Airlines Making Bank With Add-on Charges

Look up in the sky: It's a bird? It's a plane? It's airline ancillary revenue, and it doesn't appear to be coming down anytime soon.

Aviation consultancy IdeaWorksCompany and multimodal transport solutions provider CarTrawler project worldwide airline ancillary revenue will reach $82.2 billion in 2017.

The figure signals a dramatic increase from $67.4 billion a year ago and represents a stunning 264 percent rise from $22.6 billion during 2010. The record estimate accounts for 10.6 percent of airlines' projected $776 billion in global revenue during 2017.

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Revenue from optional services ($57 billion) is estimated to make up a majority of 2017's projection. These include checked baggage, Wi-Fi access, premium seat assignments and onboard food and beverage sales, among others.

The remaining $25.2 billion will be attributed to non-fee activity, including the sale of frequent flyer miles to program partners and commissions earned on travel retail such as hotel accommodations and travel insurance.

While traditional airlines ($32.1 billion) and major U.S. carriers ($24.6 billion) will account for a majority of overall ancillary revenue in 2017, airlines dubbed "ancillary revenue champs" will generate the highest activity as a percentage of operating revenue. These carriers, which include Frontier Airlines, Ryanair, Spirit Airlines, Vietjet, and Wizz Air, are expected to obtain 30.9 percent of their revenue from services and activities beyond transportation.

"These figures indicate that ancillary profits are on a prolonged, upward trajectory and we are delighted to see more airlines looking further than traditional ancillary sources," said CarTrawler's Chief Commercial Officer, Aileen McCormack in a statement.

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Citing International Air Transport Association (IATA) predictions that nearly 4.1 billion passengers will spend $776 billion worldwide on air transport in 2017, the ancillary revenue projection equates to $20.13 per passenger, up from just $8.42 seven years ago. Of the $20.13, airlines will take home about $7.66 per passenger in post-tax profit, according to IATA.

Ancillary revenue is on pace to one day surpass airlines' fuel costs. IATA estimates carriers will spend $129 billion on fuel this year.

This year's projection is based on the ancillary revenue reported by 66 airlines for 2016. IdeaWorksCompany and CarTrawler then applied those numbers to 184 carriers from around the world. The CarTrawler Worldwide Estimate of Ancillary Revenue is now in its eighth year.

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