Even so, I almost decided to drive on Sunday, rather than fly, to attend the annual Global Business Travel Association convention, which began that day. But Southwest Airlines had a convenient nonstop, a little over an hour’s flying time (though, of course, it’s over four hours total from home to airport and airport to hotel). So flying made sense.
Why was flying rather than driving even a close call? Well, like a lot of business travelers I routinely hear from, I’ve become so annoyed with airlines and airports that taking the car is increasingly an option, even on trips up to 500 miles or so.
The airlines are adding to that incentive, by the way, with an aggressive new emphasis on blocking out large numbers of seats in coach cabins that are available for the basic fare. That is, when you try to book a flight at the posted fare, you routinely find that only the least desirable seats — like a middle seat in a row at the rear of the plane — are actually available for that price. Most of the rest are available only if you pay extra.
On July 20, for example, I flew on United Airlines from Phoenix to Tampa, Fla. When I booked that ticket, almost a month in advance, only a few seats were available without extra charge — all middle seats in the back of the plane.
United’s booking site informed me that all of the other “complimentary assignment” seats — that is, seats available without having to pay extra — were taken. The better seats were available for fees that ranged from $37 to $91 on the different legs of the round-trip flight.
Did I pay extra to avoid being wedged into a middle seat back by the toilets? Yes, I did, and as such I am an example of just the kind of traveler the airlines are banking on to increase one segment of their growing ancillary-fee revenue, the pot of gold that is the industry’s big cushion for continued profitability.
A very rough estimate of the size of that revenue can be made from data compiled by the Transportation Department, which show that airlines collected $6 billion in fees for checked bags and reservation change penalties in 2012, compared with $1.3 billion in 2007.
But the figures encompass just two big categories of ancillary revenue and don’t take into account the new revenue airlines are gaining from things like the “upsell,” which is how they typically refer to initiatives like charging extra fees for all but the least desirable coach seats. Another favorite tactic is to sell priority boarding, that is, better places in line during the confounding boarding process, giving a passenger who pays up an early crack at the crowded storage space in the overhead bins.
The ancillary-revenue bonanza isn’t limited to the United States. A report last month by IdeaWorks, an airline revenue consultant, noted that “airlines all over the world have been watching this demonstration of ancillary revenue power” by carriers in the United States, and many are devising similar initiatives, especially for flights within Europe.
For airlines, the model has obvious appeal. United Airlines, for example, reported that its ancillary revenue grew 13 percent in the second quarter over the same period in 2012. The sale of coach seats designated Economy Plus was especially strong, James E. Compton, the chief revenue officer, said in an earnings call July 25. “The Economy Plus upsell continues to perform very well, growing 37 percent year over year in the second quarter,” he said.
After years of protesting that airlines make it difficult to budget for added-on fees because many involve sales to the passenger after the initial fare booking, corporate travel managers are basically just trying to keep pace with the changes in the way airlines charge for travel.
“We are long past the discussion about whether fees should exist or not,” said Michael W. McCormick, the executive director of the Global Business Travel Association. But travel managers continue to insist that suppliers provide better transparency on price. “That’s still an ongoing debate with all sectors of business travel — not just airlines,” he said.
I’m glad he makes that distinction, because hotels are also busy devising extra fees, especially convention-style hotels. For example, when I checked into the Hilton San Diego Bayfront hotel on Sunday, the desk clerk offered me a “room with a better view” for an extra $20 above the basic room.
I declined to pay up. Which explains why this is being written from the 19th floor of the Hilton Bayfront, in a room by the elevators, with a sweeping view of the industrial dock where Dole Food transfers fruit from ships onto trucks. I’m watching workers unload a big banana boat right now.
E-mail: jsharkey@nytimes.com
Article source: http://www.nytimes.com/2013/08/06/business/for-airlines-theres-big-revenue-in-those-little-fees.html?partner=rss&emc=rss
