Ancillary sales drive pandemic recovery for many airlines

Sales of add-ons drove an increase in revenue last year as airlines sought to recover pandemic losses.

Total ancillary revenue reached $48.4 billion in 2021 – up 54.2% from 2020, but 28% lower than 2019, a new study reveals.

Overall airline revenue rose 32% to $462 billion from 2020 to 2021. But 2021 still trailed 2019 revenue by about half, according to a report by CarTrawler, a B2B provider of technology solutions for the global travel industry.

The 2022 CarTrawler Yearbook of Ancillary Revenue, produced by IdeaWorksCompany, analyzes data from 75 international airlines.

When broken down per passenger, average ancillary revenue reached $29.96 per person among the 75 airlines disclosing results for 2021 – an increase of $8.42 over 2019.

Out of 67 airlines disclosing ancillary revenue results for 2019 and 2021, nearly 80% posted a better 2021 result for ancillary revenue as a percentage of total revenue, the study shows.

Aileen McCormack, chief commercial officer at CarTrawler, says the findings make it clear that ancillary revenue was “a key driver of revenue” for airlines in 2021.

“The report shows significant increases in ancillary revenue as a percentage of total revenue across all flight carriers – up to 35.5% for high-performing low-cost carriers and 22.2% for major U.S. airlines, which is a very encouraging result for the industry,” McCormack says.

Ancillary revenue accounted for more than half of 2021 revenue at four airlines: Wizz Air, Frontier, Spirit and Allegiant.

Airlines grew ancillary sales by expanding product offerings such as carry-on fees, extra leg room, subscription-based benefits, freeze-your-price and prepaid-change flexibility; adopting better retailing methods for mobile apps, web sites and online travel agencies to facilitate easier booking and more visibility; and raising prices.

However, an analysis of whole figures shows a different finding: Of the 10 airlines with the largest ancillary revenue totals, nine saw ancillary revenue drop from 2019 to 2021. Of the top 10, only Frontier saw a rise in ancillary revenue from 2019 to 2021, by 3.3%.

Frequent flyer programs were also a solid revenue source as consumer spending rebounded in 2021, with co-branded credit cards accounting for “more than 90% of this cash bonanza,” CarTrawler says.

Co-branded credit cards associated with large programs - especially in the U.S. - generate revenue from everyday consumer spending, which preserves cashflow even when passenger traffic or fare revenue drops, according to the report.

The five largest U.S. airlines - Alaska, American, Delta, Southwest and United - generated revenue of $16.4 billion last year from their frequent flyer programs. That equates to an average of $30.88 per passenger – up from $25.71 per passenger in 2019. However, the 2021 total of $16.4 billion still lags 2019 by 13.7%.

Per-passenger totals can reflect more positively than other metrics because the per-passenger amount can rise with fewer passengers, the study points out.

Read the full report here .

Meanwhile, the U.S. Department of Transportation is proposing a rule to require airlines and travel search sites to disclose certain fees beyond the base fare up front.