive income tax system and replace it with a 9% income tax, as well as a 9% sales tax and a 9% corporate tax.

RELATED:

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-- Alana Semuels

Chart courtesy of EPI

Prius owners are trading into electric vehicles

One reason why auto companies are rolling out comparatively low-volume electric cars is to get buyers into showrooms they might have otherwise ignored.

The strategy appears to be working for Chevrolet, which makes the Volt plug-in hybrid sedan and Nissan, manufacturer of the all-electric Leaf.

Through the first nine months of this year, Chevrolet has sold about 3,895 Volts and Nissan has sold about 7,199 Leafs, according to Autodata Corp.

“The true value of these launches is the buzz, the conversation on social media and total media attention,” said Barbara Keys, a consultant with auto information company R.L. Polk & Co., which has examined who is buying the cars.

Through the first half of this year, about 78% of Volt buyers didn't own a Chevrolet at the time of the purchase, Keys said. 

That means that the Volt is bringing customers of other brands at almost twice the rate of the rest of Chevrolet, where about 43% of buyers are so-called “conquests.”

General Motors, which owns the Chevrolet brand, has provided some more interesting Volt data for sales so far this year.  About 37% of Volt buyers are California residents.  And the most frequent car traded in for a Volt is the Toyota Prius hybrid.  It is the car traded in 7% of all Volt sales. 

German cars also were comparatively frequent trade-ins.  The BMW 3 Series, the Audi A4 and the Volkswagen Jetta were traded in for a combined 6% of Volt sales, GM said.

The Leaf has a similar trend line for conquests, according to Polk.  About 90% of Leaf buyers didn't own a Nissan previously.  That’s much better than Nissan's average conquest rate of 52%.

Nissan says that 18% of the customers purchasing a Leaf are trading in a Prius.  And 38% of Leaf buyers are trading in a Prius or another Toyota.

Keys looked into whether both Chevrolet’s and Nissan’s ability to attract customers is a result of their respective EVs being new models. She looked at the Chevrolet Cruze and Nissan Juke, which also are new models. They had conquest rates of 48% and 65%, respectively.

Speaking of the Volt and the Leaf, Keys said, “These two high-profile launches have been successful in bringing new customers to the brand, and that may have long-term benefits in terms of make loyalty and customer retention.”

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-- Jerry Hirsch

Twitter.com/LATimesJerry

Photo: Autoworkers work on a Chevrolet Volt at the General Motors plant in Hamtramck, Mich. Credit: Associated Press.

Consumer Confidential: Store prices, student loans, bank fees

Here's your walk-on-by Wednesday roundup of consumer news from around the Web:

--You're paying a little more food and clothes and stuff -- and that's probably not such a bad thing. The consumer price index rose 0.3% in September, less than the 0.4% increase in August, according to the Labor Department. Excluding food and energy, so-called core prices increased 0.1%, the smallest increase since March. Food prices rose 0.4% in September, pushed up by big increases in dairy, cereals and fruits and vegetables. Gas prices rose 2.9%. Costs of medical care, airline fares and tobacco also increased. But economists say a little bit of inflation is a good thing because it shows the economy is relatively stable. A deflationary spiral is something to be feared because it can lead to more jobs being lost and more pistol whippings for stocks.

--Speaking of inflation, let's talk about student loans. The amount of student loans taken out last year crossed the $100-billion mark for the first time, and total loans outstanding will exceed $1 trillion for the first time this year. Americans now owe more on student loans than on credit cards, according to the Federal Reserve Bank of New York. Students are borrowing twice what they did a decade ago after adjusting for inflation. Total outstanding debt has doubled in the last five years -- a sharp contrast to consumers reducing what's owed on home loans and credit cards. Full-time undergraduate students borrowed an average $4,963 in 2010, up 63% from a decade earlier after adjusting for inflation. And down the road, of course, those bills will have to be paid.

--Looks like many consumers won't take higher bank fees on the chin. About 30% of U.S. consumers say they'd leave their banks over fees for using their debit cards, according to a survey by the Research Intelligence Group. About 43% say they'd switch to paying with cash or credit cards if their bank implemented charges, while 13% say they'd pay the fee if it was "reasonable." The survey comes as the largest banks, including Bank of America, are testing or planning to start charging fees of as much as $5 a month for consumers who have a debit card or use one for purchases.

-- David Lazarus

Photo: You might have to look harder for bargains amid rising prices. Credit: Rahoul Ghose / We TV