Ancillary services to help Indian carriers fly out of red

NEW DELHI: For bleeding Indian carriers, earning revenue from non-ticket or ancillary sources, a strategy adopted by global peers seem to be the only recourse to turn profitable.

Indian airlines might still be apprehensive of government control to earn revenue from non-ticket or 'ancillary' sources as losses pile up, but globally, ancillary income is a six-year old phenomenon, perfected especially by air carriers of North America, to turn around their fortunes from being chronically loss-making companies.

In 2007, when American airlines first adopted non-ticket streams to supplement their incomes, it constituted $2.5 billion of the global industry's revenues.

By last year this figure swelled to a phenomenal $36 billion of global airline income.

As experts forecast ancillary income, derived from activities like frequent flier programmes, charging for baggage, selling on-board merchandise, preferential seating, charges on carrying fragile equipment, using airline lounges, charging for pillows, blankets, reading material etc, contribute $50 billion to airline revenues globally this year, more air carriers plan to rely on this.

"Because it's been so difficult for airlines to make money on the basic ticket product by selling a seat, on an average for the last 40 years, the industry's net profit margin has been zero. On balance, airlines have made no money at all. The success of these revenue streams means that airlines will be increasing emphasis on doing that. This is about providing new value to passengers. This is going to be an expanding enterprise," global airline association IATA Chief Economist Brian Pearce said. Ancillary revenues was so far considered to be a phenomenon limited only to low-cost carriers helping them keep fares low by offering a base price and then charging for extra services.