Dublin, Ireland, 13 July, 2015: For the eighth consecutive year, 63 airlines tracked in a CarTrawler-sponsored study reported substantial increases in revenue from retail activities and the sale of a la carte services and frequent flier miles.
- Ancillary revenue per passenger is $17.49, 8.5% more than the 2013 result.
- Activity among low cost carriers (LCCs) jumped more than $2.9 billion, or 32.8%.
- Ancillary revenue among US major airlines increased $2.6 billion, or 18.7%.
The IdeaWorksCompany study focused on 63 airlines which disclosed qualifying revenue activity, to reveal that ancillary revenue reported by these airlines was $38.1 billion for 2014.
“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. “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.”
The top 10 carriers in the list achieved a huge increase of nearly $4.6 billion in a single year, which represents revenue growth in excess of 22.5%. Revenues and passenger traffic for these airlines increased due to improving economies and these are leading factors for annual ancillary revenue gains. These airlines also had individual initiatives that boosted results. The big ancillary revenue numbers posted by carriers such as Air France/KLM, American, and United, include fees charged for baggage and extra leg room seating. But a big portion of the ancillary revenue total is generated by the sale of miles or points to banks that issue co-branded credit cards.
When ancillary revenue is measured as a percentage of revenue, low cost carriers top the chart. Since 2011 the top slot has been held by US-based Spirit Airlines, which is conspicuous among consumers and regulators for its aggressive pursuit of a la carte sales. But other LCCs, such as Ryanair and easyJet, have broadened their strategy to seek higher-revenue business travelers, in response to slower ancillary sales growth among their traditional leisure travelers. Ryanair has made significant changes to its business plan by adding more frequencies on select routes, creating a bundled fare with business-friendly features, and even targeting commercial travelers with an advertising campaign.
For many carriers the majority of miles and points are now accrued through partners such as co-branded credit cards, hotels, car rental companies, and retailers. Banks have contracts with airlines and pay them for these cardholder benefits, in addition to the miles and points purchased as a result of charge activity. But as the overall numbers show, the ancillary revenue boom continues unabated.
For more information, and to read the full report, please follow this link.
CarTrawler connects business and leisure customers and online travel retailers with more road and rail transport solutions than they will find anywhere else. Over 70 international airlines and 2,000 travel retailers around the world trust CarTrawler to provide their customers with real-time access to more than 1,500 leading and independent car rental agents, coach transfers, rail networks and chauffeur drive services at 30,000 locations in 174 countries. CarTrawler also owns and operates the Cabforce, Holiday Autos and Argus Car Hire brands. The company headquarters and Customer Centre of Excellence are located in Dublin, Ireland, with additional offices in Boston, London and Helsinki. CarTrawler is private equity backed by BC Partners and Insight Venture Partners. For further information, please visit www.cartrawler.com.
IdeaWorksCompany was founded in 1996 as a consulting organization building brands through innovation in product, partnership and marketing, and building profits through financial improvement and restructuring. Its international client list includes airlines and other travel industry firms in Asia, Europe, the Middle East, and the Americas. IdeaWorksCompany specialises in ancillary revenue improvement, brand development, customer research, competitive analysis, frequent flier programs, and on-site executive workshops. Learn more at IdeaWorksCompany.com.