Airlines eye merchandising as passenger traffic declines

Ancillary income at U.S. airlines could double to more than $10 billion over the next two years as carriers turn to merchandising to help offset a decline in passenger numbers. "I think you are seeing the industry not only unbundling its product, but discovering its merchandising power, and the ability to sell goods and services and generate ancillary revenue that has a very significant margin," Continental Airlines CEO Jeffrey Smisek told analysts last week. Some experts believe airlines could eventually provide transportation at cost, while counting on merchandising to provide profits.

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