Ancillary revenue

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Ancillary revenue is revenue that is derived from goods or services other than a company's primary product offering. Examples include concessions at sporting events, baggage handling or seat selection revenue received by airlines, restaurant revenue received by hotel owners, and car-wash services sold by gas stations. Ancillary revenue may exceed primary revenues, leading to changes in business models. [1]

Contents

Airline industry

In the airline industry, ancillary revenue is revenue from non-ticket sources, such as baggage fees and on-board food and services. [2] [3]

Airline ancillary revenue was estimated to be $92.9 billion worldwide in 2018. [2] In the first half of 2018, ancillary revenue at Ryanair rose 28%. [4] United Airlines is the leader in dollar volume of ancillary revenue. [5]

2006 figures

The following lists total ancillary revenue reported by these airlines for fiscal year 2006: easyJet €189,476,508, [6] Aer Lingus €63,407,000, [7] SkyEurope €10,827,000, [8] AirAsia (Malaysia) €22,713,479. [9]

According to a study published by Amadeus IT Group and IdeaWorksCompany, airlines’ ancillary revenues were projected to increase from $13.5 billion in 2009 to $22.6 billion in 2010. [10] In 2009, United Airlines had $1.5 billion in ancillary revenues; for many airlines ancillary revenues accounted for a huge part of their total revenues: Allegiant Air (29.2%), Spirit Airlines (23.9%) and Ryanair (22.2%). [11] For 2018, the financial results have greatly increased with the following top performers noted: [12]

Passenger reaction

Airlines can use product differentiation and potentially boost their revenues by "unbundling" the travel experience by charging separate fees for services such as checked baggage and beverages served on board. [13] Low cost carriers such as easyJet and Ryanair have generated significant profit from ancillary revenue. However, the consumer backlash from charging fees (for services included in the price of a ticket by other airlines) can damage a carrier's reputation. For example, "European Skyway Robbery" was the headline written by noted travel columnist Peter Greenberg to warn consumers of abusive overcharging for baggage fees in Europe by easyJet and other carriers. [14] British Airways also wanted to boost its ancillary revenue with higher baggage fees during 2007. The carrier eventually backed down after the public outcry became too great. [15]

Types of ancillary revenue

According to IdeaWorksCompany in its annually produced CarTrawler Yearbook of Ancillary Revenue, ancillary revenue for airlines includes: à la carte features, commission-based products, frequent flier activities, advertising sold by the airline, and fare or product bundles. [16]

Hotel industry

Ancillary revenue in the hotel industry includes revenue from high speed WiFi, in-room dining, parking, business services, meals, fees for extra loyalty points, late checkout/early check-in fees, in-room entertainment, and trip cancellation insurance. [21]

Related Research Articles

EasyJet plc is a British multinational low-cost airline group headquartered at London Luton Airport. It operates domestic and international scheduled services on 927 routes in more than 34 countries via its affiliate airlines EasyJet UK, EasyJet Switzerland, and EasyJet Europe. The company employs circa 13,000 people, based throughout Europe but mainly in the UK. EasyJet plc is listed on the London Stock Exchange and is a constituent of the FTSE 100 Index.

Ryanair is an Irish ultra low-cost carrier group headquartered in Swords, Dublin, Ireland. The parent company Ryanair Holdings plc includes subsidiaries Ryanair DACTooltip Designated activity company, Malta Air, Buzz, Lauda Europe and Ryanair UK. Ryanair DAC, the oldest airline of the group, was founded in 1984. Ryanair Holdings was established in 1996 as a holding company for Ryanair with the two companies having the same board of directors and executive officers. In 2019 the transition began from the airline Ryanair and its subsidiaries into separate sister airlines under the holding company. Later in 2019, Malta Air joined Ryanair Holdings.

Travelocity.com is an online travel agency owned by the American Expedia Group. It has 12.4 million monthly unique visitors, making it the third most popular website owned by Expedia Group, after Expedia.com and Hotels.com.

<span class="mw-page-title-main">Low-cost carrier</span> Airline with generally lower fares

A low-cost carrier (LCC) or low-cost airline, also called a budget, or discount carrier or airline, is an airline that is operated with an emphasis on minimizing operating costs. It sacrifices certain traditional airline luxuries for cheaper fares. To make up for revenue lost in decreased ticket prices, the airline may charge extra fees, such as for carry-on baggage.

<span class="mw-page-title-main">Orbitz</span> Web-based travel fare aggregator service

Orbitz.com is a travel fare aggregator website and travel metasearch engine. The website is owned by Orbitz Worldwide, Inc., a subsidiary of Expedia Group. It is headquartered in the Citigroup Center, Chicago, Illinois.

<span class="mw-page-title-main">Allegiant Air</span> American ultra-low-cost airline

Allegiant Air is an ultra-low cost airline headquartered in Las Vegas, Nevada. The airline focuses on serving leisure traffic from small and medium-sized cities which it considers to be underserved, using an ultra low-cost business model with minimal inclusions in fares and a greater number of add-on fees.

The largest airlines in the world can be measured in several ways. As of 2023, United Airlines was the largest by fleet size and Passenger destinations served; Delta Air Lines was the largest by revenue, assets, market, and brand value; American Airlines Group by passengers carried and employees; FedEx Express by freight tonne-kilometers; Southwest Airlines by routes; and Turkish Airlines by countries served.

<span class="mw-page-title-main">Budapest Ferenc Liszt International Airport</span> Airport in Budapest, Hungary

Budapest Ferenc Liszt International Airport, formerly known as Budapest Ferihegy International Airport and commonly denoted as Ferihegy, is the international airport serving the Hungarian capital city of Budapest. It is the largest of the country's four commercial airports, ahead of Debrecen and Hévíz–Balaton. The airport is located 16 kilometres southeast of the center of Budapest and was renamed in 2011 after Hungarian composer Franz Liszt on the occasion of his 200th birthday. The facility covers 1,515 hectares and has two runways.

<span class="mw-page-title-main">Boarding pass</span> Document provided to an air-travel passenger functioning as a ticket.

A boarding pass or boarding card is a document provided by an airline during airport check-in, giving a passenger permission to enter the restricted area of an airport and to board the airplane for a particular flight. At a minimum, it identifies the passenger, the flight number, the date, and scheduled time for departure. A boarding pass may also indicate details of the perks a passenger is entitled to and is thus presented at the entrance of such facilities to show eligibility.

Opodo is a Spanish-owned online travel agency which offers deals in regular and charter flights, low-cost airlines, hotels, car rental, dynamic packages, holiday packages and travel insurance. It is a pan-European enterprise, founded by a consortium of European airlines, including British Airways, Air France, Alitalia, Iberia, KLM, Lufthansa, Aer Lingus, Austrian Airlines and Finnair. The travel technology provider Amadeus owned 99.4% of the company until 2011, when it was taken over by eDreams ODIGEO.

<span class="mw-page-title-main">Amadeus IT Group</span> Spanish travel technology company

Amadeus IT Group, S.A. is a major Spanish multinational technology company that provides software for the global travel and tourism industry. It is the world's leading provider of travel technology that focus on developing software for airlines, hotels, travel agencies, and other travel-related businesses.

<span class="mw-page-title-main">Baggage allowance</span> Bags allowed per commercial transportation passenger

On commercial transportation, mostly with airlines, the baggage allowance is the amount of checked baggage or hand/carry-on luggage the company will allow per passenger. There may be limits on the amount that is allowed free of charge and hard limits on the amount that is allowed.

<span class="mw-page-title-main">Buy on board</span> Food or beverages purchased in-flight

In commercial aviation, buy on board (BoB) is a system in which in-flight food or beverages are not included in the ticket price but are purchased on board or ordered in advance as an optional extra during or after the booking process. Some airlines, including almost all low-cost carriers and a handful of flag carriers, have buy-on-board food and beverages as part of their ancillary revenue generation.

The Electronic Miscellaneous Document (EMD) is an International Air Transport Association (IATA) standard for electronically documenting ancillary revenue; that is, all other sales and transactions between airlines and passengers besides electronic tickets. It is a step toward moving the airline industry to purely electronic transactions in the business-to-consumer context.

A low-cost carrier terminal or LCCT is a specific type of airport terminal designed with the needs of low-cost airlines in mind. Though terminals may have differing charges and costs, as is common in Europe, the concept of an all-budget terminal was promoted and pioneered by Tony Fernandes of AirAsia at Kuala Lumpur International Airport in 2006.

eDreams is an online travel agency based in Barcelona, Spain, that offers deals on regular and charter flights, low-cost airlines, hotels, car rentals, dynamic packages, holiday packages and travel insurance.

Navitaire LLC is a subsidiary of Amadeus IT Group. Navitaire primarily offers systems for passenger reservations, travel commerce, ancillary revenue and merchandising, as well as revenue accounting and revenue management to airlines and rail companies.

In online retail, drip pricing is a sales technique where a headline price is advertised at the beginning of the purchase process, followed by the incremental disclosure of additional fees, taxes or charges. The objective of drip pricing is to gain a consumer's interest in a misleadingly low headline price without the true final price being disclosed until the consumer has invested time and effort in the purchase process and made a decision to purchase.

<span class="mw-page-title-main">Kiwi.com</span> Czech online travel agency

Kiwi.com is a Czech online travel agency founded by Oliver Dlouhý and Jozef Képesi in 2012. Kiwi.com provides a fare aggregator, metasearch engine and booking for airline tickets and ground transportation. Its ticket search features Kiwi.com’s "virtual interlining" concept – itineraries combined from over 750 carriers, including many that do not usually cooperate in online bookings.

<span class="mw-page-title-main">Basic economy class</span> Type of airfare offered by airlines

Basic economy class is a travel class offered by a number of airlines. The class has superseded economy class as the cheapest airfare option for passengers and generally comes with more restrictions when compared to standard economy fares. Restrictions vary between different airlines, but they generally include not allowing passengers to change or cancel tickets or select seats for free. They are seen as a strategy for market segmentation.

References

  1. ↑ "Ancillary Revenue". Investopedia.
  2. 1 2 "Airline Ancillary Revenue Projected to Be $92.9 Billion Worldwide in 2018" (PDF) (Press release). IdeaWorksCompany. 27 November 2018. Archived from the original (PDF) on 2 November 2021. Retrieved 20 January 2020.
  3. ↑ "Flying for Free on Ryanair". BBC News . May 13, 2001.
  4. ↑ "Ryanair walking a fine line with ancillary revenues". The Irish Times . November 5, 2019.
  5. ↑ Sumers, Brian (September 21, 2016). "United Generates More Ancillary Revenue Than Any Other Airline". Skift .
  6. ↑ easyJet 2006 Annual Report (fiscal year ends September 30)
  7. ↑ Aer Lingus 2006 Annual Report
  8. ↑ SkyEurope 2006 Annual Report and the Financial Report Presentation for the 3rd Quarter of fiscal year 2007
  9. ↑ Air Asia Fiscal 2007 from Fourth Quarter 2007 Results dated 30 August 2007
  10. ↑ Fabey, Michael (October 14, 2010). "Airlines boost ancillary revenue 67% in 2010". Travel Weekly.
  11. ↑ May, Kevin (July 22, 2010). "Study: Winners in airline ancillary revenue". Phocuswire.
  12. ↑ "Top Ten Airlines Generated $35.2 Billion from Ancillary Revenue in 2018" (PDF) (Press release). IdeaWorksCompany. 24 July 2019. Archived from the original (PDF) on 2 May 2022. Retrieved 20 January 2020.
  13. ↑ Strauss, Michael (2010). Value Creation in Travel Distribution. www.lulu.com.
  14. ↑ Greenberg, Peter (May 16, 2007). "European skyway robbery". Today .
  15. ↑ Chesshyre, Tom (October 25, 2007). "BA admits baggage charges too high" . The Times .
  16. ↑ "Ancillary Revenue Defined". IdeaWorksCompany.com. Archived from the original on 2022-04-20. Retrieved 2019-09-24.
  17. ↑ Grossman, David (August 28, 2005). "A la carte: The future of airline pricing". USA Today .
  18. ↑ "Global Baggage Fee Revenue Jumps to $28.1 Billion (€25.2 Billion)". cartrawler. 30 April 2019. Archived from the original on 20 April 2021. Retrieved 20 January 2020.
  19. ↑ "Europe's Top 4 Low Cost Carriers Generated 470 Million Euros (US$593 Million) From Non-Ticket Sources in 2005" (PDF) (Press release). IdeaWorksCompany. October 10, 2006.
  20. ↑ "2018 Top 10 Ancillary Revenue Rankings" (PDF). IdeaWorksCompany. 24 July 2019. Archived from the original (PDF) on 24 August 2021. Retrieved 20 January 2020.
  21. ↑ "The $28 billion opportunity for hotels". Phocuswire. April 3, 2018.
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