Airlines Assign Big Revenue Priority to Seat Selection

Issued 24 May 2022

Issued 23 May 2023

This report reviews the state of assigned seating fees in the US and how this billion-

dollar ancillary revenue business can be improved.

Contents

HOW DID WE GO FROM $12 TO BILLIONS? .......................................................... 4

ASSIGNED SEATING REVENUE RIVALS BAGS ..................................................... 5

THE PATH TO AN ASSIGNED SEAT IS COMPLEX ................................................. 7

TO SEAT OR NOT TO SEAT, THAT IS THE QUESTION ......................................... 9

REVENUE MANAGEMENT IS EVOLVING .............................................................. 13

CREATE A PRODUCT, NOT JUST A FEE .............................................................. 14

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About Jay Sorensen, Writer of the Report

Jay Sorensen’s research and reports have made him a leading authority on frequent flyer

programs and the ancillary revenue movement. He is a regular keynote speaker at ancillary

revenue and airline retail conferences and has testified to the US Congress on ancillary

revenue issues. His published works are relied upon by airline executives throughout the

world and include first-ever

guides on the topics of

ancillary revenue and loyalty

marketing.

Mr. Sorensen has 38 years

experience in product,

partnership, and marketing

development. As president of

the IdeaWorksCompany

consulting firm, he has helped

boost airline revenue, started

loyalty programs and co-

branded credit cards, developed products in the service sector, and helped start an airline

and other travel companies. His career includes 13 years at Midwest Airlines where he was

responsible for marketing, sales, customer service, product development, operations,

planning, financial analysis and budgeting. His favorite activities are hiking, exploring and

camping in US national parks with his family.

About Eric Lucas, Editor of the Report

Eric Lucas is an international journalist whose work has appeared in

Michelin travel guides, Alaska Airlines Beyond Magazine, Epoch

Times, Westways and many other publications. Founding editor of

Midwest Airlines Magazine, he is the author of eight books. Eric has

followed and written about the travel industry for more than 30 years.

He lives on San Juan Island, Washington, where he grows organic

garlic, apples, beans and hay; visit him online at

TrailNot4Sissies.com.

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to your particular circumstances. IdeaWorksCompany cannot guarantee, and assumes no

legal liability or responsibility for, the accuracy, currency or completeness of the information.

IdeaWorksCompany is not compensated by industry suppliers described in its reports. The

views expressed in the report are the views of the author, and do not represent the official

view of CarTrawler.

Eric, at his favorite summer retreat, Steens Mountain, Oregon.

Jay with sons Anton and Aleksei at Artist Point in Yellowstone

National Park.

Airlines Assign Big Revenue Priority to Seat Selection

HOW DID WE GO FROM $12 TO BILLIONS?

I never imagined the topic of assigned seating fees would appear in a presidential

State of the Union address, but on 07 February 2023 it did. President Biden’s

speech in the Capitol included this specific reference: “We’ll prohibit airlines from

charging up to $50 roundtrip for families just to sit together. Baggage fees are bad

enough – they can’t just treat your child like a piece of luggage.” This moment

strongly suggested it was time to review the state of assigned seating fees to

determine the scale of activity, how these are implemented, and how this ancillary

revenue business can be improved.

Among the earliest examples of assigned

seating fees is Air Canada’s 2003 move to

simplify its fares.

By 2004 this resulted in a $12

assigned seat fee for its lowest priced fares for

flights in Canada and the US. Northwest Airlines

(later merged with Delta in 2008) implemented a

$15 fee for extra leg room seats in 2006. The

2008 Yearbook of Ancillary Revenue makes

reference to SkyEurope’s (defunct in 2009)

assigned seating fees which started at €2 for the

last cabin row.

There was a time when these fees were in the

single digits and industrywide assigned seat

revenue was in the millions. Only 13% of airline

managers surveyed by IdeaWorksCompany in

2007 said their airlines charged assigned seating

fees. Fast forward to today with virtually all

airlines – from global network carriers to LCCs –

now charging seat fees and achieving a revenue result in the billions. The humble

€2 fee from 2008 has indeed become a big business.

“Northwest to Charge Extra for Aisle Seats” Wall Street Journal article dated 14 March 2006.

The world's most expensive seat

assignment: Seat 1A on Air Force One.

Presidential candidates spent $6.6 billion

during the 2020 election cycle.

Image: The White House

ASSIGNED SEATING REVENUE RIVALS BAGS

$4.2 billion is my estimate of the assigned seat fee revenue generated by eight key

US airlines (Alaska, Allegiant, American, Delta, Frontier, JetBlue, Spirit, and United)

for their US domestic networks in 2022. By comparison, baggage revenue from the

same eight airlines is estimated to be $5.1 billion on US domestic flights. That’s right

– assigned seat revenue has reached a level exceeding 80% of baggage revenue.

Generating this estimate was a complex task and includes numerous assumptions.

Table 1 below represents the first step of the evaluation. We conducted 180 total

booking queries for the airlines listed to collect a sample range of prices for assigned

seating. Each airline had the same profile of flights queried in terms of distance

(600-800, 900-1,100, and 1,600-1,800 miles) and advance booking windows (100,

75, 50, 25, and 15 days) for domestic US markets. The results in the table are an

apples-to-apples comparison, and therefore are best evaluated across the different

carriers and seat types. The data does not reflect a statistically valid average of

assigned seating fees for the individual carriers.

Table 1: Sample of Assigned Seating Fees

Selected US airlines, various route lengths & advance booking windows

Airline

Preferred Seat *

Exit Row

Last Row

Allegiant

$29

$34

$15

American

$31

$55

$11

Frontier

$40

$64

$28

JetBlue

$17

$82

$10

Spirit

$36

$50

$23

United

$46

Not allowed for basic

$20

Average

$33

$48

$18

Notes: Sample of 30 booking queries per carrier, equally distributed among route lengths (600-800,

900-1,100, and 1,600-1,800 miles), and advance booking windows (100, 75, 50, 25, and 15 days) for

domestic US markets, aisle seats. * First row of the preferred seating zone (not extra leg room zone).

The following definitions of seating types are offered to enhance your understanding

of the data:

 Extra Leg Room Zone: Alaska, American, Delta, Frontier, JetBlue, and United

have created multiple rows of seats which offer extra leg room (such as 5 to 7

inches) at the front of the cabin. Alaska, American, and Delta include earlier

boarding and a free beer or wine, which attempts to create a mini business

class experience. Elite members are usually provided fee-free access to these

seats. American brands these seats “Main Cabin Extra” and JetBlue calls them

“Even More Space.”

 Exit Row: Every airline offers extra leg room seating in their exit rows due to

safety provisions for seat layouts. When an airline offers an extra leg room

zone, these seats are included in the category.

 Preferred Seats: This branding has been largely adopted by the industry as

defining seats behind the extra leg room zone and ahead of the exit row. They

are “preferred” for one reason; because they are in the front, exiting the aircraft

is much faster upon arrival.

 Standard Seats: These are seats behind the exit row stretching to the last row

of the cabin. For Table 1, the last row of the standard seat zone was queried.

Passengers in these seats are the last to leave

the aircraft upon arrival.

Alaska and Delta are missing from the Table 1

queries because these airlines do not allow

consumers who have purchased a basic economy

ticket to select and pay for an assigned seat. Thus,

we could not query fees for basic economy bookings.

An average assigned seat price was designated for

each of the airlines. For traditional airlines, a fee of

$20 was used, and this was increased to $25 for

LCCs. The lower price for traditional airlines reflects

an attempt to accommodate assigned seats included

in the cost of higher-priced standard fares. For basic

economy fares, the price is transparent because it’s

displayed on the seat map. For standard fares

(which are higher-priced to include various

amenities) the assigned seat component is bundled within the fare. For traditional

airlines, the $20 rate was assigned as a blended rate to reflect a la carte purchases

and when assigned seats are included in the standard fare.

Then we viewed the seat maps for American and Spirit a day before departure of a

flight. This allowed us to observe assigned seating activity prior to the free seat

assignment routine that occurs during check-in. For American, about 65 percent of

seats had been assigned, and for Spirit it was around 35 percent. This could

suggest traditional airlines achieve a higher level of assigned seat activity than

LCCs. But there’s another adjustment that must occur before that can be assumed.

Most frequent flyer programs offer fee-free access to assigned seating for elite

members. For traditional airlines, elite members represent a significant number of

passengers on each flight. We assumed 20 percent of passengers on a traditional

airline flight have elite status and don’t contribute to assigned seat revenue. This

activity was subtracted from the overall assigned take-rate of 65 percent to yield an

adjusted take-rate of 45 percent. This adjustment was not made for Allegiant, as the

airline does not have an elite tier. The elite status factor for loyalty programs with

newer elite tiers (Frontier, JetBlue, and Spirit) was much lower.

Main Cabin fares on American

include standard seating, or you

can pay more for preferred seats.

The $4.2 billion assigned seating revenue estimate was generated by multiplying the

figures assigned for each airline: 2022 passenger traffic, assigned seat price, and

adjusted take-rate. The average per passenger revenue for the group of eight

airlines was $9.12. By comparison, the per passenger rate for baggage is $10.94.

Please remember these figures apply for US domestic operations of the eight

airlines, and don’t include international flights, which undoubtedly fetch higher fees

for assigned seating. You might imagine a global total adds billions more to the

result.

THE PATH TO AN ASSIGNED SEAT IS COMPLEX

Consumers begin the booking path with a choice that determines their travel fate

through arrival at their destination: the fare. I recommend airlines adopt the branded

fare method which displays a good, better, and best choice to consumers. It’s an

intuitive approach which instantly conveys the initial array of features. Table 2

describes the two primary methods US airlines use to sell assigned seats. Among

the eight airlines listed, only JetBlue uses the classic branded fare method.

Table 2: Assigned Seating Methods Used in the Booking Path

Selected US airlines, economy cabin

Basic Economy Pricing Model

Airline

Basic Economy

Standard Fare

Notes

Alaska

Not allowed *

Includes

assigned seat

Basic economy fare

not always sold

American

Fee for seating

Delta

Not allowed

United

Fee for seating

Bundled Pricing Model

Airline

Base Fare

Notes

Allegiant

Fee for seating

3 higher-priced bundles include assigned seat

Frontier

Fee for seating

2 higher-priced bundles include assigned seat

JetBlue

Fee for seating

2 higher-priced branded fares include assigned

seat

Spirit

Fee for seating

2 higher-priced bundles include assigned seat

Review of airline websites, April 2023. * Preferred zone seats for a fee ( but not standard seats).

The basic economy pricing model borrows from the branded fare method, is used by

the largest US traditional airlines, and features an unfortunate inconsistency. Basic

economy is not always available for sale for every query and appears to be often

used as a discounting tool in highly competitive markets.

Thus, consumers sometimes encounter a basic economy fare and sometimes only

see a standard fare. Ask any grocer, and a primary rule of retail is to ensure shelves

are fully stocked with products. The “sometimes” approach to offering basic

economy creates consumer confusion and inconsistency in the booking path.

When a traditional airline offers a basic economy fare the consumer must click

through a message which warns of the fare’s restrictions, such as lowest boarding

priority and a requirement to pay for assigned seating. It’s an awkward message

which suggests these fares are not an appropriate offer for a traditional airline to

make. It’s unusual to find an equivalent “warning” when navigating the booking path

of an LCC. That’s because the consumer enters the “store” knowing it’s a Walmart

and not a high street department store.

If the consumer chooses basic economy, the booking path for American and United

presents a seat map for the flight. This occurs after the consumer identifies

themselves as a member of the frequent flyer program. If the traveler has elite

status, the seat map displays the fee-free seats available and the fees if an upgrade

to a better seat is desired. For Alaska and Delta travelers, the booking path does not

present the option to select a seat for basic economy; these are provided by the

airline after check-in. For passengers choosing a higher-priced standard fare, the

seat map offers all of the seats assignable for that fare. Again, the opportunity is

presented to upgrade to a better seat for a fee.

Not on the shelf. Basic Economy was not found for the nonstop flights queried in American’s hub-to-

hub market of Chicago to Dallas Fort Worth in March for an August departure.

This is one of two basic economy messages encountered in American’s booking path. The other

describes the benefits of upgrading to a Main Cabin fare.

There are also terms and conditions associated with assigned seats. This adds

another level of complexity to the decision process. The process is more transparent

on a laptop, but this added detail presents comprehension challenges on the smaller

screen of a mobile phone. Table 3 lists some of the terms and conditions associated

with US-based airlines. Some airlines offer additional details through a link on the

seat map page and for some, these could not be found.

Table 3: Examples of Assigned Seat T&Cs

 We make every effort to ensure you get your chosen seat, but seat

assignments are not guaranteed.

 If a customer voluntarily changes his/her flight or seat selection once

purchased, no refund for the original purchase will be provided.

 We reserve the right to change seats for operational, safety or security

reasons. Refunds will be issued to any reassigned customer if the customer

is not moved to a comparable or better seat.

 Seat assignments are not guaranteed and are subject to change without

notice.

 Fees for seats are non-refundable with some exceptions.

Review of airline websites, April 2023

The lack of disclosure and the onerous terms and conditions invites regulators to

focus on ancillary revenue. Throughout my career of offering advice to airlines, I

have repeated the words of Sy Syms, who operated a chain of menswear stores in

New York City. The slogan for Syms was “An educated consumer is our best

customer.” This wisdom truly applies to this portion of the assigned seating story.

More effort can be made to create a better experience for travelers. The terms and

conditions described in Table 3 should be replaced with guarantees that the product

purchased will be delivered, and that those returned to the shelf are refunded. There

is sufficient margin here to ensure a better sense of fair dealing for consumers.

TO SEAT OR NOT TO SEAT, THAT IS THE QUESTION

Concurrent with the complications of the booking path there are emotional elements

associated with selling seat assignments. Prior to landing on the seat map page the

consumer has entered their origin and destination, departure date, and number of

passengers. Next up is flight selection, quickly followed by the major choice of a

fare, be it basic economy, branded, or bundled. Perhaps checked or carry-on bags

are selected next. Finally, personal details are offered, which almost always

generates an error message because something has been missed. Thus depleted

of cash, comprehension, and patience . . . the seat map pops up on the next page.

It’s no wonder by this time, the consumer will gladly defer a decision to the future;

this is human nature. Since most bookings occur weeks before departure, they are

probably peering at a seat map that shows a sea of available seats. No worries say

they, and they happily click to advance to the car rental and hotel page. The

moment to make a quick sale has passed, and now the airline will need to sell the

seat through a subsequent contact delivered as an email solicitation or during the

check-in process.

Those of us in the airline business often fail to see our airlines through the eyes of

the everyday consumer. I was discussing this report with my college intern and he

looked at an example of Spirit’s seat map. He quickly observed that the assigned

seat fees were highest in the front of the cabin, and lowest in the back, “Why are the

seats in the front more expensive?” I replied, “Well they’re preferred.” He replied,

“Why?” He asked a similar question about exit row seats. This simple exchange

reveals the retail challenge. We think we are designing elegant systems, when in

reality, many consumers are bewildered or simply don’t care. Complexity is the

cause of this.

Simply perfect or too much? Spirit’s seat map hits all the right notes by using prices to communicate

the attractiveness of seats and special notation and color to call out extra leg room seats.

My thinking is evolving on the topic of booking path complexity. Branded fares are

attractive because the good, better, and best presentation is easily understood by

consumers. However, if the list for each fare is loaded up with too many benefits,

this method can easily tilt to deliver less than optimum results. I think the same logic

applies to seat maps. Too much complexity simply overwhelms the consumer.

Simplicity and transparency should guide the design of seat maps, to include the

branding applied to seat types and the pricing assigned to individual seats. When

this is not accomplished, the consumer simply moves to the next page, deferring the

decision to another day.

The assigned seat process includes the challenge of two levels of availability: visible

and latent. Visible availability is displayed on the seat map, and months or weeks

before departure, it displays a comforting supply of seats. But operating in the

background is the “latent” availability of seats, which is determined by how many

tickets have been sold for the flight. The seat map can display lots of “empty” seats,

but true availability is far different if the flight is nearly sold out. This is due to the

“double sale” nature of assigned seats; the first sale occurs with the purchase of the

fare and the second is the assigned seat itself.

Ironically, the provision of no-fee assigned seating for a parent and child (under 13

years) in the US may help this issue. This policy reflects the plans of the US

Department of Transportation (USDOT) and President Biden, as reflected in his

State of the Union address. The provision of these seats will reduce visible

availability on seat maps and perhaps encourage other consumers to pay for

assigned seats in the booking path.

As present there is a DOT rulemaking effort to regulate assigned seating benefits for

families for all fares, to include basic economy. Airline executives outside the US

should anticipate similar regulatory moves around the world from local government

agencies. The airlines committing to fee-free family seating fulfill the obligation prior

to check-in through automation. Future enhancements will likely use the same

method currently offered by Ryanair and Singapore Airlines, which allow parents to

select their own fee-free seats for children in the booking path.

The USDOT calls this graphic the Airline Family Seating Dashboard. It’s intended to provide at-a-

glance information for consumers, but it also has the effect of encouraging airlines to embrace the

Biden Administration’s desire to ensure children under 13 are not seated apart from a parent.

Consumers experience

various motivations to

encourage paying for an

assigned seat. The two

which provide the most

attractive results for an

airline are comfort and

convenience.

A la carte sales

markedly improve for

flights longer than 2

hours and 45 minutes.

That duration makes

seat comfort,

entertainment, and food

more important.

Convenience is defined

by being seated in the

front of the cabin for

quicker exit upon arrival

(preferred seat zone).

Travelers also have a

personal preference for

aisle or window seats.

Fear is also a motivating

factor but it’s unattractive

from the perspective of

branding and very likely

might produce

unattractive outcomes.

Couples and families fear the prospect of being seated away from each other.

Likewise, a short connecting time at a hub might cause a traveler to worry about the

delay of exiting the aircraft from the last row. Or a person with anxiety issues might

avoid a middle seat which places strangers on both sides. These travelers might be

eager to spend, but as we all know, fear is an unpredictable motivator. Extra leg

room and preferred seats have natural advantages and perhaps no controversy. I

believe standard seats give airlines the biggest challenge because these have

nothing to offer beyond the removal of worry.

Here’s a well-intentioned email from American to remind a traveler to

select seats about 2 weeks before departure. This particular traveler

had already chosen their seats and qualified for no-fee assigned

seats because of their platinum status.

REVENUE MANAGEMENT IS EVOLVING

The science of revenue

management for air fares is well

established through decades of

practice. By comparison,

dynamic pricing (another phrase

for revenue management) is less

established. The eight airlines in

the pricing survey seem to

assign prices based upon city

pairs. This includes the factors

of flight length and airline

competition. Longer flights

should command a higher price

for extra leg room seats. On an

individual flight basis, cabin

layout is also a factor, as well as

anticipated demand.

Ticket revenue management is

largely based on historical

booking trends, including the

timing of bookings, along with

recent booking trajectory. The

same logic is applied to the

pricing of assigned seats.

Among the eight airlines

observed in the pricing queries,

American and Spirit had the

most significant variation within a

market and for a specific flight

departure. For these two, seat

fees would vary among flights

operating in the same market.

Furthermore, as a flight aged,

prices would vary as well, which

is demonstrated in the seat map

images to the right.

These are seat maps for the same American flight from

DFW to Raleigh departing on a Thursday. On the left is the

map 3 days before departure, and the map on the right is 2

days before departure. Every price dropped 2 days before

departure.

It’s important to remember, months or weeks before departure, the visible seat

availability of a seat map doesn’t reflect a flight’s actual load. Significant dynamic

pricing activity occurs close to departure as assigned seats become scarce.

The price designated for a seat should provide generous motivation for consumers to

act while in the booking path. That’s because their wallet is open and it’s easier to

pay. Experience has demonstrated a la carte fees can increase with fares. The

higher the fare, the less hesitancy a consumer has for buying a higher-priced a la

carte service, such as assigned seating. There’s another dynamic to consider, and

that’s the relationship of prices within the seating zones of the cabin. A large leap in

price from standard to preferred can encourage a consumer to stay with standard, or

perhaps to not buy a seat assignment at all. Too high a price, especially for LCCs

with far fewer elite members, can lead to unpurchased exit row seating.

The complexity can be overwhelming which explains why many airlines choose to

keep prices static. Software companies working in this space like to capture and

devour client-airline data and use machine learning and statistical forecasting to

generate optimum price management.

Some might wonder why Southwest Airlines, which carries the most US domestic

traffic, is not included in this report. That’s because the carrier does not offer seat

assignments and uses a globally unique method of open seating. Those first to

board the aircraft have first choice of seats. Southwest sells early boarding

privileges and provides this as an elite perk. These passengers also have earlier

access to overhead bin space, which is less crucial as Southwest includes two

checked bags for all fares. IdeaWorksCompany estimates the airline generated

$750 million from its Early Bird Check-In and Upgraded Boarding services during

2022 based upon disclosures made in a 3

quarter 2019 investor call. That’s an

amazing development for an airline that’s largely known for its all-inclusive approach

to pricing and retail.

CREATE A PRODUCT, NOT JUST A FEE

Back in 2009 Alaska Airlines lagged behind other airlines in adopting fees for a first

checked bag in the US market. When the airline introduced bag fees it added a

guarantee for speedy delivery to the bag belt upon arrival.

In the event bags did not

reach baggage claim within 25 minutes of arrival, the traveler could choose a 2,500-

mile frequent flyer voucher or a $25 travel voucher. The guarantee worked so

effectively that the airline later reduced the delivery window to 20 minutes. Alaska

management confessed they didn’t want to simply start adding a fee for checked

baggage. Rather, they sought to change the dynamic by reinventing baggage as a

standalone service backed by a guarantee. This concept has been lacking for the

airline industry in its development of assigned seating fees.

Alaska Air Group Reports First Quarter Results press release dated 23 April 2009.

Delta Air Lines later matched the offer, and

this was likely caused by the competitiveness

of the Seattle hub it shares with Alaska. It’s

an enduring example of airlines using a

portion of newfound revenue gains to

measurably improve a service to customers.

With this guarantee, these two traditional

airlines also found a method to distinguish

their airlines from low cost competitors.

Assigned seat fees are now a billion-dollar

component of the ancillary revenue revolution.

Consumers have come to know these are

consistent with the a la carte methods used by

LCCs. Global network carriers rapidly copied

and embraced these fees. Likewise, basic

economy fares provide more evidence of the

competitive struggle faced by traditional

airlines. This moment in time represents a

good opportunity for traditional airlines to

assess whether their basic economy fares are

consistent with what their brands mean to

consumers. For all airlines, the opportunity

always exists to continue the endless search to

improve customer value. The exceptionally attractive margins provided by assigned

seating makes this very doable. The happy outcome for airlines pursuing this

strategy is the double benefit of satisfied customers and a stronger brand distinction.

Assigned Seating: How This Business Can Be Improved

 Encourage purchase with miles/points: Allow your frequent flyer program

to do its magic by integrating assigned seats as a bonus offer.

 Create a product: Guarantee travelers will receive their assigned seat or a

truly equivalent replacement. If not, a refund is automatically issued and

bonus miles/points or a travel voucher is issued.

 Accommodate families: Guarantee that an adult and child will receive no-

fee assigned seats in the booking path.

 Strive for effective but simple seat maps: Marking each seat with a price

implies value. But give the consumer a nudge with graphics which quickly

describe the benefits of preferred and exit row seats.

 Reduce and simplify rules: It’s just a simple seat assignment, not a major

life event for the consumer. Making assigned seats refundable will greatly

decrease complexity.

Alaska had an idea that was perfect in

every way. Shown here is the advertising

the airline placed at its baggage belts.