IdeaWorks, the foremost consultancy focused on airline ancillary revenues and Amadeus, a leading travel technology partner and transaction processor for the global travel and tourism industry, today announce preliminary results of the Amadeus Guide to Ancillary Revenue by IdeaWorks. Findings show the airline industry’s ancillary revenue tidal wave continued in 2009 with more carriers disclosing millions ? and billions ? in ancillary receipts in financial reports. The 43 percent increase over 2008 also reflects new a la carte fees and commission-based services.
During 2009 ancillary revenue became a crucial component of the revenue mix for all types of carriers - from major to small - worldwide to regional – LCC to full service. The full report of this activity will be available in the autumn 2010 release of the Amadeus Guide to Ancillary Revenue by IdeaWorks. Early results from an analysis of 2009 financial filings made by 96 airlines indicate ancillary revenue increased €3.32 billion from 2008 to a total of €11 billion ($13.5 billion) for 2009.
These estimates include revenue from a la carte features such as baggage fees and food sold onboard aircraft, commissions from the sale of hotel accommodations, car rentals, and travel insurance at airline websites, and partner revenue generated by frequent flier programs.
Philippe Chérèque, Executive Vice President Commercial, Amadeus, the sponsor of this analysis of ancillary revenue and the upcoming 3rd edition of the Guide, commented: “Amadeus is fully committed to helping airlines maximise revenues and profits and deliver unmatched levels of customer service with a comprehensive and multi-channel ancillary services solution.” He continues: “This month we have announced major milestones to support this initiative including the launch of our comprehensive EMD solution with Finnair and an extensive pilot of a la carte pricing within the travel agency and direct channels with Corsairfly.”
Amadeus has three flagship solutions to enable ancillary revenue sales:
§ Amadeus Airline Ancillary Services which allows airlines to automatically offer and collect fees for all ancillary services through any sales channel – direct or indirect. The solution is fully integrated with Amadeus’ IT offerings including the Altea CMS and e-Commerce suite.
§ Amadeus Cross-Sell Ancillary Services which seamlessly integrates with Airline IT systems to enable simple management of cross-sell content such as car, hotel and destination services in conjunction with flight bookings.
§ Amadeus EMD, which enables airlines to issue, store, manage and distribute associated and standalone Electronic Miscellaneous Documents (EMD), the industry standard fulfilment document for the effective sale and management of ancillary services.
IdeaWorks’ findings with regards to the current top 10 list of airlines show subtle changes from the 2008 ranking. US-based network airlines fill the top three positions courtesy of robust partner revenue from frequent flier programs and a stronger emphasis on baggage fees. But revenue from this mature group has stabilised, while the revenue produced by lower-ranked carriers has jumped dramatically. The 4th place slot is now held by Qantas at a 25 percent revenue premium above the same position held by Ryanair in 2008. The annual revenue required to join the top 10 club now begins at €300 million. US Airways and Air Canada are new to the list, displacing JetBlue and Emirates.
Large network carriers can generate huge ancillary revenue numbers. But ancillary revenue success is better measured by reviewing activity as a “percentage of revenue” or on a “per passenger” basis.
Spirit Airlines and Tiger Airways joined the “% of total revenue list” for 2009 because the carriers only recently disclosed ancillary revenue results. Spirit is a privately held carrier and disclosures are rare and Tiger made disclosures for 2009 due to its initial public offering. Eight carriers in the 2008 list scored higher percentages for 2009. Of the two that dropped off the list, SkyEurope ceased operations and Germanwings was folded into Lufthansa Group during 2009.
The carriers in this top 10 list pursue a robust ancillary revenue agenda that includes baggage fees, buy-on-board cafes, assigned seating fees, and commissions from the sale of hotel accommodations and car rentals. Alaska is the only network airline in the list; the carrier has a less aggressive a la carte approach but benefits from powerful frequent flier and co-branded card programs.
Overall “per passenger” activity for 2009 clearly increased with top and bottom results better than 2008. Allegiant continues to achieve strong growth with a nearly 25 percent increase above 2008 results. UK-based carrier Jet2.com generated an amazing 58 percent increase while Qantas posted a spectacular 72 percent jump. A major upset occurred with ancillary revenue champ Ryanair falling off the top 10 list and arch-rival easyJet entering the list at the number 10 slot for 2009.
By every measure the ancillary revenue movement is growing. More airlines are switching on a la carte fees and disclosing financial activity. Existing practitioners are boosting revenue streams by adding services, testing price limits, and becoming better marketers.
The Amadeus Guide to Ancillary Revenue by IdeaWorks will be available for online purchase September 2010 at $449 per copy. Order details will be available at IdeaWorksCompany.com at a later date. Jay Sorensen will speak on the topic of “Moving to Merchandise Methods in the Cabin” at the global Amadeus airline conference “Horizons” which will be held in San Francisco 13 – 15 October 2010