Ancillary fees were once a nice little add-on for
airlines. Now they are becoming more and more of a revenue driver.
What used to be a small charge to bring an extra bag
or to change your seat suddenly became a huge factor in why airlines made
more than $900 billion in revenue last year, according to Phocuswire.
Now passengers are willing to pay more for things like
extra leg room.
According to a CarTrawler report, 57 airlines combined
for a $7.4 billion rise in ancillary revenue in 2023. That was more than 25
percent greater than it was in 2022 and almost 50 percent higher than in 2021.
Expect more airlines to offer more bundles in ticket
packaging, including things like car reservations and hotels. Call it one-stop
shopping, and away for airlines to bring more customers to their doors.
“The dream of the airline is the marketplace - the
travel marketplace,” said Eric Leopold, founder and managing director of
aviation consultancy Threedot.
Since many travelers book their plain first, airlines
are in a unique position to be privy to the likes and tendencies of customers.
“They know what you eat, because they serve the meal
[on the plane],” he said. “So if you can pick your preference in the meal, they
say, ‘oh, we noticed you like Italian food, by the way, when you arrive at your
destination, here's the top five Italian restaurants when you arrive, and
here's the 10 percent voucher discount if you come on our behalf.’ ”
Could a sea change be coming?
Pardon the pun, but it would be a sea change in how airlines
go to market.
“The ancillary world, once you start to dig into it,
is quite a complex world,” said Sinead Finn, founder of Affinnity airline
consulting agency.
Said Damian Hickey, global head of travel
partners at Travelport: "Global distribution systems, online travel
agencies, travel management companies, online booking tools, agencies’ custom
user interfaces, back office and mid-office applications, etc. all need to
speak the same language for the shopping, booking and servicing to flow
smoothly."
One potential problem is that legacy carriers differ
from low-cost carriers. The capability to offer more services might not
technologically be there for everyone.
There’s no doubt, however, that airlines
have long been looking for other ways to drive growth.
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