Industry Shift: Ancillary Revenue Outpaces Declining Airfares
The 2025 Yearbook of Ancillary Revenue reports a significant shift in the aviation industry, revealing that ancillary income has increased while base fares have decreased. Airlines such as Frontier (F9), Spirit (NK), and Wizz Air (W6) are at the forefront of this change, setting new records in ancillary revenue percentages.
Global Overview of Ancillary Revenue
The report, which includes data from 61 airlines worldwide, shows that in 2024, global ancillary revenue exceeded $148 billion, a notable rise from the previous record of $109.5 billion in 2019. Low-cost carriers (LCCs) continue to lead in this aspect, with some now generating more income through additional services like baggage and seat fees than from basic fares.
Top 10 Airlines by Ancillary Revenue Percentage
According to IdeaWorksCompany, which tracks ancillary revenue streams such as baggage fees, seat fees, and loyalty program contributions, overall ancillary revenue reached $148 billion globally in 2024. This was fueled by an 8.6% increase in passenger traffic to 4.6 billion.
| Rank | Airline | Ancillary Revenue % | 2023 Result | Change |
|---|---|---|---|---|
| 1 | Frontier (F9) | 62.0% | 56.2% | +5.8 points |
| 2 | Spirit (NK) | 58.7% | 56.4% | +2.3 points |
| 3 | Volaris (Y4) | 55.3% | 48.7% | +6.6 points |
| 4 | Breeze (MX) | 54.0% | 51.3% | +2.7 points |
| 5 | Allegiant (G4) | 52.9% | 49.8% | +3.1 points |
| 6 | Wizz Air (W6) | 44.6% | 44.7% | -0.1 points |
| 7 | Viva Aerobus (VB) | 43.7% | 45.5% | -1.8 points |
| 8 | Volotea (V7) | 40.0% | n/a | n/a |
| 9 | easyJet (U2) | 38.6% | 36.1% | +2.5 points |
| 10 | Pegasus (PC) | 33.9% | 30.3% | +3.6 points |
Impact on Traditional Airlines and LCC Strategies
Traditional airlines are seeing an increase in ancillary revenue, helping to counteract the impact of declining fares, with a noted 5.3% rise per passenger in ancillaries reducing the effect of a 6.0% fare drop. Low-cost carriers excel in offering a la carte services, with five airlines deriving over half their revenue from ancillary sources.
For high-performing LCCs, ancillary revenue has increased by 3.6% per passenger despite a 5.7% drop in passenger fares. Other LCCs saw minimal ancillary growth of 0.6%, but a 1.4% increase in fares. In comparison, traditional airlines demonstrated the most significant ancillary gain of 5.3% per passenger.
Major US carriers like Alaska Airlines (AS), American Airlines (AA), Delta Air Lines (DL), Southwest Airlines (WN), and United Airlines (UA) reported a 2.4% increase in ancillary revenue, juxtaposed with a 1.4% decline in fares.
Convergence of Airlines and Passenger Choices
The data highlights a 2.5% growth in ancillary revenue per passenger across 58 airlines year-over-year, despite a 3.8% fall in other revenues, largely due to a reduction in fares. The spread of basic economy fares facilitates broader adoption of LCC strategies across airline types. Jay Sorensen, President of IdeaWorksCompany, notes that successful airlines manage carry-on fees and seat pricing through demand-driven revenue management.
Advancements and Airline Innovations
Frontier Airlines surpassed the 60% ancillary revenue mark, noting significant contributions from policies limiting larger carry-ons. Notably, Norse Atlantic Airways (N0) set new standards with over $100 in ancillary revenue per passenger annually. In Australia, Qantas (QF) leads with 35% of consumer credit spending through co-branded cards, highlighting the importance of loyalty program profits.
US airlines collectively generated $28 billion in loyalty revenue, a per-passenger increase to $35.48 from $34.86 in 2023, underscoring a trend toward offering more customizable travel options. However, increased basic economy fare adoption may narrow the gap between traditional airlines and LCCs, creating a challenge in maintaining distinct brand identities.
Industry Guidance
The 18th edition of IdeaWorksCompany’s report underscores the strategic importance of balancing ancillary services to sustain revenue streams while minimizing potential passenger alienation. The aviation industry continues to navigate the complex landscape of fare pressures and ancillary growth opportunities.
