Jump in global air­line an­cil­lary rev­enue this year

The Star Malaysia - StarBiz - - News - By B.K. SIDHU bksidhu@thes­tar.com.my

PE­TAL­ING JAYA: Global air­lines are pro­jected to earn US$82.2bil (RM337.3bil) in an­cil­lary rev­enue this year, a jump from US$67.4bil last year.

The amount is triple what air­lines had made in 2010 at US$22.6bil.

Bag­gage fees will make up the big­gest por­tion of the in­come at 27%, fol­lowed by a la carte ser­vices (25%), on­board ser­vices such as food, seat­ing and duty free (21%), in­surance, ho­tel and car hire (21%), and sale of fre­quent flier miles to banks (12%).

Th­ese pro­jec­tions were made in a study by con­sult­ing firm IdeaWork­sCom­pany and on­line car rental dis­tri­bu­tion com­pany CarTrawler in­volv­ing 184 air­lines.

“It is ter­rific to see such healthy growth in world­wide air­line an­cil­lary rev­enue,” said Aileen McCor­mack, CarTrawler’s chief com­mer­cial of­fi­cer.

The In­ter­na­tional Air Trans­port As­so­ci­a­tion (IATA) pre­dicts nearly 4.1 bil­lion pas­sen­gers will spend US$776bil world­wide on air trans­port this year, and an­cil­lary rev­enue ac­count for 10.6% of that.

On fuel, IATA be­lieves the air­line in­dus­try will spend US$129bil this year, and “it is rea­son­able to sug­gest an­cil­lary rev­enue will some­day ex­ceed the air­line in­dus­try’s an­nual fuel bill. It is amaz­ing to view bag fees as a mean­ing­ful hedge against the price of jet fuel”, the study said.

The study said low-cost car­ri­ers through­out the world typ­i­cally rely upon a mix of a la carte ac­tiv­ity to gen­er­ate good lev­els of an­cil­lary rev­enue. The per­cent­age of rev­enue for this group re­mained un­changed for a sec­ond year at 11.8% for 2017. Low-cost car­ri­ers in­clude Brus­sels Air­lines, China United Air­lines, Con­dor, In­ter­jet and Jazeera Air­ways, the study said.

Ai­rA­sia Bhd is one of the high­est earn­ers of an­cil­lary in­come in the re­gion. Last year, Ai­rA­sia’s an­cil­lary rev­enue reached RM1.26bil, ac­count­ing for 18.4% of to­tal group turnover.

The big­gest con­trib­u­tor was bag­gage fees (45%), fol­lowed by cargo (10%) and 19% from food and bev­er­age, seat se­lec­tion and travel in­surance. The air­line flew 56.6 mil­lion pas­sen­gers and ex­pects a 29% in­crease this year to 73 mil­lion.

For the sec­ond quar­ter this year, its per pas­sen­ger an­cil­lary rev­enue was RM47-RM49 to­talling RM471mil for the pe­riod, and its group CEO Tan Sri Tony Fer­nan­des hopes the fig­ure will reach RM60 per pas­sen­ger next year.

Re­cently, Fer­nan­des said Ai­rA­sia will mon­e­tise data and boost an­cil­lary rev­enue by be­com­ing an “Ama­zon in the sky”.

The air­line wants to roll out e-wal­let ser­vices for its South-East Asian trav­ellers and opt for an in-flight dig­i­tal pur­chas­ing sys­tem to re­move cash and mer­chan­dise trol­leys and re­brand its on­line du­tyfree store to in­clude home de­liv­ery ser­vices.

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