air passenger traffic and revenue were down more than 50% in 2020 due to the
impact of COVID-19, several carriers got a boost in revenue from their
ancillary products and services.
to the 2021 CarTrawlerYearbook of Ancillary Revenue, produced by
IdeaWorksCompany, Allegiant, Spirit, Viva Aerobus and Wizz Air all earned more
than 50% of their total revenue from ancillaries last year.
Air is in the top stop – with ancillary revenue accounting for 55.9% of its
total revenue, which the report says beats the prior record of 47.6% from Viva
Aerobus in 2018.
The report includes data voluntarily disclosed by 75 airlines
around the world. Seventy-three of those airlines were part of the prior year’s
report, and for them, total ancillary revenue was down $34.7 billion in 2020.
Along with the four airlines that crossed the 50% threshold
in 2020, 50 airlines saw their “ancillary revenue as a percent of total
revenue” figure increase in 2020 compared to 2019. And for the 75 airlines that
provided data, ancillary revenue accounted for 14.6% of total revenue, an
increase from 12.1% in 2019.
Some of this, of course, was due to lower seat revenue during the
pandemic. As the report acknowledges, “The improved results for 2020 occurred
because fares were discounted during the pandemic (representing a smaller piece
of the revenue pie) and take rates for key a la carte services, such as checked
baggage and assigned seating, were higher.”
But CarTrawler chief commercial officer Aileen McCormack says it
also shows the power of ancillary revenue as a source of support for airlines.
saw some key carriers who during the pandemic ancillary revenue was over half their
revenue, which is amazing given it’s not their core business,” she says.
goes to show travelers’ appetite to purchase non-core products from the
airlines, to trust the airlines in purchasing, whether it’s their car rental,
their mobility, their hotels, activities, other products. And it reinforces the
piece from the revenue point of view around how much airlines can benefit if
they have a proper ancillary revenue strategy.”
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indicates passengers have also shown a willingness to pay for things they
believe reduce their risk of COVID exposure, such as front-of-cabin seats to
enable quick exit from the plane and seats with extra personal space.
says all the airlines she works with are revising their ancillary strategies,
looking for new opportunities to maximize this source of revenue. One
opportunity she says carriers could be missing is related to the idea of
blocking middle seats: Rather than either not doing it at all or doing it for
the entire plane, McCormack suggests airlines could generate revenue by maintaining
empty middle seats in a few rows and charging more for seats on either side.
report says another type of ancillary revenue – from frequent flyer programs
that sell miles or points to partners such as co-branded credit cards, hotel
chains, car rental companies and retailers – was also crucial for
airlines since it is not linked to passenger traffic.
five largest airlines in the United States – Alaska, America, Delta, Southwest
and United – generated $19.5 billion from frequent flyer programs in 2019,
which equates to $25.71 per passenger, with 90% of that from co-branded credit
card programs. In 2020, that figure dropped to $11.1 billion, but on a per-passenger
basis that amounted to a 46.4% increase to $37.64 per passenger.