A Closer Look: How Airlines Can Climb Above Fuel Costs While Meeting Customer Needs
April 28th, 2011

U.S. airlines in recent days reported first quarter losses of over $1 billion dollars against higher bills for fuel. Seven airfare increases so far this year prevented the losses from being even more damaging to airlines’ balance sheets. However, airlines face a potential consumer backlash this summer from angry travelers who are increasingly tired of both fare increases and hidden ancillary fees, which can now double the base price of a ticket.

On the managed travel front, more financial problems loom for airlines after Labor Day when many corporations move to curtail travel as they realize they under budgeted for air travel in 2011 because of fare increases and hidden fees. The fourth quarter could be a real financial black hole for many airlines. But there is a solution that would be embraced by air travel consumers and that would financially benefit airlines.

In recent analyst calls to review first quarter earnings, and to provide going-forward guidance, some airlines pointed to airline product unbundling and the sale of ancillary fees as the “magic sauce” for climbing above increasing jet fuel prices. Well, why not greatly accelerate the uptake and sale of ancillary fees and defeat surging fuel costs?

Travel agencies are eager to sell these services and could power airline revenues above the dark clouds on the horizon of rising oil prices. The airlines have built a very low-cost transmission system for the dissemination of fees through the airline-owned Airline Tariff Publishing Company. The system has been tested with some 26 airlines and 3 reservation systems and would cost no more than $3,000 per airline, per month. It’s ready to go!

This solution would provide rapid acceleration in growth of fee revenue; mitigate consumer anger in the marketplace thus supporting demand; and show regulators in Washington and Brussels that airlines are listening to their customers.

Safe travels,
Kevin Mitchell
Business Travel Coalition