Travel managers face MI problems as a growing number of airlines are now imposing extra charges to compensate for falls in revenue. Unbundling is now the "Number One" topic in aviation, , Amadeus' senior manager, distribution in its airline business group, says.
Cyril Tetaz told 100 delegates at the Association of Corporate Travel Executives (ACTE) executive forum in Amsterdam yesterday (April 28, 2009) that with a few exceptions airlines were faced in the current climate with decreasing volumes, capacity and fares.
"To offset this, we are seeing a trend that started one to two years ago, charging for ancillary services, unbundling their product.
"This is now genuinely the Number One topic in the aviation industry. Everybody is looking into to it.
"Low cost carriers (LCCS) are now generating between 20-25% of their revenue from this annually. For Ryanair it is 22% and for easyJet it has grown from 11% to 19%," Mr Tetaz said.
But he warned that it is causing problems for travel managers who have difficulty capturing the various payments on MI.
Mr Tetaz said full services carriers in the US were also using ancillary charges to boost revenue with it now common for them to charge $15 for the first bag checked in and $20 for subsequent bags.
Delta Air Lines has just announced a $794m first quarter loss, has said it will charge a $50 fee for second bags checked in for international flights.
"The revenue from ancillary charges is expected to be 10% of revenue, about $55bn, by 2013," he said.
A poll conducted by the Airline Information, organisers of the Airline A-La-Carte Conference in Miami next month found that 48% of carriers now charged for ancillary items, like food, seat assignment or baggage.
A significant majority, 89% said they were planning t introduce or add to ancillary charges in the next 12 months while 57% said they "did not feel it was necessary" to cut fares in order to sustain ancillary fees.
But Mr Tetaz said corporate had to decide how they were going to handle these extra services and payments for them.
"How will you pay for them and what will it means for your travel management? We need to make sure display of content including these charges is easy.
"We are still in the development stage of this while airlines are still watching to see how it develops," he said.
One delegate in Amsterdam said ancillary charges were "getting out of control."
He added: "It is becoming difficult to manage the cost. Right until you book there is the chance that an extra charge might be thrown at you.
"Breaking the charges down if also reaching comedy levels with charges to use the toilet and how much you weigh. It is getting out of control."
Arthur Sollet, Shell's travel manager for Europe, said: "People just don't understand what is included. The business traveller wants an easy process.
"I can understand it for leisure but not for business travel. It gives a lot of problems to managers."
At the National Business Travel Association's business travel financial forum in New York last month, travel managers made clear they were angry with ancillary charges because of the difficulty in capturing them.
Jim Compton, executive vp of marketing for Continental Airlines, defended the charges as a "work in progress."
IT company Farelogix has since announced that it is working with US carriers to create a data warehouse for ancillary spend which will enable airlines them to supply customers with details of their extra spend.