Ancillary revenue in the airline industry 2011-2022
The airline industry is more and more contingent on ancillary revenue as airlines are trying to improve their operating margins with new sources of revenue; in 2019 this value amounted to 109.5 billion U.S. dollars. However, in 2020, due to the coronavirus outbreak, ancillary revenue dropped to only 58.1 billion U.S. dollars, a 47 percent decrease compared to the previous year.
LCC business model
The increased presence of low-cost carriers such as Southwest Airlines or Ryanair is putting pressure on legacy carriers. With their a la carte look-alike approach, these airlines are generating ancillary revenue from offering flights at low average prices and charging for optional checked bags, seat preferences or on-board retail; these services that were once at the base of the product are now unbundled and generated 109.5 billion U.S. dollars in 2019.
Ancillary revenue streams
Ancillary revenue streams focus on activities and services offered by airlines at their passengers’ choice of purchase. Not taking into consideration the contribution of frequent-flyers miles, the second largest share of ancillary revenue comes from baggage fees and other a la carte services and on-board retail. The a la carte services emphasizes the comfort of passengers, with services such as premium seat allocation, sale of food and beverages during flights or early screening and boarding. Leading U.S. carriers generate their largest share of ancillary revenue from these types of activities. With its ‘’Delta Comfort +’’, Delta Air Lines provides priority boarding, more leg room, on board food and beverages and inflight entertainment. American Airlines and United offer premium economy services such as extra leg room or other highlights.
LCC business model
The increased presence of low-cost carriers such as Southwest Airlines or Ryanair is putting pressure on legacy carriers. With their a la carte look-alike approach, these airlines are generating ancillary revenue from offering flights at low average prices and charging for optional checked bags, seat preferences or on-board retail; these services that were once at the base of the product are now unbundled and generated 109.5 billion U.S. dollars in 2019.
Ancillary revenue streams
Ancillary revenue streams focus on activities and services offered by airlines at their passengers’ choice of purchase. Not taking into consideration the contribution of frequent-flyers miles, the second largest share of ancillary revenue comes from baggage fees and other a la carte services and on-board retail. The a la carte services emphasizes the comfort of passengers, with services such as premium seat allocation, sale of food and beverages during flights or early screening and boarding. Leading U.S. carriers generate their largest share of ancillary revenue from these types of activities. With its ‘’Delta Comfort +’’, Delta Air Lines provides priority boarding, more leg room, on board food and beverages and inflight entertainment. American Airlines and United offer premium economy services such as extra leg room or other highlights.
