US Airways execs yesterday said that ancillary revenue will likely bring in about $500 million this year, enough to offset the effects of falling yields. Consumers may grumble to each other about all of the additional costs, but for the most part they pony up the extra money when flying. I think this is in part because consumers look at the fare as a separate cost from the fees, so they may feel good about getting a low fare even if they complain about the additional fees later.
US Airways said they’ll made a bit more than $100 million off of first bag fees last year, and if trends continue, that could be $300 million or more this year. Consumers are checking 20% fewer bags than they used to, which is actually a very good thing since it makes it more likely that your luggage will make the connection in Charlotte with you.
The decision to stop charging for sodas will cost more than $20 million this year (quite impressive that they were selling 10 million cans of soda a year).
The most interesting fact was that they have seen no evidence of consumers defecting to Southwest on competing routes, even though Southwest does not charge any ancillary fees. If I were a Southwest shareholder, I would be begging them to put the fees in. While no fees makes for a nice marketing message, I’m not sure any airline is in the position to turn down $500 million in revenue with little-to-no effect on passenger loyalty.