Airline Fees to Reach $42.6 Billion

Discussion in 'General Discussion | Travel' started by MSYgirl, Nov 8, 2013.  |  Print Topic

  1. MSYgirl

    MSYgirl Gold Member

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    WASHINGTON (MarketWatch) -- Airline revenue from service fees, food sales and other ancillary sales will reach $42.6 billion worldwide this year, a new report projects, nearly double the amount earned in 2010.

    The report by the Idea Works Company, which provides customer service consulting and research to airlines, pulled data from 176 airlines on service fees, including baggage fees, a la carte services and onboard food and beverage sales.

    “We are now entering an area where the airlines are becoming retailers,” said Jay Sorensen, president of the Idea Works Company and author of the report. “So instead of a simple price, the experience is more like going into a grocery store and buying a number of different items, putting them in your basket and checking out.”

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    In 2010, global airline ancillary revenue was estimated at $22.6 billion, about 5% of total global airline earnings. In 2011, the number increased to $32.5 billion, and then to $36.1 billion last year. By 2013, ancillary revenue made up 6% of total global air carrier profits.

    “They are redefining airfare to mean base price,” said Paul Hudson, president of Flyers Rights, a nonprofit consumer organization representing airline passengers. “What happens is that when you go to the third-party website, like Kayak (NASDAQ:pCLN) or Expedia (NASDAQ:EXPE) , you will come up with the lowest airfare but not the lowest cost in transportation. Obviously they’re [airlines] private corporations. They’re also in public service, and there needs to be limits on unfair business practices.”

    Hudson said base airfare should include the ticket price, carry-on luggage, at least one checked bag under 50 pounds, and a drink and light snack during flight.
     
  2. moongoddess

    moongoddess Silver Member

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    Hudson may be right, but it will take legislation to get that. Fees came about as an under-the-table way to raise prices while still remaining competitive in a marketplace where purchasers are driven solely by lowest ticket price, after all.

    I'd be all for such legislation, along with legislation requiring a decent minimum seat width and pitch. But I know that a sizable percentage of the flying public would be upset by the resulting necessary price increase.
     
  3. AdamKooper

    AdamKooper Active Member

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    Fees are the only reason United makes money.
     

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