Nickels & Dimes Add Up

For anyone not on the ancillary revenue and service fee bandwagon, check out this investor presentation from United Airlines (Dec 2008). Yes, maybe United is not the fiscal role model all airlines should aspire to be, but their nickels and dimes may be adding up to real money. $1.2 Billion in 2009 to be exact. We beeline to Slide 14 for a summary of their ancillary revenue growth:





That's a pretty ambitious target for 2009, given the 2008 data and declining capacity in a global economic downturn. Yet the growth of the previous years suggests it's within reality. Keep in mind, over half of the target comes from good old fashioned service fees tied to a captive audience (e.g. ticket change fee, call center fee, etc.), as shown in this table:





Look at it a different way. UA reported 63 million mainline revenue passengers boarded in 2008, a 7.7% decline from 2007. Yet they were able to grow the ancillary revenue 28%. That's pretty good. And if passengers remain flat in 2009 (optimistic?), and UA meets their ancillary revenue target, they'll collect ~$19 per mainline pb in ancillary revenue. That's approaching $50 per ticket sold. Pretty good stuff.