Published on : Tuesday, February 18, 2020
The global airline industry has seen a 106 per cent increase in revenue earned from the sale of ‘a la carte’ ancillary services since 2015, rising to US$75.6 billion in 2019. Europe – commonly referred to as the ‘birthplace’ of airline a la carte revenue – continues to lead the global charts, with carriers based across the region and Russia taking in US$31.5 billion in 2019, an increase of 122 per cent, according to research by IdeaWorksCompany and CarTrawler.
However, Asia Pacific saw the biggest rise of all the regions – up 158 per cent from US$8.2 billion in 2015 to US$21.1 billion in 2019. This was followed by Africa and the Middle East, which saw an increase of 147 per cent to US$5 billion.
Latin American airlines raked in US$3.2 billion – an increase of 112 per cent – while North American carriers earned US$14.8 billion, up 38 per cent on 2015.
The research takes into account revenue made from the sale of a la carte ancillary products and services, such as premium meals and seat assignment, as well as baggage, which itself accounted for US$28.1 billion in 2018.
Aileen McCormack, chief commercial officer at CarTrawler, commented “The pace with which ancillary revenue has transformed the airline industry has been exciting to observe. It is beyond doubt now that carriers which prioritise extensive choice architecture and a superior customer experience are significantly increasing their chances of reporting healthy profit margins.
“The adoption of a sophisticated ancillary revenue strategy must now be seen as a necessary step for all airlines that want to stay relevant as we enter a new decade. We can see from our report that airlines in Europe and the Asia-Pacific regions in particular have embraced this technology with remarkable success, as they realise that owning the last mile is a key component of long-term value for the customer.”
According to the research, the prevalence of low-cost carriers in a region drives the level of ancillary revenue, as evidenced in Europe and Russia, where such airlines generate more than 27 per cent of operating revenue.
However, ancillary revenue in Canada and the US, where there is relatively lower LCC
Low-cost carrier – LCCs, also know as no-frills airlines, offer low-fare flights with reduced passenger services
penetration at 9.8 per cent, is driven by the fact that many global network carriers have introduced basic economy fares where baggage and seat assignment are not included in the ticket and must be paid for.
CarTrawler said offering such ‘unbundled’ fares allows passengers to click and choose the comfort and convenience that best meets their needs and budget, with the 106 per cent increase in revenue on ancillaries standing as “solid proof a la carte sales and ancillary revenue work for consumers and airlines.