Cheap ticket, expensive extras: the silent metamorphosis of the airline industry
The basic economy class model is becoming more widespread in the airline industry, with passengers spending increasing amounts on additional services to enhance the minimum experience offered by the cheapest tickets.This is revealed in the latest edition of the Ancillaries Yearbook 2025 report, published by IdeaWorks Company.
The study analyzes the results of 61 global airlines in 2024 and highlights a remarkable phenomenon: while ticket prices are falling, revenue from extra services is soaring.
In 2024, revenue from extra services reached $148 billion, far exceeding the $109.5 billion in 2019, before the pandemic. This growth is explained by a 5.3% increase in revenue per passenger, offsetting the drop in fares.
US airline Frontier became the first airline to generate more than 60% of its total revenue through additional services, with 62%, surpassing even ticket revenue. The ranking of the airlines most dependent on ancillaries is dominated by low-cost carriers: Frontier (62.0%); Spirit (58.7%); Volaris (55.3%); Breeze (54.0%); Allegiant (52.9%); Wizz Air (44.6%); Viva Aerobus (43.7%); Volotea (40.0); easyJet (38.6%); Pegasus (33.9%). Five companies now exceed half of their revenues via ancillaries, a threshold previously considered exceptional.
The basic economy class is gaining traction
The report highlights the massive adoption of the “economy base fare” model, whereby airlines offer very attractive basic fares and charge for each additional service. The most significant revenues come from baggage and seat selection, with restrictive policies limiting bulky cabin baggage and dynamic seat pricing on demand.
Loyalty programs
In the United States, the top five airlines (Alaska, American, Delta, Southwest and United) generated $28 billion through their loyalty programs, mainly through co-branded credit cards. This represents $35.48 per passenger in 2024, up from $34.86 in 2023.
In Australia, the most striking example is Qantas, whose co-branded card program accounts for 35% of total credit card spending by Australian consumers.
While this model increases revenue in the short term, it poses a risk for legacy airlines. By adopting low-cost strategies, they are moving dangerously close to their low-priced competitors. It is a metamorphosis that is not without risks.
Data show that traditional airlines' extra revenue grew by 5.3% per passenger, while their ticket revenue fell by 6%, reflecting a strategy of capturing market share through lower fares, offset by the monetization of additional services.