Interesting data from a joint study by Amadeus and IdeaWorks outlining the top earners in the airline industry when it comes to ancillary revenue.
The project examined the disclosed financial performance of 96 airlines around the world, including low cost and other scheduled carriers, to produce detailed information on which airline is making the most from revenues gained from ancillary products.
Amadeus says the estimates include revenue from a la carte features such as baggage fees and food sold onboard aircraft, commissions from the sale of hotel accommodations, car rentals, and travel insurance at airline websites, and partner revenue generated by frequent flier programs.
The total amount of ancillary revenue for the 96 airlines over the course of 2009 was Euro 11 billion, up from Euro 7.68 billion in 2008, the study found.
Leading the way in terms of total ancillary revenue for 2009 is United Airlines with Euro 1.5 billion, an increase of Euro 330 million on the previous year.
Top 10 Airlines – total ancillary revenue:
| Rank | Total ancillary revenue (Euro) | Airline |
|---|---|---|
| 1 | 1,527,310,000 | United |
| 2 | 1,507,750,000 | American |
| 3 | 1,117,120,500 | Delta |
| 4 | 782,903,000 | Qantas |
| 5 | 663,600,000 | Ryanair |
| 6 | 608,796,693 | EasyJet |
| 7 | 540,589,693 | US Airways |
| 8 | 534,143,000 | Air Canada |
| 9 | 368,869,000 | Alaska Airlines |
| 10 | 356,742,400 | TAM Airlines |
Top 10 Airlines – ancillary revenue as % of total revenue:
| Rank | Percentage of total | Airline |
|---|---|---|
| 1 | 29.2% | Allegiant |
| 2 | 23.9% | Spirit Airlines |
| 3 | 22.2% | Ryanair |
| 4 | 19.4% | EasyJet |
| 5 | 19.4% | Tiger Airways |
| 6 | 18.1% | Jet2.com |
| 7 | 14.4% | Aer Lingus |
| 8 | 13.3% | Alaska Airlines |
| 9 | 13.2% | FlyBe |
| 10 | 13.1% | AirAsia |
Top 10 Airlines – ancillary revenue per passenger:
| Rank | Ancillary revenue per passenger (Euro) | Airline |
|---|---|---|
| 1 | 24.89 | Allegiant |
| 2 | 22.51 | Jet2.com |
| 3 | 22.35 | Spirit Airlines |
| 4 | 20.37 | Qantas |
| 5 | 18.76 | United Airlines |
| 6 | 17.23 | Air Canada |
| 7 | 16.72 | Aer Lingus |
| 8 | 16.47 | Alaska Airlines |
| 9 | 14.43 | American Airlines |
| 10 | 13.47 | EasyJet |
NB: Amadeus says the estimates include revenue from a la carte features such as baggage fees and food sold onboard aircraft, commissions from the sale of hotel accommodations, car rentals, and travel insurance at airline websites, and partner revenue generated by frequent flier programs.
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The question at the Ancillary Track at Eye For Travel in London last June was: “what is the definition of ancillary?”
It should be additional services or products, but many low cost airlines are shifting lowering ticket prices and make this up by what they call ancillaries like charging per suitcase, but in fact are not ancillaries.
I wonder if these studies took that into account.
@wouter:
“These estimates include revenue from a la carte features such as baggage fees and food sold onboard aircraft, commissions from the sale of hotel accommodations, car rentals, and travel insurance at airline websites, and partner revenue generated by frequent flier programs.”
Three things:
I´m still impressed by Ryanair, who I thought would be leading the “ancillary revenue as % of total revenue” category.
Airline bosses around the globe must be sleepless about their business model.
I also wonder how long Southwest will be able to stand the temptation of going into the unbundling game.
Third. Allegiant my gosh! How in the world do they do it?
Being in the industry for +25 years I must admit I´m embarrased that I have missed their success on ancillaries.
Anyway I found this piece about the anatomy of “Allegiants ancillaries”:
http://crankyflier.com/2009/07/08/anatomy-of-allegiants-ancillary-revenue/
If LCC’s lead in ancillary revenue, when you add the fees to the base flight costs, are they really LCCs anymore?
Stephan: Southwest unbundles a bunch. The airline just doesn’t do so for first and second checked bags. There are pet fees, unaccompanied minor fees and EarlyBird Check-in etc.
As the Amadeus Guide to Ancillary Revenue (AR) suggests, ancillary revenue is an increasingly profitable area for the airline industry and has the potential to provide carriers with a significant source of additional income. However, AR programmes that focus purely on profit are in danger of alienating consumers and risk compromising long-term loyalty for short-term revenues. There is also a lack of clarity of what airlines include in their AR reporting as this tends to differ from airline to airline. If they looked solely at the AR generated from products or services sold outside of the core, would these figures be as impressive?
Airlines could develop a more customer-centric and sustainable growth strategy that not only complements their ancillary revenue strategy but also identifies opportunities that add value to the core product and enhance the brand-customer relationship. The next generation of ancillary revenue initiatives and programmes are looking to achieve just that.
The reality behind these figures is that brands survive when their priority is to build long-term customer relationships – not short-term profits.
I think its very important to look at the type of ancillary revenue it is. Selling new services is very different than unbundling. The LCC’s seem to be doing a much better job at it than the Legacy carriers.
http://ccairways.com/blog/ancillary-revenue-new-revenue-or-new-accounting/