More Airlines Rely on Income Other Than Ticket Sales

by on January 31st, 2011
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Spirit Airlines 3rd quarter and nine month of 2011 operating and financial results outlined the importance of ancillary income. Spirit, is one of those nickel & dime air carriers that would charge you for the air you breathe inside their airplanes, if the airline could.

For the 1st nine months of 2011, Spirit received $520 million in passenger revenue, while ancillary income in that period (baggage fees, preferred seating, in-flight liquor sales) provided Spirit with another $276 million (non-ticket) of income, for a total of $797 million in revenues.

Spirit would have lost money in the nine months January to September period on total operating expenses of $690 million, had it not been for non-ticket revenue income. This is note-worthy, since Spirit has the lowest CASM (costs per available seat miles) and (excluding fuel and special items) at 5.74 cents/ASM of all U.S. major and legacy air carriers.

In comparison, United’s CASM (excluding fuel and special items) January through September came in at 12.84 cents/ASM. (In essence, more than twice the operating expense per available seat mile than that of Spirit’s operating expense). Revenue from sources other than ticket sales, is making inroads at United as well, where non-ticket revenue January to September, amounted to $ 2,356 (million). This represents almost 12% of United’s total operating revenues of $28,182 (million).

Counting on non-ticket income should be a concern for every air carrier. A backlash by consumers rejecting excessive bag fees may occur at any time, thus depriving the airline of needed revenue and pushing operating results into the red.

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