International Finance
Aviation Featured

IF Insights: Meet ‘Add-on fees’, airline industry’s latest cash cow

IFM_Airlines
The study found almost 89% of all airlines charged for 'at least one extra', with the figure rising to 97% among European carriers

As per a report from the money-saving voucher website NetVoucherCodes, almost nine out of 10 airlines are charging at least one additional fee on top of the headline flight ticket price.

Irish ultra-low carrier Ryanair has emerged as the carrier that is levying the most for ‘extras’ like seat selection, baggage check-in and insurance, in Europe.

The study also found almost 89% of all airlines charged for ‘at least one extra’, with the figure rising to 97% among European carriers.

Entering The Controversial Territory
In August 2023, an elderly couple were charged 110 pounds by Ryanair for new boarding passes after they mistakenly checked in to the wrong leg of their flight.

Ruth Jaffe and Peter Jaffe had to pay the fee as they accidentally downloaded their return boarding passes instead of the outgoing ones for a flight to France.

Ruth Jaffe told the media about finding Ryanair’s website “very confusing” but thought she had printed the correct tickets. However, they realised their mistake after arriving at the airport.

In fact, the website of Ryanair, along with the ones of Jet2.com and Tui, has been rated as the worst major airlines operating in the UK for website accessibility, as the country’s Civil Aviation Authority (CAA) stated that there was “still a way to go” for the industry to provide a smooth digital experience for all passengers.

Airlines’ Fascination With The ‘Add-ons’
United States-based airline Spirit Airlines got the top rank in the NetVoucherCodes study, with total additional costs of 736%, seven times higher than the base fare. Spirit was followed by Mexican low-cost airline Volaris and another low-cost US airline Frontier Airlines.

Talking about Ryanair, the budget airline has generated 18 billion pounds in revenue from the ‘add-ons’ over the last decade.

Analysis from The Telegraph also found charges for services like booking seats and stowing luggage resulted in a surge in “ancillary revenues,” which have risen from 910 million pounds in 2013 to 3.84 billion pounds in 2023. These additional fees now constitute nearly a third of the Irish carrier’s total revenue, marking an increase from one-fifth in 2017.

Henry Harteveldt, president of travel industry analytics firm Atmosphere Research, told USA Today that during the 2008 oil crisis, American was the first airline to levy luggage charges and others followed suit.

According to an April 2023 report from IdeaWorksCompany and CarTrawler, “Airlines are tapping into the gold mine that is excess baggage fees in a big way, with revenue from charges accounting for 4.2% of global airline revenue.”

So the trend is clear here, ‘luggage fees’ has become the new cash cow for the airlines.

US Government Gets Tough
During his State of the Union Address earlier 2023, United States President Joe Biden spent nearly two minutes of his speech decrying ‘junk fees.’

Reacting to it, United Airlines and Frontier Airlines started allowing children under age 12 to sit next to an adult without extra fees.

Biden administration has been aggressively pushing for the ‘Junk Fee Prevention Act’, which would affect airline seat selection rates too. It is actively asking the US Congress to pass the legislation, which mandates refunds to passengers who cannot get adjacent seats for children during their journeys.

The legislation has the potential to be turned into a battle between industry lobbyists and the political will of the Biden government.

Consumer rights expert Martyn James told the Guardian that the add-on culture had increased dramatically and those airlines had been stopped in the past from some practices.

“They used to charge you to pay by debit or credit card, but how else do you buy online? They were told not to do that. When these revenue streams were closed they looked at the process and thought, what else can we charge for?” he stated further, while asking the ticket comparison websites to include extra costs in the overall price from the start.

“I am having to tell people to be cynical and don’t assume a deal is a good deal,” James remarked, while batting for the UK Civil Aviation Authority to be given more power to make airlines add charges up front (during the ticket booking process), apart from noting that sometimes more expensive flights might be a better option, if every charge gets included in the ticket.

The Road Ahead
Katy Maclure of Jack’s Flight Club, which monitors cheapest airfares, batted for customer awareness of the ‘hidden fees’ as more airlines employed the tactics.

The official also gave the examples of Lufthansa and British Airways including charges on checked bags to some locations. Only a few airlines like Emirates are covering all the fees in the initial price range.

James believes passengers need to be realistic about their luggage needs, apart from carefully reading the airline’s terms and conditions about cabin bags.

Henry Harteveldt thinks reforms like the ‘Junk Fee Prevention Act’ may result in higher base airfares, thereby making tickets costlier than ever before.

Airlines have started waiving the fee to check bags once a traveller achieves ‘Elite Frequent Flyer Status’ in their loyalty programs. Yes, this status comes with a lot of perks, including, bag free waiver, but not everyone gets the status. Airlines are also comping off checked bag fees for passengers having lucrative co-branded credit cards. In fact, these credit card partnerships help the airline to make more money than what selling its own tickets does, if Harteveldt’s words are to be believed.

Airlines also use a technique called “social proof” to upsell products like trip protection, as they ‘suggest’ that since ‘many passengers’ have ‘already opted for it while booking the tickets’, you should also do it. Experts don’t see these offers as having real value for customers, so avoid this trap, because opting for it will only make your ticket cost go higher.

Also, budget American airlines like Spirit and Frontier offer ultra-low fares while charging more for basic add-ons, including carry-on bags and seat selection. Skipping the extra fees means forgoing these vital amenities. This is another tricky decision-making area for passengers. If we have the offer for upgrading our seats, along with adding a bundle of other benefits, should we go for it?

Avoiding the ‘add-on fees’ looks like a difficult task for the passengers, unless acts like ‘Junk Fee Prevention Act’ arrive with some knee-jerking clauses for the airlines.

What's New

Business Leader of the Week: Meet Vladimir Sergeyevich Lisin, Chairman of NLMK Group

IFM Correspondent

Oman’s dropshipping start-up to help entrepreneurs launch online businesses

IFM Correspondent

IF Insights: Is cryptocurrency market going to witness potential Altcoin season?

IFM Correspondent

Leave a Comment

* By using this form you agree with the storage and handling of your data by this website.