Travelers hate them – fees for everything. Change your mind? That will be $50 please. Got bags? A fee. Spirit even charges for carry on bags. Is there no end to the nickle and diming? The short answer is no.
Using 2005 as the base year, take a look at how the airline industry is mainlining on fees. It is quite remarkable. Virgin America has taken to fees with a fervor (and they have a great way to gather these on their IFE system) – but in total revenue terms, Delta is the biggest fee gatherer. Delta alone accounted for a third of the US airline industry’s 2010 ancillary revenues as the table illustrates.
Take a look at how much Delta managed to gather in reservation cancel fees through September 2011. Delta managed to charge 36% more than United and Continental combined and 57% more than American.
MIT Airline Data Project research shows that in 2010 the industry averaged a loss of $19.47 per ticket. Adding back ancillary revenue of $8.70 per ticket cut the loss to $10.76 per ticket. Between 3Q10 and 3Q11 we have seen average US airfares rise 6.2%. With capacity constraint and rising fares, and more importantly those fees, the US airline industry looks set to be profitable in 2012.