Second quarter nickel & diming report released

So, just how much extra can you expect to pay on top of your fare to travel? While it depends on the airline you’re flying the number is about 6% on average. Sortof.

Tracking the reality of airline pricing is, at best, a gray magic sort of scenario. There are quarterly reports, annual reports and a myriad of different acronyms and categories of statistics reported. Some of the reports are required by the Department of Transportation and then aggregated and distributed by the Bureau of Transportation Statistics. Even those numbers are incomplete, however, because the reporting requirements simply have not kept pace with the flood of fees that the airlines are coming up with. So all the numbers are soft. The BTS states it rather clearly:

Revenue from seating assignments and on-board sales of food, drink, pillows, blankets, entertainment, or any other ancillary items are reported as Transport Related Revenue and cannot be identified separately.

So they cannot identify all those details but that doesn’t mean that the details are trivial. The Q2 2010 report was just released and the numbers it documents are rather impressive. The industry realize $2.1 billion in “ancillary revenue” in Q2 2010. Of that nearly $900MM of the revenue came from checked baggage fees. Another $600MM came from reservation change fees with the balance attributed to standby fees, pet carriage charges and sales of frequent flyer miles to business partners.

Putting the number in context, the total industry profits from the reporting carriers during the time period was a hair over $3 billion. If there was any doubt about just how important these fees are to the profitability of the airlines this report (along with the past few that have told similar stories) should put said doubt to rest.

As for which airlines are seeing the bulk of the profit from these fees, the usual suspects are pretty well represented. As the largest carrier in the world (for a couple more weeks) Delta is atop the list for total ancillary revenue. The soon to be largest carriers, a combined United Airlines/Continental at about half the total revenue that Delta realized in the quarter ($681MM v. $340MM combined). US Airways is holding strong in its position near the top of the list which is quite impressive, especially considering how much smaller than the other airlines it is.

There’s Southwest, coming in at $200MM in ancillary fees collected in the quarter. Sure, the may not charge for checked bags (and they love to publicize that in their commercials) but their customers are still paying plenty of fees, enough to see them above the industry average in terms of revenue from fees compared to total operating revenue (6.4% to the industry average of 6%).

And, just to make sure that they’re on the top of some list, there’s Spirit Air. The carrier realized 24.2% of its revenue in the quarter from ancillary charges. Ouch.

Of course, if the total cost is the same then no big deal but the numbers generally are not well published or particularly clear for customers meaning that the total travel cost is often not known by passengers until the trip is over, after it is too late to make a fair fare comparison. There are a few folks out there trying to help level the playing field (check out TruPrice for a pretty solid example) but it is still nearly impossible for customers effectively compare prices in advance.

Lots more numbers in the report, including fuel costs (figure ~$3.5 cents per seat mile flown, so that 2500 mile trip from New York City to Los Angeles costs the airline about $85 in fuel for your seat. Kindof hard to believe that they still sell the seats for not much more than that so often.

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Seth Miller

I'm Seth, also known as the Wandering Aramean. I was bit by the travel bug 30 years ago and there's no sign of a cure. I fly ~200,000 miles annually; these are my stories. You can connect with me on Twitter, Facebook, and LinkedIn.