New Study Reveals the Numbers Behind Ancillary Fees

If you find the airlines’ passionate pursuit of ancillary revenues puzzling – or annoying – consider the findings of “The Amadeus Guide to Ancillary Revenue by IdeaWorks.”  Those revenues grew 43% in 2009 over the previous year, to $13.5 billion worldwide.

Given that airlines worldwide lost somewhere in the neighborhood of $16 billion in 2008 and nearly $10 billion in 2009, the lure of ancillary fees is compelling.

The study, underwritten by Amadeus with analysis by IdeaWorks, a consultancy focused on airline ancillary revenues, noted that some of the additional revenue came from new ancillary revenue initiatives introduced by various airlines last year.

United overtook American in 2009 as the carrier that reported the most ancillary revenue, with $2.03 billion. In the summer of 2008, United introduced its Travel Options program, which allowed passengers to fast-track their way through airport lines or have their luggage shipped via Federal Express. It added new options last September, such as extra legroom and lounge access.

Outside the U.S., Qantas, with $1.04 billion, and Ryanair, with $882.5 million, were the ancillary revenue champions. Australia’s Qantas was an early adopter of the fare family concept, and the Irish Ryanair is considered one of the world’s fiercest unbundlers of air fares. Its chief executive officer, Michael O’Leary, regularly threatens to impose a €1/£1 fee for using onboard lavatories.

When it comes to how much ancillary revenue airlines collect per passenger, a different cast of characters shows up. Las Vegas-based Allegiant Air maintained its lead in 2009 by collecting an average of $33.10 per passenger in added fees. The only way to avoid a $14.99 booking fee on the carrier is by purchasing a ticket at the airport.

Jet2.com, a low-cost carrier in the U.K., bumped United out of the No. 2 spot in 2009 with a per-passenger average of $29.93. The carrier charges a minimum of $7.57 for online check-in, unless Solo or Visa Electron cards are used.

Allegiant also maintained its lead in the “ancillary revenue as percentage of total revenue” category in 2009, at 29.2%. Spirit Airlines overtook Ryanair for the No. 2 spot, with 23.9%. Spirit is the carrier that introduced the imaginative “passenger usage fee”: You buy your ticket, then you pay a fee of $8 each way to use it, unless you buy it at the airport. Spirit also raised a ruckus this year when it began charging $20 to $45 for carry-on luggage that does not fit under the seat, effective for travel on or after Aug. 1.

By the way, Ryanair’s periodic beating of the lavatory-fee drum is most likely a ploy for press attention rather than an actual plan. Such a move would require modification of aircraft that would not come free to the carrier, as would its latest test balloon, standing room tickets.