The world’s top ten airlines generate as much as 46% of sales from ancillary revenue, new research reveals.
CarTrawler-sponsored analysis shows a big jump from five years ago, when the same group of airlines generated 10% to 33% from ancillary revenue.
The report by research firm IdeaWorksCompany also found that the top ten carriers generated more than $28 billion in ancillary revenue last year compared with $2.1 billion in 2007.
US carriers United, Delta, American and Southwest bring in the highest levels of revenues from ancillary sales, followed by Air France/KLM, Ryanair, EasyJet, Lufthansa, Qantas and Air Canada – much of it through frequency flyer scheme contributions, with the exception of the Irish and UK-based budget airlines which gain from the likes of online car hire and travel insurance sales.
Jet2.com was among the top producers of ancillary revenue per passenger of $42.46, with US carrier Spirit achieving $49.89 and AirAsia X $34.41.
Wizz Air was found to be top in Europe when calculating ancillary sales as a percentage of total revenue at 39.4%, with Ryanair at 26.8% and Jet2.com at 26%. Spirit topped the table at 46.4% and US rival Frontier at 42.4%
Of the 138 airlines reviewed, 66 revealed figures related to ancillary revenue.
The full results are due to be released in September in the annual CarTrawler yearbook of ancillary revenue by IdeaWorksCompany.
CarTrawler chief commercial officer Aileen O’Mahoney said: “Airlines that want to grow their ancillary revenue need to adapt to their customer’s behaviour.
“The online car rental market is expected to grow at a 9.3% compound annual growth rate between 2016-2020 with mobile sales for car rental showing the most significant growth at 24.2% compound annual growth rate.
“Airlines need to be sourcing the right technology and providing their customers with ancillary products where, and when, they are open to purchasing them.”
Meanwhile, Wow Air founder and chief executive Skuli Mogensen has suggested that the airline could start paying for passengers to fly with it.
“Our goal, and we’re working hard towards it, is for our ancillary revenue to actually surpass our passenger revenue,” Mogensen said. “What ever airline becomes the first to achieve this will be a game changer.
“In the future we could pay you to fly with us. If you come to us and trust us with your booking, we can see that your air fare is reduced to zero and even reward you for it,” he told the Daily Telegraph.
The Icelandic carrier is looking at a series of innovative ways to reward its passengers financially.
Those who might be paid to travel would be passengers who Wow Air has built up a “special relationship” with and who wasn’t to make the airline an integral part of their travel plans along with booking hotels and activities.
Travellers could potentially be paid if their social media posts generate business – effectively turning customers into the airline’s brand ambassadors.
“There are all kinds of interesting opportunities through using technology and social media,” Mogensen said.
“People tend to take a lot of photos while travelling, sharing their experiences. We see a lot of interesting ways to empower people to spread the word about Wow and to reward them accordingly.”
Wow Air’s plans involve going even further in terms of customer engagement.
“It means having a deeper, more personalised relationship based on your prior behaviour, needs, and obviously always with your privacy in mind,” Mogensen said.
That means Wow Air’s future value as a company will be tied to how effectively it can leverage data collected from its customers in the same vein as Facebook or Google.
Airlines are currently not even close to realizing the full potential of its business intelligence, Mogensen claims.
“If we can understand your needs better, it allows us to interact with you more effectively and help you have a more successful trip whether that be for business or leisure.”
More: