Airlines Sell Extra Items to Alleviate Fuel Costs

With competition and fuel prices increasing, Reuter's is reporting that airlines are looking for ways to up profits without incurring the wrath of customers. Rather than raise ticket prices, then, airlines are now looking to sell other items for profit. Commercial airlines are now following in the footsteps of low-cost pioneers like Southwest Airlines and Irish carrier Ryanair.

Flyers using IAG's British Airways will notice extra charges for travel insurance or seats with extra room like the front row and the emergency exit. Now, though, traditional airlines are looking for more ways to earn a profit, and they're having a hard time charging for items that are for sale on low-budget, no-frills airlines, such as teddy bears, train tickets, and bacon sandwiches.

"Because of the brand positioning, there's a definite advantage for newer carriers who can say 'we've always done it like this' whereas older ones have a problem in terms of brand image - there's a Ryanair lottery - you wouldn't find Singapore Airlines having a scratch-card lottery on board," said Ascend's chief economist Peter Morris. "But as communications and connectivity improve there are elements that will be chargeable."

Traditional airlines, for example, might start charging passengers for wireless and internet-related services. "My prediction would be that three to four years from now practically every commercial airline, with the exception maybe of some very old aircraft, will have (wireless) connectivity installed in their aircraft," said Stephan Egli, chief commercial officer of Geneva-based OnAir. "The passengers like it, use it and want it."

Ryanair is Europe's biggest budget airline and one of the pioneers of ancillary revenues. The company generates an estimated 20 percent of its total revenues from optional extras such as in-flight lottery scratch cards, internet-related services, and snacks. Statistics indicate that the revenue from extras outpaced traffic growth, rising 11 percent to $1.1 billion this year as of end of March. It's worked for other companies, as well. For example, a British company called easyJet saw profits from optional items rise 13 percent in its last full year. "Speedy boarding," the additional charge that passengers can pay to get ahead of the rush for unreserved seats, has been very profitable.

Not all extra charges go smoothly, however. EasyJet's idea to increase credit card charges for flight bookings faced backlash. So did JetBlue's decision to charge for pillows.