Analyst: Airline Revenue From Fees Reaches $32.5 Billion Worldwide In 2011 | Aero-News Network
Aero-News Network
RSS icon RSS feed
podcast icon MP3 podcast
Subscribe Aero-News e-mail Newsletter Subscribe

Airborne Unlimited -- Recent Daily Episodes

Episode Date

AMA Drone Report

Airborne-Monday

Airborne-Tuesday

Airborne-Wednesday

Airborne-Thursday

Airborne-Friday

Airborne-Unmanned w/AUVSI

Airborne On ANN

AMA 10.12.17

Airborne 10.16.17

Airborne 10.17.17

Airborne 10.18.17

Airborne 10.12.17

Airborne 10.13.17

Airborne-Unmanned 10.17.17

Airborne-YouTube

AMA 10.12.17

Airborne 10.16.17

Airborne 10.17.17

Airborne 10.18.17

Airborne 10.12.17

Airborne 10.13.17

Airborne-Unmanned 10.17.17

NEW!!! 2017 AirVenture Innovation Preview -- YouTube Presentation / Vimeo Presentation

Fri, Oct 21, 2011

Analyst: Airline Revenue From Fees Reaches $32.5 Billion Worldwide In 2011

The Amadeus Worldwide Estimate Of Ancillary Revenue Reveals A $9.9 Billion Increase

All those fees charged by airlines seems to be paying off ... literally ... at least for the carriers that charge them. A new report indicates that "ancillary revenue" has become a crucial component in the global airline industry’s profit toolbox. The International Air Transport Association slashed its 2011 industry profit outlook to $4 billion and revealed that carriers will spend $10 billion more on jet fuel this year. The $32.5 billion contributed by ancillary revenue has lifted the airline industry from a loss-making position and continues to provide a very effective hedge against runaway fuel bills.

Earlier this year, Amadeus and IdeaWorks reported the ancillary revenue disclosed by 47 airlines in 2010. These statistics were applied to a larger list of more than 200 airlines to provide a truly global projection of activity for 2011. The Amadeus Worldwide Estimate of Ancillary Revenue for 2011 is the second year Amadeus and IdeaWorks have undertaken the task of calculating global ancillary revenue activity.

“As ancillary revenues continue to grow rapidly, we are now seeing increasing interest from full service carriers around the world, which are also starting to implement ancillary services through global distribution systems, such as Amadeus. KLM and Iberia, for instance, have just joined the ranks of carriers implementing the Amadeus Ancillary Services solution for travel agencies. The model is now focusing on services that increase the scope of the product offering and reinforce the brand rather than unbundle the ticket price,” said Holger Taubmann, VP Distribution, Amadeus.

IdeaWorks believes that the majority of ancillary revenue for US major airlines is generated by the sale of frequent flier miles, notably those linked to co-branded credit card activity. This financial activity exceeds $6.5 billion annually in the US alone. Baggage fees for US carriers represent approximately 20% of their ancillary receipts. The remaining revenue is produced by a large array of à la carte and commission-based activities.

Other sources include on-board sales of food, beverages, Wi-Fi, and hotel bookings. In addition, airlines offer an ever-increasing selection of services that add to traveler convenience such as priority security screening, early boarding, and exit row seat assignments.

The IdeaWorks analysis reveals natural groupings (or categories) based upon a carrier’s ability to generate ancillary revenue. The “percentage of revenue” results associated with four defined categories were applied to a worldwide list of operating revenue disclosed by 203 airlines.2 The following describes the four categories:

  • Ancillary Revenue Champs. These carriers generate the highest activity as a percentage of operating revenue. The average achieved by this group was 19.8%, which is slightly up from 19.4% for 2010. Examples include AirAsia, Aer Lingus, easyJet, Ryanair and Spirit Airlines.
  • Major US Airlines. US-based majors generate strong ancillary revenue through a combination of frequent flier revenue and baggage fees. The average for this group was 11.9%, which is a sizable increase above the 2010 rate of 7.2%. Examples include Alaska, American and United.
  • Low Cost Carriers. LCCs throughout the world typically rely upon a mix of à la carte fees to generate good levels of ancillary revenue. The average in this group was 6.5% and is above last year’s 5.4%. Examples include AirTran, Blue1, IndiGo, Jazeera Airways, Pegasus and Spring Airlines.
  • Traditional Airlines. This category represents a catch-all for the largest number of carriers. Ancillary revenue activity may consist of fees associated with excess or heavy bags and limited partner activity for a frequent flier program. The average here remained at 2.9%. Examples include Air China, Emirates, Finnair, LAN, Qatar Airways and Singapore Airlines.

“Outside of the US market and the global LCC sector, airlines tend to choose a model that complies with industry standards rather than a customized approach to the development and deployment of their ancillary services,” said Julia Sattel, VP Airline IT, Amadeus. “Our philosophy is to balance the productivity and efficiency that industry standards bring with the desire for some airlines to customize the way in which their product is packaged and sold.”

“Whatever the model, there is no doubt that the growth of ancillary sales is here to stay. The Electronic Miscellaneous Document (EMD) standard for the fulfillment of ancillary sales is rapidly gaining momentum. According to IATA, there are now 28 airlines in the world that are EMD capable, 15 of which are using Amadeus’ EMD Server and have issued over 2.5 million EMDs this year alone,” said Sattel.

The US Major Airlines category continues to produce a commanding share of global ancillary revenue: The $12.5 billion result (38% of the global total) represents just seven airlines: Alaska Airlines, American, Continental, Delta, Hawaiian, United, and US Airways. Compare this to the second largest piece of the pie at $10.9 billion (34% of the global total) which is generated by a far larger group of 140 airlines, the Traditional Airline category. As proven by this revenue result, US-based airlines have readily adapted to an à la carte world, but they also benefit from consumers who are keen to get frequent flier miles.

Carriers in North America began to emphasize ancillary revenue after the oil price shock of 2008. Not surprisingly, this region leads the world for ancillary revenue production. IdeaWorks estimates the region achieved a stunning 72% increase above the level estimated for 2010. Ancillary revenue rose across the globe and was largely driven by traffic and passenger revenue increases as the industry recovered from the 2009 recession.

FMI: www.amadeus.com, www.IdeaWorksCompany.com

Advertisement

More News

RFP: ANN Seeking New Site/Facility For Major Studio Upgrade

It's Official: Aggressive Upgrades For New Airborne Programs WILL Require New Digs It's been in development for years, but we're getting to a point where we think we can pull off s>[...]

AMA Drone Report 10.12.17: NTSB--Drone v Blackhawk, City Drops Reg, DJI Privacy

Also: PassengerDrone, FAA Reauthorization Extension, UAS Pilot Certification, Workhorse Surefly The NTSB is now offering public details of the alleged collision between a hobby dro>[...]

Airborne 10.16.17: NBAA2017, Scaled Model 401, Hot-Air Balloon Safety Program

Also: Drone Security, Fighting Privatization, Frontier Pilots, Commercial Space, Twin Otter, AeroVironment, Honeywell The NBAA claims that its 2017 NBAA-BACE event was an all-aroun>[...]

Airborne-Unmanned 10.17.17: Eagles v Drones, DJI AeroScope, Drone Policy

Also: AeroVironment Award, Washington State Patrol, Altavian Nova UAS, Robotaxis The French Military is training four Golden Eagles to attack drones in flight as a way to defend ag>[...]

Airborne 10.17.17: Waco YMF-5F Flies!, SpaceX Streak, BBJs Rule

Also: Embraer, Aero-Calendar, AeroVironment, Sikorsky Heli's, EASA Singapore, FireFighting UAV, WestJet The amazing craftsman of the Waco Classic Aircraft operation in Michigan hav>[...]

blog comments powered by Disqus



Advertisement

Advertisement

Podcasts

Advertisement

© 2007 - 2017 Web Development & Design by Pauli Systems, LC