Airlines are struggling with low margins. The International Air Transport Association (IATA) projected an after-tax profit of $18 billion for the industry in 2014 — a 2.4 percent profit margin of just $5.42 per customer.*
That’s why ancillary fees are so important to all carriers, not just to low cost carriers. Many carriers have gone beyond
common ancillary fees for à la carte seating, dining and boarding options or commission-based hotel and rental car bookings. They are introducing innovative ways to monetize travel convenience, often using digital tools.
Ancillary revenue has grown significantly in recent years. According to IdeaWorksCompany and CarTrawler, ancillary revenue projections grew from $22.6 billion in 2010 to $49.9 billion in 2014 — that’s 121 percent jump in just five years.*
With this growth, rudimentary tools that cannot keep pace with the complex ancillaries landscape limit carriers’ pricing strategies. Status quo pricing does not support on-the-fly pricing based on a sufficiently wide variety of variables. Yet, this is critical to delivering targeted offers for today’s savvy travelers. Something must change.
In Navitaire’s recent whitepaper, they cover the three secrets to success for Ancillary Pricing Optimization:
1. Stop Flying Blind
2. Don’t Leave Revenue up in the Air
3. Give Customers a Top-Flight Experience
* IdeaWorksCompany and CarTrawler, Airline Ancillary Revenue Projected to be $49.9 Billion Worldwide in 2014,” November 3, 2014, accessed May 4, 2015 http://www.ideaworkscompany.com/wp-content/uploads/2014/11/Press-Release-92-Global-Estimate.pdf