Ancillary Revenue Growing

Ancillary Revenue Growing

IdeaWorks and Amadeus have published a report estimating that the total amount of ancillary revenue earned by the airlines is expected to reach $36.1 billion worldwide in 2012, an 11.3 percent increase from 2011. Ancillary revenue includes optional services paid for by travelers, such as baggage fees, early boarding and preferred seats, as well as commissions for hotel bookings booked through the airline’s website, in-flight meals and entertainment and the sale of frequent flyer miles to partners. IdeaWorks proposes that the airlines earn the majority of ancillary revenue (around 50 percent) from the sale of miles, especially those miles sold to the banks that issue airline credit cards.

Baggage fees account for approximately 20 percent of ancillary revenue. The report states that a significant amount of baggage revenue is generated from the “fees paid by banks that issue credit cards. These banks make payments to the airlines for the provision of ‘first bag free’ benefits associated with a growing number of airline credit cards.”

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