Airlines’ Ancillary Revenue Continues To Boom
With hefty fuel bills, overcapacity and macroeconomic uncertainty increasing pressure on the airline industry, it is no surprise carriers worldwide are focusing attention on driving growth in ancillary revenues to boost their coffers.
Traditional network airlines as well as low-cost carriers (LCC) are investing in digital innovation, but LCCs are taking the lead when it comes to making money from add-on options.
According to the latest report commissioned by online business-to-business travel technology platform CarTrawler published Nov. 19, ancillary revenues across the global airline industry should jump 18% year-on-year in 2019 to $109.5 billion, up from $92.9 billion.
That means ancillary revenues will account for 12.2% of global revenues in 2019, up from 10.7% in 2018 and only 4.8% in 2010 when ancillary revenues consultancy IdeaWorksCompany started making annual estimates.
In the past 10 years, the rise of LCCs—both long- and short-haul—has contributed to the strong ancillary growth. Carriers such as AirAsia, Ryanair, VivaAerobus, Jet2.com, Volaris and Pegasus Airlines were singled out as driving the increase among what the report dubs “ancillary revenue champs,” in other words the carriers that generate the highest ancillary revenues as a percentage of operating revenue.
Increasing digitization in the airline industry—both behind the scenes and when it comes to the passenger experience itself—has been driving strong ancillary revenue growth for some time.
As a stable—and growing—source of revenues, ancillaries are one that airlines facing a squeeze on ticket prices want to protect, as new entrants swell capacity and macroeconomic uncertainty makes consumers wary.
But the report warns there are risks to the seemingly unstoppable growth of ancillaries, especially if airlines promise more than they can deliver or charge more than passengers believe an add-on is worth.
This is an abbreviated version of an article by Helen Massy-Beresford that appeared in Aviation Week & Space Technology. More details of the report commissioned by CarTrawler is in the full article. Login or subscribe to access the full article here.