Business Travel

Airlines To Package Fees Into Annual Subscriptions

As add-on fees proliferate, the major carriers are offering deals to lock in customer loyalty.

A new twist on those extra airline fees: They’re being sold as subscriptions. United Airlines is the first to try it, letting travelers buy Premier Baggage. For an annual cost of $249, passengers can check two standard-size bags free whenever they fly. Coverage includes up to eight companions on the same confirmation number. Without a subscription, the cost of checking two bags on United is up to $50 each way, so the program makes sense for anyone who flies several times a year with checked baggage.

Other carriers will soon follow United’s lead. “American Airlines will come on strong with subscriptions early in 2010,” says Kevin Mitchell, chairman of the Business Travel Coalition. They will be targeted to frequent fliers.

Initially, these subscriptions will be for a single service, such as baggage checking, but later on, services may be packaged based on market research and demographics. For example, one package may be targeted with the business traveler in mind, says Mitchell. Such a package could include automatic seat upgrades, priority boarding and expedited security clearance -- all for an annual fee. Lounge access, food and concierge services also could be included as subscription benefits, says Ann Mack, director of trendspotting for advertising agency JWT (formerly known as J. Walter Thompson).

Airlines believe subscriptions will boost revenue and customer loyalty. Anyone who signs up with one carrier will be reluctant to buy a ticket on another and pay the extra fees. “It has the potential to be a win-win for the airlines,” says Mitchell.

The development of these fees into subscription products is driven by their revenue potential, especially given that the industry is still bleeding red ink. Such fees are expected to add $4 billion to the industry’s coffers in the U.S. and $10 billion worldwide. “The airlines are willing to try anything to make a profit. Besides, people are becoming accustomed to paying these fees,” says Mack.

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