Air ancillaries — are costs really becoming easier to compare?

Airline ancillaries is a topic that can make any travel manager's hair stand on end. After all, the job requires collecting and comparing data to understand costs and use that knowledge to manage costs.

Indeed, as the GBTA and CWT 2016 Global Price Outlook says, "Many companies continue to consolidate their data to gather information on ancillary spend to bolster negotiations."

But the challenge may have moved from capturing the ancillary spend to something of greater complexity.

Given that many buyers not only track the total spend but also look at fares' components as a means of negotiating greater value from their airline contracts, identifying the contribution that the components make to the total cost is a valuable exercise.

And that is becoming more difficult than ever.

For several years IdeaWorks and Cartrawler have conducted regular research and analysis into airline ancillaries which, not surprisingly, show amazing growth rates and are consequently very important to many airlines' revenue streams. The study in fact quotes that income from ancillaries comprises 33.7% of Wizz Air's total revenues and 24.6% of Ryanair's.

But, more importantly, the report also points out a new trend that will make comparison of components even more challenging for travel managers, namely the bundling of some of these otherwise 'a la carte' items into new fare packages.

This can be illustrated by Lufthansa's recently announced 'Light', 'Classic' and 'Flex' fares. Light excludes booked baggage which must be paid for at €15 per bag per sector and seat selection — a €10 fee — and changes are not allowed. The Classic fare includes both baggage and seat selection and allows changes for a fee. Flex, as its name suggests, is Classic plus the ability to change a booking without a fee so long as the originally booked fare class is still available. In addition to those three classes business class remains an option with such extras as priority boarding and allowing fully flexible bookings and cancellations included in the fare.

The bundling concept is gaining popularity. Ryanair Business Plus includes priority boarding, seat selection, booked baggage, fast track and flexibility all included and easyJet's Flexi fare includes seat selection, speedy boarding and some changes to booking.

So, for example, seat selection is an extra in some of these carriers' fares but included in others. The challenge of identifying spend on extras is no longer confined to specific airlines or categories because a category can be either free or incur a fee according to the fare purchased on an airline, and each carrier has different fare packages.

So, a checked bag is an extra on some easyJet fares but included in others as the below chart created by IdeaWorks and Cartrawler illustrates.

Continued below