You know the story. Airlines are continually striving to compensate for low headline fares with add-on charges and – especially – with ancillary revenue: advance seat reservation, on-board sales, and so on.
But how to push those ancillary revenues still further?
Closer airline/airport relationships are already on the cards: some European airlines are asking for dedicated gates where they can offer further paid-for ancillary air services, a win-win for airline and airport if it allows the airline to generate incremental revenue, rather than just cannibalising revenue from another airport concession.
Counterintuitively, though, in-flight retail can also be a win-win for airline and airport.
As some LCCs realised a while ago, their customers are a commercially attractive target audience for marketers. They’re attractive before and after their flight, and they’re particularly attractive when they are stuck and bored in a metal tube for two hours.
Imagine that an airline includes in its in-flight retail offer some products which are not ideally suited to on-board sale (for example full-size bottles of spirits).
The twist: the fulfilment is not on board, but at the destination airport’s arrivals shop, where the passenger presents his in-flight receipt and collects the item. The airline wins (sales commission, no logistics costs and no weight penalty), as does the airport (incremental sales to arriving passengers).
This is feasible for a limited stock range with no extra technology. Add data connectivity, though, and you open up all the retail stops. Just one example: one of my clients is developing an on-board retail and entertainment platform which will enable airlines – and airports – to tap profitably into the full commercial potential of their transient “audience.” Airlines can provide airport retail operators with a previously-inaccessible revenue stream, giving them scope to negotiate lower airport charges. And passengers will have a range of entertainment, communication and retail options to pass the time. What’s not to like?
Whether through “virtual trolleys”, branded airport gates or not-yet-thought-of innovations, what’s certain is that – with the aid of technology – airlines and their partners will continue to push the envelope. Welcome to the high frontier of ancillary revenue generation – now the sky’s the limit!
Patrick Edmond is Managing Director of e2consult, a successful boutique aviation strategy consultancy advising airlines, airports and industry suppliers worldwide. He holds an MSc in Air Transport Management and an MBA and brings many years of airline and strategy experience, most recently as GM Commercial of Air France subsidiary CityJet. When not at 36,000 feet, he is based in Dublin, Ireland.
Patrick Edmond can be found on twitter at @e2consultAero