Squeezed by taxes, airport fees and a new wave of travelers looking for better deals at shorter notice, airline margins are smaller than ever. So airlines are turning to Ancillary Revenue – money generated from non-ticket sources – to provide valuable areas for revenue and margin growth.
But how do airlines successfully drive passengers towards these additional services and boost those all-important ancillary revenue sales?
The key here is convenience. From apps to analytics and personalisation to performance metrics – digital convenience is key to sending ancillary revenue ‘sky high’.
And the results are already speaking for themselves. In 2014-15 the revenue per passenger across 63 airlines increased by 8.5% to $17.49 and a boost of 32.8% among low cost carriers, representing a total revenue of $2.9 billion.
So what is digital convenience and how does it relate to air travel already and into the future?
Back Seat Driver
Well here’s a quick example. As early as 2010, Japanese carrier ANA introduced the ability for its passengers to order food and drinks via a screen on their seat-back. These technologies are now evolving to include destination-based activities – offering recommendations, advanced tickets and discounts by forging relationships with businesses on the ground. Of course, this provides passengers with the convenience of planning their trip from the clouds, saving them time and effort, and boosting ancillary sales.
Especially For You
The habits of a passenger, particularly a frequent flier, can be used to personalise the products and services that are being pushed through apps. Analytics form an important part of delivering time, place and behaviour-centric offers right to the customer and it can begin from the moment a booking is made.
How? Well this can go way beyond offering preferred but paid for seat choice. If you know that a vegetarian traveler is on a long-haul flight with their family and that they’re travelling somewhere hot and their hotel is a fair distance from the airport, as an airline, you can use this data to provide: a discount when purchasing more than two vegetarian meals, an offer on in-flight cushions, a buy one-get-one-free offer on sun lotion from a chosen air-side retailer and even a cheaper transfer to their hotel.
Instant Apps
Instant apps are compact versions of Android apps – installed to fulfill a specific customer need. For instance, a customer checking their arrival time would be temporarily handed the module of an app that is associated with flight times. Think of it as an extension of a website, but with all the functionality of a dedicated app.
This middle ground allows customers to engage with a brand or service, without the usual barriers that might prevent them from downloading a full app. It reduces install friction and menu taps, bringing more users to an app, while also allowing for the possibility of instant, no-fuss payments for extras such as parking and excess luggage.
Connected Flier
The concept of the ‘always connected’ aircraft, is one that offers Wi-Fi for free as standard, supporting the cabin crew to offer seamless on-flight services. One example is the use of airline-specific tablets to sell snacks and drinks, whilst also integrating contactless, near field communication (NFC) payments as a convenient alternative to notes and coins.
The connected aircraft also offers the potential to earn commission-based revenue from flight-specific retailer portals. It may not occur to someone to engage in a spot of online shopping on a long-haul flight, but they might be tempted if the offers presented are compelling and only valid for the duration of their journey.
As you can see, convenience – and most importantly digital convenience – is a running theme in ancillary revenue growth. By using analytics, personalisation and insightful marketing to provide customers with digital services – airlines can really enhance their customers’ experience. The result? Passengers far more likely to part with their cash and airlines with the kind of revenue and margin growth they could previously only dream of!
