Good news for airlines: globally, the industry is making a profit. Not so good news for fliers: that profit is increasingly coming from fees on things that used to be free.
It’s called ancillary revenue, airline speak for any charge that’s not airfare, and it’s big business and getting bigger. Unable to raise airfares and still keep up with the competition, airlines are increasingly depending on fees on everything from checked baggage and preferred seating to on-board wi-fi, in-flight meals, drinks and snacks, hotel and rental car tie-ins, early check-in and redemption of frequent flier points.
The top 10 earners made nearly $20.4 billion from ancillary revenues in 2013.
“Without ancillary revenue, the airline industry would be at a loss overall,” says Jay Sorensen, president of IdeaWorks, the Shoreham, Wis.-based consulting group which tracks ancillary revenue.
IdeaWorks and its partner, the Irish-based CarTrawler, examined financial reports from 59 airlines around the globe. Among carriers in the U.S., non-ticket fees accounted for 10.2 percent of industry revenue in 2013.