Wednesday, July 21, 2010

Airline 'Fee' Revenue Up 43 Percent in Year

I was talking today to Jack Riepe, the savvy PR guy for the Association of Corporate Travel Executives, about the apparent discrepancy between surging airline revenues and improved, but still lagging, hotel revenues.

"The way I see it, there's a lot more people flying, but apparently they're staying in public shelters," he said.

As he and I and a lot of the rest of you know, the real reason for that discrepancy is that airlines are in pig city over fees that are slapped onto regular fares. For the first time in a long time, airlines have been reporting big profits for the second quarter. Business and travel demand is, without question, generally greatly improved and fares are also up significantly, in an environment where airlines have managed to shrink supply.

But wow, then add up those fees.

A report released today by IdeaWorks, the airline revenue consultancy, and Amadeus, the giant reservations technology network, shows that world airlines racked up $13.5 billion in fees and other ancillary revenues in 2009. That's a 43 percent increase over 2008.

Even more interesting than the overall haul of money, I think, is the breakdown by airline on per-passenger fee revenue. This highlights those airlines that are banging their customers for the greatest amount of extra charges.

The top three in terms of fees as a percentage of per-passenger revenue:

Allegiant -- 29.2 percent (or $31.90 per passenger)

Spirit -- 23.9 percent ($28.64 per passenger)

Ryanair -- 22.2 percent (per-passenger figure NA)

Overall, the top three in total fee and ancillary revenue in 2009:

United -- $1.94 billion

American -- $1.92 billion

Delta -- $1.4 billion

Also of great interest, the report finds that fee revenue from the top producers has become more stable in the last two years, while that from previously lower ranked fee producers has "jumped dramatically," said IdeaWorks.

That means, of course, that airlines in general are jacking up fees wherever they can.

"By every measure the ancillary revenue movement is growing," IdeaWorks says. "More airlines are switching on a la carte fess [and] existing practitioners are boosting revenue streams by adding services, testing price limits and becoming better marketers."


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