Ancillary revenue and a la carte pricing became commonplace in travel during 2008 when major airlines throughout the world started charging fees for checked baggage, premium seating, soft drinks and more. The sickly patient known as the world’s airline industry suffered through 2008 and only survived due to dramatic schedule cutbacks, the slow reversal of fuel prices… and an “intravenous injection” of ancillary revenue…
Ancillary revenue and a la carte pricing became commonplace in travel during 2008 when major airlines throughout the world started charging fees for checked baggage, premium seating, soft drinks and more. The sickly patient known as the world’s airline industry suffered through 2008 and only survived due to dramatic schedule cutbacks, the slow reversal of fuel prices… and an “intravenous injection” of ancillary revenue.
Ancillary revenue and the magic elixir of baggage fees did not singlehandedly save the US airline industry. But it’s easy to imagine the number of airline executives who silently murmured words of thanks for the millions of dollars it delivered to bottom lines during 2008. At the same time, low cost carriers around the world have been making continuous enhancements and are generating higher levels of ancillary revenue.
The combined result of this activity is reflected in the revenue reported in The Guide to Ancillary Revenue and a la Carte Pricing by IdeaWorks. The second edition of the Guide reveals ancillary revenue for calendar year 2008 rose nearly 6 billion euros – an amazing 346 percent increase – above the worldwide results listed in the previous edition of the Guide.
IdeaWorks has followed the success of the first-ever Guide on the topic of ancillary revenue with a second edition for 2009. The 145-page Guide to Ancillary Revenue and a la Carte Pricing by IdeaWorks, solely sponsored by ezRez Software, will be available for online purchase September 8, 2009.
The Guide is the result of research, interviews and analysis conducted during 2009 on a la carte pricing, commission-based services and frequent flier activities. The Worldwide Review of Ancillary Revenue Statistics has become a highly anticipated feature of the Guide. IdeaWorks analyzed financial statements from 92 airlines to develop a picture of ancillary revenue activity by carriers worldwide. Of the 92 airlines, 35 reported revenue breakdowns identifying ancillary activities.
The current top 5 list demonstrates how much has changed since the last Guide. Legacy airlines now fill the top three positions, which once included low cost carriers Ryanair and easyJet. And the ancillary revenue produced by individual carriers, such as United and Ryanair, has increased dramatically. The top 5 club now requires far more revenue to join – in excess of €450 million. That’s more than any single carrier produced to join the prior top 5 list.
The Worldwide Review of Ancillary Revenue Statistics from this year’s Guide demonstrates the success of a la carte pricing and other activities such as frequent flier programs. While ancillary revenue as a percent of total revenue remains the best measure of overall revenue prowess, the 2009 edition reveals many surprises. For example, US-based Allegiant Air appears on the top 5 list for the first time and unseats Ryanair from the #1 position.
“At the beginning of this decade, ‘ancillary revenue’ was not a buzz word or strategy that businesses were building departments around with multi-million-dollar revenue targets, but that has changed,” said Tina Fitch, co-founder, president and CEO of ezRez Software, sponsor of The Guide to Ancillary Revenue and a la Carte Pricing by IdeaWorks. “In today’s tightened market, we’re seeing airlines and other travel companies broadening the relevance of their brands to a larger set of consumers by adding more travel offerings as means to diversify revenue and increase customer loyalty. The Guide is a must-read for any travel executive who wants to innovate, compete more effectively and boost a company’s long-term viability.”
The following is a sampling of the information and best practices described in the guide:
– United Airlines generates an average of 4.36 euros ($5.81) from checked baggage charges per US domestic passenger.
– Southwest Airlines sells about four Business Select tickets per flight on average and the program contributed approximately $75 million (56.3 million euros) in revenue in 2008.
– The Qantas Frequent Flyer program contributes whopping revenue of 11.87 euros ($15.82) per passenger – a record among the world’s airlines.
– AirAsia X, the Malaysia-based low cost airline, realizes 2.06 million euros ($2.75 million) from the sale of pre-order meals to passengers on its long haul flights such as London-Kuala Lumpur.
Tatiana is the news co-ordinator for TravelDailyNews Media Network (traveldailynews.gr, traveldailynews.com and traveldailynews.asia). Her role includes to monitor the hundrends of news sources of TravelDailyNews Media Network and skim the most important according to our strategy. She holds a Bachelor degree in Communication & Mass Media from Panteion University of Political & Social Studies of Athens and she has been editor and editor-in-chief in various economic magazines and newspapers.
