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A survey initiated by Abacus has indicated that airlines across Asia will be stepping up their efforts to capture new revenue growth through ancillary revenue.

Published: 19 Mar 2010

A survey initiated by Abacus has indicated that airlines across Asia will be stepping up their efforts to capture new revenue growth through ancillary revenue.

The Abacus Merchandising Survey 2010 found that 75 percent of airlines’ management teams were either ‘very’ or ‘somewhat’ committed in making ancillary services as one of their key priorities for 2010. More than half these airlines were already somewhat or heavily involved in merchandising strategies such as branded fares or ancillary products and services.

Another key insight from the survey Asian airlines shows that travel agencies will play a key role in their ancillary revenue efforts. 60 percent of the airlines indicated the agency channel as a pivotal part of their merchandising expansion plan, and they look to work more closely with the agencies to drive greater ancillary revenue this year.

However, most of the Asian airlines surveyed by Abacus had tied the contribution of ancillary sales to a nominal amount of less than five percent of their total sales.

There is a huge revenue opportunity for Asian airlines in cultivating ancillaries as part of their overall business strategy, said Abacus vice president of marketing, Brett Henry.

“We have seen some of the world’s top carriers applying a-la-carte fees to business class travel and premium seatings over the past year, and these moves have set the industry thinking about ancillary products as a viable revenue source. What is key to the success of introducing this new revenue strategy to the market lies in careful management of customers’ expectations without hurting the brand integrity of the carriers.”

The top ancillary revenue category cited by Asian airlines in the Abacus survey was the selling of travel insurance. Other key strategies cited included onboard advertising, premium seat assignments, branded fares adoption, advanced seat assignments, paying for the first checked bag and lounge access.

Henry added, “More innovation is expected as merchandising strategies evolve. Abacus Branded Fares is a first-of-its-kind solution in Asia enabling airlines effectively to sell unbundled services categorised by fare families with similar attributes. This business model gives the airlines the opportunity to emphasise the true value of their fares instead of appearing only focused on price.”