Ancillary revenue soars worldwide, held up by a la carte activity

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Airline ancillary revenue is projected to increase 22 per cent to hit US$82.2 billion worldwide this year, US$57 billion of which comes from a la carte fee activity, according to research by IdeaWorks Company and CarTrawler.

This represents a 264 per cent increase from the 2010 figure of US$22.6 billion, the first annual ancillary revenue estimate by the two companies.

With few exceptions, the research shows airlines all over the world are moving to a la carte methods to provide more choices for consumers while boosting ancillary revenue.

A joint statement by IdeaWorks and CarTrawler stated that the pace of ancillary revenue activity quickens when major alliance members, such as Air France/KLM, American, Lufthansa, Qantas, and United embrace ancillary revenue methods. The changes have a ripple effect through the oneworld, SkyTeam, and Star Alliances which encourage member airlines to adopt the same methods to smooth commercial and operational connections.

This partially explains why the largest share of the 2017 increase came from the world’s traditional airlines at US$6.1 billion, or 41 per cent of the total increase.

For example, throughout North America, Europe, and Australasia, basic economy fares are now prevalent for short and mediumhaul travel. Airlines using this a la carte approach usually find more than 50 per cent of passengers select higher-priced bundled options. When this activity is matched by an ever-growing pool of airlines, the result is billions more ancillary revenue.

IdeaWorks and CarTrawler further stated that “it’s reasonable to suggest ancillary revenue will someday exceed the airline industry’s annual fuel bill”.

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