Airlines Focus On Ancillary Revenue
By Andrew Compart
The next big push in airline ancillary revenue could come from more pre-flight and inflight retailing and wider distribution of unbundled and ancillary services, such as preferred seats, priority boarding and lounge access via GDSs and online travel agencies.
Such options emerged as consistent themes at the Airline Sales Channel and A La Carte Pricing conference last week in Miami.
Companies such as Onboard Retail Solutions, GuestLogix and ARINC (with its SkyBuy program) were here pitching their vision and technology for more inflight retailing, including so-called “virtual products” that don’t require the on-board stocking of inventory that adds costs in logistics and fuel-guzzling aircraft weight. The future could see a lot more inflight sales of tickets for theme parks, shows and train service (a bit of which has already begun), as well as for other destination attractions and even flower orders for loved ones just left behind.
Everyone gets a cut of the sales, including the airlines and the flight attendants who sell them, and sometimes the companies that supply the product are willing to offer them at a discount to spur sales. Of course, the companies providing the technology make more money when more airlines use them, or use them more often.
Airlines are being encouraged, too, to make a bigger push to sell more destination-related products to their own customers well before they board the flight.
Martin Collings, with Amadeus, emphasized research showing that customers, on average, make airline bookings 46 days before a trip, while they buy destination-related content 30 days before, and book both hotels and rental cars about 24 days before. That leaves a huge window of opportunity for airlines to pick up more of that business than they are getting now.
Airlines have a “natural advantage” in making such sales, he noted, because they can see the passenger’s travel plans, can get them to opt-in to receive the information and “have a stronger brand in knowing the destination.”
For example, he said, an airline can see via the Passenger Name Record if a child is booked on the trip and the family is booked for discount economy tickets, which can guide the airline to offer three-star family hotels. They can similarly tailor their options for people on bookings that tend to be for business travel, again tailored to their fare level.
Collings, head of Airlines Robotics for Amadeus everywhere except North America, argued the profit potential for airlines is “maybe five times greater” than they have realized so far. “This is sitting in your lap. You have to take advantage of it,” he said.
Airlines also are looking to wider distribution of their current a la carte and optional service offerings to help boost revenue.
Currently their unbundled products are offered to customers primarily via direct sales on their Web sites — although, for example, Midwest and United recently began offering agencies the ability to make paid upgrades to their roomier coach seats via the Sabre GDS.
The ability to offer such “upsell” items or other a la carte fees via traditional or online agency channels is getting a boost from an agreement airlines worked out with ATPCO, the global conduit for real-time fares, to file such fees and options with standardized coding.
Fifteen airlines are testing the fee-filing system, and some GDSs are prepared to start making widespread use of the information later this year. That could make it easier for travel agents, corporate travel managers and consumer Web site users to obtain and pay for them.
ATPCO also turned on a new Branded Fare product May 2 that creates a central repository for accessing the branded fares offered by carriers, such as Air Canada and Qantas. That would lead to their widespread, user-friendly availability on GDSs and at online travel agencies. But ATPCO has to convince airlines with branded fares to start filing them, even though there are no end users yet (DAILY, May 14).
Some airlines remain skeptical that intermediaries and GDSs in particular, can be nimble enough to adapt rapidly to changes in airline offerings in branded fares or unbundled options. Virgin Blue and Air Canada were among the carriers raising such questions.
Photo: Finnair
