Continuing with the ancillary revenues special this March, I’d like to explore the issue whether ancillary revenues are good for the airline brand, or detrimental. We all know they’re good for the balance sheet, but what about the brand? To answer this question, let me segment ancillary revenues in two bands – charging for value addition, and un-bundling current product and services.
Charging the passenger for value-addition
A comment on the hotly debated article I wrote on RyanAir’s competition for charging passengers got me thinking. Here’s what Shyrose had to say:
“RyanAir should link up with the local taxi companies of the detination airports and agree a deal with them, whereby flyers can book their taxi on the plane so it’s ready and waiting for them the other side. Taxi companies give Ryannair a referral fee, and Ryanair will be positioned as offering greater value service for customers.”
And I think Shyrose is bang-on-target. Customers don’t mind paying for additional services they value. And this is especially true when the offer is in-sync with the brand expectation. There are ample examples of such value addition. Travel insurance and car rental are popular ones. The intelligent …

Image via Wikipedia
In his autobiography, “Straight from the top – The truth about Air Canada“, Robert Milton – the former CEO of the airline – concludes, “There is no reward in life without risk, and there are times in our lives when we must all balance risk against reward and make a decision accordingly, whether we want or not.” He has taken his own advice to heart.
Divide and conquer – the best way to win
Milton was making a risky bet in 2005 as he floated as an independent unit, Air Canada’s Aeroplan – their frequent flier program. It was the first time a major airline was separating from itself probably the most valuable part of the business. But his instincts have been proven right. Today,  Milton has been successful in monetizing the once troubled airline and its subsidiaries and turning them into profitable entities through a holding company – ACE Aviation Holdings. As Airline Business describes it in an article about Milton, “The evolution of ACE from a struggling flag carrier into money-making holding company is the story of turning side dishes into main courses.”

In fact, not only have most of the individual entities pleased investors with their financial performance over the past few years, they have actually improved performance as independent companies. Essentially, working as independent divisions, these businesses sell services to a variety of customers, not just the parent airline, hence tapping on greater revenue sources than before.