Merchandising: The big revenue opportunity for Asia Pacific airlines

Why is this the case? Intense competition from low-cost carriers and the Gulf airlines may be one of a few reasons. But perhaps there is also a missed revenue opportunity.

Today at the Technology and Innovation in Airline Distribution Conference 2016 in Hong Kong, I revealed that while more than 50% of European and Middle Eastern airline bookings through the Amadeus travel agency channel were eligible to include ancillaries and fare family content in 2015, that figure was just 33% for Asia Pacific airlines.

This is significant as merchandising is expected to be a $130 billion opportunity by 2020, and in the indirect channel, merchandising could mean a 10 – 15% increase in revenues per bookings for airlines.

The good news is, we believe that the gap may soon disappear with Asia Pacific airlines rapidly picking up the pace on merchandising. This year we expect Asia Pacific airline bookings in the travel agency channel that can include ancillaries and fare family content to increase to 64%. This growth rate outpaces airlines from all other regions, while significantly narrowing the gap with European and Middle Eastern carriers, who are expected to grow their merchandising content coverage in the indirect channel to over 70% this year.

And OTAs are playing a key role in driving the merchandising trend. They are innovative, early adopters of technology, and highly focused on user experience. As critical mass builds momentum, OTAs will drive ancillary reach and volumes that generate more revenues and higher yield. According to Amadeus data, sales of ancillaries by travel agencies – especially online travel agencies – grew almost 100% in 2015.

We believe the move towards merchandising is win-win for all. For airlines, for travel agencies both online and offline, and ultimately the traveller. Airlines that want to fully tap the merchandising opportunity must consider an omni-channel approach – one that gives travellers choice, transparency and consistency no matter where they choose to shop.

As merchandising evolves, we continue to work closely with both our airline and travel agency partners to deliver more value and better choice to travellers. To date, 109 airlines including 29 Asia Pacific-based carriers have signed up for Amadeus Airline Ancillary Services, with 76 having already implemented the solution. In addition, 27 airlines are now offering Airline Fare Families through Amadeus, with another 10 airlines signed up for the service and in the process of implementing the solution.