Too much baggage? Not if you’re an airline

SYDNEY – The low-cost carrier sector has triggered an ancillary revenue (merchandising) revolution, with airlines worldwide expected to generate US$58 billion in ancillaries this year, according to research from the Centre for Asia Pacific Aviation (CAPA).

“A sizeable figure, US$58 billion however represents just 12 percent of total airline revenues, suggesting we are just at the start of the movement to monetise services and products passengers used to receive as part of the ticket price”, according to CAPA executive chairman, Peter Harbison.

Baggage fees are one of the fast growing items in a portfolio developed largely by LCCs that also includes seat allocation, inflight services and products, related travel products (including insurance, car hire and accommodation), inflight advertising, airport lounges access and increasingly diverse opportunities including concert tickets, mobile phone credits and more.

“Air fares around the world, particularly in the US, have fallen sharply since the onset of the recession, making baggage fees (and other ancillary revenue items) an increasing lifeline for the airline sector.

“US airlines alone are expected to smash through the US$4 billion-barrier in 2010 in terms of baggage revenue generation”, said Harbison.

But such charges, particularly in the US as network carriers adopt these strategies, have quickly become a flashpoint for airline differentiation and a catalyst for marketing innovation, notes the report.

The movement is spreading to Europe, with British Airways, under considerable financial strain, one of the earlier movers after its US counterparts.

Asia Pacific adoption of ancillary revenue strategies, outside the LCC sector, has been much more cautious.

To help understand the opportunities better, CAPA, in partnership with Travelport, has launched a landmark study of Asia Pacific airline preparedness for, and participation in, the ancillary revenue revolution.

Airlines across the region will be surveyed this month regarding their strategies and targets for ancillary revenues, which will form the basis of a report to be published later in the year.

More at www.centreforaviation.com