Airline ancillary revenue expected to top $65.8B in 2021

Airline ancillary revenue is expected to increase to $65.8 billion worldwide in 2021, a 13% increase compared to $58.1 billion for the pandemic-impacted 2020.

According to CarTrawler’s Worldwide Estimate of Ancillary Revenue report, produced in partnership with IdeaWorksCompany, the increase is powered by 2021 passenger traffic gains, with steady consumer support for a la carte services and co-branded credit cards.

The report is based on statistics disclosed earlier this year by 75 airlines for 2020 and applied to a larger list of 109 airlines for 2021.

“As the travel industry continues its recovery, ancillary services have become an increasingly important revenue stream for airlines, and we project this grew by more than $7 billion in 2021 compared to 2020,” said Aileen McCormack, chief commercial officer at CarTrawler.

“Consumers are seeking more flexible, personalized services and offerings from airlines, opening up huge opportunities for the market. As we look to 2022, the airlines that come out on top will be the ones that find creative ways to use ancillary services to meet the evolving demands of travelers.”

Contrary to the average fare recorded by IATA — which showed a declining trend with a significant drop during 2020 and continuing into 2021 — ancillary revenue displayed annual increases even during the most challenging periods to aviation in 2020.

In 2012, ancillary revenue per passenger was estimated at $12.13. By 2019, it had increased to $23.91, and for 2021, the projection is $27.60.

  • Related: Air demand and fares are depressed, but ancillary sales are staying aloft

According to the report, consumer purchase behavior of ancillary offerings changed during the pandemic. Checked baggage activity increased, possibly due to people relocating or staying in destinations for a longer period of time.

With business travel mostly halted, leisure travelers made up a greater share of airline passengers, which boosted baggage revenue, as leisure travelers are more likely to check more bags.

Seat assignments, for which many carriers charge a fee, were more frequently purchased, as were in-flight entertainment options as well as Wi-Fi.

The report notes that fluctuations in consumer confidence in travel safety varied by region, and in regions with more vaccinations, consumer confidence led to lower a la carte activity.

On the flip side, in regions with increased Covid-19 infections, consumers were eager to pay for offerings such as extra leg room.

Airline breakdown

For the second quarter of 2021, EasyJet saw its per-seat ancillary revenue increase by nearly 27% compared to Q1 of this year. The carrier added fare options, including up-front seating, expedited boarding and larger carry-ons.

Volaris posted a 51% increase for per-passenger ancillary revenue for the first half of 2021 compared to the same period in 2019, having introduced an economy basic fare and extra leg room seating during the pandemic.

Meanwhile, Jetstar ancillary revenue per passenger grew 33% for the fiscal year ending June 30, 2021, compared to the same period in 2019, and Ryanair posted a 16% increase in ancillary revenue on a per passenger basis for Q2 2021 compared to the same period in 2019.

Wizz Air reported ancillary revenue per passenger increased by 25% for Q2 2021 compared to the same period in 2019, and Allegiant said ancillary revenue per passenger was up 14.6% for the second quarter of 2021 from 2019 due to better results from fare bundles, car rentals and its co-branded credit card.

CarTrawler said the above airlines are considered “ancillary revenue champs” because they readily disclose details of quarterly a la carte sales. For this group, a la carte represents 90% of ancillary revenue. But as a single category, these airlines are behind traditional airlines in global ancillary revenue sales at just above a 17% share.

Traditional airlines, at a 46% share, represent the largest category of passenger traffic and revenue.

Globally, about 63% of ancillary revenue is generated by a la carte activity. The remaining 37% is from revenue produced by frequent flyer programs and commissions paid by travel-related companies including car rentals and hotels.

Source: PhocusWire

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