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Digital Performance and Ancillary Revenues

Airline ancillary revenues are at an all-time high, up by 21% last year to almost $40bn according to the latest CarTrawler Yearbook of Ancillary Revenue press release. With some analysts hoping for US$130bn in additional ancillary by 2020 clearly hopes for sustained airline profitability rest with ancillary sales as fare competition will remain fierce. However, when only 25% of bookings through metamediaries result in ancillary purchase other channels need to be used to reach the expectations. In this post, we look at how airlines digital performance can help ancillary sales.

Defining digital performance

If you want to sell your products the way you want, first you need to get visitors to your store. This simple principle has worked for centuries and still can give invaluable insights when applied to digital performance of the airline industry. Specifically, we relate the volume of the direct traffic visiting the airline.com website (as estimated by SimilarWeb) to the number of passenger carried in 2014 by a given airline. The very strong relation between those two measures, as shown in our earlier post, allows us to develop a reliable regression model. Difference between the model predictions (i.e. market average traffic for a given airline size) and actual online engagement defines digital performance.

Digital performance scores are calculated for 55 out of 63 airlines analyzed in the CarTrawler Yearbook. We include only those for which data at airline, not group, level was available, and exclude airlines that carried under 1mln passengers in 2014. To check how much digital performance matters we analyze how it relates to the share of ancillary revenues in total revenues for all airlines.

Digital Performance – a key for LCC ancillary revenues?

The picture below leaves no doubts that low cost airlines mastering digital performance are also ancillary revenue winners. The regression results suggest that low cost airlines that have 10 percentage points better digital performance have 1.5 percentage points higher share of ancillary revenues.


Website attracting visitors is the best channel of communication with customers allowing to exchange information for mutual benefit. More traffic, gives more chances not only to push extra leg space or priority boarding to website visitors but also earn commission through affiliate programmes. For example, Vueling’s  ancillary revenue per passenger was $15 during 2014, but the average for bookings made exclusively via direct channels leaps to over $29, as pointed by the CarTrawler report. Traditional carriers selling over 50% of tickets through GDS miss the flexibility in offering paid services. The long awaited NDC may reduce the gap between the carrier types.

Why it is not the case for the legacy carriers? The bulk of ancillary revenues for legacy carriers, especially in the US and Australia, comes from sale of frequent flier miles or points to partners such as hotel chains or co-branded credit cards. The success of this B2B strategy, is independent of digital performance.  But even more important is the variety in approaches to ancillary revenues and unbundling between the traditional airlines. Some airlines invest in digital performance to improve customers’ digital experience while other have more retailing mentality. However, most likely the biggest reason for lack of relation between digital performance and ancillary revenues are reporting issues. Many of the traditional carriers have implemented unbundling in a form of fare families and branded fares which has lead to a strong boost of ancillary revenues. Unfortunately, those are not included in the report.

New ancillary revolution needed?

The so called ‘ancillary revolution’ that has introduced luggage fees and eliminated complimentary on board meals has unlocked new streams of revenue for the industry. More price discrimination introduced by branded fares and a la carte pricing, given the tight competition in the airline market, has been beneficial both for passengers and the economy as a whole. However, the revenue boost is close to its limits. It is difficult to think of services for which the ancillary revenue leaders – Spirit, Wizzair and Allegiant – don’t charge their customers already.


NB Image courtesy frankieleon/flickr (image cropped)


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