The Growing Divide Regarding Ancillary Fees: Part One

When the airlines announced that they would start charging for checked baggage, preferred seating and priority boarding—otherwise known as ancillary fees—the concern over tracking, spending and reporting the cost associated with these fees spread like a wildfire. In the couple years since their introduction, the industry remains abuzz with discussions, seminars, webinars and articles on how corporate customers want a more transparent view of airline fees.

But now that we are accustomed to airline fees as common practice, and we have accounted for the increase in cost in our budgets, it begs the question: Is the business travel industry truly concerned about tracking these costs in detail or has the dialogue simply been over-hyped by the press?

The concern seems to grow as the variety of airline fees continues to increase. In 2010, $22.6 billion dollars was collected by airlines globally, according to a study by Amadeus and IdeaWorks. With rising fuel prices, that amount could more than triple as airlines seek ways to create additional revenue. Ancillary fees have proven to be a successful approach, accounting for most of the airlines’ profit in 2010. Capturing the details of ancillary fees has been a challenge for many organizations—and so far we’re not seeing a solution in sight. Currently it is possible to make assumptions about credit card charges. For instance, as most baggage fees are $25, it’s possible to assume that when a charge for that amount comes through you can categorize that amount as “ancillary fee: baggage fee.” However, as many of these fees are within a few dollars of each other, it’s easy to go from assumption to error. A $50 charge could be two $25 baggage charges, or it could be a charge for the entrance to the club lounge. One charge might be within your corporate expense policy, the other a violation.

In our meetings with airlines, transaction processors, and credit card companies over the last few years, one thing has become clear: the issue is further complicated by the amount of stakeholders who must sign off on changes. Standard codes have been created and published by both ATPCo, the Airline Tariff Publishing Company, which is owed by airlines and used to file airfares, and the International Air Transport Association.

Not all airlines have agreed to adopt these codes. Even if and when airlines agree to use standard codes, and there is no overriding need for the airlines to agree since there is no additional revenue, there is a good amount of development work that still has to be done. Airline data processors, issuing and acquiring banks and credit card vendors all must agree on standards and specifications in order to pass the data across from the transaction to the final credit card statement.

We believe, though, that the adoption of standardized codes across the industry is the most important development that must take place. These codes need to identify the ancillary fee and then have the ability to pass that detail through to the credit card transaction. This standardization must be the same regardless of the point of purchase. Having this data will provide an automated method to report on these fees, providing more actionable and trusted data.

At the end of the day, where does the need to accurately track and report ancillary fees really lay for you and your business? Over-hyped and unimportant data or much-needed and accurate reporting visibility?

 

Ellen Trotochaud is a founding member and continues to represent Concur in The Party of Three, an informal working group that stays abreast of the issues around ancillary fees, along with AirPlus, MasterCard and Continental Airlines.

 

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