How Airlines Earn Extra Money By Selling Goods And Services!

(Last Updated On: July 26, 2017)

In the airline industry, ancillary revenue is a non-ticket source. Airlines earn a lot of money by adding charges on, extra luggage, reserved seats and in-flight food and drinks. It becomes an important financial part of low-cost carriers.

Revenue drives from the goods or services that include concessions at sporting events, pay-per-view movies offered by airlines, and car wash services sold by gas stations.

Every airline has baggage policy limitation. But, if any passenger wants to take any extra item with them than airlines charging separate fees for such services like checked baggage and beverages served in the flight. Or we can say that the passenger can take the extra items with them by paying extra charges.

So, here we discuss how airlines earn extra money by selling goods and services to engage the platforms.

  1.    A la carte features: – Other airlines, such as low-cost carriers, earn money from “a la carte” by adding fees and commissions on car hire or travel insurance sales.

Low-cost carriers consider as à la carte activity by aggressively taking revenue on checked bags, assigned seats, and extra leg room seating.

The following typical activities are:

  • 1) Onboard sales of food and beverages
  • 2) Seeking money on checking of baggage and on excess baggage
  • 3) Assigned better seats within the same cabin
  • 4) Call center support for reservations
  • 5) Priority check-in and screening
  • 6) Early boarding benefits
  • 7) Onboard entertainment systems
  • 8) Wireless internet access
  1.    Commission-Based Products: – Ancillary revenue activities also include the commissions that are earning by the sale of hotel accommodations, car services, and travel insurance.

The Commission-based categories mainly cover the airline’s website, but it also includes onboard ship-on-duty and sales of consumer products.

  1.    Frequent Flier Programs: – The frequent flier categorylargely include the sale of miles or points to program partners such as hotel chambers and car service companies, co-branded credit cards, online malls, retailers, and communication services.

Airlines earn money by selling points to financial institutions, who then offer them to customers as a reward for signing up to credit cards.

  1.    Advertising Sold by the Airline: – This is a new categoryfor 2010 and includes any advertising initiative linked to passenger travel.

The following are typical activities:

1) Revenue generated from the in-flight magazines.

2) Selling the advertising on the plane, loading bridges, gate areas, and airport lounges.

3) Fee-based placement on products and samples.

Fare or Product Bundle: –

Industry agreement largely mentions that “a la carte features” and “commission-based products should be counted under the ancillary revenue banner for accounting and reporting purposes.

So, this article highlights the major points on how airlines generate ancillary revenue.