I’ve been slightly concerned for a while now about how many people both inside and outside the industry look at the term ancillary revenue as an all or nothing option, rather than understanding that within ancillary revenue there a two main sub categories. Firslty there are a la carte fees – ie. those traditionally part of the ticket price, like checked baggage and paid-for exit row seating. Secondly there are the items that most passengers would spend money on anyway, but the real question is whether or not the airline gets a commission cut – things like hotels, rental cars and destination content.

So much of the debate this year has focussed on the first category, whilst I am much more interested in the second, especially because it is not seen as gouging and it can actually be positioned by the airline as helping the passenger with a purchase they were already planning on making.

I’m hoping speakers at this week’s FFP ARAC conference in Los Angeles will also be clear to make the distinction. I’m looking forward to this conference for the main reason that it is the first one I am attending in over a year where I am not on the agenda as a speaker. Should be much more relaxing, and a great chance to interact with clients and prospects in a low key fashion rather than having to perform on stage.

So where did I see the “sanity” that I referred to in the title?  Firstly from Southwest:

“There are substantial ancillary revenue opportunities besides bag fees that we are continuing to pursue,” Southwest CEO Gary Kelly is quoted as saying by AP. AP writes Kelly “said the most noteworthy new revenue would come through changes to Southwest’s ‘Rapid Rewards’ frequent-flier program. He offered no details. But he drew a distinction between baggage fees, which he said are not really voluntary, versus a frequent-flier program, people volunteer to sign up for.” Says Kelly: “We would much prefer to explore opportunities to provide more service to customers and give them the choice to spend more money with Southwest Airlines. Our frequent-flier program and Southwest.com both position us well to pursue that strategy.”

And secondly from easyJet:

Mr Simmons said ancillary charges were now an “important source of revenue” for the LCC and he expected this stream of revenue to expand, particularly in leisure areas, like cars and hotels.

Great to see some in the industry implying that a la carte is not an endless source of risk free revenue, and suggesting that the future of ancillary revenue might actually involve paying more attention to areas that can ad rather than diminsh from the airline’s brand. Did I just hear someone mention best practice cross selling of hotels?

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