Back to Regional e-Newsletter NEU Q2 2010
Ancillary revenues – a game changer for the airline industry
Achieving profitability in the airline industry is becoming an increasingly difficult task with each passing year. The 2009 SITA/Airline Business survey cited that the top two reasons why airlines are investing in IT is to reduce costs, followed closely by increasing revenues. One of the key areas that airlines are targeting today is ancillary revenue as it has become a key strategy that is gaining traction in airline boardrooms throughout the world. IdeaWorks, a leading authority on the research of ancillary revenue, stated that airlines had generated around US$2.3 billion in ancillary revenues in 2006, but by 2008 this had jumped by 345% to $10.2 billion, while the Centre for Asia Pacific Aviation (CAPA) predicts that airlines worldwide are expecting to generate $58 billion in ancillaries by 2010 - a figure which represents a whopping 12% of total airline revenues. IATA estimated that $80 billion will be erased from the airline industry balance sheets in 2009 (15% down on 2008 figures) because of the recession and ancillary revenue can go some way to clawing back those lost earnings. This trend of generating new forms of revenues is a game changer for the industry. Ancillary Revenues fall into two categories:
- Unbundle or a la cart products;
- Commission-based ancillaries that are provided by third parties.
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