Teddies to trinkets, airlines eye sales in the sky

Thu Jun 21, 2012 8:45am EDT
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By Rhys Jones and Helen Massy-Beresford

(Reuters) - Major airlines struggling to maintain profits in the face of stiff competition and rising fuel bills are increasingly looking at sales of non-ticket extras as a way to boost earnings without harming their reputations or alienating customers.

Low-cost pioneers such as U.S. carrier Southwest Airlines and Irish group Ryanair, have been cashing in on such alternative or ancillary revenues since their advent, pushing sales of everything from teddy bears to train tickets, bacon sandwiches to baggage charges.

Now traditional airlines are taking a cue from their no-frills rivals and looking to charge for services that do not need hefty infrastructure investment or that are contracted out.

Telecommunications, for example, is seen as a prime source of additional revenue as technology advances, with aviation consultancy Ascend expecting more traditional carriers to start charging passengers for wireless and internet-related services.

"My prediction would be that three to four years from now practically every commercial airline, with the exception maybe of some very old aircraft, will have (wireless) connectivity installed in their aircraft," said Stephan Egli, chief commercial officer of Geneva-based OnAir.

"The passengers like it, use it and want it."

Carriers such as IAG's British Airways, already charge extra for services such as hotels, car rental and day trip bookings, currency exchange and travel insurance as well as for font row seats and seats with more leg room by the emergency exit.

As competition and cost pressures increase, these and other legacy airlines are on the lookout for even more ways to boost earnings - aside from adding fuel surcharges to ticket prices - but they do not always find it as easy to start charging for services as their no-frills rivals.   Continued...

A Southwest Airlines 737-700 takes off from Bob Hope Airport in Burbank, California April 4, 2011. REUTERS/Mario Anzuoni