Airlines made $27 billion in ancillary revenue in 2012, according to Ideaworks‘ Yearbook of Ancillary Revenue. Airline fees are growing at a shocking rate. Since 2009, ancillary revenue has increased more than 100 percent. Airlines are charging and, in some cases, raising fees for checked bags, Wi-Fi use, seat selection and even elements of frequent-flier programs. Of the 116 global airlines analyzed in the study, 53 are earning revenue from ancillary fees. And four of the six worst offenders are US-based airlines. Keep reading to see how these six airlines have earned a combined $12.9 billion in ancillary fees.
1. United – $5.3 Billion
After earning $38 on average off of each individual passenger, United Airlines has made the most profit from ancillary revenue. Collecting more than $5 billion, the airline made 14.4 percent of its total revenue of $37.1 billion off of ancillary fees. Current ancillary revenue was earned from check bag fees, extra leg room, economy plus and FareLock.
United plans to increase ancillary revenue this year, aiming for a 9 percent increase in ancillary revenue in 2013. The airline has stated it will enhancing its website to sell products more effectively, especially promoting Economy Plus. It can also expect a boost in revenue in the years to come from Wi-Fi sales. Also, United has invested in its Wi-Fi infrastructure: global satellite-based Wi-Fi will be live on 300 aircraft by the end this year and will be completed on all mainline aircraft in 2014.
2. Delta – $2.56 Billion
Delta brought in more than $2 billion in revenue, making $15 off each individual passenger. The airline had a total revenue of $37 billion, 7 percent earned through ancillary revenue. Fees are generated through the sale of Wi-Fi, economy comfort, ticket upselling and baggage fees. Baggage fees for 2012 totaled more than $2 billion. In the future, you can expect some fees to be bundled. Delta is has created packaged offers which combines various services for a single optional fee. A sample package might offer a checked bag, priority boarding, and SkyClub access.
3. American – $1.98 Billion
American made $18 for every passenger, putting its ancillary revenue at almost $2 billion. However, its ancillary revenue, listed in its annual report as “other revenue,” decreased 3.3 since last year. American’s total revenue was close to $25 billion. The total revenue came from administrative service charges like flight change fees and baggage handling fees.
American’s ancillary revenue sales are limited by its distribution model. The airline currently relies on third party distribution channels (like Sabre), as well as online and regular travel agents to distribute a significant portion of its tickets. According to its annual report, the airline hopes to use these channels to better collect ancillary products. However the current model is more limiting than direct sales.
4. Southwest – $1.65 Billion
Having too many bags, flying with a pet and even sending your child alone on a plane will cost you when you fly with Southwest. The airline made $219 million in 2012 for these kinds of services. And, their rewards program might be rewarding them more than you. Southwest racked in $180 million from their Rapid Rewards program. Southwest earned more than $17 billion dollars, with more than one billion in ancillary revenue.
Southwest has built its reputation on not charging for checked bags but it’s starting to change, if only slightly. As of February 2013, on AirTran flights, a customer’s first checked bag fee was increased to $25, and second checked bag is now $35. Your first two bags remain free on Southwest, but overweight and additional bags now cost $75.
5. Qantas – $1.57 Billion
Aside from earning more than one and half billion dollars in ancillary revenue, Qantas came in first place for earning the most money out of individual passengers. On average, Qantas earns $56.21 per passenger. The gains significant revenue through frequent-flier miles and miles to program partners. Out of a total revenue of $12 billion, the airline made $1.57 million in revenue from frequent-flier redemption, frequent-flier memberships and lounge memberships. In terms of creative frequent-flyer awards, Qantas had 24,000 join the fee-based epiQure wine buying program and more than 322,000 members joined the Woolworths automatic rewards program.
6. Ryanair – $1.38 Billion
About 18 passengers pay for assigned seating on a typical Ryanair flight which might be why they made more than a billion and half dollars in ancillary revenue. Ryanair’s reserved seating has expanded from four to six rows on the average Ryanair flight. Almost a quarter of their total revenue came from their ancillary revenue. This includes debit card and credit card transactions, products and services sold online and reserved seating. With a total revenue of more than $6 billion, Ryanair isn’t stopping there. They are taking a page out of Spirit Airlines’ book and looking into possibly charging for carry-on bags as well.
For the latest on travel fees, check out:
- Peter’s report on The Land of the Fee and the Home of the Delay
- 5 Airline Fees You Can Avoid (and 4 You Can’t)
- Why Airline Fees Are Rising this Summer
By Judith Retana for PeterGreenberg.com
All data was taken from The CarTrawler Yearbook of Ancillary Revenue by Ideaworks Company