Assessment of product debundling trends in the US airline industry: Customer service and public policy implications

• Published in: Transportation research. Part A, Policy and practice Vol. 46; no. 2; pp. 255 - 268
• Main Authors: Garrow, Laurie A., Hotle, Susan, Mumbower, Stacey
• Format: Journal Article
• Language: English
• Published: Kidlington Elsevier Ltd 01.02.2012; Elsevier
• Subjects: Air transportation and traffic; Airline revenue; Applied sciences; Assessments; Carriers; Commercial aircraft; Commercial planes; Exact sciences and technology; Ground, air and sea transportation, marine construction; Low cost; Networks; Policies; Product debundling; Transportation planning, management and economics; Trends; US Airport and Airways Trust Fund; United States; North America; America; US Airport and Airways Trust Fund; Airline revenue; Product debundling; Ticketing; User service; Customer; Trend analysis; Unbundling; Air transportation; Market survey; Public policy
• ISSN: 0965-8564; 1879-2375
• DOI: 10.1016/j.tra.2011.09.009

► Airlines responded to the 2009 economic crisis by rapidly implementing new ancillary revenue fees. ► Ancillary revenues represent a higher percentage of total operating revenues for low cost carriers. ► Revenues to the US Airport and Airway Trust Funds have been reduced by at least 5%. ► We believe that ancillary revenues will continue to be more broadly adopted by low cost carriers. This paper reviews product debundling trends that have occurred in the US airline industry. Multiple sources of ancillary fees related to ticketing refunds and exchanges, checked baggage, on-board pets, preferred and/or advanced seating assignments, frequent flyer ticket redemptions, and day of departure standby policies are reviewed. Despite the fact that both low cost and network carriers stress the importance of future ancillary fees in their investor reports, our assessment suggests that these fees will be more broadly adopted by low cost carriers. We anticipate that many network carriers will eliminate ancillary fees, particularly as they begin to recognize how these fees can impact other system performance objectives such as minimizing the number of misconnecting passengers. We estimate that the debundling phenomenon has diluted revenues to the US Airport and Airways Trust Fund by at least 5%.