WHY ANCILLARIES SHOULD DRIVE PRICING STRATEGY: A PRACTITIONER’S VIEW

Abstract

Airlines have been lately earning a large share of revenue from ancillaries (Bags, seats, bundles, and loyalty add-ons). This commentary argues that the pricing teams should start treating ancillaries as first class pricing inputs to optimize the total passenger yield, instead of optimizing fares in isolation. This paper covers industry evidence and a live pricing experiment, with three practical recommendations, which is making expected ancillary value visibly in pricing decisions, test ancillary offers with small A/B experiments and keeping bundles simple and transparent for customers. Short, actionable steps are provided so commercial teams can start capturing ancillary value without major systems overhaul.
Keywords: Ancillaries; airline pricing; revenue management; dynamic pricing; experimentation; offer retailing; customer experience