Top 10 airlines, ancillary revenue as percentage of total revenue
1. Allegiant, 29.2
2. Spirit, 22.6
3. Ryanair, 22.1
4. Jet2.com, 21
5. Tiger Airways, 20.5
6. easyJet, 19.2
7. AirAsia, 18.7
8. AirAsia X, 18.1
9. Flybe, 15.7
10. United Continental, 14.7
A report by a company that specializes in building corporate profits through ancillary revenue strategies has confirmed what many travelers to Las Vegas surmised: Las Vegas-based Allegiant Air is one of the top air carriers in the world at selling things to passengers besides their tickets.
The report released by Shorewood, Wis.-based revenue consultant IdeaWorks and Spanish transaction processor Amadeus says Allegiant generates the highest percentage of ancillary revenue as a portion of total revenue at 29.2 percent.
Florida-based Spirit Airlines is second at 22.6 percent and European discount flier Ryanair is third at 22.1 percent.
Those three carriers were the top three in a similar report in 2009.
The IdeaWorks report said ancillary revenue worldwide has grown by 96 percent since 2008, to $21.5 billion, as more airlines develop additional revenue strategies and those that had strategies in place have developed new ideas and more partnerships to generate extra income.
“While ancillary revenue can help compensate cuts in the base fare, it has evolved to offer new services to travelers that were not traditionally included in the ticket price,” said Jay Sorensen, president of IdeaWorks and the author of the report.
“In the words of an early à la carte airline pioneer back in 1981, ‘You pay only for baggage you want to check, drinks you want to drink and the snacks you want to snack.’ It’s a proposition that is difficult to change, even 30 years later,” Sorensen said.
Ancillary revenue is defined as income from unbundled nonticket sources, such as baggage fees, the onboard sale of food and beverages and seat-selection fees. Over the years, revenue sources have expanded as airlines partner with hotels and rental car companies on package deals and offer co-branded credit cards, inflight retail sales and pay-to-play entertainment and communications systems.
Nowhere is that more evident than at Allegiant, which has partnerships with dozens of Las Vegas resorts as well as with hotels and chains in other cities it serves.
Allegiant also sells show tickets, in addition to charging baggage and seat-selection fees and convenience costs for booking online or by phone. Customers can dodge booking fees by buying a ticket at the airport.
Airlines have been more aggressive generating ancillary revenue as a means to offset the recession, the soaring cost of fuel and competition — and investors have applauded airlines such as Allegiant for being consistently profitable. But there has been some consumer backlash, and some advocates have called for legislative limitations on fees.
The IdeaWorks report examined the financial filings of 47 airlines that disclosed ancillary revenue.
The report said that in 2010, United Continental, the newly merged Chicago-based carrier that offers some flights to and from Las Vegas, generated the most ancillary revenue, $5 billion. United on its own was the top revenue generator in 2009 at $1.88 billion.
Other carriers that serve Las Vegas and were in the top 10 for 2010 include No. 2 Delta Air Lines, $3.7 billion; No. 3 American, $1.95 billion; No. 5 US Airways, $1.18 billion; and No. 9 Alaska Airlines, $552.5 million.
Allegiant came it at No. 5 by the amount of ancillary revenue generated per passenger at $32.86. The Las Vegas carrier led that category in 2009 with $30.61 per passenger.
Per-passenger revenue for other carriers with Las Vegas flights were No. 3 United Continental, $34.32; No. 6 Spirit, $25.16; No. 8 Alaska, $23.68; and No. 9 Delta, $22.75. AirAsia X led the category with a $41.60 average.