20 October 2009

Airlines owe their survival to new fees

After flying low last year, the US airline industry may owe its survival to the "creative minds" that brought fees and more fees, writes Kyle Peterson in a Reuter analysis.

"The charges are a mixed blessing for airline passengers who resent paying for formerly complimentary services like bag checks, but who like the option to pay for in-flight Internet access, extra legroom or express check-in. For airlines, such charges are a gold mine with unlimited potential," Peterson says.

Travelers can expect to see more and more airlines adopting fees, she says.

"Nominally full-service airlines see this as a key part of their profitability now," said Andrew Watterson, an airline consultant at Oliver Wyman.

Sales of ancillary goods and services by airlines enable them to squeeze more money out of their customers while keeping fares competitive, Peterson writes.

The strategy has paid off for US carriers that have struggled for stability amid volatile fuel prices, fare competition and the lingering recession.

Ancillary revenues and fees increased by about 60 percent in the first quarter just at UAL, parent of United Airlines, to about $14 per passenger.

By David Wilkening