Airline fees create the ‘billion-dollar club’ for 10 carriers
The airline industry collects so much revenue from charges to check bags, reserve seats, buy food and connect to the Internet, among other things, that 10 of the world’s biggest carriers have surpassed the $1-billion revenue mark solely from fees.
A report by IdeaWorks, a Wisconsin-based consultant on airline revenue, concluded that 67 of the world’s biggest airlines generated a total of $40.5 billion from passenger fees and other ancillary revenue last year, up 6.5% from the previous year.
The largest 10 airlines each pocketed at least $1 billion from such fees, the study found.
“Now, the top 10 group is a billion-dollar club with annual ancillary revenue ranging from just over $1 billion to nearly $6.2 billion per airline,” according to the IdeaWorks’ report, written by the company’s president, Jay Sorensen.
The $1-billion club includes United Airlines, American Airlines, Delta Air Lines, Air France, Southwest Airlines, Ryanair, Lufthansa, Easyjet, Qantas and Alaska Airlines.
By comparison, only United, American and Delta generated more than $1 billion in fee charges and ancillary revenue in 2008, when most airlines began charging bag fees.
Florida-based Spirit Airlines collects the biggest share of its overall revenue — 43.4% — from a long list of charges including bag fees, online and call center fees, assigned seat fees and charges for selling frequent-flier points to business partners.
The success low-cost carriers such as Spirit are having with passenger fees has forced major international carriers to offer rock-bottom-price seats, coupled with fees for extra services, according to the IdeaWorks report.
One reason that passenger fees have become so popular with the airline industry is that the federal government taxes airfares at a higher rate than it does passenger fees.
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