SpiceJet renews focus on ancillary revenue

The percentage of ancillary revenue as a part of total revenue of Indian carriers is estimated to be 5-7%

SpiceJet will offer flyers quicker check-in and baggage delivery for a fee. The airline said on Tuesday it would charge Rs 500 for assistance with check-in and baggage collection, Rs 200 for priority check-in, Rs 100 for faster baggage delivery, and Rs 35 for extra compensation for baggage loss, flight delays and cancellations.

SpiceJet did not provide the details of its ancillary revenue.

The share of ancillary revenue of Indian airlines is 5-7 per cent. Some European and US airlines earn over 30 per cent of their revenue from ancillary sources.

Ancillary revenue includes sale of food and beverages, air miles and merchandise, fees for seat selection and use of lounges, and advertising on aircraft and products.

Jet Airways’ annual report for 2013-14 said it earned Rs 156 crore from excess luggage charges, up 13.5 per cent from the  previous year. The airline said it would enhance ancillary revenue from seat selection, baggage, meals and lounge access.

“Indian airlines are focusing on ancillary revenue because of competition over the base fare, but there is still a long way to go,” said Amber Dubey, partner and India head for aerospace and defence at global consultancy KPMG.

“The most untapped ancillary revenue opportunity is in in-cabin advertising. Airlines have a captive audience of high-income passengers for over two hours. There is plenty of space on the seat back, overhead cabins and carpets that can be used for generating revenue without compromising on aesthetics,” he said.

According to Dubey, restrictions imposed by the aviation regulator on preferential seat fees and free check-in luggage need to go. Many airlines were pushing comprehensive travel packages, including hotels, taxis and insurance, but that needed to be marketed better, he added.

“On-board wifi may become a standard offering soon but till then there is a chance to earn a premium on it. Last-minute upgrades to premium economy and business classes are priced high. If they can be made more affordable, we may see more demand for upgrades.”