Now that fees make up nearly a quarter of some airlines' revenues, expect authorities to look closer at the tax implications of the extras.
The latest revenue total, collected by 53 airlines around the globe, is a 20% increase over the $22.6 billion collected by 50 carriers in 2011, according to a new report by IdeaWorks Co., [embedded, below] a Wisconsin consultant on airline fees. The study was sponsored by CarTrawler, a Dublin, Ireland-based provider of car rental distribution systems.
Extra charges such as baggage fees and fees to upgrade to roomier seats have become a major source of revenue for airlines since 2008, when surging fuel prices forced airlines to find another way to generate money without raising airfares.
Low-cost airlines, such as Spirit Airlines and Allegiant Air, led the high-fee, low-fare trend over the last few years. But the IdeaWorks study says that major carriers, particularly big airlines in Europe, are increasingly turning to passenger fees to boost revenue.
“Statistics help tell the ancillary revenue story, and every year key numbers are getting bigger,” the study says. “The most aggressive airlines easily generate more than 20% of their revenues from a la carte fees.”
United Airlines led all carriers in fee revenue with $5.4 billion, followed by Delta Air Lines with $2.6 billion and American with $2 billion, according to the study.
Florida-based Spirit Airlines generated 38.5% of its revenue from extra fees — the most of any carrier –followed by Allegiant Air with 30% and Britain’s Jet2.com with 27%, according to the study.
Meanwhile, the average domestic airfare rose 3% from 2011 to 2012, according to the U.S. Bureau of Transportation Statistics.
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Photo credit: Passengers wait with their luggage at Heathrow airport in London. Luke Macgregor / Reuters