Airlines’ Extra Fees Are Windfall Worth Billions

Top revenue source, surprisingly, isn’t passengers but banks.

FrequentFlyerIf you need any reason to fly Southwest, it is the staggering amount of money airlines are raking in by charging for everything other than your seat, lavatory access and maybe a cheap beverage (water, coffee, tea) and a little bag of peanuts or pretzels. Not long ago, travel authority Peter Greenberg dissected the outrageous revenues carriers are extracting from travelers in a blog post called “How Much Are Airlines Making from Ancillary Revenue?”

According to the site,  “Ancillary revenue for the entire airline community—international and domestic—hit $31.5 billion in 2013. The top 5 U.S. airlines earned over $13.5 billion alone….The folks at IdeaWorks, a company that tracks these things, has projected that ancillary revenue will climb to $49.9 billion worldwide in 2014—a 17.2 percent increase from 2013.”

As annoying as the add-on fees are to aggrieved passengers, I was very surprised to learn that what we are paying isn’t the largest ancillary revenue source for carriers. It’s banks. According to PeterGreenberg.com, “The largest contributor is the sale of frequent flyer miles—when the bank pays the airline to redeem your frequent flyer miles accrued through a credit card. This makes up 55 percent of profits from ancillary revenue, and has earned airlines $27.45 billion in 2013.”

Are you as surprised as I?