MidEast airlines told to up ancillary revenues

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Car Rental News - 18/07/2011


Ancillary revenues offer carriers a way to supplemented depressed yields.

Airlines based in the Middle East will need to focus on generating revenues from extra charges such as extra checked bags, food, on-board internet and allocated seats in order to flesh out profits while spiralling prices for oil and a wave of political unrest hit yields. The advice was issued by an industry expert.

A study recently conducted by Amadeus together with US consultancy IdeaWorks found that global ancillary revenues at airlines expanded from 10.95 billion Euros two years ago to 15.11 billion Euros last year. The income comes from commission-based travel extras like hotel bookings and car hire.

Toby Stokes, who heads up the Middle East Arline sector at Ernst & Young, said however that the Middle East’s carriers need to boost the amount of income they take from these sources. He points out that despite these sources of income having enjoyed a substantial increase, the total amount still represents a tiny sliver – not even five per cent – of the total airline revenues worldwide.

Traditional airlines generate between 5 per cent and 10 per cent of their revenues from ancillaries. The best in the class is approaching 20 per cent.

He goes on to question if airlines in the Middle East focus as much on ancillary revenues as do some carriers operating in other parts of the world. He says the region has upped its interest in such revenues but still lags behind airlines in other markets, like Europe and North America.

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