When American Airlines> announced Wednesday that it would charge an additional $19-$39 to sit in the first few rows of coach on domestic flights, it was hardly breaking new ground. The company was not the first to charge extra for such seats, and the practice of charging for items and services that passengers once enjoyed for free is increasingly common in the sky.
Still, the American Airlines (AMR)
Fees are big business for the airlines. In 2009, the industry collected $2.7 billion in baggage fees, $2.4 billion from reservation change fees and $2.7 billion from other ancillary fees, such as pet transportation and frequent-flyer mileage sales, according to the Department of Transportation.
Fees are expected to grow as a revenue source over the next few years, says Rick Seaney, the chief executive of FareCompare.com. He projects about a 15% jump in airlines ancillary revenue, which includes fees and the sale of frequent-flier mileage between airlines, this year.
The airline industry says fees have become a permanent part of their business model. They re here to stay, says David Castelveter, the vice president of communications for the Air Transport Association, an industry trade group. These are necessary revenue streams.
Baseline fares have been rising, as well. The average fare climbed nearly 5% in the first quarter the second-highest first-quarter jump since 2001, according to the DOT. Analysts at Bing Travel predict that a 22% hike in airfares this summer over the summer of 2009.
Castelveter says baseline fares were lower in 2009 than in 2000 when controlling for inflation.
For the airlines, using fees to augment baseline fare increases is a critical competitive strategy because the lowest baseline fares land near the top of the search results for online travel sites like Expedia and Travelocity, says Charlie Leocha, the director of the Consumer Travel Alliance, a nonprofit consumer advocate.
For consumers, airline fees can add up quickly. A July study of popular travel routes conducted by the CTA found that airline fees could increase the cost of a ticket by more than 50%.
What additional fees are coming down the pike?
More carriers may soon begin charging extra for priority boarding and expedited check-in, says Anne Banas, the executive editor of SmarterTravel.
Airlines may also bundling fees together, says Jami Counter, senior director of TripAdvisor Flights. For example, an airline could sell priority boarding, premium front-of-coach seats and priority check-in for a single price.
Consumers looking to minimize fees when traveling should research which airlines charge which fees. Travel web site Farecompare.com offers free fee comparisons.
Try to do an apples-to-apples comparison of fares, Counter says.