Airlines Ancillary Fees
Airlines have collected 73.3% of revenue from passenger fares, and the rest were obtained from passenger fees and other sources. Ancillary fees help airlines, but they may also be causing low customer service scores, loss of customers, assaults due to angry customers, and an overall mini-exodus of passengers from the airline industry to other modes of travel. These points and more are discussed below.
Consumers are picking other modes of travel
- According to a late 2017 USTA survey, 60% of fliers say that airline fees have gotten worse over the last five years.
- Americans avoided 32 million air trips in 2016, which resulted in a loss of $24 billion to the US economy.
- Because of these fees, air travel has become a "constant struggle" to customers.
- Customers have resorted to other travel modes such as cars, buses, and trains. During major federal holidays between 2001 and 2017, 33 million more Americans took to the highways to travel, while there was only an increase of 410,000 passengers on airlines.
- Amtrak trains carry three times more passengers than all airlines combined between New York and Washington. They also take more riders than all airlines combined between New York and Boston.
Airlines are devising ways to handle assaults
- Ten percent of airline customer-service agents say they were physically assaulted due to passengers getting angry about alcohol, airline fees, and long lines.
- A 2018 law required airlines to train agents in de-escalating conflicts, but many airlines missed the deadline to submit plans for handling assaults by passengers.
- Airlines are still hesitant to share stats about assaults, but one says they had 1.2 assaults for every 1,000 passengers in the second half of 2018.
More fees correlate with lower customer satisfaction
- The two airlines with the most revenue from baggage fees are American Airlines and United Airlines. On the list of traditional airline carriers, these two rank at the bottom of airline customer satisfaction.
- American Airlines has a point rating of 729, which is the lowest of average ratings. The lowest ratings for traditional carriers in North America were reserved for United Airlines, with 708 points.
- The inverse can be seen with Southwest Airlines, the low-budget carrier. They have a "bags fly free" policy, and currently have an 818 point rating, the highest of all low-budget carriers.
- Southwest Airlines' policy is mostly marketing as they bundle their fees on the airplane tickets. Other airlines may be hesitant to follow suit as there are considerable taxes for ticket prices, but fees don't get those same taxes.
- Airlines can manage to keep profits up if they keep people buying tickets, even with low customer satisfaction.
- Even though this correlation is observed, more studies need to be done to prove without a doubt that it is the cause.
Higher fees may keep ticket prices down but cause customer loss
- Airlines say that fees are done to keep tickets down, however, results in studies done on this topic have been mixed.
- Even though fees are frustrating for passengers, many have gotten used to additional fees and their increases. However, this may be due to economic factors. According to a survey by the ACSI, 57% of business travelers said they paid a baggage fee increase, and many report that they were highly satisfied with their service. This was not seen for the 39% of leisure travelers.
- Even though a separate fee for bags reduced fares somewhat, on average, customers who paid for checked bags paid more for the combined airfare and bag fee than when those fees were bundled together. However, if a bag was not checked, then the passengers paid less overall.
- One study found that a baggage fee resulted in a 2.7% average fare decline for non-stop flights and a 2.4% average fare decline for connecting flights.
- Another study found that when fees were increased by a dollar, there was an $0.11 reduction in fares but a loss of 0.6 passengers. When the fare was increased by a dollar, there was a loss of 7 passengers. This is why many airlines choose to lower fare prices to seem competitive and raise ancillary fees to make up for the loss.
- This shows that airlines don't have an easy decision regarding how to treat ancillary fees.