Travel Trend Update: Clearing the Air on Ancillary Fees

What once was free now has a fee – permanently. Ancillary fees added up to $36 billion in revenue for the global airline industry in 2011, with charges for baggage, preferred seating and an increasing number of other items that used to be included in the ticket price.

But ancillaries have become a mainstay at booking and airport check-in counters around the world, despite an initial industry uproar over tracking and reporting challenges.While these fees have increased by 43% year over year, the airlines and credit card companies have made little, if any, progress in terms of sharing data and making the nature of these fees more transparent.

This was a hot issue last year, but the buzz has definitely shifted to transparency,” says Ellen Trotochaud, senior director of platform services at Concur and founding member of the Party of Three, an informal working group that stays abreast of the issues around ancillary fees, along with AirPlus, MasterCard and United Airlines (formerly Continental Airlines). “While the reaction from the airlines was a willingness to work on enhancements, there are many stakeholders involved in improving transparency and very few have moved forward with development plans. Required changes across the industry are slow.”

The fight over fees

A fight has been brewing between airlines and the travel industry, specifically with the Global Distribution Systems (GDS), which distribute the lion’s share of airline inventory through travel agents or travel management companies. Along with the GDSs, those agencies are able to access all of the available ticket prices among participating airlines and thenpresent those options to consumers.

The argument centers on the way airlines have been pricing tickets with separate charges for food, premium boarding or baggage – adding them piecemeal. While total fees are required to be listed, they usually come up at the end of the booking – long after side-by-side ticket comparisons can be made. Adding more visibility into fees that are listed in the GDS still does not address fees that are charged at check-in at day of departure or onboard the flight.

Small victories

Earlier this year, Air France-KLM and Qantas signaled a move toward transparency, signing agreements that make their ancillaries available to GDSs. US Airways and Delta are in the works to follow suit later this year, though most other carriers remain uncommitted to sharing fees with GDSs, particularly in the United States.

“It’s a good step in the right direction for travel agents, travel managers and road warriors when the airlines sign these agreements,” says Trotochaud. “But the industry needs to continue working together on behalf of the traveling public to deliver greater access to the ancillary fee schedule, which will lead to smarter booking and better discounts.”

Momentum building for legislation

In the interest of consumer protection, the government is getting an earful on ancillary fees, too. Hearings on the topic were held in August during the Department of Transportation’s Advisory Committee for Aviation Consumer Protection, where industry leaders made the case for sharing fees with the GDSs. However, these DOT regulations have been delayed yet again despite the recognition of the need for modifications in the name of better industry transparency.

The push for further transparency comes on the heels of some major rules the DOT implemented in this vein in 2011:

  • Airlines and ticket agents now include all mandatory fees and government taxes in advertised fare prices.

  • Airlines and ticket agents now allow consumers to cancel reservations at least 24 hours after making a flight reservation, without penalty.

  • Post-purchase fare and fee increases after a ticket is sold are now banned.

  • Airlines now prominently disclose fees like baggage on websites. Prior to 2011, fee disclosures were not required.

Ancillary additions at Concur

In reaction to these new, permanent ancillaries, we’ve updated Concur to track these fees during or after bookings – for instance, business travelers can now expense their in-flight Internet with GoGo via Concur, as well as upgrade seats on WestJet and Virgin America.

“While the uproar around ancillary fees may have quieted down,” says Trotochaud, “there still remains a business need to better track and provide visibility into where the money gets spent. Concur continues to provide companies a way to do just that.”

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