Wednesday, July 15, 2015

A new report finds the airline industry
collected a staggering $38 billion in fees last year.
But these ten collected the most fees.
It's not your imagination.
Airline fees are going up — way up.
Airlines collected a staggering $38 billion in so-called "ancillary"
revenues last year, a jump of $6.
6 billion from the previous year, according
to a new study by IdeaWorks.
The reasons are many.
Passengers want to continue booking cheap fares but are less discriminating
when it comes to the extras airlines now charge for everything from advance
seat assignments to carry-on luggage.
Consumers also are signing up for those airline-branded credit cards that
offer frequent flier miles, and these cards generate a lot of cash for the
airlines.
Finally, airlines are also doing a better job of understanding their customers
by studying their behavior, which is leading to more services, and even more
fees.
"The secret to unlocking this revenue stream can be found in the data
that customers generate with every transaction," explains Michael
Cunningham, the chief commercial officer at CarTrawler, a travel technology
company that sponsored the study.
"It is no longer just the preserve of low cost carriers – it is something
from which all airlines are benefiting.
The question is not who is doing it, it's how well it is being done.
"
So who is doing it well? American airlines are exceptionally good at
extracting fees from their customers.
Here are the top airlines by so-called "ancillary" revenues: 1.
United ($5.
8 billion)
2.
American/US Airways ($4.
6 billion)
3.
Delta ($3.
2 billion)
4.
Air France/KLM ($2 billion)
5.
Ryanair ($1.
9 billion)
6.
Southwest ($1.
8 billion)
7.
Lufthansa Group ($1.
6 billion)
8.
easyJet ($1.
4 billion)
9.
Qantas Airways ($1.
3 billion)
10.
Alaska Air ($1 billion) These impressive numbers are a combination of
fees and the sale of miles to credit card companies.
For example, American's co-branded credit card generated additional revenue
of $624 million, thanks to changes to its relationship with Citibank.
Delta collected $350 million from its passengers, up 18 percent from last
year, by selling "comfort plus" economy class seats that have the same
amount of legroom as pre-deregulation coach class seats.
And Southwest's Rapid Rewards loyalty program scored big by earning $400
million in 2014, according to the study.
But what if the mileage programs are stripped away? For a better idea of
the airlines with high fees, check out this list of the top 10 airlines for
ancillary revenues as a percent of total revenues.
1.
Spirit (39%)
2.
Wizz Air (34%)
3.
Allegiant (32%)
4.
Jet2.
com (28%)
5.
Ryanair (25%)
6.
Tigerair (22%)
7.
Jetstar (21%)
8.
Flybe (21%)
9.
AirAsia (20%)
10.
Volaris Various (19%) Spirit, which advertises "bare" fares, is the
undisputed leader in this category.
It charges for almost everything on the plane except the use of the lavatory.
To put that number in perspective, roughly 40 cents out of every dollar you
spend on Spirit will be a fee — a staggeringly high number.
It's particularly galling to passengers who are not used to flying on a
discount carrier and don't realize they will have to pay extra to carry a
bag on the plane, for example.
Any way you slice it, American air carriers are the big winners — or big
losers, depending on your perspective — when it comes to fees.
America's network carriers dominate when measuring ancillary revenues by
fees and the sale of miles.
Those miles can't always be redeemed for a desired ticket, but the airline
still gets paid by a bank or credit card company.
The airline can also expire the miles, essentially pocketing money for a
product it doesn't have to honor.
As a percentage of a ticket purchase, the US discount carriers like Spirit
and Allegiant dominate by extracting a third or more of the value of the
ticket purchase from their customers, and putting the European and Asian
carriers to shame.
And when it comes to the actual dollar value of the fees, US carriers hold
their own, too, with four out of the top 10 airlines.
It's worth noting too that U.
S.
airlines profits are rising, along with customer dissatisfaction.
Which, arguably, is fueling the U.
S.
Department of Justice antitrust investigation.
If airlines want to get the government off their backs, these fees might be a
good place to start.
This article originally ran on Fortune.
com.
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It's not your imagination.
Airline fees are going up — way up.
Airlines collected a staggering $38 billion in so-called "ancillary"
revenues last year, a jump of $6.
6 billion from the previous year, according
to a new study by IdeaWorks.

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