Skift Take

The U.S. Transportation Department wants airlines to be more transparent about their ancillary fees. In theory it would help businesses, but the corporate travel sector has been grappling with this issue for years already.

The U.S. Transportation Department’s proposal announced this week to force airlines to display ancillary fees, like bags and seats, upfront will offer businesses, not just consumers, an upside.

Companies would gain a clearer picture of how much they’re spending overall on travel, with less chance of extras being buried away. But the U.S. department could be underestimating the complexity of the task ahead.

The proposed requirement will apply to any ticket agents that sell airline tickets, including corporate travel agencies and metasearch websites. And of course the airlines themselves, both U.S. and foreign.

But for now it’s exempting global distribution systems (namely Amadeus, Travelport and Sabre). They’re not covered by the proposal because they arrange for air transportation, but do not sell or display a carrier’s fare to consumers, the department said.

At the same time they play an integral part in business travel, as they are used by travel agencies.

Evidence of how complicated the proposal is apparent in the fact the department is asking for feedback on whether the covered entities should be broader or more limited in scope, ahead of a formal 60-day consultation.

Shopping Around

“You should know the full cost of your ticket right when you’re comparison shopping,” declared U.S. President Joe Biden on Monday, announcing the 72-page “Notice of Proposed Rulemaking” on Monday.

Sabre and other tech players like ATPCO have been trying to make sense of airline ancillaries for several years. Sabre wants to simplify the increasingly complex offers from airlines with its “new airline storefront,” in order to break down fare names, seat types and various ancillaries when someone’s trying to compare one deal with another.

ATPCO, meanwhile, has its next generation storefront. There’s that shopping analogy again. During the pandemic, for example, it helped airlines communicate to travel agencies their Covid-19 policies and responses.

These middlemen have a significant role to play in any airline retailing reforms.

“On the breakdown of the charges for airline transportation any new conditions of the Notice of Proposed Rulemaking — we will work with the industry to accommodate,” said Megan Humphries, global head of corporate communications.”

She added that ATPCO has made public comments on record with the DOT on the current industry capabilities “to try and avoid overly complex and costly new regulatory requirements where an alternate approach may achieve the same ultimate goals.”

Yet in the proposal document, the U.S. department has many questions.

It said it “solicits comment on its preliminary decision not to require airlines to share ancillary service fee data with global distribution systems. Should the Department require carriers to distribute the ancillary service fee information to all ticket agents, including global distribution systems, to which the carrier provides fare, schedule, and availability information? How would OTAs and metasearch sites receive ancillary service fee information from multiple airlines and disclose that information to consumers if airlines do not provide that information to global distribution systems?”

A spokesperson for Travelport told Skift: “Our executives are still reviewing and analyzing the impact on our customers and partners, as we want to ensure we’re supporting our customers in the best way if this takes effect.”

In a similar vein, Amadeus said: “We are beginning our review of the DOT’s rule proposal. For now, it’s too early to comment.”

Skift also contacted Sabre for comment.

Many travel technology companies are still having “internal discussions” on this. Airlines Reporting Corporation, which provides ticket transaction settlement services between airlines and travel agencies, told Skift it had discussed the possibility of submitting comments on the proposal with other partner organizations, but decided against providing input.

One consultant said the proposals, in theory, made sense.

“If delivered it will be very good for consumers, but even better for corporate travel, as if they have to display ancillary fees, they can provide it for reporting and analytics,” said Gavin Smith, director of Element Travel Technology.

“But I doubt that it will see the light of day in the format of the proposal,” Smith said. “There are too many variables and those costs are optional or up-sell in most cases. And we don’t have the technology to show them as part of the visible pricing.”

The proposed shake-up also follows the launch of the department’s new Airline Customer Service Dashboard. It also wants to set out new laws for refunding delayed bags or Wi-Fi malfunctions. There’s a sense the department is taking aim at a range of customer complaints, perhaps exacerbated by the pandemic, and seeing which ones hit the target.

Big Money

Selling ancillaries is also a huge earner for airlines. Some have mastered the art so much that more than half their revenue comes from selling extras like bags and seats.

It’s ironic that the annual CarTrawler Annual Yearbook of Ancillary Revenue was published Tuesday, the day after the proposal review was announced.

Frontier Airlines, for example, is ranked second in a list of airlines when it comes to selling ancillaries as a proportion of total revenue. In 2021 it made $1,13 billion  — or 54.9 percent of its total income.

In third and fourth places are Spirit Airlines which generated $1,75 billion (54.3 percent) and Allegiant with $876 million (51.2 percent).

The number one slot, however, goes to Europe’s Wizz Air which generated 56 percent of its revenue through selling extras.

Among the 75 airlines surveyed, average ancillary revenue per passenger stood at £27.73 for 2021, a £7.80 increase compared to 2019.

Of course not all airlines are plugged into the global distribution systems, particularly low-cost carriers who opt for direct sales, but there will likely be some turbulence ahead of the official two-month review.

“I can see the online travel agencies and the airlines fighting for this not to come about,” Smith added.

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Tags: airline fees, amadeus, ATPCO, business travel, cancellations, corporate travel, global distribution systems, sabre, travelport, us department of transportation

Photo credit: The U.S. Transportation Department wants airlines to disclose ancillary fees, like bags and seats, earlier on in the booking process. Anna Vi / Unsplash

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