Ancillary income legal deception
The first question to be answered is: what are you buying when you purchase a plane ticket? There is a distinction between before and after the arrival of low-cost airlines. Previously, a plane ticket covered the entire service: the transport of passengers from one airport to another, their seat on the plane, the transport of their luggage (with a weight limit due to the less efficient aircraft used at the time), as well as the check-in of passengers with seat and luggage allocation. There was different onboard service depending on the class chosen by the customer, including newspapers and a film (selected by the airline and the same for all passengers), all included in the ticket price. In exchange, fares were proportionally higher. In 1970, there were only two classes on board: first and economy, with business class introduced in the mid-1970s to allow for some fare flexibility.
The arrival of low-cost carriers disrupted the services included in the ticket price by subjecting traditional airlines to new, aggressive competition to which they were unaccustomed. For years, these airlines denigrated—even despised—this new way of selling plane tickets, but eventually they were forced to adopt it, in response to losing customers who were content with the minimal service offered by low-cost carriers, in exchange for much lower fares.
However, from the outset, low-cost airlines recognized 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 services to such a degree that customers would have to purchase additional services to enjoy a minimum level of comfort. This led to reduced space between seats, with an extra charge for more legroom; the sale of boarding priority, as the companies no longer allocated seats to passengers (a measure they have since reversed); and the sale of services that traditionally would be included in the ticket price, such as Ryanair’s recent, controversial policy of charging customers for airport check-in. Gradually, nearly all airlines began to adopt similar practices.
This is where it has become problematic. Air travel has aligned itself with a kind of deception: announcing prices far below actual costs to secure the best positions in the displays of major consolidators, then compensating for these losses by selling ancillary services, assuming the customer would not notice. This approach treats customers as naïve, and ultimately devalues air travel by setting prices that do not cover costs. To cover the cost of a transatlantic flight (around 11,000 km), a traditional airline needs about €900 with a cost of 8 euro cents per seat-kilometer, while a low-cost carrier requires around €700, with costs closer to 6 euro cents per seat-kilometer. This means any fares below these amounts are essentially sold at a loss, which is prohibited in most Western countries. Nevertheless, when I checked a popular consolidator this morning, I found transatlantic round trips at €633, or a Bangkok-Tokyo round trip (a 12-hour flight) at €534.
Managers often argue that the availability of such discounted rates is limited and that they compensate with revenue from ancillary services. In other words, they lure customers with an offer that does not cover costs—knowing that the offer is very limited, without making this clear—while ensuring additional revenue from charging for ancillary services, sometimes even for basic needs, such as baggage fees for cabin and checked luggage. This practice is unreasonable, as customers remember the advertised price and are surprised when they must add essential services to be able to travel.
The sums involved are far from negligible. In 2024, the estimated revenue from ancillary services is nearly $150 billion, out of a total turnover of around $1,000 billion—representing 15% of total revenue.
It appeared that after COVID-19, carriers returned to better practices by initially posting significantly higher fares that covered costs. However, the trend toward pricing below cost seems to be on the rise again. How can we encourage carriers to stop underestimating their customers?
