Ancillary revenue: That’s the money airlines make from the sale of products and services over and above basic airfare.
Much of those ancillary revenues come from baggage fees, change fees, seat-selection fees, early-boarding fees, and so on—the sort of charges widely derided by consumers as nickel-and-dimeing.
Such fees are increasingly important to airline profitability and increased 19.6 percent to $27.1 billion in 2012, according to a report released by industry consulting company IdeaWorks.
As the report notes, not all airlines disclose ancillary revenue in their financial reports. And those that do, don’t always do so fully. So the actual contributions from such fees are likely much higher.
Of the 53 airlines which do report their ancillary revenues, in part or in full, the 10 most fee-dependent airlines were as follows:
1. Spirit – 38.5 percent of total revenue from ancillary revenue
2. Allegiant – 29.9 percent
3. Jet2.com – 26.5 percent
4. Ryanair – 21.8 percent
5. Tiger Airways – 20.8 percent
6. easyJet – 19.5 percent
7. AirAsia X – 18.7 percent
8. Jetstar – 18.6 percent
9. AirAsia Group – 18.2 percent
10. Flybe – 17.7 percent
There’s no sign of a letup in the airlines’ rush to unbundle services and sell them on an a-la-carte basis. On the contrary. Just this week, the chief of the airlines’ trade association, IATA, lauded ancillary fees as a key to the industry’s future profitability: “It is clear that airlines have found new ways to add value to the travel experience and to shore-up the bottom line.”
At the same time, consumers’ initial resistance to the fees seems to be eroding. A recent J.D. Powers study found that travelers are increasingly tolerant of the fees, as they become the new normal.
The New Battle for Transparency
So fees will be a fact of travel life for the foreseeable future.
Although they’re not inherently evil, they do put consumers at a disadvantage when it comes to purchasing air travel. How do you make an rational choice among airlines when all you see is the advertised price?
Sure, United’s published airfare might be higher than Spirit’s. But will the actual price, including all relevant fees, be higher?
If the airlines want to make fees part of the travel-buying experience, they have to do so transparently, in a way that makes comparison shopping easy.
The battle to put the kibosh on nuisance fees has been lost. The new battle: to force the airlines to disclose their fees in such a way that consumers can make informed travel purchases.
Reader Reality Check
Where do you come down on the current state of airline fees?
This article originally appeared on FrequentFlier.com.
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