Airline ancillaries on the rise

Travel News 29 Sep 2016

According to an article on Business Travel News, airlines collected $40.5 billion in ancillary revenue globally in 2015, accounting for 8.7 percent of their total sales, according to the CarTrawler Yearbook of Ancillary Revenue, published by IdeaWorksCompany.

To produce the report, CarTrawler scoured financial reports and data from 67 airlines that report ancillary revenue. That revenue includes fees for checked bags, amenities and special privileges, as well as frequent-flyer program sales and commissions from sales of non-airline travel services. This year, the report for the first time included services and amenities sold a la carte through global distribution systems.

United Airlines was the only legacy U.S. carrier in the top 10 for per passenger revenue. The top 10 also included Korean Air with $38.35 and Virgin Atlantic with $36.08. Ancillaries for Qantas and Virgin Atlantic came largely from their frequent-flyer programs.

The report illustrated the past decade's explosion in ancillary revenue. On a per-passenger basis, none of the top 10 in 2008 would have made the top 10 in 2015. In 2008, American Airlines was the top ancillary earner with $2.2 billion. The threshold for the top 10 was less than $250 million, compared with $1 billion last year.

That trajectory is set to continue, as revenue from ancillaries provides a "safety net" for airlines in times of high competition and low fares, according to the report. "Some may mourn the passing of simpler times when a long-haul ticket price included the promise of a checked bag, seat assignment and an oftentimes inedible meal, but consumer behavior supports the popularity of seat-only tickets that deliver a lower price," the report said. "The potential for adding 10 percent or even 43 percent more revenue to the bottom line ensures ancillary revenue will continue to grow."