Revealed: Winners in the battle for airline ancillary revenue
Airlines raked in ancillary revenues of at least $22.6 billion in 2011, says the latest joint study by Amadeus, a global distribution system, and IdeaWorks Company, a research firm. US airlines led the world by generating about 11 percent of their income from ancillary revenue, with United and Spirit collecting the most in dollar volume.
The $22.6 billion figure for 2011 only covers ancillary revenue reported in financial filings by about 100 carriers. Amadeus estimates the actual global figure to be higher, at $32.5 billion — nearly triple the amount earned in 2009.
The project examined the disclosed financial performance of 108 airlines and the estimate includes revenue from unbundled services, such as baggage fees and food sold onboard aircraft, to new incremental income, such as ommissions from the sale of accommodation and travel insurance, plus partner revenue generated by frequent flier programs.
The airline that collected the most ancillary revenue in dollar totals was the country’s largest airline, United Continental, with $5,047,477,000 last year. It was followed by next largest airline Delta, which raked in $2,473,469,000.
The carrier the earned the most ancillary revenue as a percentage of total revenue was Spirit, with a third of its revenue coming from revenue outside of the base fare. Next up was UK carrier
Jet2.com and the U.S.’s Allegiant, tied at 27%.
Qantas was the winner if you measure ancillary revenue on a per passenger average, netting $50 a flier last year. Spirit and Jet2.com tied for second-place at $40 per passenger on average.
Airlines are increasingly innovative in their approach to ancillary revenue. During the course of its global review of ancillary revenue activities, IdeaWorksCompany uncovered some unique services. For example:
The trouble with the survey is that it doesn’t break out how much of this represents “unbundling” of existing services and how much represents actual fresh income streams for airlines.
The study does, though, point some of the most “innovative” fees:
Qantas sells its Q Bag Tag for AUD 49.95 (€39) as a permanent baggage tag with wireless RFID technology that links to a traveler’s booking and permits easy self-checking of bags on flights within Australia.
AirAsia rolled out a Red Carpet Service offering elite-style perks from a low fare airline. Starting at MYR 80 (€21), passengers can enjoy fast track security, lounge access, early boarding, and a ride to the plane in an electric cart.
KLM allows passengers to pre-order (at the time of booking) upgraded meals on intercontinental flights from Amsterdam.
Says Holger Taubmann, senior vice-president distribution of Amadeus IT Group:
Airlines have a high base of ancillary offers on their websites but only limited implementation in the hugely important travel agency channel.
The fact that 50% of airline sales are made in-directly means a huge portion of ancillary revenue isn’t being collected today that could be with a multichannel approach.
N.B. Infographic courtesy of Amadeus.
Sean O’Neill is Editor-in-Chief of Tnooz.
Before joining us, Sean was the future of travel columnist at BBC Travel, senior editor of BudgetTravel.com, and an associate editor at Kiplinger’s. He now lives in New Jersey, after having worked in London for four years. He's on Twitter and is excited for #Rio2016.