Per passenger airline revenue from ancillaries increased last year, despite the impact of the COVID-19 pandemic.
A quarterly CarTrawler and IdeaWorks Ancillary Revenue Report found per passenger average revenue was $26.91, a 13.1% increase on $23.36 in 2019.
The study also found US and Canada airlines dominate the global ancillary revenue sector accounting for more than a third of the market’s total value of $58.2 billion.
Last year, CarTrawler and IdeaWorksCompany reported ancillary revenue disclosed by 81 airlines for 2019.
This was applied to a larger list of 134 airlines to provide a global projection of ancillary revenue activity by the world’s airlines for 2020.
Aileen McCormack, chief commercial officer at CarTrawler, said: “This detailed assessment of ancillary revenue points to a promising silver lining for airlines after a challenging year.
“Airlines can be heartened by the fact that, of those passengers that did travel last year, their spend on ancillaries actually increased – proving that an outstanding customer experience is not only recession-proof, but also pandemic-proof.
“At CarTrawler, we are helping to drive recovery by facilitating the kind of transformative ancillary revenue programs that airlines need to thrive in our new reality.”
The distribution of ancillary revenue around the world is influenced by factors such as the market penetration of a la carte pricing methods, the success of co-branded credit card programs, and market influence of low-cost carriers (LCCs).
Regional findings included:
- Canada and US now dominates total ancillary revenue being home to the world’s largest three carriers (American, Delta, and United) and because consumers continued to embrace airline co-branded credit cards during the pandemic. Even with these advantages, there was a 44.6% estimated decrease of ancillary revenue for 2020.
- Europe and Russia led the world for total ancillary revenue in 2019. Even though Europe boasts a high concentration of powerful LCCs with easyJet, Ryanair, and Wizz Air, the region had the largest year-over-year drop of 55.5%.
- Latin America experienced the smallest drop of just 14.5% for 2020, although represented the smallest share of ancillary revenue. The region is undergoing an LCC revolution through the growing importance of GOL, JetSmart, Sky Airline, VivaAerobus, Viva Air, and Volaris.
Of 20 airlines surveyed for the third quarter of 2020, 13 reported an improvement in ancillary revenues per passenger.
|Ancillary Revenue – 3rd Quarter Disclosures|
Per passenger results of top 10 airlines among the 20 airlines surveyed
|Region||2019||2020||Change from 2019|
|* Indigo results based upon an estimate of 6 million passengers for 3rd qtr. 2020. Indigo ancillary revenue reduced by 30% to exclude cargo. ** Air Canada results do not include loyalty program revenue.|
Currency exchange rates from XE.com for August 15 of 2019 and 2020.
Source: Research and calculations by IdeaWorksCompany
Airline managers attributed the increases to changed consumer behaviour during the pandemic.
For example, seat assignment has become the most important feature with passengers prepared to pay a premium for seats in the front of the cabin and close to members of their party.
However, empty flights can work against the perception that seat assignments are needed.
Airlines offering the ability to carry on larger bags for a fee have found this feature to be more popular during the pandemic.
CarTrawler said more travellers also seem to be relocating, perhaps due to personal disruption, and this has increased checked baggage activity.
The ability to change reservations for any reason has proved to be a more frequent choice for consumers flying airlines that have not waived change fees during the pandemic.
The purchase window has decreased for a la carte services with many passengers deferring these purchases until a few days before departure.
When offered, the pre-order of meals has become more popular due to the uncertainty of finding open take-out services on airport concourses.
While passenger fares fell during 2020, a la carte fees remained steady with discounting not found to generate significantly more purchases.
CarTrawler said: “Across the world, the pandemic has proven ancillary revenue an able, accepted, and attractive source of cash to boost battered bottom lines.”