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How alliances are pushing ancillary revenue

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A la carte choices help drive airlines’ ancillary earnings

Airlines’ ancillary revenue is forecast to soar 22% to reach $82.2 billion (€69.3 billion) worldwide this year, US$57 billion of which comes from a la carte fees, according to research by IdeaWorks Company and CarTrawler.

This represents a 264% increase from the 2010 figure of US$22.6 billion, which was the two companies’ first annual estimate of ancillary revenue.

The research shows that airlines all over the world, with just a few exceptions, are moving to a la carte methods to provide more choices for consumers – while boosting ancillary sums.

Having to smooth connections
The pace of ancillary revenue activity quickens when major alliance members such as Air France-KLM, American, Lufthansa, Qantas and United embrace these methods, a joint statement by IdeaWorks and CarTrawler says.

The changes then have a ripple effect through the Star, SkyTeam and oneworld alliances, which encourage member airlines to adopt the same methods in order to smooth commercial and operational connections.

This helps explain why the biggest share of the increase this year came from the world’s traditional airlines, at $6.1 billion, or 41% of the total increase.

Basic economy fares are now prevalent for short- and medium-haul travel throughout Europe, North America and Australasia. Airlines using the a la carte approach tend to find that more than 50% of passengers select higher priced bundled options.

“It’s reasonable to suggest ancillary revenue will someday exceed the airline industry’s annual fuel bill,” says IdeaWorks and CarTrawler.

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