Sunday, January 31, 2010

Fee, Fi, Fo, Fum

Those niggling extra fees that cash-strapped airlines have added-on in the last couple of years? They will account for a whopping $58 billion USD in ancillary revenue in 2010, according to a new report from Sydney's Centre for Asia Pacific Aviation.

Upshot for travelers: Expect more fees, at higher levels, for more services. Money-losing airlines need the revenue they bring in, especially so since consumers seduced by low-fare carriers resist fare increases. Call it "bespoke'' service, call it customization, call it what you like, it's the trend of the moment and it is only going to intensify. You want to check a bag? Get some extra legroom? Have lunch en route? You're going to keep paying more for it.

This trend started with low-cost carriers in the United States on domestic routes, though now nearly all U.S. carriers have followed suit. LCCs in Europe and Asia are embracing fees, too, and a few big legacy carriers such as British Airlines - which is facing a scary bottom line and strike threats from staff - are adopting similar policies.

"Air fares around the world, particularly in the U.S., have fallen sharply since the onset of the recession, making baggage fees and other ancilliary revenue items an increasing lifeline to the airline sector,'' said CAPA executive director Peter Harbison in a statement.

Other ancilliary revenue streams are flowing toward the airlines from items such as in-flight advertising, access to airport lounges and what CAPA terms "related travel products,'' including insurance, care hire and accommodation.

"A sizeable figure, $58 billion USD, however, represents just 12 percent of airline revenue, suggesting we are just at the start of the movement to monetise services and products passengers used to receive as part of the ticket price,'' Harbison said.

For airlines, it's probably necessary. For travelers, it's read it and weep - and reach for your wallet.

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