A $10 in-flight meal here, a $25 bag fee there, and pretty soon you’re talking about real money, a MSN report says.
As in $32.5 billion, which, according to a just-released analysis, is the estimated amount the global airline industry will make in ancillary revenues this year. According to the Amadeus Worldwide Estimate of Ancillary Revenue for 2011, that’s a 43.8 percent increase over the year before.
“Half of the increase is a result of the airlines doing better year over year,” said Jay Sorensen, president of IdeaWorks, which co-authored the report.
“The other half is because the airlines are clearly becoming better retailers, increasing revenues of existing activities and adding more of them.”
According to Sorensen, seven US airlines — Alaska, American, Delta, Hawaiian and US Airways, along with the still-separate operations of Continental and United — will earn an estimated $12.5 billion, up 87 percent from 2010.
Of that amount, 20 percent will likely come from baggage fees and 30 percent from other à la carte services and onboard sales. The other half will come from the sale of frequent-flier miles via co-branded credit card activity.
Sales of frequent-flier miles aside, à la carte fees are also likely to begin appearing in places consumers haven’t seen them before as companies like Amadeus work to integrate fees into their global distribution systems (GDS). Those systems provide the link between the airlines, online travel agencies and other third-party sellers.
“We want to be able to provide that information across carriers on a comparative basis,” said Robert Buckman, director of airline distribution for Amadeus. “If you buy Wi-Fi service and pay $10 for it, you want to know it will be delivered onboard the aircraft.”
The goal is transparency across distribution channels, effort proponents suggest will help move the industry away from a fee system that many travelers consider punitive and toward one that provides more options and a better value proposition.
“People call it nickel and diming,” said Sorensen. “Well, it is nickel and diming if there are hidden or silly fees. But if the charges are disclosed and the prices are fair, it can be a benefit to the consumer.”