Understanding American Airlines' approach towards ancillary revenues
Published: 15 Aug 2008
Ancillary Revenue Special
Impact on brand is cited as one of the major reasons by traditional carriers' for adopting a cautious approach towards ancillary revenues.
From American Airlines' perspective, its manager of International Distribution, Cory Garner says any carrier, traditional or otherwise, must be conscious of its customers' expectations when deciding which products will share its shelf space.
"When visiting an LCC's website, customers may not be surprised to find a convenient way to save money on their electricity bills; it adds credence to the notion that the LCC is going the extra mile to save customers money. American and other traditional carriers have been around long enough to serve three generations of customers, and are just beginning to serve the fourth. There is no need to reach beyond the scope of travel-related services in order to make a name for ourselves. It makes sense for us to stay focused on offering products that enrich the customer's travel experience," Garner recently told EyeforTravel.com's Ritesh Gupta.
The airline is studying how to best merchandise its core products across all the channels, not just on its website.
"In 2007, American and its affiliates earned $20.7 billion in passenger revenue. With a base of revenue that large, it doesn't take much of a yield improvement to drive game-changing results. That's why we're studying how to best merchandise our core products across all channels, not just on our website," shared Garner.
"The past year has seen American break away from the traditional selling model of "lowest fare or best schedule." We have introduced an AA.com selling platform that adds a third axis to the air selling strategy – level of service. Customers can more easily compare fares based upon service features such as changeability, refundability, upgradeability, mileage accrual, and lounge access. We believe that we've only scratched the surface in this area. Now that our merchandising strategy is beginning to unfold, you will see American begin to dip its toe a little deeper into the non-air ancillary water through our website," said Garner.
As far as cannibalising core product is concerned, airlines have to ensure that the new products and services introduced compliment main sales, rather not affecting them.
On the same, he said two very important things a company can do are to test a few different variations of an implementation in a live environment and install tracking mechanisms to pick the variation that worked the best.
"Even a careful developer can develop user experience myopia after his one thousandth end-to-end test. Even an honest customer's behavior can vary between a controlled test environment and real life. This is why it makes sense to roll out new products to smaller subsets of customers in a variety of ways before attempting a general rollout. A company that plans to be nimble post-implementation will not be as likely to damage the online cash register as one that doesn't," said Garner.
Providing an insight into the usage of airline website, Garner shared that airline's research shows that about 75 percent of travel purchasers book the air portion of their travel first.
"I draw two conclusions from this: airlines have a natural advantage in selling non-air components, and the other 25 percent of travel purchasers should not be expected to suffer through an air booking path before finding non-air options."
"For the 75 percent of customers that like to purchase air first, my bias is to get them through the booking path as quickly as possible and then offer the most relevant non-air options at the confirmation step or between booking and travel. However, I wouldn't rule out the possibility that some ancillary products, when placed correctly within the booking path, could actually improve air conversions. The key in that respect is to test a few different selling strategies and track the results," he said.
Garner added, "The other 25 percent of customers are more likely to be package purchasers that require a bit more inspiration and research before ultimately deciding to purchase. They need a different booking experience that is more akin to what a travel agency would provide. Before investing in a separate booking product, an airline needs to decide whether it has enough customers that expect it to serve this type of inspirational role. If the volume isn't there, then a partnering approach is probably more appropriate."
Ancillary Revenue in Travel 2008 Conference
Alice Curry, Director of Distribution, American Airlines is scheduled to speak during Ancillary Revenue in Travel 2008 Conference, to be held as part of EyeforTravel's Travel Distribution Summit North America in Las Vegas on 1-2 October.
For more information, click here: http://events.eyefortravel.com/tdsusa/ancillary/agenda.asp
or contact:
Helen Raff,
VP North America
Email: helen@eyefortravel.com
Tel: +44 (0) 207 375 7582 – UK
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