Τελευταία νέα
HomeRegional NewsAfricaRapid spread of the ancillary services phenomenon
Airline ancillary revenue to soar to 18.4b. euros worldwide

Rapid spread of the ancillary services phenomenon

IdeaWorks and Amadeus, announce the preliminary results of the Amadeus Guide to Ancillary Revenue by IdeaWorks 2010. Philippe Chereque, Executive Vice President Commercial, Amadeus, the sponsor of this study commented: “18.4 billion euros, while significant, is still less than 5% of the operating revenue generated by the airlines in this study. At Amadeus, we expect to see ancillary revenues grow significantly as airlines are only now beginning use the high-yield travel agency channel to sell their range of ancillary services. Amadeus is talking to a number of airlines to help them with this…

IdeaWorks and Amadeus, announce the preliminary results of the Amadeus Guide to Ancillary Revenue by IdeaWorks 2010.

Philippe Chereque, Executive Vice President Commercial, Amadeus, the sponsor of this study commented: “18.4 billion euros, while significant, is still less than 5% of the operating revenue generated by the airlines in this study. At Amadeus, we expect to see ancillary revenues grow significantly as airlines are only now beginning use the high-yield travel agency channel to sell their range of ancillary services. Amadeus is talking to a number of airlines to help them with this. If all airlines catch up with the ‘Ancillary Revenue Champs’ identified in this report, ancillary revenues could increase by more than 300% to as much as 74.8 billion euros.”

Evidence of the rapid spread of the ancillary services phenomenon can be found throughout the new 2010 Amadeus Guide to Ancillary Revenue by IdeaWorks, available October 13 from IdeaWorks Company. Ancillary revenue and a la carte pricing today are often referenced in financial reports, investor presentations, and earnings calls; but no indicator looms larger than total ancillary revenue activity estimated for 2010: 18.4 billion euros.

Mr Chereque cautioned:  “As ancillary services represent an ever larger proportion of revenue, and add more and more layers of complexity to the airline offer, it is vital that airlines consider the end-to-end process of selling, fulfilling and delivering ancillary services. This is difficult even when things are going smoothly. But when a flight is cancelled due to bad weather, an airline has to reaccommodate a plane full of passengers, each with their own combination of assigned seats, in-flight entertainment, additional bags and preferred meals. Successfully translating ancillary revenue into additional profit rests on an airline’s ability to manage such situations efficiently.”

“Looking to the future, we expect the mobile channel to emerge as a significant platform for ancillary services sales as it offers the ability for airlines and travel agencies to push context-sensitive offers to clients. Travellers arriving early at the airport might be offered an hour in the Premium Lounge, for example. For a price, of course…”

All types of airlines, from major network carriers to small regional feeders, seek the profits enabled by ancillary revenue and a la carte fees.  Earlier this year IdeaWorks tabulated the ancillary revenue disclosures made by 46 airlines. The results reveal natural groupings based upon a carrier’s ability to generate ancillary revenue. The “percent of revenue” results associated with four defined categories were then applied to a worldwide list of operating revenue disclosed by 150 airlines. The following describes the four categories:
–  Ancillary Revenue Champs. These carriers generate the highest activity as a percent of operating revenue. The average assigned to this group was 19.4 percent.  Examples include Allegiant, Flybe, Ryanair, Spirit, and Tiger Airways.
–  Major US Airlines. US-based majors generate strong ancillary revenue through a combination of frequent flier revenue and baggage fees.  The average assigned to this group was 7.2 percent. Examples include American, Delta, and United.
– Low Cost Carriers. LCCs throughout the world typically rely upon a mix of a la carte fees to generate good levels of ancillary revenue. The average assigned to this group was 5.4 percent. Examples include AirArabia, Air Berlin, Spicejet, Spring Airlines, Virgin America, and Westjet.
– Traditional Airlines.  This category represents a catch-all for the largest number of carriers.  Ancillary revenue activity may consist of fees associated with excess or heavy bags and limited partner activity for a frequent flier program. The average assigned to this group was 2.9 percent. Examples include Asiana, British Airways, Egyptair, LAN, Scandinavian, and Silkair.

The numbers for 2011 will certainly increase. Each airline category will likely achieve a higher percentage as a la carte pricing methods are perfected and become more pervasive.  For example, coordination among alliance partners has compelled Europe-based airlines to adopt baggage charges on codeshare transatlantic routes. The Guide describes how traditional and low cost carriers are boldly experimenting with new a la carte initiatives.

The following are examples of the information and best practices described in the Guide:
– AirAsia X disclosed ancillary revenue in excess of €17 per passenger with amazing online a la carte booking activity; more than 80 percent of passengers pre-paid baggage fees
– Continental implemented flexible pricing for extra legroom seating; higher demand increases the price offered to consumers.
– easyJet offers unlimited early boarding benefits for 12 months through its easyJet Plus membership card.
– KLM is testing premium pre-order a la carte meal options for 10 euros on 8 long haul routes from Amsterdam such as Calgary, Dubai, and Sao Paulo.
– Ryanair now sells carry-on compliant luggage from Samsonite at its website.
– Vueling Airlines uses frequent flier bonus points to encourage consumers to book hotel accommodations at its website.

Co-Founder & Managing Director - Travel Media Applications | Website | + Posts

Theodore is the Co-Founder and Managing Editor of TravelDailyNews Media Network; his responsibilities include business development and planning for TravelDailyNews long-term opportunities.

27/01/2023
26/01/2023
25/01/2023
24/01/2023
23/01/2023