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COVID-19 Cuts 2020 Airline Ancillary Revenue in Half

COVID-19 Cuts 2020 Airline Ancillary Revenue in Half
Joe Cortez

Considered a key strategy in airlines revenue programs, the COVID-19 pandemic is cutting deeply into ancillary revenue numbers for carriers around the world. The recent CarTrawler Worldwide Estimate of Ancillary Revenue suggests airline ancillary revenue will be nearly cut in half this year to $58.2 billion, marking the worst year since 2011.

It’s no secret that airlines are relying more and more on ancillary fares as part of their passenger revenue strategy. As the COVID-19 pandemic has taken grip on the world, passenger traffic has been decimated, causing ancillary fee income to drop as well. According to the latest IdeaWorks report, the 2020 CarTrawler Worldwide Estimate of Ancillary Revenue, carriers will bring in only $58.2 billion in 2020, a decrease of 47 percent worldwide.

Although Ancillary Revenue Drops, More Airlines Rely on Extras to Make Money

Over the past 11 years, IdeaWorks has used ancillary revenue data from reporting airlines to project the final number. This year, the company collected 2019 data from 81 airlines, and applied them to 134 airlines to determine how much they might collect by the end of the year.

Much like passenger load numbers this year, that number is expected to be the worst in the past decade. With COVID-19 forcing travelers to stay at home, airlines are expected to take in the least amount of ancillary revenue since 2011.

Even though ancillary revenue is down, airlines are dependent now more than ever on upselling extras to complete the passenger experience. While the average global one way far is just over $120 in 2020, the ancillary revenue per passenger is $25 – an increase of $15 since 2010.

Chart courtesy: 2020 CarTrawler Worldwide Estimate of Ancillary Revenue

“COVID-19’s impact on the travel industry cannot be understated, but ancillary revenue has been a much-needed silver lining during an unprecedented year,” Aileen McCormack, chief commercial officer at CarTrawler, said in a press release. “Even though the average fare has dropped steadily over the past decade, we have seen significant growth in ancillary revenue per passenger – a figure that has grown by over 200% since 2010 and whose trajectory has been unaffected by the pandemic.”

So what are flyers buying to put together their itineraries? According to the data, baggage revenue from flying families is increasing, as well as seat selection fees to keep everyone seated together. Consumers are also choosing “premium” seats with extra legroom over onboard food sales and lounge passes, as the novel Coronavirus has changed how airlines offer catering before and during flights.

Is Ancillary Revenue More Profitable Than Frequent Flyer Programs?

Although it’s no secret that frequent flyer programs are incredibly profitable for airlines, they may come in second place to ancillary revenue in the future. Projecting forward based on 2019 data, traditional airlines are expected to make more through a la carte add-ons than frequent flyer programs.

Table courtesy: Chart courtesy: 2020 CarTrawler Worldwide Estimate of Ancillary Revenue

While the trend is equally true for low-cost carriers and those in the “ancillary revenue champs” category, frequent flyer programs are still king in the United States. The major U.S.-based carriers are expected to earn $11.5 billion from their loyalty programs, over 50 percent more than from ancillary charges.

View Comments (2)

2 Comments

  1. katiep23

    November 19, 2020 at 9:07 am

    Being banned from flying Spirit seems more like a prize than punishment.

  2. MRM

    November 19, 2020 at 4:54 pm

    I really hope these airline execs that have lived high off the hog this past decade are somehow able to continue payments on their third vacation home and 6th vehicles – those people have needs too!

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