Aviation Study: Airlines' ancillary fees topped $10 billion last year By Michael Fabey / September 10, 2009 Share 1 -- Uncle Sam wants a piece of the pieAirlines are likely to increase their ancillary charges, according IdeaWorks' Ancillary Revenue and A La Carte Guide. And that has captured the attention of federal lawmakers.Rep. James Oberstar ( D-Minn.) and Rep. Jerry Costello ( D-Ill.) last month directed the U.S. Government Accountability Office, the investigative arm of Congress, to study ways that Congress can capture these fees for the Airport and Airway Trust Fund.The fund, which gets some of its money from taxes collected from airlines based on traffic and usage, has taken a hit lately with the reduction of airline capacity and flyers using the network. Now with airlines focusing on making money from ancillary fees, the lawmakers see a potential new tax stream.-- Michael FabeyAirlines' extra fees, including unbundled and ancillary charges, increased 345% in 2008 compared with the previous year, according to a guide released by consultancy IdeaWorks.Airlines worldwide generated more than $10.25 billion in ancillary revenue in 2008, IdeaWorks said in the second edition of its Ancillary Revenue and A La Carte Guide. IdeaWorks analyzed financial statements from 92 airlines to provide a snapshot of ancillary charges worldwide."Ancillary revenue as a strategy or business line wasn’t largely in practice or even germane in the general context of the industry just a decade ago," Tina Fitch, CEO of ezRez Software, wrote in the beginning of the IdeaWorks guide. Fitch’s company sponsors the guide. EzRez software enables airlines to integrate hotels, rental cars, trip activities and insurance in the booking path.The airlines started unbundling services and charging more fees in an a la carte fashion in the summer of 2008, when skyrocketing fuel prices prompted them to uncover ways to make more money. The carriers have expanded those programs to raise more revenue to steel themselves against the impact of the recession."As airlines expand beyond their core product, the key is to determine how to best generate more revenue without alienating loyal customers or losing new ones to the competition," Fitch wrote. Some examples of ala carte success stories highlighted in the guide include the following:● United generates an average of $5.81 per domestic passenger from checked-bag charges.● Southwest sells about four Business Select tickets per flight on average. The program contributed approximately $75 million in revenue in 2008.● AirAsia X, a Malaysia-based low-cost airline, realizes $2.75 million per year from the sale of pre-ordered meals."Consumers want more choice and more value, and whether an airline chooses to add ancillary travel or merchandising options to their website, the additional options should benefit most consumers," Fitch wrote. "At ezRez, we have witnessed several airline clients add hotels, rental cars, trip activities and insurance to their core flight offering. The most successful airlines make these ancillary products relevant to their customers’ search habits and present them as a value-add, not a distraction. " Airlines generated more than $10.25 billion in ancillary revenue in 2008, IdeaWorks says in its second edition of its Ancillary Revenue and A La Carte Guide.IdeaWorks analyzed financial statements from 92 airlines to provide a snapshot of ancillary revenue charging by carriers worldwide.