The Future of Airline Ancillary Services: Key Trends
The future of airline ancillary services is evolving, with airlines increasingly relying on personalized offerings and smart technologies to enhance profitability.
Airlines are making more money than ever by offering extra services. Many big airlines are coming up with new ideas to earn more. They offer things like special seats and fun activities during flights. These extras aren’t just for fun—they’re very important for how airlines make money.
We’ve put together all the research and information to show how these extra services are changing airlines. We’ll talk about how they bring in more money and how airlines can use smart technology and strategies to get even better results, especially for passengers.
The Changing Role of Extra Airline Ancillary Services
In the last ten years, airlines have changed how they make money. Before, they mostly made money from selling tickets. Now, they are using extra services to make more profit. These services, like baggage fees and entertainment during flights, are really important for airlines today.
This blog talks about the different types of extra services, why they matter, and the latest trends, backed by the newest data from the industry. Airline ancillaries are extra services and products airlines offer, besides just flying passengers. These services make the journey better and more convenient for travelers. There are different types of these extra services, as shown in the diagram.
Revenue Management in Airline Ancillary Services
The money airlines make from extra services has been growing a lot over the past ten years. A 2023 report from IdeaWorksCompany and CarTrawler says that in 2023, airlines are expected to make about USD 117.5 billion from these extra services. This is more than what they made in previous years: USD 102.8 billion in 2022, USD 109.5 billion in 2019, and USD 82.2 billion in 2018. The projected revenue of USD 117.5 billion for 2023 is almost three times more than the USD 31.5 billion they made in 2013. This shows that extra services are becoming more important for airlines as they look for new ways to make money, beyond just selling tickets.
Key Trends and Numbers in Recent Years
- Baggage Fees: Airlines in the U.S. are making a lot of money by charging for extra bags. In 2023, they earned over USD 5.8 billion just from this, which is more than the USD 4.9 billion they made in 2019. This shows that airlines are asking for more money when passengers check bags.
- Seat Selection Fees: Many passengers like to choose better seats on the plane. For example, one big North American airline made almost USD 1 billion in 2022 from selling special seats and other services.
- In-Flight Services: Services like Wi-Fi, food, and entertainment on planes are becoming very profitable. By 2026, airlines are expected to make USD 4.7 billion from in-flight internet. Airlines are teaming up with tech companies to make flying more enjoyable.
- Loyalty Programs: Frequent flyer programs are also making airlines a lot of money. In 2021, one large North American airline’s Advantage program added about USD 1.5 billion to its income, and Delta’s SkyMiles program brought in over USD 1.2 billion.
- Onboard Retail: Around the world, airlines made USD 86 billion from selling items like duty-free goods and other products on flights in 2019. A big portion of that money came from sales made while passengers were in the air.
Regional Differences & Impact of the Pandemic – Airline Ancillary Services
The types of extra services airlines offer can be different in various parts of the world. For example, low-cost airlines in Europe and Asia were the first to use extra services to keep ticket prices low while still making money. Ryanair, the largest budget airline in Europe, said that extra income made up 40% of its total money in 2023, which was much higher than before.
On the other hand, large airlines in North America focus more on providing high-quality services and loyalty programs. For example, United Airlines made about USD 7.6 billion from loyalty programs and similar services in 2023, showing how important these extra services are to their business.
The COVID-19 pandemic was a tough time for airlines. It created many challenges and difficult moments for the industry. During this period, extra services (ancillaries) helped airlines survive. Services like flexible booking options and new health and safety measures became key offerings that helped airlines get through the tough times.
The Data-Driven Future of Airline Ancillary Revenue
The future looks bright for extra airline services because of new technologies like IATA’s New Distribution Capability (NDC) and changing customer needs. New methods like continuous pricing and AI-powered personalization will help airlines make even more money from these extra services. These smart ways of managing revenue will allow airlines to offer customized services based on passenger data, making travel more personalized and profitable for both airlines and passengers.
What’s Next for the Future of Airline Ancillary Services?:
- Personalization and Data Analytics: Airlines are using data to offer more personalized services. This makes passengers happier and helps airlines earn more by promoting the right services to the right people.
- Sustainability Initiatives: With growing concerns about the environment, airlines are offering eco-friendly options, like ways to offset carbon emissions and green products on flights.
- Digital Transformation: Extra services are going digital, making it easier for passengers to buy them through apps and websites.
- Dynamic Ancillary Pricing: Airlines will start using flexible pricing that changes based on what passengers need and market conditions, helping them earn more money.
Conclusion
Extra services will become even more important for improving the passenger experience and helping airlines make more money as the industry keeps changing. Offering these services and pricing them separately is not just a trend—it marks a new era for airlines. Airlines that innovate and successfully increase their income from airline ancillary services will be the ones that succeed in the competitive skies of the future.
ADO is leading this change, helping airlines connect their innovation efforts with their goals to reshape the future of extra services. ADO has developed better practices to transform these services, working with airline partners to imagine completely new possibilities.
ADO is focused on creating new frameworks for extra services, using technology to improve profitability and thrive in a world with limited resources.
