No, it’s not you imagination. Airline fees have been going up consistently for a while and are now a whopping 15x what they were in 2007. A recent study by IdeaWorks revelead a 21% increase in ancillary revenue in 2014, to a total of $ 38.1 billion. Ancillary revenue is basically any revenue beyond the sale of tickets. These 10 airlines are the winners, or losers, depending on how you look at it, when it comes to ancillary revenue.
- United – $ 5.7 bn
- US Airways – $ 4.7 bn
- Delta – $ 3.2 bn
- Air France/KLM – $ 2 bn
- Ryanair – $ 1.9 bn
- Southwest – $ 1.8 bn
- Lufthansa – $ 1.6 bn
- easyJet – $ 1.4 bn
- Qantas Airways – $ 1.3 bn
- Alaska Air – $ 1 bn
This trend keeps growing as airlines find new innovative ways to increase ancillary revenue for each passenger. In 2013, airlines were receiving $ 16 in ancillary revenue per passenger but this increased to an average of $ 17.5 in 2014. For a better idea of how airlines might be collecting these fees, IdeaWorks came up with the typical ancillary revenue profile found below.
““Ancillary revenue is an increasingly important indicator of commercial success, and a major contributor to the bottom line of airlines across the globe,” says Michael Cunningham, Chief Commercial Officer at CarTrawler who funded the IdeaWorks study. “The secret to unlocking this revenue stream can be found in the data that customers generate with every transaction. It is no longer just the preserve of low cost carriers – it is something from which all airlines are benefiting. The question is not who is doing it, it’s how well it is being done,” Cunningham adds.
Major legacy airlines have indeed increasingly followed in the footsteps of airlines such as Ryanair, who was a pioneer when it came to focusing on ancillary revenue. U.S. airlines, who have been very profitable recently, dominate the top of the list with 56% of total ancillary revenues in the industry, compared to a 29% European share and a 14% Asian share. United tops the list with $ 5.7 in ancillary fees but Spirit tops the chart when it comes to ancillary revenue as a percentage of total revenue. Spirit’s customers are paying a whopping 40% of the total cost in fees, but the other 60% for the airfare. The following list shows the top 10 airlines that have the highest ratio of ancillary revenue to total revenue.
- Spirit – 38,7%
- Wizz Air – 33,7%
- Allegiant – 32,4%
- Jet2.com – 28,5%
- Ryanair – 24,6%
- Tigerair – 21,8%
- Jetstar – 20,8%
- Flybe – 20,7%
- AirAsia X – 20%
- Volaris – 19,5%
So what does this mean for the consumer? It can certainly expect this trend to continue as the larger airlines keep trying to catch up with the low-cost carriers. Consumers can also expect the cost of traveling to stay high, despite lower fuel prices. However, IdeaWorks predicts that low-cost airlines will soon hit a ceiling and do not expect the ancillary revenue to rise far above 40% of total revenue.
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