Nov 19, 2019
The CarTrawler global estimate forecasts an 18% increase above 2018, with $75.6 billion of the total consisting of a la carte fee activity.
Dublin, Ireland & Shorewood, Wisconsin, 19 November 2019: IdeaWorksCompany, the foremost consultant on ancillary revenue, and CarTrawler, the leading provider of online car rental distribution systems, project airline ancillary revenue will reach $109.5 billion worldwide in 2019, compared to $92.9 billion in 2018. The CarTrawler Worldwide Estimate of Ancillary Revenue represents an almost fivefold increase from the 2010 figure of $22.6 billion, which was the first annual ancillary revenue estimate.
Earlier this year, CarTrawler and IdeaWorksCompany reported the ancillary revenue disclosed by 76 airlines for 2018. These statistics were applied to a larger list of 160 airlines to provide a truly global projection of ancillary revenue activity by the world’s airlines for 2019. This marks the tenth year IdeaWorksCompany has prepared a projection of ancillary revenue activity.
Ancillary revenue is generated by activities and services that yield cashflow for airlines beyond the simple transportation of customers from A to B. This wide range of activities includes commissions gained from hotel bookings, the sale of frequent flyer miles to partners, and the provision of a la carte services − providing more options for consumers and more profit for airlines.
Aileen McCormack, Chief Commercial Officer at CarTrawler.
Analysis performed by IdeaWorksCompany during the past nine years reveals natural airline groupings based upon a carrier’s ability to generate ancillary revenue. The “percentage of revenue” results associated with four defined categories have been applied to a worldwide compilation of operating revenue disclosed by 160 airlines. The following describes the four categories:
Ancillary revenue is nearly $24 per passenger for 2019
IATA predicts almost 4.6 billion passengers will spend $899 billion worldwide on air transport for 2019. Applying the global ancillary revenue estimate to IATA’s statistic yields a result of $23.91 per passenger. Back in 2010, the per-passenger average was a far smaller $8.42. Ancillary revenue now represents 12.2% of global airline revenue, which greatly exceeds the 5.0% operating profit margin (EBIT earnings before interest and tax) predicted by IATA for 2019.
Ancillary revenue also equals more than half of the industry’s annual fuel bill. IATA estimates the airline industry will spend $206 billion on fuel during 2019, which has jumped substantially from the 2017 level of $149 billion. The sum of the industry’s global ancillary revenue provides an abundant hedge against fuel prices. Ancillary revenue also has proven to be a stable revenue source, even as passenger yields (revenue per mile) have been dropping since 2012. Competitive pressure from new airlines, capacity additions by existing carriers, and economic troubles have not affected the continued upward trajectory of ancillary revenue’s growing contribution to airline income statements.
There are risks. The results produced by any product or service can be punished by the marketplace through reduced demand, lower prices, and a drop in revenue. Traditional airlines can overreach by aggressively charging fees for services that don’t align with consumer expectations. This occurs when airlines quickly implement fees before modifying how their brand is presented. For instance, neglecting how to accommodate children when seat assignments are not purchased by parents. Low cost carriers also face risks when venturing into new areas. For example, many try to attract business travelers with premium services, such as more leg room, early boarding, and onboard treats. These higher yield customers might be tempted to fly once or twice, but if the LCC fails to deliver as promised, they will quickly return to the comfort of flying a traditional airline.
The big results projected in this worldwide estimate prove ancillary revenue is a necessary and powerful component of the global airline industry. However, when consumers feel they don’t have a choice, and airlines become careless about implementation and indifferent to offering good value, this mighty revenue stream could become as unpredictable as the price of jet fuel or a politician’s desire to regulate.
 Operating revenue results were drawn from research conducted by IdeaWorksCompany in its annual global review of financial filings and disclosures made by airlines.
 IATA figures on this page: IATA Economy Performance of the Airline Industry, Mid-Year Report for 2017, 2018 and 2019 (amount includes airline revenue and indirect taxes) and IATA Industry Factsheet – June 2016.
Classon HouseDundrum Business ParkDundrumDublin 14Ireland
14th Floor575 5th AvenueNew YorkNY 10017United States
3 Waterhouse Square138 – 142 HolbornLondonEC2N 2SWUnited Kingdom
Manage my BookingFAQs