If it feels like extra fees are becoming a bigger and bigger part of your air travel experiences, there’s a reason for that: it’s true.
The air travel research firm IdeaWorksCompany released new estimates this week, suggesting that airline ancillary revenue will reach $82.2 billion around the world this year. This refers to things like baggage and legroom fees, along with partner activities such as frequent flyer mile sales and hotel booking commissions.
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Ancillary fees constitute an ever-larger chunk of airlines’ total revenues. That $82.2 billion figure is 10.6% of total revenues. Last year, ancillary revenues accounted for $67.4 billion, or 9.1% of the total. Go back to 2010, when IdeaWorksCompany started making these analyses, and ancillary revenues of $22.6 billion accounted for just 4.8% of airlines’ global revenues.
The breakdown of these statistics by airline type is quite interesting. For traditional carriers such as Cathay Pacific and Etihad, ancillary revenues now account for 6.7% of the total, versus 5.8% a year ago.
For major U.S. Airlines such as Alaska (ALK) and United (UAL), the percentage has gone up year-on-year from 12.3% to 14.2%. And if you go down the chain to cheaper airlines such as Ryanair and Wizz, the figure goes all the way to 30.9% this year (from 25.5% in 2016).
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IdeaWorksCompany had a warning for the airlines, though. It said that, while ancillary revenue has proven to be a highly useful tool to fix airline finances,” there’s a risk of carriers pushing their luck.
“A la carte pricing works best when consumers are truly free to choose the product that best meets their needs. Good retail practice ensures the ability to easily remove unwanted products from a shopping cart and place them back on the shelf. But some carriers continue to treat ancillary revenue as an opportunity to simply charge new fees without creating a better product,” the firm said.
