Ancillary Product Sales
The airline industry has moved to swiftly grasp opportunities for providing ancillary services, such as baggage fees, extra legroom and on-board catering. The next wave of innovation in ancillary services will come from those airlines which develop new products that support their brand positioning and deliver value to the traveler by meeting their individual needs and preferences. Consumers are beginning to accept this method of airlines pricing their products, for consumers who can travel light, they don’t care when they board and don’t want to eat on the plane, they’ll find a cheaper fare. And those that want the extras they like the transparency.
Meanwhile, and regardless of where individual travelers stand on the issue, it’s obvious that ancillary revenues have become the lifeblood of the industry, providing billions of dollars in income. According to the International Air Transport Association, the global industry posted an estimated net profit of $7.9 billion last year on revenues of $597 billion, a post-tax margin of 1.3 percent for ancillary products. Given those pressures and the difficulty of raising fares in tough times, it’s unlikely that the airlines will forgo their ancillary revenues anytime soon.