Washington - Nickel and diming used to be a niche practice in the airline business. Now it's becoming an industry standard.
Airlines around the world will make an estimated $29-billion in 2014 from carry-ons, food, more leg room and other extra fees, up by more than 20 percent from last year and nearly 44 percent since 2012, according to a new study by IdeaWorksCompany and CarTrawler.
For major airlines in the United Sates, the largest chunk of those charges will come from baggage fees, followed by food, a la carte services (like, say, more leg room), and other onboard retail extras. With other carriers, passengers will have paid the most for a la carte services, followed by baggage fees and onboard retail.
Budget airlines, like Spirit in the United States and Ryanair in Europe, have led the charge towards cheapness, offering bare bones tickets that come with little else, if anything else at all.
One low-cost carrier even plans to use the model to start flying people across the Atlantic for comparatively low prices. But traditional airlines, like American, Delta and Lufthansa, have begun implementing similar models, too. On many major carriers, snacks might still be offered free of charge, but meals will cost extra, and baggage and carry-ons will too.
And it adds up. In all, traditional carriers will rake in a sizable bit — more than 40 percent — of all extra fees this year.
More airlines are adopting the pay-as-you-go model because many of the world's largest carriers have been teetering on the edge. “The desperation of some airlines can be understood, because so many airlines still suffer poor margins,” the study says. “Ancillary revenue for many airlines now defines the distinction between profit and loss.”
The trend is likely to continue because passengers, despite complaints, are willing to pay the extra fees. “Consumers are more accepting (or perhaps less combative) and the introduction of no-frill fare options — which don't include a checked bag — can provide leverage against low fare competitors,” the study notes. - The Washington Post
* Ferdman is a reporter for Wonkblog covering food, economics and immigration.