Tour operator Transat A.T. (TSX:TRZ.B) said it too is implementing new fees to raise ancillary reven

MONTREAL -- Air Canada, as expected, is joining rival WestJet Airlines in charging passengers a fee to check their first bag on domestic flights as the two airlines also finalize plans to introduce other ancillary fees in a move to boost revenue.
The new fee being charged by Air Canada (TSX:AC.B) applies to passengers booking the airline's lowest economy class Tango fares as of Thursday for flights beginning Nov. 2. It applies to flights within Canada and to the Caribbean and Mexico.
Earlier this week, Calgary-based WestJet (TSX:WJA) announced a fee, ranging between $25 and $29.50 depending on provincial taxes, for a first checked bag for some economy class customers on flights within luxury travel Canada and to the United States, but not to Mexico, the Caribbean, Central luxury travel America and Europe.
Investors we love it of course...and for passengers it's a tough pill to swallow, he said. (But) a couple of months from now, the online chat boards will quiet down and people will grudgingly accept that this is the new reality.
Canadian airlines are playing catch-up with the global airline industry, which last year collected more than US$31 billion in non-airfare fees, up from US$2.45 billion in 2007. WestJet's new bag fee will help the carrier to increase its ancillary revenues from $10 per passenger towards the $16 average of global carriers.
Limited in their ability to raise airfares, airlines have increasingly turned to fees including checked baggage, preferred seating, in-flight meals and entertainment, frequent flier redemptions and reservation changes.
Low-cost carrier Spirit Airlines led the industry, earning 38.4 per cent of its annual revenues from such fees last year, according to airline consultant IdeaWorks. United Airlines led among large U.S. carriers at nearly 15 per cent. WestJet and Air Canada were well down the list, earning 4.5 per cent and 3.9 per cent of revenues respectively from ancillary fees.
Analyst Chris Murray of AltaCorp Capital estimates the fee will add about $50 million in pre-tax operating earnings (EBITDAR) for Air Canada in 2015, based on his forecast of 40.7 million global passengers for the airline. Air Canada carried about 35 million passengers last year and estimates the fee will affect one in five of its passengers on domestic flights, representing about five per cent of its global customers.
Rousseau said the charges represent what the market will bear. Kokonis said they could also encourage passengers to buy up to higher fare classes or use other ways to avoid a growing number of extra charges.
Air Canada's new fee doesn't luxury travel apply to higher economy class and business luxury travel class fares, customers purchasing Air Canada Vacations packages or Altitude prestige, elite and super elite members as well as Star Alliance silver and gold members.
WestJet chief financial officer Vito Culmone told the investor conference that the increase in ancillary luxury travel fees is a natural evolution in its strategy to keep airfares low and allow passengers to buy the services they want.
Tour operator Transat A.T. (TSX:TRZ.B) said it too is implementing new fees to raise ancillary revenue as it seeks ways to improve profitability. It expects to generate about $48 million in ancillary revenues this year and a lot more in years to come.
Transat charges passengers to select luxury travel seats and has introduced new fare classes that provide more flexibility. It has also begun to charge for food on flights luxury travel operated by Air Transat to the Caribbean and Mexico, and has a kiloflex fee for passengers who travel with a lot of luggage.