Focus on ancillary revenue
We asked Jay Sorenson: What do you think are the most important conclusions of your report on baggage fees? Airlines need to consider how a brand is affected by the introduction of a la carte fees. The revenue potential from baggage fees is certainly there. But world-class airlines shouldn't create a fee structure that attempts to squeeze every last euro, dollar, and peso from the customer. That treatment is expected more from LCCs . Big global brands should offer a tariff that generates revenue with the first bag for Economy customers . . . but do it in a manner that is simple to understand and accommodates the vast majority of travel styles.
If airlines don't get their acts together and offer a transparent baggage charging structure, is regulation likely to affect the level of income from this type of AR? The US Government has yet to address the issue of opt-out retail methods. For example, airlines may pre-check boxes in the booking path so consumers are more likely to buy services . . . even when unaware of the purchase. This is prohibited in Europe. But regulation does eventually occur, and this is a needless outcome if carriers simply treated consumers fairly up front.
Is there really room for a complete range of approaches from charge for everything to charge for nothing? Isn't this just too confusing for the customer?
"Airlines may pre-check boxes in the booking path so customers are more likely to buy services even when unaware of the purchase"
Watch out when a meeting room is filled with lawyers, accountants, customer service staff, and revenue managers! The result will create a pricing tariff stuffed with text, tables, and trouble for consumers and airport staff. The objective should be simplification. Yes, some money will be left on the table, but that's preferred to procedures that attempt to match the complexity of the tax code issued by the revenue service.
Can you see baggage charges going any higher, especially as fuel costs rise? Airlines will try to increase fares to cover higher fuel prices. If these fail to hold, then higher bag fees might be used to fill the gap. But this method has its limits, as travellers will merely try to stuff more onto the plane. That's a point smart airlines are keen to avoid.
Can you see any new initiatives for AR in the near future? I think practically every possible fee has already been introduced somewhere in the world. Growth will come with the adoption of what's already out there by more airlines. Revenue growth will be boosted by higher fees and more savvy retail methods for more sales. Some may even disappear because they don't prove to be that profitable. For example, carriers may not offer onboard internet if installation costs prevent economic returns.
Revenue figures are sourced from the 2011 Amadeus Yearbook of Ancillary Revenue by IdeaWorks, released in August. This and the full 18-page baggage report are available at: www.
IdeaworksCompany.com.
CONTACT US
OnBoard Hospitality's AR Focus is now a regular feature. If you have a new product, new technology, a relevant report, or a new partnership to announce do email richard@appinpublishing.
co.uk (text only, please). Please send any picture files, marked AR in the subject line, direct to
jo.austin@
onboardhospitality.com
www.onboardhospitality.com 41
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