Airlines using cost reduction measures, added fees and other tactics in effort to drive revenue Amid volatile gas prices, airlines are working to drive earnings growth through added fees and other measures, The New York Times reports.

Since the government officially deregulated the airline industry more than 20 years ago, airline companies have struggled to maintain profitability. Volatile energy prices have been the biggest single contributor to their poor financial performance over the past decade or so, but many major carriers have implemented business cost reduction measures and other initiatives aimed at bolstering profits.

While the fees airlines now charge for checked bags and in-flight beverages and snacks are a nuisance for travelers, they have largely helped fuel an uptick in profit growth over the past few years. Such campaigns have helped airlines deliver net income gains even as oil prices shot up in 2011. However, such initiatives have been so successful that airlines are now beginning to mull additional fees for services.

Airlines are aware of the substantial amount of money they have made from revenue generated by nonticket items, and they are increasingly searching for other areas where such fees can be applied to raise earnings. Carriers are unveiling a myriad of new potential revenue drivers, including the sale of branded merchandise.

Nonticket items have become one of the airlines' most successful money drivers, according to the Times. In 2011, carriers recorded more than $32.5 billion worldwide from levying such charges. That figure represents a nearly 44 percent surge from the $22.6 billion nonticket items and fees earned airlines in 2010. While cost reduction campaigns were once airlines' sole means of combating dwindling profits, fees and other initiatives are also buttressing earnings.

Carriers charge passengers assorted fees for a number of services, but their future growth is contingent on developing additional ways to drive revenue and profits, Airsavings revenue specialist Raphael Bejar said. Airlines must increasingly shift their business models, and concurrently focus on improving efficiency through strategic sourcing and supply chain management, in addition to charging for new products and services.

Airlines must "transform themselves from airline companies to retailers," Bejar said. "As long as the airline is thinking the old way, it will die. The airlines moving up and transforming themselves will succeed," he added.

Some airlines are venturing far outside the realm of traditional carriers' core businesses, with Air New Zealand recently opening its own banking segment. The company is converting certain members of its frequent-flier club into customers of its fledgling bank operations.  Some of the airline's customers will receive its own branded debit card that stores cash, accrued airline miles and foreign currency. Air New Zealand loyalty director Simon Pomeroy said the card would help drive earnings.

"It gives us the opportunity to build a larger revenue channel, the ability to make money from foreign revenue conversion," he said. "We make money off the individual as well as the collective use of the card every day. If fuel goes up we will still be making money."

Rising oil prices are among the most significant concerns looming on the minds of airlines executives across the globe. On the New York Mercantile Exchange in New York on Tuesday, oil futures for April delivery traded at approximately $106.55 per barrel, a figure that is more than 10 percent higher than at the same point the year prior.

As airlines increasingly focus their attention to driving revenue through alternative fees and nonticket items, they are helping ensure they will survive – even as some major players stand on the brink of bankruptcy.

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