How will mobility and the rise of mobile broadband in Asia impact airlines?

The air travel industry, especially carriers, is seeking new ways to interact consistently with its customers through all travel touch points in the travel continuum.

Published: 29 Nov 2010

The air travel industry, especially carriers, is seeking new ways to interact consistently with its customers through all travel touch points in the travel continuum.

One of the arenas where new initiatives are being taken is related to the development of smartphone applications, aimed at offering travellers with access to the airlines’ onboard stores at any time.

Smartphones are changing the way travellers behave

Each year, nearly 100 million travellers use smartphones onboard US-bound flights, and this trend will gain momentum in Asia in 2011, home to some of the fastest growing mobile broadband markets in the world. Travellers today can use their smartphones to book their airline tickets, track their flights, hold their boarding pass and more. They have also begun to rely on their smartphones for their virtual check-in and travel concierge.

The airlines will focus on monetising more travel touch points with their customers, according GuestLogix and Ipsos. The two entities have predicted the same in their recently produced onboard retail benchmark to measure onboard retail activity.

According to GuestLogix, onboard retailing is still primarily an offline transaction environment with a lot of opportunity for fraud and risk. Managing cash and inventory has always been problematic. In mitigating losses, this has led to inconsistencies from airline to airline as to accepted onboard payment methods, with some operators rejecting the use of cash altogether. Airlines have also resorted to maintaining credit card black lists and capping the value of onboard purchases, leading to missed sales opportunities.

Earlier this month, GuestLogix became the first company to integrate smartphone usage with onboard retailing with its latest platform offering, the OnTouch Concierge mobile application for BlackBerry smartphones. The mobile application enables airlines to provide their customers with access to their Branded Onboard Stores, wherever they are, through their smartphones.

U.S. airlines alone achieved more than US $7.8 billion in ancillary revenues last year, according to the U.S. Department of Transportation. Estimates suggest that ancillary revenues may contribute up to 35% of airline revenues in the near future. Today's ancillary growth has been largely facilitated by baggage fees, tomorrow's growth will be driven by proximity to point of sale and compelling experience through all channels that support and integrate with air travel.

Other predictions for the Airline Industry in Asia

The first release of the benchmark, which covers carriers in North America, compares onboard purchases representing meals, beverages and comfort items, for January to June 2010 versus the same period in 2009. The sales per flight among the top 10 carriers were over US$206 in 2010 versus US$202 in 2009.

With 2011 round the corner, how will airlines in Asia fare when compared to their counterparts in other regions? Here are just some of GuestLogix’ predictions for 2011.

Sustaining profitable revenue growth will remain the biggest challenge faced by airlines in Asia
According to IATA, as the airline industry approaches the end of 2010, passenger demand is 5% above press-crisis levels and Asia outside of Japan is barrelling towards high speed growth. However, we need to bear in mind that airlines’ operating results could easily be sideswiped by higher fuel prices, weather, natural catastrophes, fluctuating currency rates, and other developments beyond an operator’s control. As such, the biggest challenge will still remain sustaining profitable revenue growth.

With capacity utilisation running at an all time high, cost control and transformation will yield less and less going forward. Airlines will need to focus on meaningful ways to enhance service while growing new revenue streams and continue their push to grow ancillary revenues. The cabin will surely emerge as a focus for sustainable and profitable revenue generation next year.

Onboard duty-free concessionaires will evolve as passengers take advantage of destination related offers
In surveying travellers globally, GuestLogix found that more than half of them would take advantage of destination-related offers aboard a flight. GuestLogix expects items such as tickets to entertainment, ground transportation, attractions, tours and other offers that add immediate value to a trip to be in demand, not just in Asia, but around the world.

In response, leading onboard duty-free concessionaires will evolve their business models to include broader shopping categories with the convenience of home delivery. This will represent the next wave in onboard innovation that will usher other important changes in the onboard experience.

There will be an evolution in payment methods onboard to facilitate more higher-valued transactions.
As the use of credit cards and other payment methods penetrate the industry, there will be greater demands placed by the payment industry for operators to achieve security compliance in Asia. Airlines will need to upgrade their existing POS systems to meet the more stringent payment standards globally. As connectivity slowly takes its place onboard aircrafts, payments will incorporate real-time credit card authorizations to support higher-valued transactions.

Airlines will look at new and meaningful ways to support their customers
Carriers are seeking new ways to interact consistently with their corporate and leisure customers through all travel touch points in the travel continuum. By staying better connected with their passengers throughout the entire journey, airlines can establish new and meaningful ways to support their customers, invigorate their brand loyalty, and sustain ancillary revenue growth. By doing so, they can extend the access to their onboard store to all travel touch points.

Airlines will differentiate their onboard offerings on different flights
Airlines will focus efforts that benefit all customers as most flyers are affluent and highly predisposed to spending. Onboard retail technology is now such that operators can differentiate offerings to appeal to their most valued customers on any given flight. There is also the potential to allow passengers to upgrade meals and seating. This virtualises the traditional fare class structure, and with shopping on onboard, they can present different offers based on frequent flyer status.

Electronics, skincare and jewellry will continue to be the top performing duty free category
According to GuestLogix’ duty-free partner, In-flight Sales Group Hong Kong, the top performing category has been electronics, particularly those related to the iPhone and BlackBerry smartphone. We expect this trend to continue with the introduction of new product models. Skincare has been strong across all North and East Asia countries, but especially strong in mainland China. Jewellery has also experienced strong performance and a marked return recently to higher priced products and premium positioned brands. Bottom performers are tobacco and colour cosmetics.

 
 
 

Related Reads

comments powered by Disqus