News Backgrounder
Qantas tops region for ancillary revenue
Only some Asia-Pacific carriers are exploiting the benefits of this increasingly important part of an airline’s business.
October 1st 2015
Many Asia-Pacific airlines are missing out on opportunities to boost their businesses from ancillary revenue, with only one Asia-Pacific airline listed in the world’s top ten ancillary earners, a new study has reported. Read More »
Australia’s Qantas Airways is ranked ninth on the IdeaWorks 2015 CarTrawler Yearbook on ancillary revenue, with earnings of $1.38 billion, mostly accrued from the sale of frequent flyer points. IdeaWorks is a brand development agency and consultancy based in Wisconsin in the U.S that publishes an annual report on airline ancillary revenue earnings.
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| The Qantas group leads the region in ancillary revenue income |
However, a breakdown of the survey results reveal Asia’s low-cost carriers fare well in the ancillary revenue stakes when income is calculated as a percentage of total revenue.
Singapore controlled Tigerair was sixth best, with ancillary revenues contributing 23.6% to the budget carrier’s income. Jetstar ranked seventh (20.6%) and AirAsia X (19.2%) was ninth. The study also showed Qantas earns an average of $50.16 in ancillary revenue from each passenger. At loss-making AirAsia X, it was $43.22 and at Korean Air $39.28.
IdeaWorks 2015 CarTrawler Yearbook of Ancillary Revenue is the result of an examination of the financial filings of 130 airlines across the world. Only 63 of the airlines studied listed an ancillary revenue breakdown in their financial reports in 2014.
The airlines, made up of the Asia-Pacific (14%), the Americas (56%), Europe and Russia (29%) the Middle East and Africa (1%), reported ancillary revenue of $38.1 billion in 2014 compared with 23 airlines reporting $2.45 billion in ancillary revenue in 2007.
Most of the big earners were the major U.S. and European carriers although their expanding ancillary revenue earnings are a modest contributor to their total incomes. United Airlines earned $5.7 billion in ancillary revenue in 2014, American Airways collected $2.5 billion followed by Delta ($2.1 billion), AirFrance/KLM and Ryanair ($1.7 billion) and Southwest Airlines ($1.6 billion).
The average ancillary earnings per passenger across all the airlines examined was $17.49, which was 8.5% more than in 2013. “By every measure, ancillary revenue continues to grow,” said the report. “For the eighth consecutive year, airlines tracked by IdeaWorksCompany reported substantial increases in revenue gained from retail activities and the sales of a la carte services and frequent flyer miles.”
One surprising aspect of the report is the significant difference in ancillary revenue income among LCCs. Ancillary revenue at Australia’s Jetstar ($673.2 million) is 20.8% of its total income. It earns $30.17 in ancillary revenue per passenger. At the AirAsia Group, the $556.9 million it collects in ancillary revenue is 18.5% of its revenue, or $13.19 per passenger.
Tigerair earned $118.4 million, 21.8% of its revenue and $23.03 per passenger, in 2014. AirAsia X ‘s bottom line collects 20% of its revenue from ancillaries ($182.8 million) at $43.22 from each passenger.
Other Asia-Pacific airlines are not achieving such good results. Cebu Pacific receives $131.7 million, or 11% of its total revenue in ancillary earnings with spending averaging $9.18 per passenger. In India, Spicejet earned $97.9 million, or 9.3% of its revenue, at $7.23 per passenger.
Non-core passenger spending at China’s Spring Airlines was 5.7% of its revenue last year at $66.8 million or $5.84 per passenger. Thailand’s Nok Air gets $28.2 million, 7.4% of its revenue from ancillaries at $3.70 from each passenger.
There also is a significant disparity in ancillary revenue collection among full-service carriers . Qantas’ $1.3 billion in ancillary earnings is 12.1% of its revenue and Korean Air’s $919.2 million is 7.8%. China Eastern collected $491.2 million, just 3.4% of its revenue and $5.86 per passenger, and China Southern earnt $81.9 million, 0.5% of its revenue and US$0.81 cents per passenger. Garuda Indonesia took in $10.2 million in ancillaries, 0.3% of its total revenue at US$).35 cents per passenger.
Ancillary revenue reported by Asia-Pacific airlines in 2014 |
