Loyalty programs are becoming an increasingly valuable tool for customer engagement marketers. However, there has been a longstanding criticism that the ROI on such initiatives is often difficult to measure. However, a recent study from the IdeaWorks Company has just shown that the ancillary revenue of global airline companies has significantly and steadily increased over the last few years.
Overall, this ancillary revenue, which includes loyalty programs, was up 21% year-on-year for global airlines in 2014. According to the IdeaWorks Company, a leading aviation consultancy firm, this increase equaled $38.1 billion USD for 63 airlines. This includes revenue acquired from loyalty programs and other customer engagement initiatives such as co-branded credit cards, hotel and car bookings, baggage check, and other commission-based services.
Among the top 5 airlines to receive the biggest gains in ancillary airline revenues were Air France/KLM, the busiest European intercontinental carrier, and Ryanair, a low cost Irish airline based in Dublin.
The study found that ancillary revenues for Air France/KLM exceeded 2 million USD. And in 2014, Ryanair generated over 1.9 million USD from ancillary airline revenues alone.
Lufthansa, a German airline and the largest airline in Europe, also faired well in the study.
Lufthansa’s frequent flier loyalty program, Miles & More, single handedly pulled in over €200 million. This number reflected a profit that was twice as large as it was just the previous year.
Generally speaking, one of the most impressive statistics revealed by the study was the steady and substantial increase these offers have shown over the last few years. In 2007, cumulative ancillary airline revenues peaked at 2.45 billion USD. Considering the current number of $38.1 billion USD, that is a 1455% increase in only eight years.
“Ancillary revenue is an increasingly important indicator of commercial success, and a major contributor to the bottom line of airlines across the globe,” said Michael Cunningham, Chief Commercial Officer at CarTrawler, which sponsored the report. “The secret to unlocking this revenue stream can be found in the data that customers generate with every transaction. It is no longer just the preserve of low cost carriers – it is something from which all airlines are benefiting.”