An examination of the possible future trends in airline ancillary revenues

The airline industry seems permanently embedded in producing thin margins whilst continuously having to battle against downward pressure on yields. To perpetuate the problem, the industry remains eclipsed with high cost structures and low barriers to entry. However a new sizzling concept is beginning to counterbalance this effect in the form of ancillary revenues. Globally, these revenues have increased by 38% from 2009 to 2010 and by an even more impressive 44% from 2010 to 2011. This trend is set to continue as carriers are quickly implementing structural changes to accommodate these revenues streams. Could ancillary revenues be the next industry game changer? This paper examines the performance of three core classifications of ancillary revenues, which include unbundled products, commission based income and the sale of frequent flyer programs spread over the years 2010-2011. The results were shared with industry practitioners and were used to construct insights into the trending nature of such revenues and specific ancillary items that airlines should focus on and also avoid in the coming years.