Airline ancillary revenues to grow by $9.9bn in 2011 – Amadeus

Airline ancillary revenues to grow by $9.9bn in 2011 – Amadeus

Global Distribution System Amadeus has estimated that ancillary revenue earned by airlines this year will soar by $9.9 billion.

The 43.8% increase comes as the airline industry faces a difficult economic outlook, Iata having downgraded its profit forecast by $4 billion, Amadeus said.

Moreover, carriers will spend £10 billion more on fuel this year than last year making ancillary revenue “a very effective hedge against runaway fuel bills”.

For the second year Amadeus and IdeaWorks have collaborated to analyse the disclosed data on ancillary revenue from 47 airlines.

Holger Taubmann, vice president distribution at Amadeus said: “As ancillary revenues continue to grow rapidly, we are now seeing increasing interest from full service carriers around the world, which are also starting to implement ancillary services through global distribution systems.

“KLM and Iberia, for instance, have just joined the ranks of carriers implementing the Amadeus Ancillary Services solution for travel agencies. The model is now focusing on services which increase the scope of the product offering and reinforce the brand rather than unbundle the ticket price.”

The Amadeus Worldwide Estimate for Ancillary Revenue for 2011, released today, projects a 43.8% increase with major US airlines leading the way, with a forecast 87% increase to $12.5 billion.

Although major US airlines account for 38% of all ancillary revenue this is generated by just seven airlines while the second largest contributor category ‘traditional airlines’ encompasses 140 carriers.

The figures for global regions show north America will see the highest increase (72% to $15 billion) while Europe will see the smallest increase (18.7% to $9 billion).

Amadeus said of the 28 airlines that are Electronic Miscellaneous Document systems to fulfil ancillary sales 15 are using Amadeus and this saw 2.5 million issued this year.

Julia Sattel, vice president airline IT at Amadeus, said outside of the US and low cost carrier sectors most legacy carriers are opting to implement an industry standard approach rather than customising their own systems.

She said: “Our philosophy is to balance the productivity and efficiency that industry standards bring with the desire for some airlines to customise the way in which their product is packaged and sold.”

The Amadeus study breaks out what it calls Ancillary Revenue Champs from Low Cost Carriers, a group that includes Ryanair, easyJet, AirAsia and Aer Lingus.

These airlines generate the highest proportion of ancillary sales to overall revenue, the average achieved being 19.8%, up from 19.4% in 2010.

US airlines are particularly adept at driving up ancillaries through their frequent flyer loyalty programmes and baggage fees.

Amadeus Worldwide Estimate of Ancillary Revenue 
Airline Category2011 Ancillary Revenue2010 Ancillary RevenueIncrease for 2011 
US Major Airlines$12.5 billion$6.7 billion87%
Low Cost Carriers$4.8 billion$3.6 billion33%
Traditional Airlines$10.9 billion$8.5 billion28%
Ancillary Revenue Champs$4.3 billion$3.8 billion13%
Worldwide Totals$32.5 billion$22.6 billion43.8%
Source: Ancillary revenue statistics applied by IdeaWorks to individual airline revenue results listed in the  Worldwide Airline Report in the July 2011 issue of Air Transport World

Chart: 2011 ancillary revenue estimate

2011 airline ancillary estimates - by Amadeus

Chart: Key ancillary revenue components

Ancillary Revenue Estimates by World Region
World Region 2011 Ancillary Revenue2010 Ancillary RevenueIncrease for 2011 
North America$15 billion$8.7 billion72%
Africa / Middle East$1.4 billion$0.9 billion 52%
Latin America / Caribbean$0.8 billion$0.6 billion47%
Asia / Pacific$6.3 billion$4.8 billion30%
Europe$9 billion$7.6 billion18.7%
Source: Ancillary revenue statistics applied by IdeaWorks to individual airline revenue results listed in the  Worldwide Airline Report in the July 2011 issue of Air Transport World

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