Airline ancillary revenues soar
25-04-24
From checked baggage to preferred seating, ancillary charges become a vital source of revenue for airlines.
In the airline industry, ancillary charges are not only common practice, but an increasingly crucial component of the airline revenue structure. These include additional payments passengers make for services such as checked baggage, advance seat selection and in-flight meals. What were once considered extras now form a significant and growing part of airline profits.
The gap between classes of service on flights has widened markedly in recent years. While business class passengers enjoy increasing amenities, economy class travelers increasingly face space restrictions and additional paid options. This "unbundled pricing" strategy allows airlines to offer lower base fares while generating additional revenue through a variety of optional services.
A prime example of this model is Air Canada, which reported nearly $2 billion in ancillary revenue in 2022, a 50% increase from five years ago. This revenue now accounts for more than 15% of the airline's total revenue, a significant increase from less than 11% in the same period.