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March April 2017
For Business, Corporate Travel & Meeting Buyers & Arrangers

Mystery buyer: unbundled flight fares are a pain in the... air

RYANAIR BOSS MICHAEL O’LEARY’S RECENT BOAST that his airline’s average fare in the third quarter of the 2016-17 financial year amounted to just €33 is impressive – at least, it is if you like Ryanair and believe the hype. Equally, IATA says the global average air fare fell by US$44 against 2015.

There’s a huge difference between the cost of a ticket and the price of a flight. Travel managers trying to add up the total cost of a business trip now have loads more numbers to juggle, and most of that is down to an airline industry infatuated with “ancillary” revenues.

The global average air fare may well have been US$44 cheaper last year, but IATA is careful not to say how much travellers paid to get from A to B when you take into account the cost of priority boarding, advance seat selection, extra legroom, food, drink, wi-fi and a whole lot more.

Ancillaries are out of control, and the airlines are laughing all the way to the bank – and becoming a laughing-stock in the process.

Look at it this way. If a traveller has a particular fondness for an over-wing aisle seat on the right-hand side of the cabin, and is prepared to book that specific seat in advance, what is the cost to the airline? Absolutely nothing. So what is the advance booking fee actually paying for? Again, absolutely nothing.

Ryanair – and it’s not alone – asks passengers to print out their own boarding passes. Forget to do that, and there’s £15 to pay at the airport. The printing costs are negligible, and the whole process takes no more than a minute, but the airlines calculate that’s worth the equivalent of £900-plus per hour.

The old argument that passengers only pay for what they want, and aren’t being charged for “stuff” they don’t want or need (salted almonds, amenity kits, lemon-scented wet-wipes or whatever), simply doesn’t work any more.

The world is waking up to the fact that ‘complimentary’ inflight snacks were never actually “complimentary”; the cost to the airline was included in the ticket price all along. But it’s a fair bet that the cost of providing those ‘free’ snacks was substantially less than the prices now being charged for today’s ‘optional extras’.

From a corporate perspective, the ancillary costs don’t stop there. In my own company, we reckon that processing the additional expense claims through in-house systems can be as much as £30 per flight – not only are we paying for the ticket, the coffee and the legroom, we’re paying internal costs as well.

So what can we do about it? The obvious answer is to move market share to other, more sympathetic and accommodating airlines. However, that’s never easy, and in some cases, and on some routes, it’s nigh on impossible.

We can try to persuade airlines that they are shooting themselves in the foot – the self-inflicted reputational damage they are doing is putting off employees and employers alike. It’s the aviation equivalent of self-harming.

But they’re not going to buy that. Globally, airlines are thought to be ‘earning’ more than US$60 billion a year in ancillary revenues, and no-one in their right mind is going to kiss goodbye to that kind of money. Like it or not, ancillaries are here to stay.

They just might be persuaded to add in the extras at the point of sale, and so cut expense-processing costs. Then again, how many of our travellers can accurately forecast how many cups of coffee they will want on an early-morning flight, or whether or not they will feel peckish on the way back in the evening?

There is one other solution. Just as we have ‘all-inclusive’ holidays, why can’t we have ‘all-inclusive’ flights? A return to the days when even an economy fare included a modicum of ‘hospitality’? On a red-eye flight, I’d happily pay a higher ticket price in return for a bacon butty and unlimited coffee refills.

Let’s bundle!

Comments

I don't have to pay for the extras so I am happy to have them unbundled. The same applies for a lot of business travelers. This could end up costing my company a lot more if it were rebundled.

Barry Graham's picture
Barry Graham (not verified)

...encourage your airlines and value chain partners to distribute ancillaries through existing managed channels so that you're travellers aren't having to buy out of the booking process. This will save you your £30 processing costs for many of the ancillary services. It's what IATA's NDC hopes to achieve.

Paul Tilstone's picture
Paul Tilstone (not verified)

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