ANCILLARY INCOME OR LEGAL DECEPTION

November 03, 2024

The first question to be answered is what you are buying when you take a plane ticket. There is the before and after the arrival of low-cost airlines. Before, a plane ticket covered the entire service, i.e. the transport of passengers from one airport to another, their seat on the plane, the transport of their luggage (with a weight limit because the aircraft were less efficient than those used now), but also the check-in of passengers with the allocation of their seat and luggage,? A different on-board service depending on the class chosen by the customer, the newspapers, a film (certainly selected by the company and the same for all passengers), this was included in the ticket price. In exchange, fares were proportionately higher, in 1970 there were only two classes on board: first and economy, business class having been introduced in the mid-1970s to allow for some fare flexibility.

The arrival on the low-cost market has disrupted the service included in the ticket price by subjecting traditional airlines to new and aggressive competition to which they were not accustomed. For years they denigrated, even despised this new way of selling plane tickets, but they were forced to get into it in the face of the flight of customers who finally settled for the minimum service, the one offered by the low costs, in exchange for fares far below those charged by their usual carriers.

However, from the beginning, low-cost airlines had taken into account the fact that the price of the plane ticket, offered at incredibly low levels, would not be enough to balance their accounts. It was therefore necessary to reduce the service to such a level that customers would have to buy an additional service in order to benefit from a minimum of comfort. We then saw the space between seats shrink so that an extra charge could be sold to obtain more airy seats, the sale of boarding priorities because the companies no longer allocated seats to their passengers (they have since reversed this measure), and the sale of services that should still be included in the ticket price,? such as the recent absurd idea of making Ryanair customers pay for their check-in at the airport. And gradually everyone more or less started to practice it.

That's where it's not going anymore. In fact, air transport has aligned itself with a great deception: announcing prices well below their cost price in order to obtain the best position in the displays of the major consolidators and to compensate for this loss by selling ancillary services, thinking that the customer would see nothing but fire. It is taking them for idiots and above all it is lowering the value of air travel to the prices posted knowing full well that these do not cover the costs. Thus, to balance the costs of a transatlantic flight, which represents a little more than 11,000 km, it takes €900 for a traditional airline with a cost of around 8 euro cents per seat kilometre and €700 for a low-cost carrier whose cost per seat kilometre is around 6 euro cents. This means that all proposals below these costs are ultimately selling at a loss, which is banned in most Western countries. However, when I opened the first consolidator that comes to mind this morning, I immediately found transatlantic round trips at €633 or Bangkok-Tokyo (12-hour round trip flight) at €534.

So, the managers with whom we talk about the figures first retort that there is little supply at the so-called discounted rates and that they are making up for it on ancillary services. In other words, the customer is lured with a proposal that does not cover the costs, knowing that the offer is very limited, without this being explicitly indicated, while being sure to recover additional revenue by charging for ancillary services, sometimes elementary, such as paid baggage now in the cabin or in the hold. This is not reasonable because customers keep in mind the commercial proposal that is displayed and they are surprised when they have to add services without which they could not travel. Basically, airlines are determined to devalue a product of which they are rightly proud.

And the sums at stake are far from negligible. For 2024, the amount of ancillary services is estimated at nearly $150 billion for a total turnover of around $1,000 billion. This still represents 15% of total revenues.

It seemed that after Covid, carriers returned to better practices by posting significantly higher fares from the outset that had the merit of covering costs. Except that the drift towards displays below the cost price seems to be on the rise again. How can we get carriers to stop taking their customers for fools?

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