01 August 2010

How Big Ancillaries?

Depends who you ask.

According to the US government (GAO) - figures for 2009 come to at least $3 billion. But the DOT reports as quoted by PCW come to over $7.8 Billion Ideaworks and Amadeus say its going to be over $13 billion in 2010.

PhocusWright says as noted above - $7.8 of which nearly $3 billion are bags alone.

Anyway you cut it the numbers are getting bigger. If we take the Global flight revenues to be approx $500 Billion in 2009 - these numbers are starting to become serious contenders. According to ATW's annual survey of airlines - annual US average cost per ticket (pure air ticket revenue) fell to $227 in the fourth quarter. Down from $300 in 2000. With average ancillaries now making up averages of $50 plus per ticket - they are replacing airline tix revenue as a source of income for the airlines.

When distribution costs are factored in - then there is a pretty strong correlation between the cost to distribute a ticket and the additional revenues per ticket achieved. Coincidence?

Definitely this is a story that will play a long time. Organizations such as Charlie Leocha's and Kevin Mitchell's will continue to belly ache about it - even while supporting the airlines' need for additional revenues. While we all personally hate it - I think we as consumers will begrudgingly continue to accept it.


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