I’ve been following the ancillary revenue revolution since 2006. A report I wrote that year offered a first definition that has become the industry standard: “Revenues beyond the sale of tickets that are generated by direct sales to passengers, or indirectly as a part of the travel experience.” That definition is as valid today as ever.
Though the definition has not changed, the scale certainly has. Ancillary revenue has grown from a €1.7 billion business in 2007 to more than €15 billion in 2010. And these numbers only represent the revenue actually disclosed by 47 airlines, billions more likely lie within the revenue statements of dozens of other carriers.
Difficult airline economics are driving this activity. Carriers can boost revenue through a la carte fees to balance damage brought by recession, new competitors, traveler demand for low fares – due to the culture prompted by low-cost airlines – and rising oil prices. Today, Ancillary revenue has grown well beyond its low-cost airline beginnings and is practiced around the globe.
While ancillary revenue can help compensate cuts in the base fare, it has evolved to offer new services to travelers that were not traditionally included in the ticket price. In the words of an early a la carte airline pioneer back in 1981, “You pay only for baggage you want to check, drinks you want to drink, and the snacks you want to snack”. It’s a proposition that is difficult to change, even 30 years later.
For further information please see the press release announcing the IdeaWorks-Amadeus ancillary revenue report here.