Can Anyone Stop the $38 Billion Airline Fee Squeeze?
U.S. airlines earned $2.6 billion in fees and frequent flier mile sales in 2014, an 18.7 percent increase from 2013, according to an annual report by consultancies IdeaWorks and CarTrawler.
That represents the eighth consecutive year that carriers saw substantial revenue ancillary to ticket sales. Globally, ancillary revenue soared more than 20 percent to $38.1 billion.
“Ancillary revenue is an increasingly important indicator of commercial success, and a major contributor to the bottom line of airlines across the globe,” said Michael Cunningham, CarTrawler’s Chief Commercial Officer, in a statement.
Related: 6 Sneaky Fees that Are Making Airlines a Bundle
By passenger, additional revenue grew by 8.5 percent to $17.49. Low cost carriers increased ancillary revenue by 32.8 percent for the year, or $2.9 billion.
Ten airlines earned two-thirds of the ancillary revenue, led by United Airlines, American/U.S. Airways, and Delta. Delta brought in $350 million through its Comfort Plus program, which allows passengers to pay extra for more legroom and priority boarding.
Among passengers’ most hated fees are checked bag fees. Airlines typically charge $25 for the first bag, $35 for the second, and more than $100 for a third bag.
As frequent fliers turn to branded credit cards as a means of avoiding fees, airlines are still earning money. Last year, American’s Citibank-issued credit card, which gives consumers one free checked bag and priority boarding, yielded an additional $624 million for the carrier last year.
The additional fees are not improving the customer experience. More than 60 percent of consumers surveyed by the U.S. Travel Association in March said they were frustrated with air travel generally.
Stat of the Day: 0.2%
The New York Times’ Jim Tankersley tweets: “In order to raise enough revenue to start paying down the debt, Trump would need tariffs to be ~4% of GDP. They're currently 0.2%.”
Read Tankersley’s full breakdown of why tariffs won’t come close to eliminating the deficit or paying down the national debt here.
Number of the Day: 44%
The “short-term” health plans the Trump administration is promoting as low-cost alternatives to Obamacare aren’t bound by the Affordable Care Act’s requirement to spend a substantial majority of their premium revenues on medical care. UnitedHealth is the largest seller of short-term plans, according to Axios, which provided this interesting detail on just how profitable this type of insurance can be: “United’s short-term plans paid out 44% of their premium revenues last year for medical care. ACA plans have to pay out at least 80%.”
Number of the Day: 4,229
The Washington Post’s Fact Checkers on Wednesday updated their database of false and misleading claims made by President Trump: “As of day 558, he’s made 4,229 Trumpian claims — an increase of 978 in just two months.”
The tally, which works out to an average of almost 7.6 false or misleading claims a day, includes 432 problematics statements on trade and 336 claims on taxes. “Eighty-eight times, he has made the false assertion that he passed the biggest tax cut in U.S. history,” the Post says.
Number of the Day: $3 Billion
A new analysis by the Department of Health and Human Services finds that Medicare’s prescription drug program could have saved almost $3 billion in 2016 if pharmacies dispensed generic drugs instead of their brand-name counterparts, Axios reports. “But the savings total is inflated a bit, which HHS admits, because it doesn’t include rebates that brand-name drug makers give to [pharmacy benefit managers] and health plans — and PBMs are known to play games with generic drugs to juice their profits.”
Chart of the Day: Public Spending on Job Programs
President Trump announced on Thursday the creation of a National Council for the American Worker, charged with developing “a national strategy for training and retraining workers for high-demand industries,” his daughter Ivanka wrote in The Wall Street Journal. A report from the president’s National Council on Economic Advisers earlier this week made it clear that the U.S. currently spends less public money on job programs than many other developed countries.
