Ross Brannigan

Airline profit margins are famously thin. Fuel, aircraft and crews are expensive, and competition keeps fares down. So how do airlines actually make money? There are five engines, and the ticket is only the first.

First, the fare itself. Seats on the same flight are sold in different fare classes. Revenue management systems open and close those classes as demand changes, so two people in the same row can pay very different prices.

Second, ancillaries. Bags, seat selection, priority boarding, upgrades and bundles. They are sold online, at check-in and after booking, and the right offer at the right moment matters as much as the price.

Third, loyalty. Frequent flyer programmes sell miles to banks, hotels and retailers, who use them to reward their own customers. For many airlines, loyalty is one of the most valuable parts of the business.

Fourth, cargo. Passenger aircraft carry freight in the hold, so a long-haul flight earns from the cabin and from what travels beneath it.

Fifth, distribution. Partner airlines, interline connections and metasearch sites put an airline's flights in front of travellers its own website would never reach, and turn single flights into connecting journeys.

Ross Brannigan led ancillary pricing at Etihad Airways, within an ancillary revenue budget of more than three hundred million dollars. The lesson: price matters, but timing and relevance matter just as much.

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