Airline revenues from on-demand services have tripled in 7 years
The sale of ancillaries from airlines continues to increase at an unstoppable rate, up 308% since 2010, according to a report by Idea Works Company and Car Trawler. The model adopted by the low-cost companies has become so widespread that all suppliers have already opted to unbundle the tariff.
In addition to this increase in retail, airlines have also found a line of business with their partners for ancillary services, such as car rental or hotel bookings.
The 2017 summary table by region shows how on-demand services activity varies. The dominance of low-cost carriers in a region actually drives ancillary revenues:
• Europe is the leader in on-demand service activity. Low cost carriers (LCCs) generate a not inconsiderable 27% of the operating revenues of the airlines based in Europe and Russia.It is not surprising, therefore, that the region also leads in on-demand service revenues as a percentage of total airline revenues.The leading carriers in ancillary revenues (EasyJet, Norwegian and Ryanair) have extensive networks that have influenced the business models of the other operators.North America shows less penetration by LCCs, especially Southwest, which operates similarly to a traditional airline in terms of a la carte services. However, larger airlines, such as Air Canada, Delta or United, have adopted more "a la carte" services. Nótense hereó as in Europe, increases as añías transatlantic carriers have begun adding fees for the first checked bag.
• In Latin America, the market is evolving rapidly as airlines such as GOL, JetSmart and Volaris challenge the status quo of all-inclusive airline pricing. Regulations are also changing: in 2017, Brazil allowed airlines to charge fees for checked baggage on domestic flights.
• In the Asia/Pacific region, there is a long tradition of low-cost, with AirAsia Group's extensive network reach leading the way. However, the region's international network and legacy airlines have been much slower to adopt the a la carte service methods now used by U.S. and European-based network carriers.
Chinese regulatory authorities have only begun to express support for LCC development in the past two years. Once the low-fare model becomes widespread in China, it is easy to imagine how quickly passengers will adopt it.
• &Africa and the Middle East have lagged in the development of low-cost, ancillary revenue carriers. The major airlines that produce revenue from a la carte services are ranked because of their large size rather than their dynamic retail activities. The region's leading low-cost carriers are only Air Arabia and Flydubai. The growth of the low-cost model and ancillary revenues is inhibited as a result of government control and ownership of the airlines, a model that is entrenched in the region.