Airlines remain profitable due to ancillary revenue

July 28, 2014 |

The annual CarTrawler survey of global airline ancillary revenue found that extra fees for baggage, food and drink and frequent flier rewards points are keeping airlines profitable. According to the survey, performed by IdeaWorksCompany, ancillary revenue in 2013 rose 1,200 percent to $31.5 billion.

United Airlines, Delta Air Lines, American Airlines, Southwest Airlines and US Airways were the U.S. airlines to collect the most ancillary revenue. United topped the charts with $5.7 billion in revenue generated from extras sold to travelers, while Delta collected 2.5 billion, American at $2 billion, Southwest with $1.6 billion and US Airways with $1.1 billion.

Airlines collect an average of $16 per passenger in ancillary revenue, according to the survey. CarTrawler chief commercial officer Michael Cunningham told TravelMole that this allows the airlines to become multi-faceted retailers rather than only providing aviation services. As a result, the companies are able to generate more revenue each year.

“The shop window for travel is no longer static,” Cunningham told TravelMole. “It follows the customer across more devices and locations than ever before. The opportunity for airlines is to continue to evolve their ancillary strategy so they take full advantage of the new technology and retailing practices that will enable them to proactively service this growing customer appetite for goods and services that previously may not have been considered core to their business.”

Tony Tyler, International Air Transport Association CEO and general director, said that the travel industry hopes to reach an average net margin of 2.4 percent for 2014. This would be a rise of less than $6 per passenger for extra fees and services provided by carriers.

A total of 59 airlines provide ancillary revenue activity for the survey, but the research looked at financial filings from 114 carriers.