Surge pricing is coming to airline baggage fees

Spirit Airlines CEO Ted Christie remarked that the airline business has done a good job at managing ticket price revenue with respect to charging the appropriate fare based on desired travel date or other customer desires. But carriers generally don’t apply the same reasoning to managing ancillary revenue streams.

He cites the example of charging the same bag fee for travel on 23-Sep versus 23-Dec, “which doesn’t make a heck of a lot of sense”, said Mr Christie. In September there could be as little as two bags in an aircraft belly while on 23-Dec an airline leaves bags on the ground. “We have a supply-demand problem,” Mr Christie declared. “So we believe there are opportunities...to price that product that will drive incremental revenue.”

The next iteration of maximising ancillary revenue lies in broadening revenue management of existing ancillary revenue rather than exploiting new revenue streams.