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Loyalty delivers massive ancillary earnings to Qantas

July 17, 2015 Aviation, Headline News No Comments Email Email

egtmedia59Qantas Airways came third in the world in the amount of money it earned in ancillary revenue per passenger in 2014, a new report shows. The amount has risen almost 10% over the previous year.

Qantas earned USD 50.16 per passenger in ancillaries in 2014, an increase of 9.83% over the equivalent figure in the previous year. Qantas came third worldwide in ancillary revenue per passenger, behind Jet2.com (USD 56.28) and Spirit (USD 52.35).

The top three rankings were the same last year, when Qantas earned USD 45.67 in ancillaries per passenger. The other seven in the league for 2014 were, in order, Allegiant, AirAsiaX, United, Virgin Atlantic, Korean Air, Wizz Air and Alaska Air.http://www.itcma.com/

The report, from US consultancy IdeaWorks Company in conjunction with CarTrawler, says Qantas earned USD 1,387,084,868 (that’s AUD 1,866,949,691 at current rates) from ancillary services, mainly its frequent flyer program, in 2014. That was an increase of 8.925% over the previous year.

The report defines ancillary revenue as: “Revenue beyond the sale of tickets that is generated by direct sales to passengers, or indirectly as a part of the travel experience.”

The definition includes four categories: a la carte features; commission-based products; frequent flyer activities, and advertising sold by the airline.

Qantas is one of only two in the top 10 whose prime ancillary source is listed by IdeaWorks as “frequent flyer program”. All other airlines in the top 10 have “various” sources for their ancillary revenue, other than Virgin Atlantic, which also derives most of its ancillary earnings from its frequent flyer program.

IdeaWorks says it’s time to recognise the growing importance of fare bundles by adding a fifth category to include ancillary revenue generated by “the a la carte components associated with a fare or product bundle”.

In the same report a year ago, the compilers observed: “Qantas is the most successful in terms of loyalty marketing results with approximately 80% of its ancillary revenue associated with its Qantas Loyalty business unit. The carrier de-emphasises a la carte activities by continuing to bundle elements such as baggage, food and beverages in its basic fares.”

That situation is unlikely to have changed much. It shows that Qantas chief executive Alan Joyce was astute in choosing to hang on to the frequent flyer program when times were tough.

Overall, IdeaWorks notes:

“By every measure, ancillary revenue continues to grow.

“For the eighth consecutive year, airlines tracked by IdeaWorksCompany reported substantial increases in revenue gained from retail activities and the sale of a la carte services and frequent flier miles.

  • Ancillary revenue per passenger among the 63 airlines is USD 17.49, which is 8.5% more than the 2013 result.
  • Activity among low cost carriers (LCCs) jumped more than USD 2.9 billion, or 32.8%.
  • Ancillary revenue among US major airlines increased more than USD 2.6 billion, or 18.7%.

IdeaWorksCompany researched financial filings made by 130 airlines around the world, 63 of which disclosed qualifying revenue activity, to reveal that ancillary revenue reported by these airlines increased USD 6.6 billion for 2014.

To download more material in the report in PDF format access: http://www.ideaworkscompany.com/wp-content/uploads/2015/07/Press-Release-99-Ancillary-Revenue-Top-10-for-2014.pdf

Written by  Peter Needham

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