The Internet has furthered the evolution of retail by determining which companies perish, survive, or thrive. It’s a story that parallels much of what has happened in the airline business. The common theme is this: Companies that embrace change enjoy a better chance of success.
Those clinging to the past risk others taking their place. The latest report by IdeaWorksCompany examines the changes occurring in merchandising, what lessons can be applied to the travel business, and how airlines are becoming better ancillary revenue retailers:
• Ryanair Rooms, the hotel booking service from Ryanair, essentially gives back all the sales commissions it earns in the form of air travel credits to its customers.
• Jetstar’s new option to allow travelers to boost their carry-on limit by 3 kg (6.6 pounds) achieved first month sales beyond management’s expectations.
• Ryanair’s revenue from seat assignments is estimated to be €455 million annually or a very meaningful 22.5% of ancillary revenue.
• United is serious about the success of its buy-on-board food offer; for example, its popular breakfast taco was in development for 13 months before it was introduced.
• Viva Aerobus offers Flexi Pass, which for a modest price (such as $7.70 for a domestic Mexico flight) applies flexibility to any low-price branded fare.
• Delta expects a $350 million incremental branded fare contribution for 2018, and up to $2.2 billion eventually. That’s an average of nearly $12 per passenger with 186 million annual passengers.
The Airline Retail ’Round the World: A Global Tour of Ancillary Revenue Best Practices was released today as a free 18-page report sponsored by CarTrawler.
“Merchandising mastery is now required to attract customers to airline websites and encourage them to spend more while booking. At one time it was sufficient to build websites that merely took customer orders. Today’s airlines need to embrace change and innovate, and this requires a shopkeeper’s mindset. Engaging consumers in online stores is the surest method to boost ancillary revenue through the sale of items beyond the airline seat, such as a la carte items, hotel and car hire bookings, and co-branded credit card activity,” says Michael Cunningham, Senior Vice President of Distribution Strategy at CarTrawler.
