What are referred to as ancillary revenues by the airlines, and nickel-and-diming by consumers, accounted for around $36 billion in 2012, up more than 10 percent from the previous year.
If plans by United and Southwest are any indication, travelers are likely to see comparable increases during 2013.
United: Fee Growth
In his presentation at the J.P. Morgan Aviation, Transportation and Defense Conference earlier this week, United chief Jeff Smisek enthused about his company’s prospects for both increasing fees for current products and for creating new products and services that can be sold as independent add-ons to the basic price of airfare.
The relevant portion of his presentation:
And our goal this year is to grow our ancillary revenue by 9 percent. We’re going to do that in two different pieces. The first is we’re going to improve how we offer the existing products and services we have today. And the second piece is to offer new products and services to our customers.
In other words, more aggressive advertising of United’s current ancillary services, and more fees for services that are currently free.
Southwest: More Restrictions
Southwest’s strategy is a bit different, although the outcome is similar.
At that same J.P. Morgan conference, Southwest acknowledged plans to “tighten some of the restrictions on our lowest priced fares sometime in 2013.”
What that likely means is that Wanna Get Away fares will no longer allow fee-free ticket changes, for which most airlines charge between $50 and $150.
Less likely but also possible is that Southwest would begin charging Wanna Get Away customers to check bags, restricting its “Bags Fly Free” promise to more expensive tickets.
Here’s what Tammy Romo, Southwest’s CFO had to say about the airline’s commitment to maintaining its no-bag-fee policy:
I don’t think our brand is Bags Fly Free, that’s not who we are. As I mentioned, our brand is the affordable fares that you get with Southwest and the friendly, warm service that you get from our employees. So I don’t think—an advertising campaign is not your brand. So at least, that’s my belief. And we’ll continue to look at our plan and adjust as we need to meet our financial objectives.
Many of Southwest’s longtime customers would argue that the “friendly” aspect of the airline’s brand image includes, centrally, its relatively fee-free approach to pricing. Romo’s remarks confirm that the former and future faces of Southwest will be very different. In the months ahead, Southwest flyers will no longer be free from fees.
Reader Reality Check
Disappointing, or just business as usual?