Assessment of product debundling trends in the US airline industry: Customer service and public policy implications

This paper reviews product debundling trends that have occurred in the US airline industry. Multiple sources of ancillary fees related to ticketing refunds and exchanges, checked baggage, on-board pets, preferred and/or advanced seating assignments, frequent flyer ticket redemptions, and day of departure standby policies are reviewed. Despite the fact that both low cost and network carriers stress the importance of future ancillary fees in their investor reports, our assessment suggests that these fees will be more broadly adopted by low cost carriers. We anticipate that many network carriers will eliminate ancillary fees, particularly as they begin to recognize how these fees can impact other system performance objectives such as minimizing the number of misconnecting passengers. We estimate that the debundling phenomenon has diluted revenues to the US Airport and Airways Trust Fund by at least 5%. (C) 2011 Elsevier Ltd. All rights reserved.