Airline ancillary revenues soar to $32.5 billion

Survey: worldwide ancillary estimate increases by 43.8% in 2011

It’s a major trend in the airline industry. Ancillary revenue has become a crucial component in the industry’s profit toolbox. While the International Air Transport Association has slashed its 2011 industry profit outlook to $4 billion, revealing that carriers will spend $10 billion more on jet fuel this year, airlines will make $32.5 billion this year on ancillary revenue – lifting the airline industry from a loss-making position and providing an effective hedge against runaway fuel bills.
Earlier this year, the global distribution system Amadeus and the research company IdeaWorks reported the ancillary revenues disclosed by 47 airlines in 2010. Now a bigger list of more than 200 airlines has been created to provide a worldwide projection for 2011. US-based majors are generating strong ancillary revenue through a combination of frequent flier revenue and baggage fees, almost doubling (+87% to $12.5 billion) such revenues among major American airlines this year. Overall across the globe, ancillaries for traditional airlines are rising 28% to reach $10.9 billion in 2011 – not much less than the increase for low-cost carriers (+33% to $4.8 billion). By region, North America (+72% to $15 billion) has surged ahead of Europe (+18.7% to $9 billion) this year.
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[pictured: US Airways first-class check-in counter; courtesy Star Alliance]