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Top 10 things to know about ancillary revenue for airlines

Friday 11, April 2014

 

Top 10 things to know about ancillary revenue for airlines

 

The business upheaval that began in the air travel industry a decade ago, has now grown to span the globe and has brought economic vitality back to the world’s airlines, enabled the worldwide boom in low-cost travel and granted consumers the gift of choice.

 

The ancillary revenue revolution is spreading its ideas and impacting on air travel and its companion industries such as accommodation, cruising, car rental, credit cards, dining and more.

 

‘Top 10 Things You Need to Know about Ancillary Revenue’, the newest report from CarTrawler and the IdeaWorksCompany, describes the depth and breadth of this phenomenon, which has transformed the world’s largest industry. More than 1 billion people traveled internationally in 2013, according to UN statistics, and the vast majority of them have experienced the ancillary revenue revolution in one way or another. The new report identifies many key elements of this phenomenon, including:

 

The king of a la carte fees remains baggage charges, which totaled $3.5 billion in the United States in 2012. Bag fees are now spreading across the world, to Europe and beyond.

Service-specific fees, such as bag charges, inherently yield better results for consumers by turning a once-free item into a stand-alone business. Mishandled bags, for instance, once the bane of frequent travelers, have declined more than 50 percent worldwide since 2007.


High-value customers, the key demographic sought by service industries, are happy to utilize ancillary services such as premium travel (early boarding and extra legroom). 11 airlines now offer VIP airport services that may include luxury sedan rides to the plane.

 

Transparency is key to success. Not only do government regulators worldwide require disclosure and clarity with ancillary fees, the best companies realize that no amount of extra revenue can make up for the damage represented by angry consumers—a fact Ryanair is learning as it moderates its “crawl over broken glass” customer-service philosophy.
Frequent-flier programs bring in billions in extra revenue through co-branded credit cards, and also provide a welcome marketing platform for other services, such as car rental and lodging.

 

 

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