Carriers need more focus on ancillary revenues

Despite much talk of the importance of ancillary revenues for airlines, few have managed to achieve marketing strategies in this direction, according to a new survey.

The findings, carried out by Sabre Airline Solutions Consulting, revealed that hardly any of the 90 global airlines it studied were bundling and unbundling air fares to boost coffers.

The survey also found that airlines were loathe to go down the route of selling premium seats, giving elite frequent flyer status and charging for second checked bags because they perceived merchandising to be too complex to execute and were also afraid of customer rejection and harm to their brand.

Sabre Travel Group chief marketing officer Greg Webb said: “Airlines are focused on the obstacles of change, but it’s imperative to concentrate on the value merchandising offers them and their customers.

“Despite the struggles airlines are facing, there is a real opportunity for them to provide choice and value to passengers while at the same time generating incremental revenue.”

Sabre says its research into this area shows that travellers place a value on getting the widest number of options when deciding which airline products and services to purchase, with one-third preferring a mixture of bundled and unbundled pricing options. If airlines match their offerings with traveller wants, says the technology provider, they can increase consumer loyalty.

The survey found that of the airlines, which were a mix of business models and sizes, 36% said that apart from the cost of fuel, boosting revenue through pricing is set to be their biggest issue in the near future.

Webb said: “Airlines find themselves in a hybrid situation – they are trying to balance a new world of now having to become more of an all-round service provider, travel supplier and travel retailer.

“It’s an unusual situation where airlines are trying to ensure they have the ability to market products to consumers, while also trying to keep up with a marketplace that’s evolving rapidly.”

The survey found that airlines prefer using tried-and-tested methods such as frequent flyer products and services, including co-branded credit cards, and selling advertising space on their websites or in-flight materials. Frequent flyer programmes are still as popular as ever for a third of airline decision makers.

Half of the airlines sell advertising as an ancillary revenue but regionally there is a bias, with only 48% of airlines considering or doing this in Europe/Middle East and Africa versus 62% in Asia Pacific.

by Dinah Hatch