Unbundling returns: Where will low-fare airlines stop?

The low-fare revolution is now coming to bite the airline market.

- Anjuli Bhargava

Let me elaborate. A report titled The Sky's the Limit, by a United States (US) Senate sub-committee on the airline industry's practice of "unbundling"—as many charges as possible in a way that these ancillary fees have become a critical revenue stream—criticises carriers for levying new charges besides ticket price. Be it seat preference, food, water, or check-in baggage, extra charges are being levied for virtually anything.

This strategy, known as unbundling, has spread to almost every airline. The so-called ancillary fees have become a vital revenue stream. According to the report, unbundling has "insidiously raised the cost of flying" for consumers, forcing them to pay to be seated next to their minor children or have carry-on luggage.

The report argues that US-based airlines like United, Delta, Spirit, Frontier and American Airlines have generated billions of dollars in revenue from ancillary fees while travellers confront increasingly complex fees, with fewer options for avoiding them, obscuring the total cost of travel. The report says that the five airlines collectively earned $12.4 billion in revenue from seat charges between 2018 and 2023 and that, in 2023, United earned $1.3 billion, more than the $1.2 billion it earned from carry-on baggage fees.