Canadian airfare discounts won’t last — but fees will, experts say
While customers of WestJet Airlines are seeing more enticing ticket fares, for many, any savings they’ve won are being drained by new fees on luggage and in-flight perks, such as new entertainment options and wireless Internet.
WestJet execs said on an earnings call this week “ancillary” revenues, or fees charged to customers for checked luggage, seat reservations and other services that are above the base fare have climbed to $16.44 per passenger — up nearly 70 per cent from the same time last year.
“Very robust ancillary revenue growth from initiatives such as the first bag fee and Plus upgrades helped offset some of the pricing pressure [on airfares],” analysts at Raymond James said in a research note on Wednesday.
WestJet introduced a $25 charge on the first checked piece of luggage for economy fliers on transborder and domestic flights last fall. A new entertainment and connectivity system on part of its fleet is also boosting ancillary revenues, providing customers the option to surf online for $8 to $9 per flight.
WestJet – which has been joined by Air Canada in adding new baggage fees – says it’s making the push into generating more ancillary fees to keep up with other North American carriers who have made similar moves in recent years. And it says it’s still committed to being a “low-fare” carrier.
“We will … be Canada’s low-fare airline to the U.K., no matter what fare you buy,” Gregg Saretsky, head of WestJet, said in an interview in September when the Calgary-based airline announced plans to launch service to London.
But fliers should brace themselves for more fees to come.
WestJet announced yesterday it will be introducing the first baggage fee on all international flights in the new year. The airline’s also increasing fees for pre-reserved seating by $10 to $20 per seat based on the distance flown.
These initiatives alone are expected to generate up to $25 million in revenue, the airline believes.
End of deals?
WestJet and its regional service Encore have entered a dizzying number of new destinations this year – 22 in all, experts say. Next year, the carrier plans to launch service to less than half that number of markets.
The slowdown likely means the current promotional environment will get a lot less so, according to experts at CIBC World Markets.
“This suggests to us that the ‘introductory fares’ WesJet utilizes to stimulate traffic should begin to normalize,” they said.Click here to view data »