Global airline ancillary revenue has grown by leaps and bounds, from just US$2.45 billion in 2007 to US$31.5 billion for 2013, an increase of 1,200% since the first such survey in 2007 as revealed the annual CarTrawler survey.
Soaring ancillary revenue for airlines in 2013
Analysis from IdeaWorksCompany, sponsored by CarTrawler, finds the top airline generated US$55.61 per passenger, way above the US$14.36 back in 2007.
IdeaWorksCompany researched the financial filings made by 114 airlines all over the world. Of this number, 59 disclose ancillary revenue activity to reveal that ancillary revenue reported by airlines reached US$16 per passenger in 2013, easily surpassing global figures for profit per passenger.
This latest report describes research highlights and a top 10 list of best performing carriers in three categories.
Tony Tyler, director general and CEO of IATA, stated 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.
Ancillary revenue, consisting of ala carte charges, commissions on travel-oriented services, and the sale of frequent flier points, now provides the power to allow airlines to be profitable. The average ancillary revenue per passenger for the 59 airlines disclosing results for 2013 was US$16.
The high margins associated with checked bags and loyalty points easily ensure this amount provides profits beyond the US$6 threshold predicted by IATA. Among the 59 disclosing carriers, 44 achieved ancillary revenue above US$6, ranging from China Eastern at US$6.43 to Jet2.com at US$55.61 per passenger.
The record number of airlines included in the 2013 review testifies to the importance ancillary revenue plays in the health of the global airline industry.
“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, said airlines all over the world are shifting their focus from being a purely aviation-based service to becoming multi-product travel retailer
“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,” he added.
This year’s CarTrawler Review of Ancillary Revenue Results look back at the beginnings of this still-youthful method of boosting revenue. IdeaWorksCompany first tracked ancillary revenue activity seven years ago for 2007 before global airlines started charging extra for checked bags, early boarding, and extra leg room seating. Total annual ancillary revenue of just US$71 million placed Alitalia in the top 10 ranking for 2007. Today, the #10 slot is held by US Airways at US$1.1 billion.
As a group, the 2007 top 10 carriers generated total ancillary revenue of nearly US$2.1 billion. Seven years later, some of the original airlines remain on the top 10 list. But the total revenue volume for the top 10 has undergone drastic change by surging to US$20.4 billion, some having grown through mergers. The primary reason for the bigger numbers is the fact that ancillary revenue has become so commonplace in today’s airline industry.
Read the full report here.
• Featured image credit (airline’s wing): IdeaWorksCompany
