It been a while since I’ve mentioned one of my pet topics, that being the lack of a industry standard definition of what is and what is not to be classified as ancillary revenue. In all honesty, the topic was getting a bit boring, but then when I saw United mention the same topic (in bold below) and I couldn’t resist posting it here. Text below is from this press release issued by United.
Q2: How have United’s efforts to generate ancillary revenue performed year-over-year?
A2: United has been a leader in the industry’s move toward unbundling and the generation of new ancillary revenue streams through our Travel Options by United program and has launched a number of innovative products that provide customers with the choice to purchase products and services that offer comfort, convenience, rewards and peace of mind. Ancillary revenue and fees have increased to a total of $259 million this quarter. These revenues consist of Travel Options products such as Economy Plus upsell, Premier Line and Award Accelerator, as well as ticket change fees and first and second bag fees. On a per passenger basis, ancillary revenues and fees have increased by about 60% this quarter to approximately $14 per passenger.
Q3: Which fee and ancillary revenues does United include in passenger revenue and which are included in other revenue? What impact did fee and ancillary revenues have in the quarter?
A3: There is not a consistent industry practice among airlines regarding the recording and classification of ancillary and other revenues. Some ancillary revenue products, such as premium seat upsell revenues, are consistently recorded by most airlines as passenger revenue. Certain other ancillary revenue products, such as first and second bag fees and ticketing and change fees, are classified by some other carriers in other revenue. For United, first and second bag fees and ticketing and change fees are recorded in passenger revenue. Increases in these fees resulted in a two percentage point improvement in consolidated PRASM year-over-year.
And from then I saw something much more interesting from the associated earnings conference call:
“Last month we began the move to a cashless cabin domestically. Such a move will further enable our ancillary revenue strategy.For example, we can now enable flight attendants to upgrade customers to Economy Plus while onboard.”
This sounds great for a number of reasons, especially if it means what I think it means. It sounds like if you are stuck next to an unappealing or unhygenic or un-anything customer that you don’t like the look of, you pay to move seats. There is no risk of offending the person next to you, as you are really purchasing extra legroom, but the ability to have flight attendants charge for this service on board the plane is a stroke of genius.