The impact of cargo and ancillary revenues on net profit for full service carrier airlines

Airline companies have had to manage their capacities better and generate new revenues due to low profitability rates, high risk and increasing competition conditions. As a result of the sale of products and services offered free of charge to passengers by companies applying the traditional airline business model for a separate fee to increase the revenues of the companies applying the low cost / low cost airline business model, ancillary revenues (AR) have occurred. AR are what airline companies offer to their passengers other than the tickets they have sold, services such as inflight catering, baggage fees, loyalty programs, seat fees, advertising and commission revenues and in-flight entertainment systems. In this context, in order for airline companies to survive today in tight competition conditions, it is important that they gain AR in addition to their main income. The study examines the effects of cargo revenues (CR) and AR on net income (NETINCOME) for three full service carrier airline companies:Turkish Airlines- THY, American Airlines-AA and Delta Air-DA. As far as it is known, there is no direct empirical study that addresses the effects of CR and AR on NETINCOME for airlines companies. The data used for the period of 2014Q1-2019Q4 was collected from Sorensen&Lucas (2020), IATA and related airline companies’ annual reports in their official websites. Methodologically, a logarithmic econometric model was used in which CR and AR were included as independent variables and NETINCOME as dependent variable. SPSS-22 version was used to analyse data to cover the necessary analysis and tests (regression, reliability, cross section dependent, second generation unit root, delta slope homogeneity, cointegration, casualty etc). The study indicated a positive correlation existed between CR and AR and NETINCOME. The increase in CR and AR also increase the NETINCOME of airline companies. It was revealed that the AR in aviation, provide an important resource for airline companies. The study also reflected that AA and DA are among the top three companies with the highest AR in the world, while THY-AR are lower compared to these two US companies. On the other hand, the study indicated that the contribution of THY-CR revenues to NETINCOME is much higher than the other two companies. The results are also compatible with IATA data that THY is among the top 10 carrier companies worldwide in terms of CR. It is recommended airline companies should give enough importance to CR and AR to increase the profitability