0 min left

Ancillary Revenue Continues to Grow Despite Global Pandemic

In the darkness of 2020, airlines were able to hold on to one bright area of growth: ancillary revenue. Low-cost carriers increased their haul from extras to $34.7 billion in 2020, with three U.S. airlines increasing ancillary as part of their total revenue by at least five percent.

While 2020 will be remembered as one of the worst years for airlines, it may also be remembered by low-cost carriers as the best for ancillary fees. The 2021 CarTrawler Yearbook of Ancillary Revenue by IdeaWorksCompany shows airlines hauled in $34.7 billion in extras during 2020, with four airlines making over half of their total annual revenue from fees.

Wizz Air, Spirit and Allegiant Lead in Ancillary Fee Growth

The COVID-19 pandemic forced flyers to stay “safer at home” and staying away from the airport. As a result, thousands of flights were cancelled, hundreds of aircraft were put into storage, and airlines began a fight for survival.

Although ancillary fee collection dropped in 2020, the report suggests that adding extra charges to the fare helped to keep them alive through the darkest hours. Although total ancillary revenue dropped by nearly 55 percent compared to 2019, four airlines earned over half of their total income from extra fees: Wizz Air, Spirit Airlines, Viva Aerobus and Allegiant Air.

Table courtesy: The 2021 CarTrawler Yearbook of Ancillary Revenue by IdeaWorksCompany

Southwest Airlines also increased their revenue from ancillary fees by 7.8 percent, while Frontier Airlines takings increased by 5.6 percent.

“Ancillary revenue as a percent of total revenue is a key measurement,” the report states. “It accurately reflects results for traditional and low cost carriers.”

Among all carriers, total ancillary revenue dropped significantly as flyers were staying at home and off airplanes. Both American Airlines’ and United Airlines’ ancillary income was cut nearly in half, with both carriers bringing in over $3 billion in extras. Delta dropped by 40 percent with an income of $3.68 billion, while Southwest brought in $2.5 billion primarily through their loyalty program.

Table courtesy: The 2021 CarTrawler Yearbook of Ancillary Revenue by IdeaWorksCompany

Loyalty Programs Become Major Lifelines for Airlines in 2020

Even though there were significantly less flyers traveling, airline loyalty programs helped to keep the carriers afloat. While the five largest U.S. carriers only brought in $11.1 billion from loyalty programs in 2020, the amount of revenue per passenger significantly increased.

The 2021 CarTrawler Yearbook of Ancillary Revenue by IdeaWorksCompany

“When measured on a per passenger basis, the result [of loyalty program revenue] was $37.64, which is a stunning 46.4 percent increase,” the report states. “It’s true, cardholders were a little less enchanted by the lure of reward travel during 2020, but these programs continued to deliver bountiful revenue for their airline owners.”

The value of the programs also allowed airlines to fund their recovery on loans taken against them. All three major U.S. legacy carriers – American, Delta and United – each sought to take loans based on loyalty program income and user data, in order to avoid taking extra funding from the federal government.