The lucrative practice of charging ancillary fees has carved a niche in airline revenues, and corporate travel managers face a harried task in sorting through the complex and untidy charges.
Ancillary fees such as checked bag fees, additional charges for Wi-Fi, seat upgrades and charges for in-flight meals accounted for $7.8 billion in revenues for U.S. airlines in 2009, according to the Department of Transportation. That number represents a 40 percent increase from the previous year and accounts for 6.5 percent of all U.S. airline revenues.
As the recession dug its heals in and airlines went through several convulsions, consolidations and bankruptcies a new model for garnering revenue was needed, and airlines successfully alleviated that need with the ancillary charges in 2009. However, so great are the revenues streaming into the airlines’ coffers, travelers should expect them to be a permanent pest in their traveling road-maps.
According to a forecast issued by the International Air Transport Association (IATA), the airline industry is poised to make $58 billion in ancillary fees in 2010 worldwide, and airlines in the U.S. stand to make $4 billion in baggage fees alone.
Since ancillary fees include everything from the charges for airport club access to on-board meals, entertainment and Internet, those in charge of managing travel expenses have a difficult task in determining which fees are basic flight necessities and which are mere luxuries.
One problem for corporate travel managers is that these fees are often lopped under one charge or listed under general terms, making it difficult to decipher what charges were made within corporate policy. A business traveler may be permitted under corporate policy to purchase an in-flight meal, but when that in-flight meal is not readily set aside on the bill from an upgrade to a seat with more leg room, the travel manager cannot properly budget and report these fees.
Additionally, several airlines unbundle the fees, so the traveler can acquire them at several different positions in the traveling process: they may upgrade their seat online, pay checked baggage fees upon checking in, and purchase Wi-Fi during takeoff. All of these instances are charged at different points and the airlines do not bundle them under one encompassing charge; therefore, corporate managers must rely on travel expenses submitted by their travelers.
A recent summit held by the Association of Corporate Travel Executives in Amsterdam on April 6 outlined three goals that the corporate travelers’ industry should strive to draw from airlines: transparency, uniformity and negotiability. The summit recommended that corporate travel managers grapple with ancillary fees by figuring them into their travel budgets, emphasizing regulations around the new fees in the corporation’s travel policy and by being specific about what is reimbursable and what is not.
Furthermore, the summit determined that the lack of uniformity and unbundled ancillary fees should, in many cases, “become deal makers or breakers in negotiations with carriers for the next year.”