The margins for airlines are thinner than ever, squeezed by taxes, airport fees and corporate/leisure travellers looking for better deals at shorter notice. Ancillary Revenue – money generated from non-ticket sources – has become an important area of revenue growth for airline operators as a result.
In 2014-15 the revenue per passenger across 63 airlines increased by 8.5% to $17.49. This contributed to an overall boost of 32.8% among low cost carriers, representing a total revenue of $2.9 billion.
From Apps to analytics, personalization to performance metrics, digital convenience has significant potential to drive travellers directly into the airline booking flow and boost all-important ancillary revenue sales.
Manage Your Trip from the Back of a Seat
As early as 2010, Japanese carrier ANA introduced the ability for its passengers to order food and drinks via a screen on the seat-back. These technologies are evolving, as airlines start to tie in destination-based activities, offering recommendations, advanced tickets and discounts. Forging relationships with businesses on the ground and serving up relevant activities can be an effective way of boosting ancillary revenue.
Apps and Personalized Offers
The habits of a passenger, particularly a frequent flier, can be used to personalise the products and services being pushed through apps. Analytics can form an important part of delivering time, place and behaviour-centric offers to their device. This insight runs the range in complexity and can begin from the moment a booking is made.
Know that a traveller is on a long-haul flight with their family, that they’re a vegetarian, 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: an offer on in-flight cushions, a discount when purchasing more than two vegetarian meals, a buy one-get-one-free offer on sun lotion from a chosen air-side retailer and even a cheaper transfer to their hotel.
This is a contentious one, as it flies in the face of traditional customer retention. Instant Apps are compacted versions of android apps that are installed to fulfill a specific need. For instance, a customer checking their arrival time would be temporarily served the module of an app that is associated with flight times. Think of it as an extension of a website, but with the functionality of a dedicated app.
This middle-ground is the main advantage for Instant Apps. Customers can download and engage with your brand/service without the usual barriers that prevent them from downloading a full app. It reduces install friction and menu taps, bringing more users to your app through upselling, while allowing for the possibility of instant, no-fuss payments for extras such as parking and excess luggage.
Right now Instant Apps are an Android-only technology, but it would be wise to assume that Apple is working on similar developments after the introduction of ‘app thinning’ in iOS 9.
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, integrating contactless NFC payments as an alternative to notes and coins.
The connected aircraft also offers the potential to earn commission-based revenue from flight-specific retailer portals. When first logging on to the Wi-Fi, passengers could be greeted with a splash page showing flight-specific offers. 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.
These are just a few of the ways that developments in digital convenience, marketing and analytics can open up new streams of ancillary revenue for airlines in an ever competitive industry.
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