Extra flight charges: SAA vs the world
Loss-making South African Airways could be missing out on an additional revenue stream which global airlines are milking for as much as 39% of their total revenue.
This is according to data from IdeaWorks and CarTrawler.com, looking at how much international airlines make from ancillary revenue tied to flights.
Ancillary revenue is revenue sourced beyond the sale of tickets, which is generated from direct sales to passengers, or indirectly, as part of the overall travel experience.
This includes frequent flier activities, a la carte features, commission-based products, and advertising sold by the airline.
Compared to global airlines, SAA has some of the lowest ancillary revenue in the world – in total and on a per-passenger basis – indicating that the struggling airline may be missing a beat in finding a way to draw in much-needed additional revenue.
In the case of SAA, reported ancillary revenue for the group is sourced primarily from its Voyager frequent flier programme – which drew in over R480 million during the company’s 2014 financial year.
According to the report, the Voyager programme has 2.5 million members, which equates to a split revenue of R192 per member.
Across the group’s 9.33 million passengers, however, this works out to be around R51.50 ($3.81*) per person- ranked 53rd out of 63 airlines which report this revenue stream.
* As of September 2015, $4.82 at the time of the report.
The top airline, Jet2.com, pulls in $56.28 (R757) per passenger.
Top 10 airlines, ancillary revenue per passenger
| # | Airline | Ancillary revenue per passenger |
|---|---|---|
| 1 | Jet2.com | $56.28 |
| 2 | Spirit | $52.35 |
| 3 | Qantas Airways | $50.16 |
| 4 | Allegiant | $45.16 |
| 5 | AirAsia | $43.22 |
| 6 | United | $42.46 |
| 7 | Virgin Atlantic | $39.60 |
| 8 | Korean Air | $39.28 |
| 9 | Wizz Air | $34.87 |
| 10 | Alaska Air | $31.46 |
| 53 | South African Airways | $4.82 |
Jet2’s ranking is largely due to its holiday package options, as well as other services which it charges for – such as advanced seating, in-flight sales, car hire, and travel insurance.
The airline which makes the most from ancillary sales is United Airlines, which drew over $5.86 billion in ancillary revenue in 2014.
Top 10 airlines, ancillary revenue
| # | Airline | Ancillary revenue |
|---|---|---|
| 1 | United | $5 861 000 000 |
| 2 | American Airways | $4 651 000 000 |
| 3 | Delta Airlines | $3 212 909 000 |
| 4 | Air France | $2 046 292 309 |
| 5 | Ryanair | $1 906 616 921 |
| 6 | Southwest | $1 885 000 000 |
| 7 | Lufthansa | $1 632 765 608 |
| 8 | easyJet | $1 457 215 349 |
| 9 | Qantas Airways | $1 387 084 868 |
| 10 | Korean Air | $919 239 157 |
| 55 | South African Airways | $44 976 053 |
Expressed as a percentage of total revenue, Spirit Airlines has the biggest take through ancillary sales – 38.7% of the group’s total revenue.
South African Airways only makes up 1.7% of total revenue in the same way.
Top 10 airlines, ancillary revenue as % of total revenue
| # | Airline | % of total revenue |
|---|---|---|
| 1 | Spirit | 38.7% |
| 2 | Wizz Air | 33.7% |
| 3 | Allegiant | 32.4% |
| 4 | Jet2.com | 28.5% |
| 5 | Ryanair | 24.6% |
| 6 | Tigerair | 21.8% |
| 7 | Jetstar | 20.8% |
| 8 | Flybe | 20.7% |
| 9 | AirAsia | 20.0% |
| 10 | Volaris | 19.5% |
| 54 | South African Airways | 1.7% |
SAA a loss-making mess
In the first five months of the current financial year, SAA has made a loss – following years of troubled revenues amid declining fare prices and rising costs.
According to CFO Wolf Meyer, competition in 2014 also hit the group, with forecast costs looking to increase by 76% in 2015 to R561 million.
None of South Africa’s other airlines disclose ancillary revenue, according to the CarTrawler report. SAA’s finances also include those of low-cost airline, Mango.
The country has seen a number of new low-cost airlines enter the market, looking to grab some of the airfare pie.
This includes the latest entrant Fly Blue Crane, which launched in September. Tanzania-based low-cost airline Fastjet also has a presence in the country, along with FlySafair – which launched in 2014.
SAA is expected to reveal its financial results for the year ended 31 March 2015 in early October.
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