Revenus des Compagnies

Ancillary Revenue – the airline revenue drug

Travelers hate them – fees for everything. Change your mind? That will be $50 please. Got bags? A fee. [Vous devez être inscrit et connecté pour voir ce lien] even charges for carry on bags. Is there no end to the nickle and diming? The short answer is no.

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Using 2005 as the base year, take a look at how the airline industry is mainlining on fees. It is quite remarkable. Virgin America has taken to fees with a fervor (and they have a great way to gather these on their IFE system) – but in total revenue terms, Delta is the biggest fee gatherer. Delta alone accounted for a third of the US airline industry’s 2010 ancillary revenues as the table illustrates.

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Take a look at how much Delta managed to gather in reservation cancel fees through September 2011. Delta managed to charge 36% more than United and Continental combined and 57% more than American.

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The US airline industry is dependent on these fees. Without them profits would disappear. The next slide shows just how crucial these fees have become to the industry’s revenue.

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MIT Airline Data Project research shows that in 2010 the industry averaged a loss of $19.47 per ticket. Adding back ancillary revenue of $8.70 per ticket cut the loss to $10.76 per ticket. Between 3Q10 and 3Q11 we have seen average US airfares rise 6.2%. With capacity constraint and rising fares, and more importantly those fees, the US airline industry looks set to be profitable in 2012.

Chinese carriers post losses despite passenger traffic increases

Chinese carriers reported a net loss of almost CNY200 million ($31.6 million) in March, reversed from a collective net profit of CNY1.71 billion in the year-ago month, due to high fuel prices and a decline in cargo traffic.

Passenger boardings increased 8.6% to 25.03 million, up 8.3% on domestic routes and 12.8% on international routes compared to the same month in 2011. Cargo traffic dipped 6.1%, up a slight 0.4% on domestic routes and plummeted 18.3% on international routes.

Industry analysts said market demand started to pick up in April with continuous domestic economic growth and slow global economic recovery but rising fuel expenses still remain a major challenge.

Fuel costs rose 16% in March, an increase of CNY1.64 billion over the same period last year. Analysts said that fuel surcharges revenue, which was CNY1.17 billion, was not enough to offset rising fuel expenses.

Earlier this month the Chinese government has raised domestic jet fuel prices to CNY8,061 ($1,275) per ton, up 4.35% from CNY7,725 per ton ([Vous devez être inscrit et connecté pour voir ce lien]).

“In the first quarter, domestic carriers increased operating expenses [mainly fuel costs] by 22%, which has a big negative impact over Chinese airlines’ financial performance. To make matters worse, domestic carriers got less exchange gain this quarter over the year-ago quarter,” Great Wall Securities aviation analyst Liu Kun said.

It is widely expected that financial results of domestic airlines will improve in the third quarter.