Airline ancillary fees come across as a 'cash grab': Consumer advocate
If restaurants operated like airlines, you might have to pay extra for your table setting in addition to your food.
That’s how one airline passenger advocate described the way certain airline ancillary fees — for services like checked baggage, cancellations and in-flight sales — operate.
“It does come across as some form of cash grab,” said Gábor Lukács, founder of the group Air Passenger Rights, in an interview with BNN Bloomberg’s Amanda Lang Tuesday.
“You expect when you go into a restaurant to pay for your meal. You don’t expect to pay separately for the salt, the pepper, the fork and the knife.”
As airlines look to ancillary revenue to boost their margins, travellers may have to be more diligent about budgeting for extra expenses beyond the flight itself to calculate the true cost of flying.
“By breaking out various extra services, which the airlines claim to be extra services, they are making the expense more palatable but more difficult for passengers to know what the bottom line is,” Lukács said.
His comments came on the heels of WestJet’s release of its first-quarter earnings results, which were bolstered by baggage and seat-selection fees. Ancillary revenue for the quarter increased 15.2 per cent year-over-year to $126.1 million, up from $109.5 million in the first quarter of 2018, WestJet said. On a per-guest basis, ancillary fees for the quarter rose by 10.2 per cent to $20.47 per guest, up from $18.58 per guest in the first quarter of 2018.
WestJet said in its results that charging ancillary fees allows the company to “sell higher-margin goods and services while enhancing our overall guest experience.”
Still, Lukács said he doesn’t take issue with airlines charging extra for seat selection in particular.
“I would say that’s optional. As long as children are sitting next to their parents,” he said in a follow-up phone interview. “If you want to have a window seat, monetizing that, from a purely economical perspective, it makes perfect sense.”
But he said the additional fees for baggage are “completely misguided.”
“The real problem with respect to baggage is that even though clearly a large portion of passengers is using [the service], it is still being treated as an optional item.”
But another industry watcher says baggage fees and other ancillary charges help lower the cost of flights for travellers overall.
“The consumer, who’s not thinking of pricing strategy, is thinking, ‘Oh they’re gouging me, they’re nickel-and-diming me, why can’t they just throw it in?’” said Mark Satov, founder and leader of management consultancy Satov Consultants Inc.
“If they threw it in, they would just raise the price on average … They’re making a bet that some people would rather have the choice to be no frills and add back as they will,” he added.
Satov also said airlines rely on extra charges to turn a profit.
“Airlines are very cyclical,” he said. “They’re exposed to so many variants. They’re exposed to the economy, they’re exposed to fuel costs, they’re exposed to Boeing forgetting to update the software.”
He acknowledged, however, that options for consumers are limited when it comes to Canada’s airline market.
“You really only have two choices on many routes, and there are many routes where you only have one choice,” Satov said.
Lukács, who described the industry in Canada as an “oligopoly,” said this lack of competition has led to airlines raising prices in tandem, at the expense of consumers.
“When WestJet introduced baggage fees, what was Air Canada’s reaction? They introduced it too for domestic flights,” Lukács said. “So what choice do people really have?”
While Lukács says he’s “not a prophet,” he wonders what else airlines may target and turn into an extra service.
“Hand baggage could be the next one, or carry-ons,” he said.
“Some people talk about such extremes as having an airfare based on your own weight. I would hope human rights legislation would say that’s too far.”