Learning about ancillary revenue strategy from US carriers
Airlines in the Asia Pacific region can adopt strategies around ancillary services and onboard sales to strengthen their position and leverage opportunities as the Asian economy starts to turn around.
Published: 25 Sep 2009
Airlines in the Asia Pacific region can adopt strategies around ancillary services and onboard sales to strengthen their position and leverage opportunities as the Asian economy starts to turn around.
According to John Devins, regional director for Asia Pacific at GuestLogix, airlines need to choose whether to perform short-sighted triage on current expenses, or to take a cue from US airlines and consider onboard retail solutions that translate to improved long term business performance.
Airlines can re-conisder their ancillary revenue strategy.
“GuestLogix estimates that given the right strategy, revenues could increase from US$3.8 billion in 2008 to nearly US$17 billion by 2011 from global onboard duty free sales and estimated food & beverage sales based on an approximate conversion rate of 1 percent of passengers. This is a huge figure by any airline’s standards. Airlines will need to address onboard sales in order to get the most out of their ancillary revenue strategies,” said Devins.
Sale of onboard items
“Many airlines in the region focus largely on the sale of duty-free or Food & Beverage (F&B) items onboard. But onboard sales can comprise many more innovative products not limited to the in-flight experience,” said Devins. “For example, what if you could sell tickets to Disneyland onboard a Hong Kong-bound flight, or a train ticket to the middle of the city? This would not only open up a whole new sales channel to airlines and attractions, but also improve the customer’s travel experience.”
GuestLogix estimates that the top 20 airlines in Asia, measured by passenger trips, could generate over US$115 million in annual incremental profits from onboard transport ticket sales on the basis of just 10 percent of their passengers buying tickets onboard. In addition, catalogue shopping and entertainment ticket sales could generate US$172 million in annual incremental profits for these airlines if only one sale was made per flight.