A new study estimates that airlines around the globe will charge $36.1 billion in fees for things like checked luggage, seat reservations, and in-flight meals this year. That’s an all-time high, and an 11% increase over the 2011 total.
The figures, courtesy of the Wisconsin-based firm IdeaWorks, are confusing not only because they’re so big it’s impossible to truly wrap one’s brain around them, but because they seem to contradict other data in circulation.
Earlier this year, the same company released a study stating the airlines worldwide collected $22.6 billion in fees in 2011. But that study didn’t give the full picture. It was based on numbers gathered from 50 airlines. In the more recent study, IdeaWorks looked at ancillary fee revenues from 176 airlines around the globe and estimated that the 2011 total was actually $32.5 billion. For 2012, the fee pile is expected to grow by another 11%, hitting $36.1 billion.
In 2010, meanwhile, fees totaled “just” $22.6 billion according to the more comprehensive study. Fees rose nearly 50% from 2010 to 2011, so the 11% increase expected for 2012 actually represents a slowdown in growth for fees, as mind-boggling as that may seem. For airlines in North America, fee totals are expected to creep up 4.6% this year, from $14.9 billion to $15.6 billion. That’s the smallest increase of any region; in Latin America and the Caribbean, by contrast, fees will be up 30%.
Don’t think for a second that the mild rise in airline fees in North America is an indication that carriers are scaling back on fees. It’s just that airlines may be running out of things to charge for. A USA Today story explained how things have been evolving:
Experts say airlines have just about exhausted the fees they can introduce for services they used to offer for free, such as choosing seats and getting a snack on board. Airlines have taken on a new role: They’re becoming retailers by devising new services and products to sell. American Airlines, for instance, introduced a baggage-delivery service within four hours of arrival from $29.95 to $49.95 depending on the number of bags. And U.S. Airways now has a premium meal in economy on international flights for $19.99.
Airlines have also started doing things like auctioning off upgrades to boost revenues. These fees are easier for travelers to swallow (quite literally in the case of premium meals) because passengers never had an expectation that these services should be complimentary. Unlike checking a bag, which many travelers view as a necessity that should be included with the cost of a flight, upgrades and baggage delivery are undeniably “extras”—and therefore it’s completely acceptable for airlines to charge extra for them.
Such extras are also easier for money-conscious travelers to skip since they’re not remotely necessary. Airlines may try to keep tacking on new charges for things that they used to offer for free; for instance, the European carrier Wizz Air recently instituted a fee of up to £27 ($43) for bringing “hand luggage” (basically a large backpack or carryon) without reserving in advance. In the U.S., Spirit Airlines will surely figure out new and interesting ways to charge for things that passengers used to get without coughing up extra cash.
At some point, however, tacking on more and more unreasonable fees becomes counterproductive. They’ll annoy travelers so much that they’ll stop flying with the airline. If an airline chases away passengers, who is it going to get to pay all of those fees?
For the most part, though, it looks like we haven’t yet reached that point yet. No matter how much travelers gripe about being charged for everything from bottled water to getting a boarding pass printed at the airport, fee-crazed carriers such as Spirit and Ryanair are the industry’s most profitable players. On the other hand, Virgin America, which provides many impressive perks free of charge, has struggled to make profits even during what’s recently been a relatively booming period in the business.
While there hasn’t been a major backlash against airline fees yet, the airlines seem to realize that new fees should be added carefully and strategically. That, and the overall slowdown in the pace of rising fees, give some indication that passengers aren’t likely to be hit with another monster round of new fees anytime soon. Granted, the ongoing annoyance of being nickel-and-dimed to death with the current roster of fees is very likely here to stay. But old annoying fees tend to be less annoying that new annoying fees.