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Travellers have been able to personalise their air travel experience for longer than the iPhone has been around. IdeaWorks says the ancillary revenue revolution is ten years old this year, Apple says the iPhone is only seven. Both are now taken for granted and both are evolving whilst facing new competition, such as Amazon’s smartphone launch including a streaming service. This evolution is driven by changing demands of travellers and users alike.
The iPhone propelled Apple to the top of the smartphone industry in the same way that allowing passengers to pay for the services they require has increased profitability for the airline industry.IATA said recently : "Without ancillaries, the industry would be making a loss from its core seat and cargo products."
And the popularity of ancillaries is growing as passengers realise these services, such as inflight internet, comfort seats or à la carte meals, can improve their travel experience. IATA’s2013 Global Passenger Survey found that nearly half (48%) of passengers bought ancillary products in previous twelve months, compared with 34% in its2012 report.
Meanwhile,PhoCusWright reported that passengers' interests are changing. Baggage fees remain strong, but were the only category to decline between 2011 and 2012 - fees for a more comfortable seat, better meals, lounge access and Wi-Fi connectivity were all up.
Contrary to popular belief, most passengers want to be offered add-ons at the time of shopping, not after they've completed their booking. Amadeus Business Travel Insights 2014 found that as many as two-thirds of business travellers want to be able to book a range of ancillaries as part of the booking process.
Evidence from elsewhere confirms that passengers will pay for a better in-flight experience. Airbus revealed that "almost half of economy passengers are prepared to pay more in order to get greater comfort in economy" and that 34% of passengers visit specialist websites to find out.
Fly.com found 45% of US passengers would pay for extra legroom, 26% to have an empty middle seat next to them, and another 34% to stop the seat in front from reclining.
KLM is already profiting from this. Its Economy Comfort Seat generates €65 million annually on transcontinental routes. And the airline has now rolled out this concept to almost every route and every plane type across its entire network.
In-flight catering is another area where passengers are increasingly willing to pay to make their flight more enjoyable.IdeaWorks compared and contrasted how six airlines - Austrian Airlines, Air France, KLM, Air Berlin, Condor, Hawaiian and US Airways - are offering economy passengers an upgraded meal option, concluding that "this is a category of ancillary revenue activity that is expanding and attracting the interest of airlines all over the globe."
But the shift towards passengers paying for a personalised and improved flight has happened alongside another big change: distribution through agency channels, once shunned in favour of brand dotcom and other direct channels - is now welcomed by the airlines.
The number of airlines integrating their ancillary product content into the GDS booking process continues to grow. Amadeus has full content agreements in place with airlines around the world, and is developing new solutions to help agents, airlines and travellers profit from the next ten years of ancillary revenue development. Watchthis space !