Have we finally reached the limit for airline fees?
In the past few years, nothing has been more likely to make you clench your fist and shout one particular f-word than air travel. But you might find yourself using that f-word (fees!) a little less often. Or at least you might not be yelling it any more than you already have been. According to data from Planestats.com and consulting firm Oliver Wyman, ancillary fees for things like checked baggage, ticket changes or in-flight amenities are currently increasing at a slower pace than they have in the past.
According to Oliver Wyman's research, ancillary revenue accounted for 8% of the total revenue for U.S. domestic airlines during the second quarter of 2015. Ten years ago, ancillary revenue added up to less than 3% of revenue for those same carriers (just ask JetBlue what a difference those fees can make: it earned an extra $40 million in the first full quarter after it implemented its new fare structure and baggage fees).
Despite those huge numbers, the ancillary revenue of Alaska, American, Delta, Hawaiian and United grew less than 1% year-over-year last year. In 2015, those five airlines plus Southwest accounted for $18.1 billion in ancillary revenue, roughly 30% of the record-setting worldwide total of $59.2 billion.
Southwest's contribution to that total is a small one; Oliver Wyman says that the airline collects the lowest amount of ancillary revenue per-passenger at $4.46. Delta scores $22.48 per passenger, which is the highest of those network carriers. Of the six low-cost/value carriers it analyzed, Spirit had the highest per-passenger haul, earning almost $50 in fees for each passenger. Unsurprisingly, Spirit's fees make up almost 40% of its total segment passenger revenue.
While the overall growth of those fees may have slowed down among U.S. carriers, super cynics like me can just say, “Yeah, because they’ve run out of things to charge us for!” And there might be something to that mindset, which is why ancillary revenue is continuing to grow amongst international carriers, even as it slows domestically. Khalid Usman, a vice-president at Oliver Wyman, told Quartz:
“U.S. network airlines have been at the forefront of the ancillary-revenue generation. Naturally, at some point, growth slows down and … carriers start reaching the ancillary ceiling. International airlines, other than low-cost carriers, in some parts of the world will have more untapped opportunities as they adapt to some of the more successful models of ancillary-revenue generation.”
You're welcome, rest of the world.