Don’t miss: New raft of Delta SkyMiles changes coming
When checked bag fees started seven years ago, airlines quickly realized they were onto something big. (Image: Jim Glab)
When airlines first started charging checked bag fees back in 2008, they did so to counteract a spike in oil prices that was eating into their bottom lines. Expensive oil is no longer a concern, but carriers have discovered that add-on passenger fees are a revenue bonanza, and they have been gorging on them ever since.
The latest annual study from IdeaWorks Company and CarTrawler finds that worldwide airline revenues in 2014 from sources other than ticket sales jumped 21 percent. That includes the sale of “a la carte services,” retail activities, and the sale of frequent flyer miles to credit card companies and others. At U.S. carriers, the increase was 18.7 percent. (IdeaWorks does not include those onerous $200+ change fees in its definition of ancillary revenue.)
Airline revenue streams are flowing in stronger than ever from all over the place these days, the report noted. For example:
- American’s co-branded credit card brought in extra revenue of $624 million largely due to enhancements in its relationship with Citibank.
- Revenue generated by Delta’s Comfort Plus service increased by 18% to $350 million.
- Southwest’s Rapid Rewards program contributed almost $400 million to its coffers thanks to its 2014 strategic initiatives.
According to IdeaWorks, United hauled in the most– more than $5.8 billion in ancillary revenues last year, although that was a gain of less than 3 percent from 2013. By contrast, Delta’s total of $3.2 billion represented an increase of 27 percent, while American/US Airways posted a combined 46 percent gain, to $4.7 billion.
But when you look at ancillary revenues as a percentage of total revenues, it’s the low-cost airlines that shoot to the top of the chart. Number one was Spirit Airlines, where add-on fees accounted for almost 39 percent of its revenues. At leisure-oriented bargain carrier Allegiant, the percentage was 32.4. IdeaWorks said the typical Spirit passenger last year spent more than $52 above and beyond his ticket price.
The report noted that airlines are increasingly offering customers “bundled” and “unbundled” fares to serve different marketing purposes: “Global network airlines use fare bundles to preserve their normal service through a classic product and deploy a basic ‘bare bones’ fare to drop pricing to LCC levels. Low cost carriers use product bundles as a method to offer premium experiences to lure business travelers to their flights,” IdeaWorks said.
What airline fee frustrates you the most? Please leave your comments below…
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The $200 UA change fee. It’s not about the money, it’s about the immense complexity imposed on the expense process in every company. From that perspective – these fees actually cost more in productivity and accounting loss. I average one change per round trip ticket, but it is common for the cost of the changes to exceed the cost of the ticket. Its Asinine.
Spirit and Frontier airlines charging for carry on bags as well as non alcoholic beverages on like water, soda and juice.
People should get together and buy stocks in one or two airlines. At the annual stockholders meeting, tell the company board they’re thieves and your group will demand Federal action.
Using that kind of illogic, I bet I could prove that your salary is at least as much of a ripoff.
ALLLLLLLL!!!!!’
There is no way for an airline to justify a $200 change fee. $200 for hitting a few keys on the key board, what a ripoff.
same-day change fees
The various fees they’ve added to using or redepositing frequent flyer miles are frustrating.