Last updated: 09:22 AM ET, Wed November 30 2016

Airline Ancillary Revenue Has Tripled Over The Last Six Years

Airlines & Airports | Rich Thomaselli | November 29, 2016

Airline Ancillary Revenue Has Tripled Over The Last Six Years

PHOTO via Thinkstock

Whoa.

This is a lot of baggage and change fees.

IdeaWorksCompany and CarTrawler today projected airline ancillary revenues will reach $67.4 billion worldwide in 2016, the companies said in a statement.

That would be a record amount for the aviation industry, surpassing last year’s total of $59.2 billion and tripling the amount of $22.6 billion in 2010 when IdeaWorks and CarTrawler began releasing their estimates.

The $67.4 billion represents a little more than nine percent of the airlines total worldwide revenues of $740 billion.

The IdeaWorksCompany is an airline consulting organization specializing in ancillary revenue, loyalty marketing, and a la carte shopping. CarTrawler connects business and leisure customers and online travel retailers with transport solutions, and counts 95 international airlines among its clients.

Revenue from optional services, such as onboard sales of food and beverages, checked baggage, premium seat assignments, and early boarding benefits, was determined to represent $44.9 billion of the projected global 2016 total of $67.4 billion. The ‘other’ $22.5 billion comes from non-fee activity such as the sale of frequent flyer miles to program partners, and commissions earned on the sale of ground-based services to travelers, such as hotel accommodations and car rentals.

Still, it’s safe to say ancillary fees have become a huge staple in airline budgets.

“Successful ancillary revenue generation is dependent on offering customers the right product at the right time, often before they have even asked for it,” Aileen O’Mahony, chief commercial officer at CarTrawler, said in a statement.

O’Mahony used the e-commerce site Amazon.com as an example, noting the impact that data science has had on its business. An estimated one-third of total sales for Amazon now come via its recommendation algorithm.

Airlines are now using the same system.

“As with Amazon, the unlocking of data-driven insights is enabling airlines to propose ancillary products and services to their customers in an increasingly sophisticated way,” she said. “This application of data is fueling the continued growth of the sector while at the same time unearthing further potential for building loyalty by identifying when, how, where and what to offer customers when they visit your website or app.”

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