In recent years, a new expression has gained currency with airline executives: ancillary revenue. That’s the extra money the airlines generate from the sale of services related to the core product.
Of course the airlines’ core product is a moving target. Once, the price of a ticket included unlimited phone conversations with a reservations agent, a paper ticket, an in-flight meal, a movie on longer flights, and so on. Today those are considered ancillary services, which cost extra, and generate ancillary revenue for the airlines.
To use another bit of current insider terminology, the airlines have been “unbundling” their services, cutting back on what used to be considered basic services and recategorizing them as additional-cost extras.
Of course to consumers, the operative expression is nickel-and-diming. Rather than buying a ticket which covers every aspect of the air portion of their trip, they’re required to pick and choose from an a-la-carte menu of service options, paying extra for everything over and above the seat itself.
And according to a report by consulting company IdeaWorks, that menu of optional services, and the additional fees associated with them, will continue to grow.
In IdeaWorks’ poll of more than 140 airline managers, 63 percent of the respondents indicated that unbundling is becoming more prevalent. And none reported that airlines were moving in the opposite direction: adding back amenities to the basic price of a ticket.
It remains to be seen just how far the airlines will go in shedding services included in the price of a ticket. Might there come a day, for example, when the lavatories are converted into pay toilets? As absurd as that might sound, it’s worth remembering that the notion of paying extra for the privilege of calling an airline’s reservations center would have been unthinkable a few short years ago.
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