Would you like some legroom with that seat? Perhaps a glass of wine?
Anyone who’s flown in the last few years knows that airlines are upselling anything they can get their hands on. And the airlines are seeing green as a result of those monetized perks.
American Airlines, the U.S.’ largest passenger carrier, just released it third quarter 2018 earnings report, showing a net profit of $341 million. However, the price of oil puts a hurt on all airlines and American, for one, felt it.
American sees the way to boost its profit margin is through branded fare products like seat upgrades. The company is seeing a 50 percent upsell rate to more expensive branded fare products and has decided to see if fliers are willing to up that profit margin even more.
“We've actually done a pretty good job of growing our ancillary revenue stream,” American’s SVP of Revenue Donald Casey said in a third quarter earnings call.
“In the third quarter, ancillary revenues are up 18%. We re-launched our Main Cabin Extra product in June. And since we've done that we've seen unit revenues for Main Cabin Extra grow at 24%, but we see that we actually have more opportunity beyond that.”
Airlines continue to ask for more
American is not the only airline trying to leverage added passenger revenue. Almost all airlines have gone to upselling more comfortable seats and extra legroom, a particular painful point with passengers given the fact that the average distance between rows has shrunk from 35 to 31 inches over the last two decades.
But analysts say that asking passengers to pay for perks helps the larger carriers -- like Delta, American, and United -- to keep fares competitive, and ancillary revenue is becoming the go-to rather than charging more for tickets.
“I think that's a big window where we can put and show many offers in front of our customers to increase our ancillary revenue stream even more than we've been able to go do it,” American’s Casey went on to say.
The best way for fliers to get free perks?
So, what is the best way for fliers to avoid all of these extra charges? According to airline officials, it’s by signing up for airline-branded credit cards.
“There remains strong competition among the 3 (United, American, Delta) for co-branded credit card accounts, which is always a good thing for consumers,” Jay Sorensen, President of Product, Partnership and Marketing Practice for IdeaWorksCompany told ConsumerAffairs.
“These remain the singular best method for travelers to insulate themselves from a la carte fees,” said Sorensen.