The birthplace of airline a la carte revenue – Europe – continues to lead the globe in annual growth for this key sales component, but the world’s fastest-growing air travel market, Asia, is not far behind, reports IdeaWorksCompany and CarTrawler in the latest update of a la carte ancillary revenues. It estimates that in 2019 worldwide totals reached USD75.6 billion, more than double the USD36.7 billion figure recorded in 2015.
Each year IdeaWorksCompany, a consultancy on airline ancillary revenues, through the sponsorship of leading technology platform CarTrawler, analyses the ancillary revenue disclosures for airlines all over the world. They recently estimated airline a la carte revenue at USD75.6 billion for 2019 ( up from USD65 billion worldwide), but have now released a regional breakdown and comparisons to the 2015 performance figures.
The ‘CarTrawler Global Statistics of a la Carte Revenue’ report highlights that European airlines lead in terms of a la carte ancillary revenue generated, accounting for 27.1% of the global share, or USD31.5 billion with easyJet, Eurowings and Ryanair the leading carriers generating such income.
Asia Pacific airlines come in second place with an 18.8% share, or USD21.1 billion, but the region is growing at a faster rate than the more-established European market. The report shows Asia Pacific recorded the largest rise of all global regions between 2015 and 2019 – up 158% from USD8.2 billion in 2015.
Elsewhere, North American carriers earned USD14.8 billion in 2019 and was the slowest growing region over the analysis period. Africa and the Middle East carriers secured a la carte revenues of USD5 billion and Latin American and Caribbean airlines secured USD3.2 billion.
The pace with which ancillary revenue has transformed the airline industry is clear to see in this latest report. Aileen McCormack, chief commercial officer at CarTrawler says it “is beyond doubt now that carriers which prioritise extensive choice architecture and a superior customer experience are significantly increasing their chances of reporting healthy profit margins”.
She argues that the adoption of a sophisticated ancillary revenue strategy “must now be seen as a necessary step for all airlines that want to stay relevant” as we enter a new decade, one that is sure to see further dramatic changes in distribution and airline business strategies.
The latest report further demonstrates the principle that the prevalence of low cost carriers in a region drives the level of ancillary revenue, effectively a higher concentration of low cost carriers boosts ancillary revenue and a la carte results. However, there is increasing evidence that traditional airlines are making an impact as they make moves to increase a la carte activity.
This can be seen in the dominating Europe and Russia region were LCCs generate more than 27% of operating revenue. The report highlights how traditional airlines are making moves to increase a la carte activity and have recently been more forthcoming regarding their results. Examples include Air France/KLM loyalty members accruing miles for fees paid for premium meals, seat assignment, and baggage; Aeroflot Group introducing basic economy fares in 2019 and SAS Scandinavian establishing a business unit to grow ancillary revenue.
As the report highlights: “the clear lines which once separated traditional airlines and LCCs have become blurred”. Traditional airlines had built their brand on an all-inclusive service with economy fares that included a checked bag, pre-assigned seating, and the ability to make reservation changes, but now have competitive fares that rival LCCs with no checked bag, no advance seat assignment and last to board restrictions.
Meanwhile, while LCCs are now offering fares without overhead baggage space, many are also pushing for the business travellers which had been the preserve of the traditional airlines, using their point-to-point regional connectivity to their advantage.
The report acknowledges European carrier easyJet has a good example. Its easyJet Plus membership provides early boarding, fast track security, extra leg room seats, and express bag drop. “The only items missing from the offer are lounge access and a glass of sparkling wine. Oh wait … those are available as a la carte services also sold by easyJet,” says the report.
“This is the magic of the a la carte method,” the report highlights. “It frees airlines from rigidly providing the same perks for all economy passengers. Instead, passengers can click and choose the comfort and convenience that best meets their needs and budget”.