A new Amadeus and IdeaWorks report on airline ancillary revenue projects that it will grow to $22.6 billion in 2010, fed in part by alliance partnerships compelling some European carriers to impose bag fees.
First, the numbers.
The forecasted $22.6 billion (Euro 18.4 billion) in global airline ancillary revenue would translate into some 4.8% of airlines' $473.6 billion in global operating revenue.
A prior Amadeus-IdeaWorks report, released in July, estimated that airline ancillary revenue in 2009 was $13.5 billion (Euro 11 billion), but this previous report relied only on disclosures from 47 airlines which reported their ancillary revenue numbers.
The latest report, "2010 Amadeus Guide to Ancillary Revenue," used additional sources, including alliance websites, to forecast 2010 ancillary revenue from 150 airlines.
The report unabashedly supports airlines' drive to gain ancillary revenue and points to certain increases in 2010, noting "Our baby is growing up" and "Long live the revolution."
The report lumps airlines into categories: Ancillary Revenue Champs (Allegiant, Flybe, Spirit, Ryanair and Tiger Airways, for example); Major U.S. Airlines (American, Delta and United); Low Cost Carriers (Air Arabia, Air Berlin, SpiceJet, Spring Airlines, Virgin America and WestJet); and Traditional Airlines (Aero Mexico, Asiana, British Airways, Egyptair, Scandinavian and Silkair).
The Ancillary Revenue Champs -- or tyrants, depending on your perspective – are estimated to average getting 19.4 percent of their revenue in 2010 from ancillary fees, according to the report. The Major U.S. Airlines average 7.2%, LCCs 5.4% and Traditional Airlines 2.9%, the report estimates.
Thus, ancillary fees may be a mainstay in the U.S., but that isn't necessarily the case throughout the airline world.
The $22.6 billion mark in ancillary revenue in 2010 undoubtedly will be shattered in 2011, the report says.
"For example, coordination among alliance partners has compelled Europe-based airlines to adopt baggage charges on transatlantic routes," the report says. "Traditional airlines are boldly experimenting with new a la carte initiatives. All Nippon Airways, KLM, and United are testing the sale of upgraded meals to economy class passengers on long-haul routes."
And the report authors expect new Ancillary Revenue Champs to emerge in 2011.
"In addition, carriers may move up a category - - some low cost carriers might become better practitioners of the ancillary revenue art and upgrade to ―champ status," the report says.
However, there are some ominous signs in the ancillary revenue crush, the report warns.
"A surprising number of LCCs throughout the world continue to provide complimentary beverages or have yet to assess fees for checked baggage," the report says.
You can't always get what you want.
httpv://www.youtube.com/watch?v=wxkdmL3iMCY
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Disclosure: This report was released during the Amadeus Horizons 2010 conference in San Francisco. Amadeus paid this writer's flight and hotel expenses for the conference.