ANCILLARY REVENUE
In a round-up of recent industry reports and conference presentations, Richard Williams focuses on the hot Ancillary Revenue topics of 2013
Hot topics
The hot topics of 2013 are likely to be services linked to frequent flier programmes (FFPs), social media and smartphone and tablet adoption
RAPHAEL Bejar of AR solutions company Airsavings published his latest report High Flying Success in December. It points out that while AR continues to grow, rising by 11% last year, it remains a tiny percentage of total airline revenue (between 4.8 and 5.6%) and that proportion is not increasing fast. Bejar makes the distinction between fee- based AR such as baggage, food and drink, headphones, pillows and blankets, and service- based AR, especially services linked to airline loyalty programmes. He maintains the latter is the key to acceleration in the growth of AR as a percentage of total airline revenue.
Frequent flier programmes The breakdown of AR among airlines worldwide has FFPs responsible for the largest share, at about 50%. This obviously provides great scope for growth and is an area that airlines should focus on.
FFPs have been around for a long time, but they have historically provided problems as well as solutions. Jay Sorensen’s presentation at the Mega Event in San Diego in November referred to a classic piece of mismanagement by PanAm. In 1984 the airline’s FFP over- reached itself by offering 30 days free First travel anywhere on its network for up to 225,000 miles – the airline subsequently lost $50 million.
In his December report for Ideaworks Points, Pillows and Porsches: Hotel and Car Rewards at
Main picture: Sony xperia tablet; below facebook screengrabs showing its use by airlines
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www.onboardhospitality.com
the Top 30 Airlines, Sorensen ranks the FFPs according to the percentage of rewards offered for cash spent and the availability of flights. Airlines vary widely in the quality of their offering.
Southwest has a fair programme, with good rewards and availability, and US Airways offers few rewards and poor availability. Sorensen says reward availability is just one attribute of a scheme – but for most members, saver rewards are the most important. He insists that every programme should have a strategy: generate cash, loyalty, or a blend of both.
Social media Back to Raphael Bejar for the second hot topic:
“Success or failure for the airline industry at large depends in part on capitalising on customer travel needs throughout the booking path, or pre-flight, in-flight and after landing. Specifically, that comes down to enhanced ancillary revenue offerings (fee and service based), increased use of social media for passenger communications as well as booking and stand-alone point of sale technologies.” Airlines are increasingly using social media. While 40% in 2011 were looking to increase their budget, now 70% are aiming to do this. A Facebook page allows passengers to communicate with each other, share information about flights, and make bookings online. Twitter allows passengers to communicate directly and immediately with each other about an airline’s
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