On June 3, 2020, the Jakarta-based Lion Air group announced that it would be suspending flight operations starting on June…
U.S. Congressional Bill Removes Restriction on Baggage Fees
U.S. airlines will be unrestricted with regard to baggage charges and change fees after a bill authorized by a congressional board removed a clause from the FAA reauthorization bill to mandate “reasonable and proportional” fees. The disclosure comes after a month in which U.S. airlines raised baggage fees and it was announced that ancillary revenue for airlines had hit an all-time high of $65 billion in 2017. Checked baggage fees account for the highest source of ancillary revenue totaling $23.6 billion. Congress will vote on the bi-partisan bill, which Bloomberg reports do include some passenger protections, later this week to meet a Sept. 30 deadline.
After the social media controversy of United Airlines forcibly removing Dr. David Dao from an aircraft last year and the death of a pet placed in an overhead locker earlier this year, the legislation will prevent passenger’s being removed from a flight after they have boarded and ban pets being placed in overhead lockers. The bill will also allow for the FAA to set minimum seat width and legroom dimensions alleviating concerns over the densification of airline cabins in recent years.
Other passenger-centric additions to the bill include a requirement for airlines to check in a stroller for passengers traveling with toddlers, a continued ban on the use of e-cigarettes and the making of mobile phone calls in-flight, and refunds for services paid for but not received. Airlines had been lobbying to prevent any limits placed on the setting of fees so the removal of that clause, first mooted in 2017, has seen them compromise in other areas.
The report on airline ancillary revenue published this week by IdeaWorks and CarTrawler sees the four biggest U.S. airlines taking the top four spots with a combined total just shy of $20 billion. United Airlines is the king of ancillary earners with $5.7 billion and Delta and American close behind with $5.4 billion and $5.2 billion, respectively. Southwest managed to accrue $3 billion in ancillary revenues, almost a billion ahead of the European airline Ryanair, which modeled itself after the original U.S. low-cost carrier (LCC).
The LCCs which pioneered ancillary revenue when deregulation occurred and the unbundling of fares gave an opportunity to charge for a variety of services, led the way with revenue per passenger. Spirit, the ultra LCC, gains $50.97 per passenger in charges with ancillary revenue accounting for 46.6 percent of its total revenue, the highest percentage of any airline. The report also highlighted the gains some airlines are making with ancillary strategies such as 50 percent of Ryanair passengers now paying for assigned seating, up from 23 percent in 2016, and Frontier’s per passenger bag revenue doubling in 2017.
Ancillary revenue has grown from $2 billion in revenue in 2008 to be a (reluctantly) accepted element of the airline passenger experience. All airlines have now followed the LCC model and utilize a mix of charges to supplement base fares. Ryanair CEO Michael O’Leary has said that in the future base fares may disappear completely and his airline would gain revenue solely from ancillary revenue.
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