Extra airline fees to become the new 'normal'

Posted Oct 16th 2009 3:40PM by Tom Johansmeyer
Filed under: Boeing Co (BA), AMR Corp (AMR), UAL Corp (UAUA)

If you think all those new airline fees were a temporary measure to help these beleaguered companies through an economic crisis, you're out of your mind. Now that they've had a taste of how much they can make by charging you for an extra bag or a little more leg room, they're hooked. More important, the fees are making up a meaningful portion of airline revenues and profits, so investors aren't likely to be satisfied with a return to normal – well, they can't. Extra fees are the new "normal."

American Airlines: This unit of AMR Corp (NYSE: AMR) saw "other revenues" increase 7% for the first half of 2009 relative to the same period in 2008. Though this includes more than just fees – it also has some maintenance revenue, for example – it's up, and extra fees are a way to make sure it keeps heading in that direction.

United Airlines: This UAL Corp (NASDAQ: UAUA) company picked up first quarter 2009 ancillary revenue of $259 million. These fees were up 60%, increasing to around $14 per passenger.

And, it's not just the airlines who get a bump.

The emerging business model is changing the way the planes are built, according to Colleen Rainbolt, a director of Passenger Satisfaction and Revenue at Boeing (NYSE: BA). She says that the interiors need to be designed for comfort but that the design must be flexible enough for the airlines to make some features optional. If something is optional, the airlines can charge for it.

Tags: airline, airline fees, airline industry, airline sector, AirlineFees, AirlineIndustry, airlines, AirlineSector, american airlines, AmericanAirlines, amr, amr corp., amrcorp, AmrCorp., boeing, ual, ualcorp, uaua, united airlines, UnitedAirlines