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An analysis of ongoing trends in airline ancillary revenues

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  • Warnock-Smith, David
  • O'Connell, John F.
  • Maleki, Mahnaz

Abstract

This paper examines the performance of the two core classifications of airline ancillary revenues, which are unbundled products and commission based income. It also investigates the willingness of passengers to pay (WTP) for these services together with what type of ancillary items are acceptable at a particular price point. The study found that passengers value a narrow range of perceived ‘necessity’ products and services such as food and drink, checked baggage and seat assignment as opposed to perceived ‘optional’ unbundled or commission based products/services. It also found significant differences in WTP for specific ancillary services based on carrier type (FSC/LCC/Charter), length of flight (long and short haul) and journey purpose (business, leisure, VFR).

Suggested Citation

  • Warnock-Smith, David & O'Connell, John F. & Maleki, Mahnaz, 2017. "An analysis of ongoing trends in airline ancillary revenues," Journal of Air Transport Management, Elsevier, vol. 64(PA), pages 42-54.
    • Handle: RePEc:eee:jaitra:v:64:y:2017:i:pa:p:42-54
    DOI: 10.1016/j.jairtraman.2017.06.023
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    References listed on IDEAS

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    1. O'Connell, John F. & Warnock-Smith, David, 2013. "An investigation into traveler preferences and acceptance levels of airline ancillary revenues," Journal of Air Transport Management, Elsevier, vol. 33(C), pages 12-21.
    2. Blaise Waguespack & Tamilla Curtis, 2015. "Ancillary revenue and price fairness: an exploratory study pre and post flight," International Journal of Aviation Management, Inderscience Enterprises Ltd, vol. 2(3/4), pages 208-225.
    3. Scotti, Davide & Dresner, Martin & Martini, Gianmaria, 2016. "Baggage fees, operational performance and customer satisfaction in the US air transport industry," Journal of Air Transport Management, Elsevier, vol. 55(C), pages 139-146.
    4. Tuzovic, Sven & Simpson, Merlin C. & Kuppelwieser, Volker G. & Finsterwalder, Jörg, 2014. "From ‘free’ to fee: Acceptability of airline ancillary fees and the effects on customer behavior," Journal of Retailing and Consumer Services, Elsevier, vol. 21(2), pages 98-107.
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    Cited by:

    1. Onur Bas & Tamer Aksoy, 2022. "Examining the impact of cargo and ancillary revenues on net profit for full service carrier airlines," International Journal of Business Ecosystem & Strategy (2687-2293), Bussecon International Academy, vol. 4(3), pages 48-72, July.
    2. O'Connell, John F. & Avellana, Raquel Martinez & Warnock-Smith, David & Efthymiou, Marina, 2020. "Evaluating drivers of profitability for airlines in Latin America: A case study of Copa Airlines," Journal of Air Transport Management, Elsevier, vol. 84(C).
    3. Stacey Mumbower & Susan Hotle & Laurie A. Garrow, 2023. "Highly debated but still unbundled: The evolution of U.S. airline ancillary products and pricing strategies," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 22(4), pages 276-293, August.
    4. Jeon, Mi-Sun & Lee, Jang-Ho, 2020. "Estimation of willingness-to-pay for premium economy class by type of service," Journal of Air Transport Management, Elsevier, vol. 84(C).
    5. Song, Woon-Kyung & Lee, Hyun Cheol, 2020. "An analysis of traveler need for and willingness to purchase airline dynamic packaging: A Korean case study," Journal of Air Transport Management, Elsevier, vol. 82(C).
    6. Chiambaretto, Paul, 2021. "Air passengers’ willingness to pay for ancillary services on long-haul flights," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 147(C).
    7. Maung, Yun Shwe Yee & Douglas, Ian & Tan, David, 2022. "Identifying the drivers of profitable airline growth," Transport Policy, Elsevier, vol. 115(C), pages 275-285.
    8. Zhao, Guihong & Cui, Yue & Cheng, Shaoyu, 2021. "Dynamic pricing of ancillary services based on passenger choice behavior," Journal of Air Transport Management, Elsevier, vol. 94(C).
    9. Özlem Atalık & Mahmut Bakır & Şahap Akan, 2019. "The Role of In-Flight Service Quality on Value for Money in Business Class: A Logit Model on the Airline Industry," Administrative Sciences, MDPI, vol. 9(1), pages 1-15, March.
    10. Ian Yeoman, 2022. "The value of revenue management and pricing in a challenging environment," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 21(5), pages 485-486, October.
    11. Michal Sznajder & Richard Ratliff & Cuneyd Kaya, 2023. "A heuristic for incorporating ancillaries into air choice models with personalization (Part 1: estimating preferences using hedonic regression)," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 22(2), pages 122-139, April.
    12. Shaw, Mark & Tiernan, Siobhan & O'Connell, John F. & Warnock-Smith, David & Efthymiou, Marina, 2021. "Third party ancillary revenues in the airline sector: An exploratory study," Journal of Air Transport Management, Elsevier, vol. 90(C).
    13. Murat Sahin & Christophe Bisson, 2021. "A Competitive Intelligence Practices Typology in an Airline Company in Turkey," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 12(2), pages 899-922, June.
    14. Alderighi, Marco & Nicolini, Marcella & Piga, Claudio A., 2019. "Is low-cost carriers’ revenue management a firm capability?," Journal of Air Transport Management, Elsevier, vol. 78(C), pages 15-22.
    15. Bayuaji Prasetyo & Areo, Adebowale Biodun & Omotayo, Vincent Adewale, 2020. "Board Attributes And Quality Of Financial Reporting In Nigerian Companies: An Empirical Evidence," Malaysian E Commerce Journal (MECJ), Zibeline International Publishing, vol. 4(2), pages 33-38:4, May.
    16. Ghazaleh Azimi & Alireza Rahimi & Xia Jin, 2022. "Exploring the attitudes of Millennials and Generation Xers toward ridesourcing services," Transportation, Springer, vol. 49(6), pages 1765-1799, December.
    17. Michal Sznajder & Richard Ratliff & Cuneyd Kaya, 2023. "A heuristic for incorporating ancillaries into air choice models with personalization (part 2: integrated multinomial logit and hedonic regression models)," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 22(2), pages 140-151, April.

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