Key Takeaways
- An airline pricing model using drip pricing can boost revenue through baggage, seat selection and other fees.
- Low fares attract customers, but unexpected charges can erode trust and repeat purchases.
- Jetstar and Virgin Australia faced penalties for misleading airfare claims.
- Clear communication, transparent charges and customer value make drip pricing more sustainable.
Airlines use digital booking channels to display fares and additional charges, making price transparency important throughout the purchasing process. One common approach is drip pricing, in which additional fees are disclosed as customers progress through the booking process. Airlines use ancillary fees, including charges for baggage and seat selection, to generate revenue beyond base fares.
Is Drip Pricing a Good Airline Pricing Model?
Drip pricing can increase airline revenue, but its effectiveness depends on how airlines present prices and communicate value. It attracts customers with low advertised fares before introducing additional charges during the booking process. However, the same approach can damage customer trust when the final price differs significantly from initial expectations.
The main advantages and disadvantages are:
- Attracting customers: Low starting fares can make an airline appear more competitive when travellers compare initial prices.
- Increasing revenue: Charges for checked baggage, seat selection and other extras can raise the final amount customers pay.
- Protecting customer relationships: Unexpected fees can frustrate customers, reduce satisfaction and encourage them to seek more transparent alternatives on future purchases.
- Managing legal risk: Misleading airfare representations can result in penalties. In March 2017, the Federal Court ordered Jetstar Airways Pty Ltd to pay a $545,000 penalty and Virgin Australia Airlines Pty Ltd to pay $200,000 for breaches of Australian Consumer Law. The case concerned misleading representations about specific airfares and inadequate disclosure of applicable booking and service fees.
Drip pricing is therefore not automatically a sustainable pricing strategy. Airlines should communicate additional charges clearly, explain the value of optional extras, and ensure advertised prices do not mislead customers about the likely final cost.
The following sections examine the main advantages and disadvantages of this airline pricing model.
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Customers may view drip pricing as deceptive when additional fees make the final price significantly higher than the advertised fare.
Drip pricing can be sustainable when it reflects customer value and complies with applicable laws and regulations. At Taylor Wells, we believe that a customer-focused, value-based pricing approach can help airlines balance revenue generation with customer satisfaction and long-term profitability.
Drip Pricing in the Airline Industry: Definition and Examples
Airlines use drip pricing in online booking systems to reveal additional costs and fees progressively throughout the purchasing process. For example, an airline may advertise a low base fare and introduce additional charges during booking, resulting in a final price that is higher than customers initially expected.
The approach can encourage customers to continue with a booking after investing time in the purchase, even when later fees increase the total cost. What are the pros and cons of this strategy?
Pros of Drip Pricing as an Airline Pricing Model
1. Attracts Customers with Low Initial Fares
Travellers often compare initial fares across competing airlines before considering the final price. This is particularly relevant when customers compare advertised fares without accounting for differences in baggage allowances, seat selection and other inclusions. For example, an advertised fare that excludes optional extras may appear cheaper than a competitor’s fare that includes them. This can lead customers to perceive the first offer as better value, even when the final prices differ.
2. Allows airlines to highlight the value of their offers and add-ons
Drip pricing separates the base fare from optional extras. Customers initially see the airfare, while charges for baggage and other services may appear later in the booking process. Airlines can use this process to explain the benefits of additional services and offer customers a choice of bundles.
3. Can increase revenue
When customers add extras such as checked baggage and seat selection, the final price can be significantly higher than the advertised fare. The price gap between airlines narrows and sometimes reverses. Additional fees can make price comparisons more difficult and increase the effort required to find the best-value option. However, these fees can increase airline revenue by raising the total amount customers pay for their bookings.
What Is a Chief Revenue Officer and What Should They Know About Pricing? 🧑🏼💼 Podcast Ep. 110Cons of Drip Pricing as an Airline Pricing Model
1. May frustrate customers and make them skeptical
One of the major downsides of drip pricing is that customers feel deceived after undergoing the whole sales process. For instance, they are initially shown a price that they think should cover the entire cost of their flight. As customers progress through checkout, they may encounter additional charges for services they consider necessary. If these charges were not clearly disclosed earlier, customers may feel misled. This can diminish customer satisfaction and trust.
2. May cause sales to decline
Although drip pricing can increase revenue per booking, unexpected charges may discourage repeat purchases. Customers who feel misled may choose competitors that communicate total prices more clearly. Some customers may continue booking with the airline but become less satisfied with the purchasing experience.
3. May lead to legal complaints over misleading pricing
The Jetstar and Virgin Australia case illustrates the legal risks of misleading airfare representations and inadequate fee disclosure. So why do airlines continue to use drip pricing?
Discussion: How Does the Airline Drip Pricing Model Work?
Research on airline pricing suggests that how fares and additional fees are displayed can affect consumers’ ability to compare offers. In a 2026 US airline-market field experiment, Nicholas G. Rupp found that consumers searched for airfares and baggage fees faster and estimated itinerary costs more accurately on online travel agency websites than on airline websites.
The strategy is common across the airline industry. In ads and when customers first log in to their websites, they show the lowest fares possible, then promote seat selection and baggage as add-ons during checkout. Some airlines offer lower-priced fares that exclude checked baggage, with baggage available for an additional fee. The baggage allowance depends on the airline, route and fare type. Passengers on long-haul flights may need checked baggage, which can increase the total cost when it is not included in the base fare.
Drip pricing can reduce price transparency when additional fees are disclosed late in the booking process. Drip pricing can frustrate customers and create a misleading impression when additional charges are not disclosed clearly. Drip pricing is not automatically unlawful, but airlines must ensure their advertised prices and fee disclosures comply with applicable consumer protection laws. Under Australian Consumer Law, businesses must not mislead consumers about prices and must clearly disclose applicable fees in accordance with the relevant pricing requirements.
We believe that the airline drip pricing model becomes misleading and deceptive when airlines don’t consider add-ons when presenting the initial price.
When using drip pricing, advertisements should not give the impression that the displayed price is the final price that customers are likely to pay. Thus, airlines can continue using this pricing approach as long as they are transparent with the purchasing process.
The airline drip pricing model is fair to customers when there is proper communication.
Customers should understand the value of the step-by-step process and the offer at every stage of the buying journey. Rather than relying on tactics customers may perceive as deceptive, airlines should improve pricing communication and explain the benefits of their offers. Understanding customer value drivers can help airlines make these offers more appealing.
See how pricing breaks in practiceImplications of the Airline Drip Pricing Model
How can airlines integrate value-based approaches to drip pricing? When airlines choose to employ drip pricing, the key is to keep customers from becoming skeptical. The Australian Competition and Consumer Commission (ACCC) advises businesses to disclose applicable fees and when they apply at the start of the purchasing process. Businesses must also display the total price, including taxes and unavoidable or pre-selected fees, in accordance with Australian consumer law. Make booking pages and payment interfaces easier to navigate. Use clear pricing and service descriptions, and explain the value of optional extras. Justifying the need for a step-by-step flight package purchasing process will also enable customers to comprehend the strategy.
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Bottom Line
Drip pricing allows airlines to offer competitive base fares while charging separately for optional extras that suit different customer needs. However, the airline pricing model depends on clear fee disclosures and accurate price representations. Airlines must ensure customers can understand the total cost of a booking and avoid misleading them about what they will pay.
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