Starting in 2007, airlines began slowly transforming the airline business model by adding ancillary airline fees, which let them keep base ticket prices steady, while still adding revenue. Despite grumbling from consumers, the model has worked: airline fees have become responsible for an increasingly large percentage of airline revenue. In fact, some industry observers speculate that airline profitability will eventually be built more on fees than on the cost of tickets.
In other words, consumers – especially those looking for the cheapest tickets – should be prepared to pay even more airline fees in the future.
How Much Are the Airlines Collecting?
The following chart shows airline fee revenue growth since 2007, as gathered by Amadeus/IdeaWorks. These numbers show total ancillary revenues, which include checked luggage fees, reservation change fees, phone booking fees, and all other fees introduced by airlines since the beginning of 2007. Over that time period, airlines have taken in approximately $48 billion in ancillary fees.
In 2010, United/Continental, Delta, and American took in the most in ancillary fees, according to an Amadeus/Ideaworks study quoted by the Centre for Asia Pacific Aviation (CAPA-Centre for Aviation). In that time, United/Continental took in approximately $4.8 billion in fees, while Delta took in about $2.6 billion.
According to a Wall Street Journal article, airline fees are a growth market. Passengers should expect the biggest growth in fees to occur with intercontinental flights, particularly on airlines operating from the Asia/Pacific region, like Qantas.
How Do the Airline Fees Break Down?
Checked luggage fees represent the largest category of new airline fees, and you can see how they break down here, courtesy of the U.S. Department of Transportation?s Bureau of Transportation Statistics (BTS).
Looking at these numbers by quarter, you can see a steady increase in fee revenue until the 2010 holiday season, likely from customers packing lighter and carrying on more luggage. As consumers find ways to avoid fees, it means that airlines need to find even more fees, just to maintain the same level of revenue.
Breaking down these ballooning numbers further is difficult, as airlines do not generally report revenue on other fees. For this reason, the BTS has proposed a rule change requiring airlines to break these fees down into 16 additional categories so that fees can be reported in more detail.
The takeaway is this: fees are not going away any time soon, but in future years, if the Department of Transportation gets its proposed changes, consumers will at least have more insight into where all that fee money is going.