Battling for Non-Flight Dollars

Battling for Non-Flight Dollars

IdeaWorksCompany.com has issued a report regarding non-ticket sources of revenue for airlines in 2005. “Ancillary revenues” is the newest buzz phrase to hit airline board rooms across Europe. These non-ticket sources of revenue have become an important financial component for low cost carriers such as Ryanair. But as the report from IdeaWorks states, “Mr. O’Leary [Ryanair, Chief Executive] needs to add a frequent flyer program if he wants to squeeze more revenue from non-traditional sources.”

According to the report, Ryanair generated ancillary revenues of $9.77 per passenger while United Airlines generated $11.98 per passenger if you take into account the revenue from the Mileage Plus program. Ancillary revenues for frequent flyer programs can include miles sold to banks issuing co-branded credit cards, hotel chains, car rental companies and other partners such as online malls, retailers and communication services. In other words, Ryanair can sell the customer onboard food and beverages, the ability to check luggage, assigned seats and onboard advertising, but all of that doesn’t add up to what a good co-branded credit card can bring in. By IdeaWorks reckoning, credit card banks are paying $250 for each 25,000-mile award ticket. The IdeaWorks full report can be seen at http://www.insideflyer.com/link/?34

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