November 12, 2008
Fliers Don’t Like a La Carte, but Will Pay It
By Dan Reed
More than half of US air travelers now prefer buying the cheapest available ticket, then paying fees for "extras" such as food and drink, preferred seating and checking bags.According to a new survey that captures for the first time U.S. travelers' sentiments about a la carte pricing, many consumers do dislike the concept. The survey, done for Amadeus North America, shows that 85% of air travelers don't like having to pay extra for services that used to be included in their fare.
But a majority of travelers -- 52% -- now understand why airlines are moving to a la carte pricing, and do see some consumer value in it.
In fact, 53% say that when presented with a choice of buying an all-inclusive service or unbundled services, they would buy the lowest-price ticket available, then pay extra only for the services they value. Only 18% said they prefer buying a basic fare in which the fees for services are embedded.
Other survey results:
*28% say they will pay above-average prices for noticeably better services; 40% say they won't.
*49% say checking a bag should stay part of the basic fare; 17% say pillows and blankets should; 15% say seat selection; and 14% say food and beverages.
The results were "a bit affirming to us, in that consumers feel that there are some services that they now pay for which really do add value to their travel experience," says Robert Buckman, Amadeus North America's director of airline distribution strategies. Amadeus is one of the three big computerized travel sales systems used by airlines and travel agents.
Airline managers view a la carte pricing as a way of growing revenue in an intensely price-competitive industry at a time they can't push through fare increases fast enough to offset rising costs.
But "airlines walk a very narrow line in how they roll out ancillary services so that it does not seem to the consumer like nickel-and-diming, and more like a true value-add," said Buckman.
In any case, the pricing approach is certain to continue expanding rapidly.
Jay Sorensen, president of IdeaWorks, a Wisconsin consulting firm, estimates that U.S. carriers generated $1.7 billion in ancillary revenue in 2007. But that amount should skyrocket as carriers put more fees in place for more services.
This summer, American became the first large U.S. carrier to charge for checking a first bag. It has been followed in that by all its large conventional airline competitors.
United officials expect to generate $700 million in additional revenue from fees in 2009. Before its acquisition two weeks ago by Delta, Northwest officials were expecting an extra $250 million to $300 million in revenue this year from checked-bag fees they only began charging in midyear. (c) Copyright 2008 USA TODAY, a division of Gannett Co. Inc. <>>