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40 CHARLES M. BYLES

in a number of ways. First, AirTran has business class seating on all aircraft and oper-
ates a hub-and-spoke system (as opposed to point-to-point). Second, it offers free digi-
tal XM Radio, a student travel program, and requires no roundtrip purchase or
minimum overnight stays. Finally, AirTran has food for sale on flights. In early 2009,
AirTran began offering Sky Bites on all flights, which are à la carte food items ranging
in price from $1 to $4 (Kraft Foods snacks such as Oreo Cakesters or Chips Ahoy!
cookies) or combination packages ranging from $4 to $6 (Kraft Foods snacks and
drinks).
One new dimension of AirTran’s business strategy is the increasing use of ancillary
revenues as a means to generate profits. These are optional fees for advance seat assignments
or call center services, in addition to fees for pets, alcoholic drinks, excess baggage, and fees
related to the transportation of unaccompanied minors.
In its 2008 Annual Report, AirTran noted significant increases in its ancillary
revenues, especially fees for the second bag ($25) and a fee for the first checked bag ($15).
According to a recent Wall Street Journal article (February 9, 2009), AirTran collected
$77 million in ancillary revenues in 2005. That amount increased to $233 million in 2008
and is expected to grow to $300 million in 2009. A comparison of fees among AirTran and
its main competitors Delta, JetBlue, and Southwest can be seen in Exhibit 3, which appears
later in the chapter. The exhibit reveals that AirTran is more similar in its fees to the legacy
carrier Delta than to its low-cost competitors. Of these competitors, Delta clearly charges
the highest ancillary fees, followed by AirTran, JetBlue, and Southwest (which has the
lowest fees charged).
The rationale behind the use of ancillary fees is that they do not appear in most
reservation systems when consumers are shopping for fares because airlines are not
required to advertise fees that only some travelers will pay (such as fees for checked bags).
If the fees were included in the fares, customers may make different choices in booking
tickets and would shop around for airlines with lower fees. A recent Wall Street Journal
article (March 10, 2009) says by the end of 2009, consumers will be able to comparison
shop for airfares with the ancillary fees included in the price quote. Web sites such as
TripAdvisor.com and Flying.fees.com already offer a way of calculating ancillary fees.
Later in 2009, advanced technology will include fees in fare quotes from travel agents,
online vendors, and airline Web sites.
Two major airline booking companies, Sabre Holdings Corp. and Amadeus IT
Group SA, are expected to have tools available to travel agents, Web sites, and airlines
later in 2009 that will add fees into ticket prices. TripAdvisor (a company owned by
Expedia) has added to its differentiation by providing its users with a “fee estimator”
based on the services that the traveler is intending to use. As such, it provides the traveler
with a more realistic price of the price offering. The somewhat similar Flyingfees.com
does not provide ticket prices but instead has data on ancillary fees for 27 airlines includ-
ing some international carriers. When the traveler enters the airline name, a list of all
ancillary fees is presented.
Service Quality
The nationally recognized 2009 Airline Quality Rating (AQR) (for the year 2008) ranked
AirTran second in overall quality ahead of its competitors Delta (number 12), JetBlue
(number 3) and Southwest (number 6) (see Exhibit 2). The specific comments given in the
report are as follows:

AirTran Airways (FL) On-time performance remained the same in 2008 (76.8%
in 2007 compared to 76.7% in 2008). AirTran’s denied boardings performance
(0.15 per 10,000 passengers in 2007 compared to 0.34 in 2008) was worse. An
increase in customer complaint rate to 1.10 complaints per 100,000 passengers
in 2008 was higher than the 2007 rate of 0.83. The mishandled baggage rate of
4.06 per 1,000 passengers in 2007 was improved to 2.87 for 2008. This was the best
mishandled baggage rate of all airlines rated for 2008. (http://aqr.aero/aqrreports/
2009aqr.pdf)