By Peter Greenberg, CBS News
(CBS News) You may have heard American Airlines will start selling preferred seats on Priceline.com. Is this the beginning of better seats for less money? Not so fast.
Why Priceline? It's really less about Priceline than it is about American trying to pay less in commissions to online travel agents and/or sell directly to the public.
It goes back to a series of strategic moves made by American in late 2010.
Most airlines sell tickets through something called a Global Distribution System (GDS), such as Sabre, Amadeus or Travelport. That inventory is made available to brick-and-mortar and online travel agents (OTA). A GDS, of course, charges a commission.
In December 2010, American Airlines began providing flight and fare information through its own system, called AA Direct Connect, thereby avoiding the GDS commission. Priceline was one of them. Since January 2011, Priceline has quietly sold American Airlines tickets through Direct Connect, and that represents as many as 2,000 tickets a day.
This latest move to sell preferred seats through Priceline, starting from$4 a seat, highlights American's interest in using its own system to distribute this product -- in theory passing along the savings to the customer.
But are preferred seats worth it?
First, let's look at the definition of a "preferred seat." That varies by airline, but for American in particular, it means "standard legroom seats conveniently located near the front of the main cabin." Translation? You could be paying extra for a middle seat in row 10. Basically, you're paying for a better view of first class, and the privilege of boarding earlier than some other passengers.
On Virgin America, you can pay around $139 to move up to Main Cabin Select, which gets you early boarding, extra legroom, and unlimited in-flight entertainment, food and drinks. Sounds like a deal, right? When you do the math, you'd have to order quite a few $7 snacks and a whole lot of alcohol to make that investment worthwhile.
Delta charges anywhere from $9 to $59 for preferred seats, which are defined as window or aisle seats toward the front. United's preferred seats might mean those coveted bulkhead or emergency exit row seats, or a window or aisle seat in front of the plane.
But passengers are paying and the airlines are reaping the benefits, especially when you consider that, by not making the preferred seats part of the basic airline ticket, which is taxed at a much higher rate, the airlines are selling it as a "product," which just gets hit with lower sales taxes.
And in the brave new world of ancillary fees, how much money are we talking about? Consider the example of US Airways, which offers ChoiceSeats, which are mostly window and aisle seats towards the front of coach. Up-selling those seats earned US Airways a whopping $100 million in one year. For context, last year, the airline made $537 in ancillary revenue overall.
In fact, according to research firm IdeaWorks, the global airline industry collected $22.6 billion in ancillary revenue in 2011. That represents a 66 percent increase in 2 years!
Airlines call it "unbundling" and claim it's how they can keep their fares competitive. I call it nickel and diming, where passengers are now expected to pay for everything short of breathing: food, blankets, early boarding, checked luggage, even carry-on luggage in some cases! And now, those so-called "preferred seats" include many that aren't so preferable at all.
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