Airlines Earn $157b In Fees But Passengers Pay 40% Less To Fly

BURBANK, CALIFORNIA – JULY 25: Travelers disembark from a Delta Air Lines flight with Southwest Airlines planes in the background at Hollywood Burbank Airport on July 25, 2024 in Burbank, California. Southwest Airlines has announced it will discontinue its 50 year policy of open seating, instead opting for assigned seating that will include premium seating in an effort to broaden its appeal. (Photo by Mario Tama/Getty Images)

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Airlines worldwide are projected to earn an unprecedented $157 billion in ancillary revenue in 2025, according to a new analysis from IdeaWorksCompany, a firm that specializes in airline retail and revenue strategies. The figure marks a sharp increase from $148.4 billion in 2024 and is more than double the $67.4 billion recorded in 2016. The results reflect how effective “unbundled” pricing has become for airlines. Despite the extra fees, passengers are saving by buying “unbundled” tickets with the total cost of a flight dropping by up to 40% compared to 2016.

Ancillary revenue—which includes baggage fees, seat selection, onboard sales, and commissions from hotels, car rentals, and co-branded credit cards—will represent 15.7% of total airline revenue in 2025, up from just 9.1% in 2016, the consultancy said. Among individual airlines, the revenue share ranges from 3.2% for full-service carriers at the low end to 62% for ultra-low-cost airlines.

IdeaWorks attributes the surge to steady passenger growth and the global expansion of basic economy fare products.

Basic Economy Has Redefined Airline Pricing Worldwide

First introduced by low-cost carriers, basic economy began as a no-frills fare aimed at price-sensitive travelers. The model allowed passengers to buy a low base fare and then add whatever comfort or convenience features they wanted, including services that were traditionally included in the price of the ticket like checked baggage, extra-legroom seating, or meals. In Basic Economy, passengers would receive these as paid à la carte options.

Major U.S. network carriers adopted the model, introducing tiered air fares that ranged from full-service to the right to sit on the aircraft, with everything else costing extra. This approach to low-cost airline competition has proven more effective than major airlines’ earlier attempts to launch their own budget brands. Seeing strong results in the U.S., airlines across Europe, Asia, Latin America, and the Middle East soon followed suit.

The IdeaWorks analysis shows that à la carte fees remain the single largest source of ancillary revenue, even as revenue from loyalty program credit cards also grows. À la carte revenue per passenger has steadily risen from $15.92 in 2016 to an estimated $21.21 in 2025 (adjusted for inflation).

Air Travel Is Now Cheaper for Consumers—Even With More Fees

Despite the increased contribution of fees for ‘extras’ to airline revenue, consumers are paying significantly less overall for air travel, IdeaWorks finds.During the same period, the global average one-way base fare has dropped sharply.

In 2016, the average one-way global airfare was $294, plus $16 in ancillary charges, for a total of $310 (all figures inflation-adjusted to 2025 dollars). For 2025, IATA estimates the average base fare at $166.38, while IdeaWorks forecasts $21.21 in optional extras, bringing the total to around $187.59.

This represents a 40% decrease in the total cost of flying over nine years, driven by intense competition and airlines unbundling services.

“While about 45% of travelers purchase only the base fare, more than 50% opt for add-ons such as baggage, assigned seating, and inflight services,” said Jay Sorensen, President of IdeaWorksCompany and author of the analysis. “This dynamic allows airlines to sustain lower base fares while providing travelers with greater choice and flexibility, producing a win for consumers, and a win for airlines.”

The Fee Revenue Model Is Now Embedded In The Industry

With ancillary revenue approaching one-sixth of global airline income in 2025, the practice is now an essential structural component of the airline industry. Airlines have fought back against proposed regulations that would reverse this progress.

In October, The Fifth U.S. Circuit Court of Appeals in New Orleans said all 17 active judges would reconsider arguments in the dispute between the U.S. Department of Transportation and Airlines for America over a “junk fee” rule proposed under the Biden Administration. The trade group represents major carriers including American, Delta, and United.

The USDOT’s Final Rule to Protect Consumers from Surprise Airline Junk Fees required airlines to disclose more details on their ancillary fees upfront.

“Airlines should compete with one another to secure passengers’ business—not to see who can charge the most in surprise fees,” said then U.S. Transportation Secretary Pete Buttigieg. “DOT’s new rule will save passengers over half a billion dollars a year in unnecessary or unexpected fees by holding airlines accountable for being transparent with their customers.”

A4A challenged the regulation, claiming that the USDOT exceeded its statutory authority. The group contested the broad scope of the rule, arguing that 49 U.S.C. § 41712 only permits the department to investigate unfair or deceptive practices on an individual, case-by-case basis, but its authority did not extend to broad, prescriptive rulemaking. A4A has previously stated that its member airlines meet or exceed DOT requirements for consumer protection and transparency.

An earlier panel’s decision partially upheld the USDOT’s authority to implement the rule, but found some procedural flaws.

In its appeal for a rehearing, A4A also claimed the USDOT relied on inadequate economic studies when drafting the rule. Airlines cautioned that the regulation would significantly increase passengers’ costs to fly.

The results of IdeaWorks’ recent study, while highlighting how much airlines have gained from the unbundled fare model, also appears to support airline arguments that à la carte pricing makes flying more affordable. Passengers who fly with cheaper unbundled tickets can select the product and service features they value most.