Ancillary revenue for airlines: Analysis of willingness to pay for ancillaries in terms of travel and customer attributes

Over the last decade, ancillary revenue has become very important for the aviation industry. Ancillary revenue shares have increased rapidly and contributed to the overall revenue stream: fluctuating fuel prices, operational costs, and the global economic recession challenge airlines. The high-cost structure and competitive market conditions pushed airlines to seek opportunities to generate additional income from nonflight-related services. Therefore airlines seek innovative approaches to gain more revenue from their ancillaries. Market research in Bahrain was conducted among travelers by asking about their previous purchase history and willingness to pay for unbundled ancillaries in their future travels. This study aims to examine whether a customer's annual income, travel frequency, carrier type (customer choice and attributes), duration of the flight, travel purpose, and cabin class (travel attributes) have an impact on the willingness to pay (WTP) of airline ancillaries. Also, the customer's past purchase behavior is studied to understand if there is any relation between the demographic profile of customers and purchase attitude. According to the results of the survey, it is found that there is a strong relationship between travel frequency and WTP for ancillaries. On the other hand, there was no direct relation between the purpose of travel and customers' purchase tendency. It is also found that there are differences in WTP for particular ancillary products and services based on the customer's annual income, carrier type, length of flight, and cabin class. Keywords: Airline Ancillary Revenue, Customer Purchase Tendency, Customer and Travel Attributes, Willingness to Pay.