Originally Posted by
elitetraveler
You're also talking about an industry that will try to save a buck wherever it can from taking olives out of salads to removing pillows. And fees are one of its first breakthroughs in finding new revenue streams.
They are not finding new revenue streams. They are shifting revenues among different buckets -- fares vs. ancillaries, taking advantage of a loophole in U.S. tax law that fares are taxed while ancillaries aren't.
The oldest ancillaries (bag fees) have already peaked and are decreasing, and airlines never report the
net earnings from them -- i.e. backing out costs of collecting them, including having to hire extra check-in people due to the slowdown caused by them, and the lower asset utilization of their multibillion-dollar fleets due to the higher turn times required by the carry-on mess created by the existence of the fees.
Southwest is no dummy -- they know exactly how to manage the bottom line, not the top line (hey, look at all the fee income we're getting, isn't that a great PR message to bring to Wall Street -- let's ignore that we spend more money due to the fees that what we collect in fees!)
The problem with ancillaries decreasing is that somewhere in a bureaucratic organization like AA there's a silo called "ancillaries revenue management" who is rewarded for the top line, and they need to find a way to combat decreasing revenues.