Ancillary revenues keep airlines profitable
Ancillary revenues – like add-on baggage charges, food and drink, and the sale of frequent flier points – is driving airline revenues like never before.
The annual CarTrawler survey of global airline ancillary revenue shows growth to $31.5 billion for 2013, an increase of 1,200% since the first such survey in 2007.
The research, carried out by IdeaWorksCompany, looked at the financial filings made by 114 airlines, 59 of which disclose ancillary revenue activity.
Ancillary revenue reported by airlines reached $16 per passenger in 2013, easily surpassing global figures for profit per passenger.
Ancillary revenue now provides the power to allow airlines to be profitable, said the report.
"Airlines the world over share a common evolutionary pattern; the shift in focus from being a purely aviation based service to becoming multi-product travel retailers," says Michael Cunningham, CarTrawler chief commercial officer.
"The shop window for travel is no longer static. It follows the customer across more devices and locations than ever before.
"The opportunity for airlines is to continue to evolve their ancillary strategy so they take full advantage of the new technology and retailing practices that will enable them to proactively service this growing customer appetite for goods and services that previously may not have been considered core to their business."
Tony Tyler, director general and CEO of IATA, said at a recent conference the world’s airline industry hopes to achieve a 2.4% average net margin for 2014, which is less than $6 per passenger.’¨
But among the 59 disclosing carriers, 44 achieved ancillary revenue above $6, ranging from China Eastern at $6.43 to Jet2.com at $55.61 per passenger.
Bev
Editor in chief Bev Fearis has been a travel journalist for 25 years. She started her career at Travel Weekly, where she became deputy news editor, before joining Business Traveller as deputy editor and launching the magazine’s website. She has also written travel features, news and expert comment for the Guardian, Observer, Times, Telegraph, Boundless and other consumer titles and was named one of the top 50 UK travel journalists by the Press Gazette.
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