Asian airlines focus on extras
Air travellers throughout Asia can expect airlines to be adding more and more optional extras to their bookings – at a price.
Abacus, an Asian provider of travel solutions and services recently completed the Abacus Merchandising Survey 2010 interviewing Asian airline executives. the surveyed results show that airlines across the region will be stepping up their efforts to capture new revenue growth through ancillary revenue.
The Abacus survey found that three in four airline management teams were either ‘very’ or ‘somewhat’ committed to making ancillary services one of their key priorities for 2010. More than half these airlines were already somewhat or heavily involved in merchandising strategies such as branded fares or ancillary products and services.
The top ancillary revenue category cited by Asian airlines in the survey was the selling of travel insurance. Other key strategies cited included onboard advertising, premium seat assignments, branded fares adoption, advanced seat assignments, paying for the first checked bag and lounge access.
Abacus VP of marketing, Brett Henry, said the survey has made it clear that airlines in all segments across Asia – not just budget carriers – are making ancillary revenues a key component of their future revenue growth strategies.
Another key insight from the survey Asian airlines shows that travel agencies will play a key role in their ancillary revenue efforts. sixty per cent of the airlines indicated the agency channel as a pivotal part of their merchandising expansion plan, and they look to work more closely with the agencies to drive greater ancillary revenue this year.
Regarded as a high-yield revenue stream, industry analysts think the unbundling of services can offer airlines opportunities for brand image enhancement, product differentiation and sustainable competitive advantage . A recent report by the Centre for Asia Pacific Airlines (CAPA) predicted that airlines worldwide are expected to generate US$58 billion in ancillaries this year. For leading low cost carriers in mature markets, ancillary revenue already accounts for more than 15 per cent of total revenue.
However, most of the Asian airlines surveyed by Abacus had tied the contribution of ancillary sales to a nominal amount of less than five per cent of their total sales.
“In the US, traditional network carriers now fill the top three positions in annual total ancillary revenue instead of budget airlines. There is a huge revenue opportunity for Asian airlines in cultivating ancillaries as part of their overall business strategy,” said Henry.
“We have seen some of the world’s top carriers applying a-la-carte fees to business class travel and premium seats over the past year, and these moves have set the industry thinking about ancillary products as a viable revenue source. What is key to the success of introducing this new revenue strategy to the market lies in careful management of customers’ expectations without hurting the brand integrity of the carriers.”
Abacus has been supporting carriers to ancillary models being first to market in the region with solutions such as Abacus Branded Fares.
Henry added: “More innovation is expected as merchandising strategies evolve. Abacus Branded Fares is a first-of-its-kind solution in Asia enabling airlines effectively to sell unbundled services categorised by fare families with similar attributes. This business model gives the airlines the opportunity to emphasise the true value of their fares instead of appearing only focused on price.”
Singapore-based Abacus International is a provider of travel solutions and services with offices across all markets in Asia. With over 21 years of experience in fusing international best practices with local expertise, Abacus provides end-to-end technologies and services driven by in-market insights.
Abacus International is owned by Sabre and a consortium of Asia’s leading airlines including All Nippon Airways, Cathay Pacific, China Airlines, EVA Airways, Garuda Indonesia, Dragonair, Philippine Airlines, Malaysia Airlines, Royal Brunei Airlines, SilkAir and Singapore Airlines. Sabre is the global leader in the electronic distribution of travel and travel related services.
More information on Abacus can be found at abacus.com.sg
