For many years now, ancillary revenue has transcended its status as a mere add-on or minor source of income and become central to airlines’ commercial strategy. Today baggage fees, seat selection, upgrades, lounge access, and inflight purchases are no longer placed on the fringes of airlines’ revenue activities.
In fact, in 2025 airlines earned approximately $157 billion from ancillary revenue – 15.7% of airline revenue for the whole world. Moreover, ancillary revenue appears to be growing faster than overall airline revenue of the airlines compared, which further highlights its significance as a commercial lever.
The commercial, revenue management, and e-commerce departments of airlines are already well aware of the importance of this form of revenue. However, they are less sure as to how to ensure continuous growth after these major areas such as baggage fees, seat selection, and priority boarding are well marketed already.
Currently, airlines continue to make ancillary sales in such a way that passengers are provided with the same set of extra options right at the same point of booking a ticket.
The next step of using ancillary revenue is not only increasing the number of services offered but finding the best fitting offer for each client at the right moment in the journey.
The Limits of a One-Size-Fits-All Ancillary Catalogue
Traditional ancillary merchandising is based on three assumptions:
- If there are multiple choices for ancillary selling, there will be more opportunities to do it.
- If ancillaries are shown late in the booking process, this is enough.
- The same products that are sold as ancillaries to most passengers can be applied.
However, none of these assumptions work in practice. A business traveler flying on a short domestic trip may care about choosing a seat, priority services available, Wi-Fi availability, or fare conditions. A family traveling for a long-haul flight will be interested in baggage allowance, a possibility to sit together, or options for comfort at the time of boarding.
If the same set of ancillaries is presented to every passenger, it does not mean that you will maximize the level of exposure.
The purpose of commercial activities is not to sell more products. The goal is to present the right products to the right passengers according to the principles of smart ancillary merchandising.
Often, what hinders airlines’ ability to personalize passenger experiences is the fragmented nature of passenger data. Combining data from different sources, such as booking history, loyalty status, as well as behavioral patterns, is what allows for a true personalisation capability, instead of just moving from segmentation to working with spreadsheets.
Data-driven personalisation enables airlines to embrace relevant ancillary offers, This is the approach explored in How ADO’s Data-Driven Personalization Unlocks Higher Ancillary Revenue for Airlines.
Why Ancillary Revenue Optimization Cannot Stay an Afterthought
Airlines have turned the ancillary revenue from something that was considered optional to an effective commercial tool. The recent developments in the industry confirm that ancillary revenue is growing faster than the whole airline revenue among airlines with similar performance.
The airlines are not only imposing the fees. More and more often the airlines integrate the ancillary revenue into the retail strategies.
There are three points about this shift:
- It allows making revenues that are not associated with the ticket price which puts pressure on the pricing
- It enables airlines to respond to the passenger preferences rather than simply average them
- It gives commercial teams an opportunity to create packages that exploit the company value even before booking.
The aim is not to increase the number of ancillary products that will be shown on the screen. The aim is to maximize the meaning and commercial effectiveness of the offered products.
What Personalization Actually Means in Airline Retailing
Personalization in this sense is more than just a marketing tool. It is the use of the signals from passengers, bookings, trips, and behaviours to choose the offer, time of delivery, and communication channel. It forms part of the process of managing ancillary offers.
It requires three components to work.
1. Passenger and Journey Context
The signals that should trigger actions include:
- type of traveler, e.g. business, leisure, or VFR,
- purchase history and previous experience with ancillaries,
- VIP or loyalty status,
- type of trip and seat class,
- flight route and length,
- channel of booking,
- time of departure,
- ancillaries purchased before.
Business travelers on a short flight will most probably be willing to pay for priority services, while a family going on a holiday trip may want one of the ancillary services based on baggage.
The aim is not to create an overcomplicated segmentation scheme, but to have enough context in place to make the following offer much more relevant.
2. Timing the Offer Across the Journey
An ancillary may have a different degree of importance in relation to where the customer is in the travel journey:
Booking stage: Relevant bundles assist in a decision-making process and contribute to a better understanding of the value proposition than the list of solo features.
Post-booking: When the travel plan is confirmed, baggage, seat selection, upgrades, and lounge access may gain greater relevance than when they were sold.
Before departure: New demands arise as time to travel gets closer and travel plans are being developed.
Within the travel process: Depending on the communication channel and operations capabilities, context helps providers offer relevant services in the course of the journey.
That is why personalization should be seen as an ongoing merchandising process rather than a one-off occurrence at the moment of reservation.
3. Designing Offers Around Passenger Needs, Not Product Lists
When personalization is applied, it alters the format of ancillary offerings.
Instead of flooding the passengers with an exhaustive list of options to choose from, airlines will be able to customize the services they offer into understandable bundles.
Business Bundle
- Preferred seats on the flight
- Fast boarding
- Extra luggage
Family Bundle on Long Flights
- Flights seats selection
- Extra luggage
- Some services according to choices made on board
What bundle will include should depend on passengers’ habits, flight parameters, service availability and company goals rather than a fixed set of offerings.
Hence, merchandising goes beyond simply offering products. Unlocking Revenue Potential: The Power of Ancillary Merchandising in Airlines explores how airlines can use ancillary merchandising to create additional revenue opportunities.
The Commercial Impact of Personalized Ancillary Merchandising
Making Offers More Relevant, Not Making More Offers
A passenger is likely to be more inclined to accept an offer with which he has shown interest.
For example, a passenger who regularly buys extra baggage may be more responsive to an offer for extra baggage than a passenger who has never shown such interest.
The goal is to make the offer relevant, rather than voluminous.
Less Friction in Choice
Having more options on the screen does not ensure more conversions.
A selected set of relevant offers will facilitate the decision-making in comparison with showing passengers the whole range of ancillary offers.
This means airlines should shift from more choices to better choices by giving passengers more relevant options.
Bundling and Dynamic Pricing Working Together
The strength of personalization grows when it is applied in conjunction with intelligent packaging and pricing.
After an airline identifies the relevant products for a passenger, a new question arises regarding how to group these products into an offer and what rules will govern the offer.
Dynamic pricing can assist in this process, as it will make it possible to tweak the offers depending on such factors as demand, availability, and departure time instead of relying just on fixed prices.
Therefore, personalization, bundling, and pricing are interconnected elements within a larger ancillary marketing approach.. For a deeper look at the pricing aspect, Dynamic Ancillary Pricing: The Next Frontier in Airline Revenue Optimization explores how dynamic pricing can support more responsive ancillary strategies.
Where Airlines Get Stuck Scaling Personalization
There are three challenges that are confronted continuously.
Old Systems that have Little Adaptability.
Pricing, passenger information, inventory, and reservations might be stored in multiple systems that were not built to be compatible with each other. This might make it challenging to modify offer logic or deploy advanced airline upselling strategies when technology needs to be used.
Data that is Not Unified Together.
Booking history, availability of products, prices, and all transactions can sometimes be stored in different systems. Personalization requires connecting important signals to help negotiate offers.
Inconsistent Offers Across Channels
Airlines sell using many different channels. They include:
- Airline websites and mobile apps
- Corporate booking systems
- Travel agents
- NDC-enabled distribution channels
- Other indirect channels.
Aerial routes of all these channels differ and offer many different types of merchandise. Because of this, travelers can receive different offers any time they book their flights with any airline.
Thus, the scalability of the personalization strategy relies on a consistent offering system used across the channels chosen by airlines to sell their products.
The Technology Layer Behind Ancillary Revenue Optimization
Achieving sufficient scale in personalization is not simply a matter of accumulating passenger data. It involves establishing a merchandising layer that combines passenger information with offer rules, product availability, bundling methods, pricing strategies, and distribution channels.
An airline’s ancillary management software must perform the following functions:
- Create customized ancillary offers
- Utilize rules for merchandising passengers and their journeys
- Create ancillary bundles spontaneously
- Utilize flexible pricing arrangements and discounts
- Keep track of offer efficacy and conversion
- Generate performance metrics benefiting future offer-making decisions
That last function is the one that makes personalization more than just a temporary project.
Data drives offers; offers are processed via appropriate channels, and passenger actions deliver feedback on future offers.
This is an ongoing process.
A Practical Roadmap for Getting Started
Airlines do not need to personalize the entire ancillary catalogue on day one.
Define Segments That Actually Change a Decision
Corporate versus leisure, frequent versus infrequent flyers, short-haul versus long-haul, fare-family or cabin preference, and demonstrated ancillary purchase behavior can all provide useful starting points.
The important thing is to select distinctions that can actually influence which offer gets shown.
Map Where Offers Create Value Across the Journey
Consider:
- Search and booking
- Booking confirmation
- Post-booking
- Pre-departure
- Relevant in-journey touchpoints
At each stage, ask:
What is genuinely useful to this passenger right now?
Start With One or Two High-Value Use Cases
Baggage, seat selection, upgrades, lounge access, or bundling can provide focused starting points.
Personalizing a limited number of high-value use cases makes it easier to establish the data, rules, integrations, and measurement framework required before scaling.
Build a Flexible Merchandising Layer
Offer rules, segmentation, bundle logic, pricing rules, channel integration, and performance monitoring all need to work together in a system that can expand as the airline’s offer strategy develops.
Measure What Actually Matters Commercially
Airlines should track metrics such as:
- Ancillary attachment rate
- Offer conversion rate
- Average ancillary revenue per passenger
- Bundle conversion
- Revenue per offer impression
- Incremental revenue
- Passenger engagement
These metrics help commercial teams identify which offers, segments, and touchpoints are creating measurable value.
Ancillary bundling data can also reveal patterns that help airlines refine their merchandising strategy. What Ancillary Bundling Data Can Tell Airlines If They Know Where to Look provides a useful perspective on how airlines can extract more insight from this data.
Where Ancillary Retailing Is Heading
The next stage of ancillary sales is not about showing passengers more products. It is about making every offer more relevant than the last.
The commercial question is shifting from:
How many extras can we sell?
to:
What does this passenger need right now, and what is the most relevant offer we can put in front of them?
Airlines that pull ahead will be the ones that:
- Treat ancillaries as products that require deliberate merchandising
- Use passenger and journey context to improve offer relevance
- Combine personalization with intelligent bundling and pricing
- Keep offers consistent across relevant channels
- Continuously learn from purchase and conversion data
That is part of the broader shift toward intelligent airline retailing. From Ancillaries to Intelligent Offers: The Next Phase of Airline Retailing explores this broader evolution and how airlines are moving beyond traditional ancillary selling toward more intelligent offer-based retailing.
Personalization is therefore not simply another feature of ancillary merchandising.
It is becoming a core capability for airlines that want to move from selling individual extras to delivering intelligent, context-aware offers at scale.
