Last updated: 02:03 PM ET, Mon April 25 2016

Are Travel Agents Launching A New Era in A La Carte Airline Pricing?

Airlines & Airports | Josh Lew | April 25, 2016

Are Travel Agents Launching A New Era in A La Carte Airline Pricing?

New data released recently by the Airline Reporting Corporation (ARC) shows that the amount of revenue that travel agents are getting from ancillary airline products and services is increasing drastically. 

Compared to the first three months of 2015, the number of transactions for such purchases is up by more than 350 percent this year. In terms of dollars and cents, travel agents have earned 170 percent more during the first quarter this year compared to last year. 
The reason for this increase: airlines and the global distribution systems that serve them are getting much better at being able to process these non-ticket transactions. This allows agents to offer extra services and products (most related to seating and in-flight options) to people who could previously only purchase tickets through them. 

READ MORE: Southwest Blasts Ancillary Fees With New 'Transfarency' Campaign

This is important for the industry for several reasons. Fares are dropping, so other revenue streams are becoming as important for agents as they are for the airline industry. During the first quarter of this year, the number of ticket transactions was up by 4 percent (year on year), but the revenue totals were down by 4.5 percent compared to 2015. That shows that more people are flying, but fares are lower. 

The fact that this data is demonstrating a sustained trend of lower fares is good news for fliers. They are paying less, especially on competitive routes, and it appears that ultra-low-cost-carriers are having an industry-wide effect on fares that could continue for the foreseeable future.  

The huge increase in sales of ancillary products paints another kind of picture, however. Airlines have become fond of earning additional revenue from fees, surcharges and various forms of upgrades. They now have the technology and the transaction infrastructure that will allow travel agents and other third parties to sell these extras on their behalf. This will make fees and the practice of upselling (higher cabins classes, seat selection, better food, etc) even more ingrained in the air travel industry. 

READ MORE: Airline Ancillary Revenues Rise Again

On one hand, this is very bad news for people who do not like the a la carte pricing models that airlines have become so fond of over the past few years. Now that the infrastructure is in place, airlines can offer more and more extras and third parties will have an incentive to try and sell them. 

The positive for fare-conscious fliers is that base fares will probably remain low, so if you can stand to fly without any extras whatsoever, prices should be cheap on both legacies and ultra-budget airlines. Ideally, the increase in ancillary sales will also make it possible, eventually, for fliers to go to a travel agent and get exactly what they want without having to pay for anything that they don’t want. 

Hopefully, as the technology gets better and better, that kind of personalized pricing will become commonplace.  


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