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Airlines fly high on ancillary revenues

Posted on 26 Jul 2010 at 14:01 pm
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Findings from IdeaWorks and Amadeus show ithe airline industry’s ancillary revenue tidal wave continued in 2009 with more carriers disclosing millions – and billions – in ancillary receipts in financial reports.  Revenues in 2009 jumped 43% to 11 billion Euros (US$13.5 billion), reflecting new a la carte fees and commission-based services.

The full report of this activity will be available in the autumn 2010 release of the Amadeus Guide to Ancillary Revenue by IdeaWorks. Early results from an analysis of 2009 financial filings made by 96 airlines indicate ancillary revenue increased €3.32 billion from 2008 to a total of €11 billion ($13.5 billion) for 2009.

These estimates include revenue from a la carte features such as baggage fees and food sold onboard aircraft, commissions from the sale of hotel accommodation, car rentals, and travel insurance at airline websites, and partner revenue generated by frequent flier programmes.




 

Worldwide Review of Ancillary Revenue – Based on Financial Disclosures

€11 billion ($13.5 billion)

Total Annual Result – 2009

€7.68 billion ($10.25 billion)

Total Annual Result – 2008

2008 results were calculated in euros, re-stated based upon a €1.0 = $1.33 exchange rate for the period.

2009 results were calculated in euros, re-stated based upon a €1.0 = $1.23 exchange rate for the period.

IdeaWorks’ findings with regards to the current top 10 list of airlines show subtle changes from the 2008 ranking.  US-based network airlines fill the top three positions courtesy of robust partner revenue from frequent flier programmes and a stronger emphasis on baggage fees.  But revenue from this mature group has stabilised, while the revenue produced by lower-ranked carriers has jumped dramatically.  The fourth place slot is now held by Qantas at a 25% revenue premium above the same position held by Ryanair in 2008.  The annual revenue required to join the top 10 club now begins at €300 million. US Airways and Air Canada are new to the list, displacing JetBlue and Emirates.

 

Top 10 Airlines – Total Ancillary Revenue

Annual Results – 2009

Annual Results – 2008

€1,527,310,000

United

€1,650,000,000

American

€1,507,750,000

American

€1,200,000,000

United

€1,117,120,500

Delta

€1,125,000,000

Delta

€782,903,000

Qantas

€625,350,240

Ryanair

€663,600,000

Ryanair

€458,622,000

Qantas

€608,796,693

easyJet

€396,468,000

easyJet

€540,589,500

US Airways

€262,500,000

JetBlue

€534,143,000

Air Canada

€207,298,140

Emirates

€368,869,000

Alaska Airlines

€184,888,900

TAM Airlines

€356,742,400

TAM Airlines

€184,275,000

Alaska Airlines

Source:  Worldwide Review of Ancillary Revenue Statistics from the Amadeus Ancillary Revenue Guide by IdeaWorks.  Some carrier results were based upon the most recent fiscal year.

Spirit Airlines and Tiger Airways joined the “% of total revenue list” for 2009 because the carriers only recently disclosed ancillary revenue results. Spirit is a privately held carrier and disclosures are rare and Tiger made disclosures for 2009 due to its initial public offering.  Eight carriers in the 2008 list scored higher percentages for 2009.  Of the two that dropped off the list, SkyEurope ceased operations and Germanwings was folded into Lufthansa Group during 2009.   
 

Top 10 Airlines – Ancillary Revenue as a % of Total Revenue

Annual Results – 2009

Annual Results – 2008

29.2%

Allegiant

22.7%

Allegiant

23.9%

Spirit

19.3%

Ryanair

22.2%

Ryanair

15.5%

easyJet

19.4%

easyJet

14.8%

Jet2.com

19.4%

Tiger Airways

14.1%

Vueling

18.1%

Jet2.com

13.0%

Germanwings

14.4%

Aer Lingus

11.0%

Aer Lingus

13.3%

Alaska Airlines

10.3%

JetBlue

13.2%

Flybe

9.8%

Flybe

13.1%

AirAsia

9.6%

SkyEurope

Source:  Worldwide Review of Ancillary Revenue Statistics from the Amadeus Ancillary Revenue Guide by IdeaWorks.  Some carrier results were based upon the most recent fiscal year.


The carriers in this top 10 list pursue a robust ancillary revenue agenda that includes baggage fees, buy-on-board cafes, assigned seating fees, and commissions from the sale of hotel accommodations and car rentals.  Alaska is the only network airline in the list; the carrier has a less aggressive a la carte approach but benefits from powerful frequent flier and co-branded card programmes. 

Overall “per passenger” activity for 2009 clearly increased with top and bottom results better than 2008.  Allegiant continues to achieve strong growth with a nearly 25 percent increase above 2008 results.  UK-based carrier Jet2.com generated an amazing 58% increase while Qantas posted a spectacular 72% jump.  A major upset occurred with ancillary revenue champ Ryanair falling off the top 10 list and arch-rival easyJet entering the list at the number 10 slot for 2009.
 

Top 10 Airlines – Ancillary Revenue per Passenger

Annual Results – 2009

Annual Results – 2008

€24.89

Allegiant

€20.00

Allegiant

€22.51

Jet2.com

€17.14

United

€22.35

Spirit

€14.97

Aer Lingus

€20.37

Qantas

€14.75

American

€18.76

United

€14.28

Jet2.com

€17.23

Air Canada

€11.98

JetBlue

€16.72

Aer Lingus

€11.87

Qantas

€16.47

Alaska Airlines

€10.84

Ryanair

€14.43

American

€10.61

Delta

€13.47

easyJet

€10.55

Vueling

Source:  Worldwide Review of Ancillary Revenue Statistics from the Amadeus Ancillary Revenue Guide by IdeaWorks.  Some carrier results were based upon the most recent fiscal year.


By every measure the ancillary revenue movement is growing.  More airlines are switching on a la carte fees and disclosing financial activity.  Existing practitioners are boosting revenue streams by adding services, testing price limits, and becoming better marketers. 

Tags: Amadeus , IdeaWorks , ancillary services , airline revenues
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