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THE NATIONAL NEWSPAPER OF THE TRAVEL INDUSTRY
SEPTEMBER 18, 2006
SECOND OF A SEVEN-PART SERIES
TRAVEL+MONE Y
H ow the Industry R eally Works
T W ILLUS TRA TION B Y THOMAS R. LECHLEI TER
RE TAIL
BRICK &
MORTAR ONLINE AGENCY HOME-BASED
TAR OGA PEV TNE IOCL NYS
MOM & POP CORPORATE
From commission cuts to the growth of the Internet, volatile market
conditions test the adaptability of travel agents
BY NADINE GODWIN PAGE 17
WORLD BEAT
Southwest now Visa rules said Two years
offering deals to be holding after Orange
on vacations to back travel to Revolution,
Oahu, Maui. Brazil. Kiev shines.
P. 49 P. 50 P. 56
[ WELCOME TO THE FLYING FIVE-AND-DIME ]
Airlines increasingly want to sell you … anything
By Andrew Compart
LONDON — Just how far will an airline go
these days to earn a few extra bucks?
One airline executive attending the third-annual World Low Cost Airlines Congress
here describes how a certain Asian low-cost
carrier uses blankets to increase its nonfare
revenue: When in-flight sales of blankets
aren’t going well, the flight attendants, who
get a commission on sales, ask the pilots to
crank up the air conditioning.
Most airlines aren’t taking things that far,
but low-cost carriers in Europe and Asia in
particular are getting aggressive about increasing their ancillary revenue, defined as
revenue derived from anything other than
passenger ticket sales. Some airlines already
have ancillary revenue managers.
Besides, some executives argue, it is not really a unique business model. For example,
Tony Davis, CEO of Tiger Airways in Singapore, noted that “movie theaters make more
money selling popcorn and Coke than they
do selling the ticket for the movie.”
No airline is making more money from
ancillary sales than from ticket sales, but the
amounts are steadily increasing.
Diono Nurjadin, president, director and
majority owner of Indonesia’s Mandala
Airlines, said the carrier’s aim is to increase
ancillary sales to 30% of its revenue within
three years.
Ryanair reported that its ancillary revenue
rose 31% in the quarter ended June 30, outpacing its 20% increase in traffic. That revenue was realized primarily from hotel and
car rental bookings and travel insurance
sales, but it also included in-flight sales and
other sources. In all, the ancillary category
accounted for 13% of its revenue in the
quarter.
Last year, Ryanair reportedly offered about
a quarter of its tickets for free (not counting
taxes). CEO Michael O’Leary got lots of attention this year when he predicted that ancillary revenue would get such a boost from
in-flight gambling that Ryanair might be able
to offer half its tickets for free by 2010.
At EasyJet, ancillary revenue increased by
31%, or $1 per seat, for the six months ended
