Highly debated but still unbundled: The evolution of U.S. airline ancillary products and pricing strategies

Stacey Mumbower (), Susan Hotle and Laurie A. Garrow
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Stacey Mumbower: Embry-Riddle Aeronautical University
Susan Hotle: Virginia Polytechnic Institute and State University
Laurie A. Garrow: Georgia Institute of Technology

Journal of Revenue and Pricing Management, 2023, vol. 22, issue 4, No 5, 276-293

Abstract: Abstract This paper investigates how airline pricing strategies and revenues have evolved over time for unbundled flight products, using the eight largest U.S. airlines. Findings indicate that ticket exchange fees are being eliminated by network and low-cost carriers. On the other hand, baggage and seat reservation fees have grown more complex, with some carriers moving towards dynamic pricing. Ancillary revenues from unbundled flight products represent an increasing portion of airlines’ total operating revenues, especially for ultra low-cost carriers. We estimate that the product unbundling trend has decreased revenues to the U.S. Airport and Airway Trust Fund by 4.0%–4.6% due to untaxed baggage and seat reservation fees alone. We also discuss government policies on ancillary revenue disclosure and pricing transparency, and the global COVID-19 pandemic’s impact on ancillaries.

Keywords: Airlines; Product unbundling; Dynamic pricing; Ancillary fees; Airport and Airway Trust Fund; COVID-19 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1057/s41272-022-00388-5

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