Expedia will show airlines’ extra fees alongside flight prices, in an attempt to present customers a more transparent view of what they are actually paying for airfare.
Called “Upgrade Options,” the company will give customers an array of price options that include checked baggage fees, seat choice fees and other previously “hidden” flight fees. Change and cancellation fees will also be displayed, and the entire menu of prices is intended to help travelers book flights with customized services, according to Greg Schulze, Expedia’s senior vice president of global tour and transport.
The initial roll-out, starting today, will be a partnership with Delta in the U.S. and Airberlin in Europe. Expedia hopes to include “dozens more shortly” in the coming months and into the early part of next year, Schulze said in an interview with Fortune.
“There is a huge amount of data we are collecting, along with information we have to help travelers to make informed decisions. We are starting to be more confident in ourselves in helping travelers compare options,” he said.
A screenshot of “Upgrade Options,” Expedia’s new feature showing ancillary fees for flights.
Courtesy of Expedia
Expedia is also rolling out “Baggage Calculator,”which provides flyers with accurate baggage fees and policies for different airlines while searching, and paid seating options later in the year that showcase premium seating choices and its corresponding prices at the site itself.
These moves are two-fold in its objective for the world’s largest online travel agency, one of which is to address the growing frustration at the lack of accountability in what flyers have to actually pay for a flight.
Since American Airlines became the first U.S. airline to charge customers a $15 fee for the first bag checked in June 2008, the industry has seen a growing apportion of services that flyers have to pay to receive. In a study by IdeaWorksCompany, ancillary revenue per passenger among 63 airlines that publicly report such fees was $17.49 last year, and the amount is much higher for certain airlines:
These ancillary fees have become a significant source of revenue for carriers. Airlines collected around $38 billion in revenues from these fees last year, representing around 6.7% of total revenues.
These fees have been the subject of debate even in Congress, with a report released by the minority staff of the Senate Commerce Committee determining that consumers were kept in the dark about the true cost of air travel. Many air travelers, said panel member Bill Nelson, “don’t learn about the actual cost of their travel until it’s too late.”
To further add to the flight price noise, airlines have bundled these fees into “branded fares,” essentially fare packages that include certain options that result in a tier of flight prices. Expedia’s new feature will allow customers to compare these bundled fares, and see which are the services they are willing to pay for (and which they can live without). “There’s a difference between leisure travelers and business travelers, for example,” said Schulze. “We want to standardize the different attributes, and compare them across different airlines.”
Will it give Expedia an edge?
The second reason for these options, however, is a game of survival in an increasingly competitive marketplace of online travel purchasing. Expedia has to battle meta-search sites such as Google Flights and Priceline’s Kayak, which give flyers a range of flight prices for their desired route, and then directs them to the airline’s website for purchase.
Increasingly, airlines are also starting to shutter themselves from third-party sites; last year, Delta pulled its flight information from TripAdvisor, preferring that customers book flights directly from its own website.
With their new features aimed at more openness, it remains to be seen how many airlines will be on board with Expedia. The company, however, is betting that carriers will continue to work with them. “We accept we have two customers: travelers and supply partners,” said Schulze. “Airlines have seen it is much better to work with us, and not just be out there to sell bunch of tickets. We want to help with operational issues and provide good info to travelers, and that only helps airlines.”
On the heels of its acquisition of Travelocity and Orbitz, Expedia invested around $700 million in technological developments this year alone with the aim of improving the experiencing on their range of sites. According to Expedia’s data, the company processed around 8 billion flight searches last year, and it takes customers around 48 searches before purchasing a flight ticket, something the company hopes to minimize.
With that in mind, the company is also looking to launch a tool that will aggregate pricing data and present flight price trends that show how much current flight fares have increased or decreased over the past two weeks for a particular destination. The tool will also help predict the best time to buy flight tickets by analyzing booking trends and airline inventory.
