Ancillary Revenue and Airline Merchandising (2026)

Airline ancillary and other revenues are projected to reach about $145 billion in 2026, nearly 14% of all airline revenue, and for some carriers ancillaries now out-earn the flights themselves. But the real shift is not that airlines sell more extras. It is that ancillary has stopped being a fee schedule and become retailing: the discipline of putting the right offer in front of the right traveller at the right moment, priced dynamically. This is the profit engine of the retail airline, and most carriers still merchandise it like a static price list.

This is the playbook for airline ancillary revenue and merchandising: how ancillary became the business, the core discipline of the right offer at the right moment, bundling and dynamic pricing, personalisation and the retail stack, the trip-level frontier, and how to merchandise aggressively without alienating the traveller.

Spoke three of Digital Marketing for Airlines in the GCC and Middle East. It develops the profit engine the retail-airline opportunity introduced, on the storefront the conversion playbook optimises.

1. Ancillary Is the Business Now

Ancillary revenue began in the early 2000s as low-cost carriers unbundled services from the base fare, charging separately for bags, seats and extras to keep headline prices low. Two decades later it is no longer a low-cost tactic, it is a fundamental revenue stream across every airline business model. Ancillary and other revenues are projected at around $145 billion in 2026, close to 14% of total airline revenue, and for some ultra-low-cost carriers ancillary services now generate more revenue than the flights.

What is striking is the convergence. To match low-cost base fares, full-service carriers introduced their own unbundled and branded-fare products, while some low-cost carriers began bundling to move upmarket, so retailing strategies across the industry are collapsing toward a common model. In that model, the base fare is a competitive entry price and the profit is built through merchandising the journey. For a marketer, this changes the target entirely: the number that matters is no longer seats sold, it is revenue per passenger, and ancillary is the lever that moves it.

The fare gets the booking. The merchandising makes the money. An airline that treats ancillaries as a static fee list is leaving most of its retail revenue on the table, while its competitors turn every step of the journey into a relevant, priced offer.

2. The Right Offer at the Right Moment

The single most important principle in modern ancillary strategy is that it is less about selling more extras and more about deciding which offer belongs at which point in the journey. Take-up improves sharply when an offer appears at the moment of need rather than as a generic upsell: a seat-selection prompt on the seat map, a rebooking-related offer inside a disruption flow, a bag reminder in a post-booking email, all convert far better than a random banner. The strongest programmes start with traveller intent, then weigh margin, operational cost and channel fit.

This matters more every year because travellers are overwhelmed by irrelevant suggestions, which means real-time relevance is becoming the only sustainable path to engagement. A useful nuance: baggage often leads in volume, but digitally-native products like seat upgrades and trip protection tend to lead in margin once the airline has enough data to personalise them, so the merchandising mix should be managed for both. The discipline is closer to how leading digital-retail platforms operate than to how airlines historically sold, offer the right thing, to the right traveller, at the exact moment it is relevant, and stop blasting everyone with the same menu.

3. Bundling and Dynamic Offers

Bundling is where merchandising science produces outsized returns. Grouping ancillaries into bundles aligned to purchase likelihood by booking window lifts conversion, and often the perception of getting a bundle alone drives the extra spend. Consider a traveller with roughly $30 of willingness to pay who is shown a Wi-Fi-and-lounge bundle at $40: the sense of a package deal can be enough to pull them past their own price ceiling, and with the right data the bundle price itself can be adjusted to secure the conversion.

Layered on top of bundling is dynamic ancillary pricing: adjusting the price of an ancillary, or the bundle, in real time based on demand, context and the traveller’s likely willingness to pay, rather than a fixed fee table. Combined with continuous pricing on the fare side, this moves the airline from selling static bundles at filed prices toward true dynamic offer creation, assembling and pricing a customised set of products for each shopping request. This is the direction the whole industry is heading, and NDC is the standard that makes it possible across both direct and indirect channels. For the marketer, bundling and dynamic pricing turn ancillary from a checkbox list into an optimisable revenue system.

4. Personalisation and the Retail Stack

Delivering the right dynamic offer at the right moment depends on the systems behind it, and this is where most airlines struggle. Historically airlines sold an emotional, high-value product using messaging standards designed before the internet, which produced static, one-size-fits-all retailing while the Apples, Amazons and Netflixes of the world set customer expectations for personalisation. Closing that gap requires a coherent retail stack: pricing engines, personalisation platforms, merchandising tools, a customer data platform and digital channels working as one.

The practical test is whether the channels talk to each other. When mobile, web, airport systems and inflight platforms share the same customer context and offer logic, the airline can present consistent, personalised offers across the entire journey, a bag offer declined on the website resurfacing appropriately at the airport, an upgrade offered inflight based on the same profile. Increasingly this offer intelligence is AI-driven, dynamically assembling and pricing bundles from each customer’s context, behaviour and willingness to pay. The marketer’s role here is as much about integrating the retail stack as about crafting individual offers, because a brilliant offer delivered through a disconnected channel converts a fraction as well as the same offer delivered through a joined-up one.

5. The Trip-Level Frontier

The frontier of airline retailing extends the ancillary concept beyond the flight itself. The emerging model is trip-level bundles that combine air, ground and experiences, hotels, car rental, transfers, activities, with embedded payments and pay-with-points options that make adding value frictionless at any moment in the journey. Ancillary is evolving from a menu of flight add-ons into a broader travel ecosystem the airline curates and monetises.

This is a natural fit for GCC carriers positioned as hub-and-network airlines serving travellers on multi-leg, multi-day trips, and it connects the airline directly to the tourism and destination demand covered in the adjacent tourism cluster. It also raises the strategic stakes of loyalty and data, because pay-with-points and trip-level personalisation only work when the airline knows the customer well, which is why loyalty and CRM, the next playbook in this cluster, are inseparable from ancillary strategy. The airlines that win the trip-level game are the ones that treat themselves not as flight vendors but as travel retailers across the whole journey.

6. Merchandise Hard Without Alienating

The risk in all of this is obvious: aggressive merchandising can tip into intrusive, and a traveller bombarded with irrelevant, poorly-timed upsells resents the airline and, as the conversion playbook showed, abandons. The resolution is the same relevance discipline that drives revenue in the first place. Offers that are contextual, well-timed and clearly valuable feel like helpful service; offers that are generic, repetitive and sprung late feel like a shakedown.

Two guardrails keep merchandising on the right side. First, transparency, echoing the cost-transparency principle from the conversion playbook, presenting ancillaries as clearly-priced, genuine choices rather than surprises protects both conversion and trust. Second, measurement: track revenue per passenger and ancillary attach rates by offer, moment and channel, so you can tell which merchandising genuinely adds value and which merely annoys, and cut the latter. Done with relevance and restraint, ancillary merchandising is the single biggest lever on airline profitability the marketing function controls. Done as a blunt, everyone-gets-everything upsell, it erodes the very direct relationship the retail-airline model depends on.

Frequently Asked Questions

The Bottom Line

Ancillary revenue has become the profit engine of the airline business, nearly 14% of total revenue and rising, and the discipline has shifted from static fee lists to dynamic, personalised retailing. Win it by putting the right offer in front of the right traveller at the right moment, bundling and pricing dynamically, integrating a coherent retail stack, extending into trip-level ecosystems, and merchandising with relevance and transparency rather than blunt volume. Revenue per passenger is the scoreboard, and ancillary merchandising is the biggest lever on it the marketing function holds.

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