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The airlines have pretty much settled on most of the kinds of ancillary services they want to charge you for, and now it’s all about marketing experts and revenue managers figuring out new ways to get you to pay for them, or to hand them out for “free” to their most loyal customers.
You can expect a bundle of new airline ancillary services options and fees in 2013 — literally.
Marketing experts and tech geeks are busy figuring out new ways to dig deeper into your wallets and purses in airline boardrooms and labs around the world.
Rather than unleash a bunch of new services, the biggest upcoming airline-fee trend globally in 2013 is that airlines will begin bundling five or ten services at a time, and giving travelers the choice of picking two or three at a discount, says Carrie DeMoss, manager of product strategy at Airline Tariff Publishing Co. (ATPCO), the airline-owned fare-data clearinghouse.
For example, airlines may present passengers with a choice of a checked bag, a seat assignment, priority boarding, a lounge pass, and a meal, and ask them to select two or three for a discounted price.
If the two or three optional services cost $30 as standalone choices, then the airline may sell them for $25, for example, DeMoss says.
That doesn’t sound like a steep discount and it is only an example, but theoretically some airline revenue managers may figure that the price will be enough to get a lot more passengers to bite at the services.
Other possibilities in the bundling arena may entail a customer buying an annual airport club membership, and it might come with four onboard Wi-Fi sessions, for example.
Airlines assigning you a value
What are you worth — to the airline?
Another discernible 2013 trend is that airlines are working on assigning you a “value score” based on your frequent flyer status and other variables so their pricing for various services, including those bundled options, could vary by customer.
“So, for example, instead of all or nothing if you are Platinum, there will be more segmentation,” says an airline industry veteran. “You might get all bags free, and I might just get the first bag free.”
Other factors may also play into changeable prices, as well.
Henry Harteveldt, travel industry analyst for Hudson Crossing, believes airlines may begin to charge checked-bag fees based on factors such as flight distance, for instance.
Ancillary services are big business for airlines, and IdeaWorks Company estimated that airlines attracted some $36.1 billion in revenue, or about 5.4% of their global revenue, from these services in 2012.
The following are currently the most widely used optional services, in descending order, according to ATPCO:
- Seat assignments
- Unaccompanied minors
- Travel Insurance
- Medical Insurance
- Lounge passes
- Meals and beverages
- Ground transportation
Rather than introducing lots of new services that are absent from the above list, airlines are busy figuring out new ways of retailing them to take the most money out of your pocket that they can.
Pricing for premium seats and — heaven help us — perhaps the majority of the seats on a plane, may be sold at varying prices depending on load factors, flight distance, and your loyalty status, for instance.
“You will see expansion of premium/prime seats,” the airline industry veteran adds, “and perhaps over time this will lead to the selling of most seats on airplanes at dynamic prices.”
Airlines such as Air Canada and Delta already are offering passengers tradeoffs such as reduced fares if the passenger opts out of accruing frequent flyer miles or getting seat assignments, Harteveldt says.
Harteveldt also believes airlines in 2013 will make a bigger push to partner with outside companies to offer things such as hotel reservations and ground transfers during the booking process instead of after you complete your flight reservation.
If airlines are merely slicing and dicing existing ancillary services in new ways without introducing new ones, does it show a lack of creativity and innovative juice?
“Over the last few years, the airlines have been sticking fees onto whatever services they were already doing, and that’s been losing steam over the last 12 months,” says one technology guy with a portfolio of airlines as customers. “They’ve been running out of ideas.”
Harteveldt disagrees, arguing that there are limits to the flight experience and what airlines have available to sell.
The airlines’ challenge is to “create services that will be appealing to a large number of people, that they will want to buy without thinking that the airline is ripping them off, and will still create revenue and profit,” Harteveldt says.
Along those lines, expect a bundle of recycled services presented in new ways in 2013.