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BLOG: Fees, Fees, Fees: An Air-Travel Nightmare

Sandra Gittlen | July 18, 2011
I'm talking about expense reporting, which had to account for items adding up to $21.5b in ancillary airline revenue last year.

FRAMINGHAM, 15 JULY 2011 - A recent European vacation got me thinking about what could be a nightmare of expense reporting, connected to the plethora of fees that are collected on air travel these days.

From the time I first stepped foot in the airport -- and actually even earlier, when I booked my reservation -- airlines wanted to pepper me with ancillary fees. My suitcase was slightly overweight; and while the agent said she was waiving the fee, she warned that others mightn't be so gracious upon my return. Also, the airlines encouraged me to give my 6' 3" nephew, who was traveling with me, a bit more legroom for a price -- not business class, mind you, but an extra few inches of economy space.

I said no to those, and the handful of other upselling opportunities. But as someone who used to travel for business most weeks out of the year, I was struck that this nightmare could be very real indeed for lots of road warriors. It used to be that your corporate travel manager would book your flight, and maybe you'd submit expenses for meals eaten at the airport and taxi rides. But not this multitude of extraneous fees, each of which must be carefully categorized in financial systems.

As it turns out, I'm right : It's a headache-and-a-half for corporations having to track and report on airline travel. So much so that there are task forces, such as the one started by the Global Business Travel Association, to figure out how to manage these ancillary fees and incorporate them into reporting structures.

Global travel technology firm Amadeus and consultancy IdeaWorks released a study in May revealing that a combined 47 airlines made $21.46 billion in ancillary revenue in 2010. This was a marked increase from 2008, when 35 airlines reported $10.25 billion in such revenue, and 2007, when 23 airlines reported only $2.45 billion. This revenue was generated from a la carte fees and offerings such as in-flight Wi-Fi, on-demand movies, sales of miles or points, baggage fees, and onboard dining. For one airline, Allegiant, ancillary revenue made up 29.2% of total revenue in 2010, according to the study. United Continental showed ancillary fees as 14.7% of its total revenue.

What this demonstrates is that the airlines are finding success with these extra charges, and finance executives and travel managers will have to change their expense management practices accordingly. Already, Concur, a travel and expense management technology firm, has incorporated these fees into its software to make accounting for them easier. They have groupings of subfees such as baggage, upgrades, seats, airline club, on board, or other to help track the nitty-gritty of airline expenses. The company, according to its blog, expects to add categories for ticket change fee, onboard entertainment and priority access in a future release.

 

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