4 Innovative Types of Airline Ancillary Revenue Management and Why This is Changing the Industry

Last updated: 8 October 2026

Airline ancillary revenue is an integral part of airline management. This article explains what airline ancillary revenue means, why it is so important and the four main types of ancillary revenue that airlines use.

An introduction to airline ancillary revenue management

Airline ancillary revenue has become a prominent part of the airline industry. Many different types of airlines operate on thin profit margins: high taxes, airport landing fees, compensation for delays, fuel costs and labour costs all squeeze profitability. This has encouraged airlines to find new and innovative ways to increase their revenue. But what is airline ancillary revenue management?

What is Airline Ancillary Revenue Management?

Airline ancillary revenue management is the management of sales that are made beyond the core product. In the case of airlines, this is anything above and beyond the sale of a seat on a particular route. According to IdeaWorksCompany, ancillary revenue can be defined as:

‘Revenue beyond the sale of tickets that is generated by direct sales to passengers, or indirectly as a part of the travel experience’

Ancillary revenue is not a new concept. It has existed in various forms across the travel and tourism industry for many years (see ancillary services in tourism).

For example, when a customer books a holiday with a travel agent and the agent offers travel insurance as an additional purchase, that is an ancillary product.

Similarly, when a package holiday customer buys a day trip to a water park from the holiday rep, that is also an ancillary sale.

Travel and tourism businesses have relied on ancillary sales for many years, but it is only in recent decades that ancillary revenue has really taken off within airlines. According to IdeaWorksCompany, airlines worldwide earned an estimated US$148.4 billion in ancillary revenue in 2024, with around US$157 billion projected for 2025 – roughly 15.7% of total airline revenue, up from 9.1% in 2016.

Increased competition in the airline industry

Airline ancillary revenue all started with the introduction of budget airlines. These airlines were based on the premise that they would provide passengers with the bare minimum, expecting them to pay additional fees for any extra products or services that they would require.

Over the past three decades budget travel has taken off, with the rapid expansion of airlines such as easyJet and Ryanair in Europe, Southwest, Spirit and Frontier in the USA, AirAsia in Asia and IndiGo in India. This has changed the face of the aviation industry.

With competitors offering discounted fares on the same routes, full-service and charter airlines have also turned to ancillary revenue as a means of staying competitive in a challenging and turbulent industry.

Increasingly, airlines such as British Airways and Qantas have unbundled their products and introduced ‘basic economy’ or hand-baggage-only fares, charging separately for items such as checked baggage and seat selection in order to remain competitive.

Airline ancillary revenue management has now become a core part of most airlines’ business models.

Examples of airline ancillary products

Airlines can charge passengers for all sorts of things.

Alongside the obvious ancillary products such as duty free items, food and drink and baggage, airlines also offer new and innovative products and services, such as the Economy Skycouch and the bookable Skynest sleep pods offered by Air New Zealand on ultra-long-haul flights.

There are many ways that revenue can be enhanced and airlines continue to capitalise on this.

Fundamentally, airline ancillary revenue can be categorised into four types: a la carte products, commission-based products, frequent flyer activities and advertising sold by the airline. These are explained in detail below.

How does ancillary revenue management impact profit?

Airline ancillary revenue is big business. IdeaWorksCompany reports that ancillary revenue ranges from around 3% to more than 60% of total revenue depending on the airline. Ultra-low-cost carriers such as Spirit, Frontier, Volaris and Viva Aerobus typically earn the largest share of their revenue from ancillaries, while in absolute terms large US carriers such as United, Delta and American earn the most – much of it from frequent flyer and co-branded credit card deals. The chart below (from an earlier IdeaWorks report) illustrates how ancillary revenue contributes to airline income.

Source: Ideaworks

Unbundling

Before we get into the details of exactly how airlines use airline ancillary revenue to increase profits, we must first understand the concept of unbundling.

What is unbundling?

Traditionally, passengers bought a ‘bundled’ airfare. A ticket with a scheduled airline typically included a seat, a baggage allowance and some food and drinks.

Then came the disruptors – the budget or low-cost carriers.

These airlines identified that not all passengers wanted every element of the traditional bundle and introduced the fare-only ticket: a ticket with no additional extras included.

This in itself is simple. The complexity began when full-service carriers started to unbundle their fares and low-cost carriers started to offer bundles of their own.

Unbundling is when an airline takes away elements that would usually be included in a traditional fare and offers them instead at an additional cost, allowing the base fare to be reduced.

This is an important part of ancillary revenue management.

The benefits of unbundling

Unbundling can bring significant benefits for an airline.

It allows them to gain revenue from selling products and services, many of which may not have been available before. It also allows them to differentiate their products more effectively- passengers can simply opt in or out of purchasing a particular product or service. For example, a passenger travelling with only hand luggage may prefer to pay a lower fare rather than subsidise a checked baggage allowance they will not use.

Product differentiation in this way is actually very popular.

In fact, consumers have become increasingly selective. Many people now live in a world where we can tailor products and services to suit our personal preferences in many different regards so there is most certainly an argument to say that airlines should move with the times and provide the option too.

They do this through unbundling.

Ultimately, unbundling allows scheduled airlines to more effectively compete with low cost carriers.

With profit margins being squeezed more than ever before, airlines are now turning to ancillary revenue as a strategy for remaining competitive in the aviation marketplace. There are different categories of ancillary revenue used by budget and scheduled airlines, as outlined below.

The disadvantages of unbundling

When it comes to airline ancillary revenue, there are some disadvantages too.

Unbundling may be a necessity for many airlines, but it can have negative consequences. In particular, it can make air travel confusing for passengers, who may ask questions such as:

Can I take a bag on board this flight?

Should I buy food at the airport or is a meal included?

Do I need to pack blankets for the children or will one be provided?

Passengers often struggle to find clear answers. Fare structures vary between airlines and between fare types on the same airline: some fares include checked bags and some do not, some include free changes and some charge fees, and some airlines include soft drinks but not alcohol.

The picture becomes even more complicated with codeshares.

Many airlines operate codeshare and partnership agreements, meaning that a passenger may book with one airline but fly all or part of the journey with a partner. If each airline applies its own policies on baggage, food and drink, the passenger may receive a complimentary meal on one sector and nothing at all on the next. This lack of consistency and transparency can be frustrating.

This is a common experience for passengers across the aviation industry.

Ultimately, unbundling is known to reduce customer satisfaction, particularly when it comes to loyal customers. People who have enjoyed a glass of wine on their flight for many years generally do not respond well to that privilege being taken away, for example.  

When British Airways introduced charges for food and drink on short-haul economy flights in 2017, it received many complaints from previously loyal passengers. In 2023 the airline reintroduced complimentary water and a snack on short-haul flights, illustrating how airlines must balance ancillary revenue against brand image and customer satisfaction.

Whilst the goal of unbundling is to reduce fares, airlines operating out of primary airports such as London Heathrow will always struggle to compete with airlines who are able to offer comparative flights at significantly lower costs out of secondary or tertiary airports where the fees are substantially lower.

Ultimately, the aviation industry is evolving and airlines need to change with it. Exactly what the best approach is, however, continues to be debated.

What are the categories of airline ancillary revenue?

Airline ancillary revenue has become an integral part of any airline’s business model.

Originating with the introduction of low cost carriers, the sale of ancillary products and services has revolutionised the aviation industry in many ways. Society has become more ‘choosy’ in what we want.

We don’t want to pay for alcoholic beverages that we won’t drink.

We don’t want to pay for a sandwich that we won’t eat.

We don’t want to pay to check in a bag that we don’t need.

These changes in consumer demand have resulted in airlines developing a range of ancillary products and services that are available for sale both on and off the aircraft. Here are the four categories of airline ancillary revenue.

A La Carte Ancillary Products

A la carte ancillary products are products and services sold to supplement the travel experience by airlines. There are two main “types”:

1- Unbundling – Charging for products and services which were traditionally part of the ticket price. Allowing passengers a “pick and mix” option of products they want. One size does not fit all.

2- Value-added – Selling ancillary products and services which may “add” to the travel experience, but that were not generally included in ticket price.

Why do airlines use a la carte ancillary products?

A la carte is a prominent example of airline ancillary revenue. Ultimately, airlines sell a la carte ancillary products to increase the likelihood of commercial survival. Snyder (2014) stated that

“When the legacy carriers all put this into place — it was around 2007, 2008 — they were just desperate for money because they were bleeding so bad. They couldn’t reduce fares because they needed to stem the tide.”

By relying less on the base fare and selling a range of additional products and services on an a la carte basis, an airline increases the likelihood of greater profitability. As you can see in the graph below, airlines make very little profit from the sale of the seat itself, so it is very important to explore other revenue opportunities.

By making money through alternative means, airlines are able to lower fares, which in turn stimulates demand. In reality this may only be a matter of perception. By the time you add on payment, baggage, check in and seat selection fees, for example, a low-cost flight may cost the same as an equivalent full-service flight. But because the initial price was lower, it attracts the customer’s interest and secures the booking.

Examples of a la carte ancillary products

The most common examples of a la carte airline ancillary revenue come in the form of in-flight retail. For budget airlines, there is often a big push in this regard, with frequent advertisements and Cabin Crew who are trained in sales techniques. Other airlines may place less of a priority on a la carte ancillary product sales.

Here are some examples of the types of a la carte ancillary products commonly offered by airlines:

• Food
• Drinks
• Fragrances
• Cosmetics
• Jewellery
• Watches
• Sunglasses
• Toys
• Games
• Duty free
• Scratch cards
• Headsets for in-flight entertainment (IFE)
• Onward travel tickets
• Attraction tickets
• Check in Baggage
• Hand baggage fees
• Excess baggage fees
• Seat selection fees
• Speedy/priority boarding
• Flight change fees
• Wi-Fi and in-flight entertainment

Why different airlines offer different a la carte ancillary products

Different airlines have different business models and it is important that they tailor their a la carte ancillary products and services to suit the needs and desires of their particular type of customers.

British Airways, for example, sells food and drink on short-haul flights through its Speedbird Café menu, while also providing complimentary water and a snack – a balance designed to suit its premium brand.

It is also important to recognise that the ancillary products and services offered change regularly depending on consumer demand, the state of the industry and the wider economy. Ryanair, for example, introduced fees for larger cabin bags in 2018, allowing only a small personal item free of charge – a model that many other low-cost airlines have since followed.

Frequent flyer programmes

Another example of an airline ancillary revenue strategy is leveraging the benefits of a frequent flier programme. Let’s take a look at how this works in practice…

What is a frequent flyer programme?

Frequent flyer programmes, or FFPs, are customer loyalty programmes offered by many airlines. These typically allow customers to accumulate (or “earn”) points for flights taken or services bought from the airlines commercial partners. Members can then redeem their accrued points for free air travel tickets or for other products and services.

Frequent flyer programmes can be critical to legacy carriers facing fierce competition from budget airlines. It encourages return business and offers something that many of the competing low cost carriers do not.

In addition, a frequent flyer programme should be viewed as a powerful marketing tool that allows airlines to collect value added information (precise members profiles, consumer habits, etc.) on a population with high spending capabilities.

More and more frequent flyer programmes are becoming a business of their own rather than just “nice to have”. These programs can provide airlines with a source of recurring and low volatility income, which is especially important given the increasingly competitive nature of the aviation industry.

Here is a handy timeline taken from the Centre for Aviation that shows how frequent flyer programmes have grown and evolved over the years.

How do airlines use frequent flyer programmes to make ancillary revenue?

How airlines make money from their frequent flyer programmes as an ancillary revenue product is not always clear cut.

Historically, there was limited evidence about how profitable frequent flyer programmes were once management costs and passenger rewards were taken into account. However, it is now clear that loyalty schemes can be enormously valuable. During the COVID-19 pandemic, United and American Airlines borrowed billions of dollars using their loyalty programmes as collateral, with United’s MileagePlus valued at around US$22 billion – more than the airline itself at the time.

What is clear, however, is that airlines can use their frequent flyer programmes to drum up business with commercial partners and directly with passengers, thus making this an important airline ancillary revenue strategy.

Relationships with commercial partners

Airlines will often sell their frequent flyer points to commercial partners. These partners will then offer the points to their own customers as a sales incentive. This can be a very successful method of using airline ancillary revenue.

Perhaps one of the best examples of this is the commercial relationship between British Airways and American Express. British Airways sell points to American Express. American Express then entice new and existing customers to use their credit card by offering points as rewards.

Just by using the credit card, customers can collect a substantial number of frequent flyer points which can then be redeemed on a flight or other travel products and services. You can find out more about how this works for the consumer over on The Points Guy website.

Whilst credit cards do seem to dominate the frequent flyer ancillary revenue market, these are not the only commercial partners who are interested in doing this type of business.

Tesco, for example, allows Clubcard members to convert their points into British Airways Avios. Again, the anticipation is that customers will choose to shop with Tesco as opposed to other supermarket retailers because they wish to collect the frequent flyer points.

It is difficult to know exactly what agreement an airline will make with a commercial partner, but it is thought that large sums of money change hands in order to set up such a deal. This can be, therefore, a very lucrative type of ancillary revenue for airlines.

Relationship with passengers

Aside from the obvious relationship in terms of loyalty that is developed through a frequent flyer programme, there is also a monetary relationship.

Customers can purchase frequent flyer points directly from the airline. These can be purchased as a gift for a friend or relative or for personal use. Sometimes it may be more cost effective to pay for a flight or other service with points rather than cash, so this would entice the customer to buy points. When customers buy points, it helps to make the airline more money.

Why don’t low cost carriers use frequent flyer programmes?

If frequent flyer programmes can be so valuable, why don’t all low-cost carriers use them?

There is no single answer. Many European budget airlines compete mainly on price rather than loyalty, and short flights do not lend themselves to traditional mileage-based schemes. In North America, however, several low-cost carriers do run points-based programmes, such as Southwest Rapid Rewards, JetBlue TrueBlue and Frontier Miles.

Another trend in recent years has been subscription-based loyalty schemes offered by low-cost carriers.

Rather than collecting and redeeming points, passengers pay an annual fee for benefits. easyJet Plus, for example, provides perks such as fast track security (where available), an additional cabin bag, speedy boarding and free seat selection for an annual fee, while Wizz Air offers the WIZZ Discount Club and an ‘All You Can Fly’ pass.

Commission-based ancillary revenue products

Another airline ancillary revenue strategy involves using a commission-based model.

What is commission-based ancillary revenue?

Commission-based sales are exactly that- sales which make the airline a commission. These will typically include products and services that are offered by third party providers (i.e. outside companies). In exchange for promoting said products and services, airlines yield a commission when a purchase is made.

Commission-based airline ancillary revenue can be an excellent source of passive revenue for the airline. Once the partnership is set up, the airline earns commission each time it refers a customer who makes a purchase.

Commission-based ancillary revenue sales has effectively enabled the airline to become a ‘one stop shop’. This means that customers can buy many of the things that they need from the airline, without having to shop around, otherwise known as dynamic packaging. For more on this, see dynamic packaging in aviation.

Commission-based ancillary revenue sales are facilitated through airlines tapping into various inventory systems. Air travel is typically the smallest part of an overall travel itinerary and by airlines attacking the total spend, the possible revenue from any individual customer can exceed three to five times the average airfare value! This shows that there is a lot of money to be made and that this can be a lucrative airline ancillary revenue strategy.

Examples of commission-based ancillary revenue products

There are many examples of commission-based ancillary revenue products within the aviation industry. These can generally be segregated into five categories, as outlined below.

Travel related services

Travel related services is the biggest category of commission-based ancillary revenue. Here are some examples:

• Activity packages
• Airport lounges
• Airport coach transfers
• Airport parking
• Car rental
• Hostel booking
• Hotel booking
• Theme park tickets
• Ferry tickets
• Train tickets
• Tours and activities

Consumer services

Consumer services tends to focus on things that the consumer wants, but that might not be directly travel related. Examples include:

• Foreign currency exchange
• Home insurance
• Life insurance
• Overseas property
• Holiday home sales
• Credit cards
• Travel insurance

Entertainment

Some airlines will make money through selling entertainment options to consumers. These include:

• Online gaming
• Scratch cards
• Theatre tickets
• Concert tickets
• Tickets to sporting events

Retail

Airlines sell a range of items both on board and off the aircraft. While many of these are sold on an a la carte basis, sometimes companies will agree a commission-based deal.

Paid advertising

Some airlines will invest in advertising-based agreements that pay on a commission-based level. This could include items such as travel guides or brochures.

Why different airlines offer different commission-based ancillary products

Different airlines have different business models and it is important that they tailor their commission-based ancillary products and services to suit the needs and desires of their particular type of customers.

Ryanair, for example, has historically sold scratch cards on board. Whereas a premium airline, like British Airways, would likely avoid such business deals for fear that it would negatively impact their brand image.

Advertising as an ancillary revenue strategy

This is one method of airline ancillary revenue that many people are not familiar with, so it is worth looking at the role that advertising plays in more detail.

Airline marketing versus ancillary marketing

Every airline will undertake significant marketing efforts to advertise their business. They might have TV adverts, adverts on the Internet or posters, for examples. In order to do this the airline will pay money to place an advertisement. The advert below is an example.

It is important to note that this is not advertising as an ancillary revenue product.

When an airline pays for advertising, it is a marketing cost rather than a source of revenue.

So, if this is not advertising as an ancillary product, then what is?

Advertising as an ancillary product is when an airline sells advertising space to a third party company. The airline earns money from selling this space, so it counts as ancillary revenue.

Methods of advertising as an ancillary revenue strategy

There are lots of different ways that third party companies can advertise with an airline. Some of these you may be familiar with, others you may not be. Below are some examples of this airline ancillary revenue strategy.

Website advertising

Advertising as an ancillary revenue strategy is perhaps most prevalent online.

Websites effectively sell advertising space to third party companies. This could be a banner ad, a side ad, an affiliate link, a review or any number of ways that a company can be promoted on the website. Some airlines may offer spaces on the home page or on other pages.

Ancillary revenue can be made from a number of sales techniques. This might include pay per click agreements, daily, weekly, monthly or annual rates or rates per impressions. The exact nature of the commercial relationship and how much money changes hands will not usually be known to the general public.

Magazine advertising

Airlines often sell space to advertisers as a means of ancillary revenue in their inflight magazines. This could be a page advert, half a page advert or a small feature. It could also include link advertisements.

IFE advertising

In-flight entertainment is something that is generally offered by scheduled carriers on long haul flights. It provides the perfect opportunity for ancillary revenue income, and with the spread of streaming and in-flight Wi-Fi, more airlines are now using it. Just like YouTube or ITV, some airlines will place adverts created by third parties before or during entertainment facilities, such as films.

Seatback advertising

Passengers spend much of a flight looking at the seat in front of them, making seatbacks a valuable advertising space for an airline to sell.

Livery/exterior wrap advertising

Some airlines will allow advertisers to paint the exterior of their aircraft to promote their own brand. Whilst an airline can make a lot of money from this, they need to weigh up the costs against the benefits. Ryanair, for example, stopped selling exterior wrap advertising some years ago as they deemed the lost opportunities to advertise their own brand outweighed the money that could be made.

Headrest advertising

Some airlines use removable headrest covers. This can be a convenient place for an external company to advertise their product and for the airline to make a little extra ancillary revenue.

Tray table advertising

Similarly, some airlines will allow for adverts to be placed on their tray tables. This can be on the back on the tray table so that the customer can see it while it is folded away, or it can be on the inside of the tray table. Some airlines will also place a paper insert on top of their food trays with an advertisement on it.

Boarding pass advertising

Airlines can make money through ancillary revenue advertising on their boarding cards. For traditional boarding cards, adverts tend to appear on the back. For online check in, where boarding cards are printed at home, adverts tend to follow the main flight details.

This can be a useful way to make money, but it can also cause some confusion when passengers are looking for important details on their boarding card.

Overhead locker advertising

Some airlines, typically budget airlines, will allow advertisers to use the space on the overhead lockers. Some airlines avoid this practice, however, as they think that it looks untidy and is not in keeping with the brand image.

Airline cup advertising

Cups, napkins and other catering items can also carry third-party advertising.

Sick bag advertising

Even sick bags have been used as advertising space by some airlines.

Should an airline allow any company to advertise with it?

When selling advertising space as an ancillary revenue product, it is important that airlines choose the right companies to work with. It is essential that the airline assess the opportunity costs i.e. will the negative impacts of this advertising outweigh the positive?

Airlines need to consider their long-term strategy when planning their airline ancillary revenue ideas. Just because an advertisement might bring in money in the short term, doesn’t mean that it might not drive away customers and in fact lose the airline money in the long term. This is something that airlines must consider when choosing to work with an advertising partner.

Airlines should choose commercial partners which align with their own brand values and which are appropriate to their business when planning their airline ancillary revenue strategies.

Hilton Hotel, for example, might be a good fit for a page advertorial in the British Airways magazine. This is because their brand image is similar to BA’s- premium quality etc.

British Airways may, however, turn down an offer from an online casino company who wishes to advertise on their website as this may have negative impacts on sales. Casino gambling companies are not aligned with the BA values and is unlikely to be of interest to the customers, who instead are likely to view it as spam.

An airline must carefully consider who it chooses to work with and why to effectively optimise their airline ancillary revenue.

Airline ancillary revenue- To conclude

Airline ancillary revenue is an important and growing part of airlines’ business models, now accounting for more than US$150 billion a year worldwide. Innovations such as dynamic offers, subscriptions and personalised retailing through NDC (New Distribution Capability) are likely to shape the future of ancillary revenue across the industry.

Airline ancillary revenue: FAQs

Below are answers to some of the most common questions about airline ancillary revenue.

Further reading

If you found this article helpful, the following posts may also be of interest:

• IATA Airport Codes- List Of Every Airport Code In The World!
• What Are Meal Codes?
• 20 Types Of Aircraft- The Past, Present + Future Of Air Travel
• The Fascinating Story Of The First Commercial Flight
• Ancillary services in tourism
• Dynamic packaging in aviation
• Types of airlines
• What is an airline reservation system?

About the author

Dr Hayley Stainton is a tourism academic, examiner and the founder of Tourism Teacher. She has a PhD in tourism and more than 20 years’ experience teaching travel and tourism at school and university level. Read more about Hayley