Airline ancillary revenues worth US$22bn

Airlines are finding an increasing number of things to charge for
Airlines are finding an increasing number of things to charge for

Global ancillary revenues generated by airlines totalled EUR18.23 billion (US$22.15bn) last year.

According to the results of the latest Amadeus Review of Ancillary Revenue Results, produced by consultancy firm IdeaWorksCompany, airlines’ ancillary revenues have now surged 66% in the past two years, from the 2009 result of EUR10.95bn.

US airlines are still leading the way, with six of the top 10 ancillary revenue generators based in the States. The top three – United Continental (EUR4.16bn), Delta Air Lines (EUR2.04bn) and American Airlines (EUR1.70bn) accounted for more than 43% of all airline ancillary revenue generated worldwide last year.

Amadeus noted that American and Delta achieve strong revenues through a range of activities, including checked baggage and the sale of frequent flier miles to bank partners. Qantas (4th, EUR1.14bn) is the only Asia Pacific-based airline in the top 10, but Amadeus remarked that this is largely due to the strength of its frequent flier programme.

Southwest Airlines (5th, EUR949.9m) stormed into the top 10 in 2011, due in part to its EarlyBird service, which provides early boarding for a US$10 fee. This generated US$142m for the airline last year. 

United generated EUR4bn in ancillary revenues in 2011
United generated EUR4bn in ancillary revenues in 2011

“We’ve seen the industry move swiftly to grasp some clear opportunities for providing ancillary services, such as baggage fees, extra legroom and onboard catering. The next wave of innovation in ancillary services will come from those airlines which develop new products that support their brand positioning and deliver value to the traveller by meeting their individual needs and preferences,” said Holger Taubmann, Senior Vice President of Distribution at Amadeus.

While the majority of ancillary revenues are generated by larger, full-service airlines, they are more important to low-cost carriers. The 10 airlines that generated the most ancillary revenue as a percentage of their total turnover were all LCCS, led by Spirit (33.2%), (27.1%) and Allegiant (27.0%). Asia’s Tiger Airways (6th, 19.1%), AirAsia (7th, 17.8%), AirAsia X (9th, 16.5%) and Jetstar (10th, 15.3%) were further back.

“Consumers choosing a low-fare airline can pay a small fare for basic transportation, or opt for everything on the a la carte menu and pay a price comparable to those charged by a global network competitor such as American Airlines or British Airways. Some even promote a EUR1 fee to have a flight itinerary sent to a mobile phone. With 15-33% of revenue produced through these methods, ancillary revenue success is a matter of financial survival for these low fare airlines,” the report stated.
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