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Despite an overall improvement in the global economy, airlines' profitability remains under pressure. Many factors are out of the airlines' hands, but one area they can control is distribution. Many airlines are starting to believe that selling all their content across all channels can help their bottom line, which is why having an effective merchandising strategy with the help of travel agents is the new gold rush. A new Frost & Sullivan merchandising study suggests that over 50% of travellers prefer to book ancillary services at the same time as booking the flight and that this could grow the average basket size by as much as €35.
IATA says that, globally, "60% of airline revenues come through the travel agent channel". The latest figures from ARC in the US also show how important agents are for airlines - in the first six months of 2014, the value of airline tickets sold by agents was 5.1% ahead of the same period in 2013. Transaction volumes were up 2.4% and the total number of segments also up 2.1%.
All stakeholders - airlines, agents and their travel technology partners – can work together to optimise revenues and we are certainly committed to foster this collaboration.
As previously discussed, passengers are prepared to pay for services which add value to their experience . Priority boarding, extra legroom or lounge access are a source of revenue for airlines while agents are seeing the benefits to their own bottom line as ancillaries become easier to sell through the GDS.
Airlines can help fulfil this demand by ensuring that ancillary services are available in all channels. By making sure agents have access to enriched content via their preferred booking platform, they can extract the maximum possible revenues via the travel agency channel.
Amadeus is enabling airlines to make ancillary content available to travel agents. Currently 26 airlines are live in Amadeus selling ancillaries via the GDS. These airlines are available to agents in more than 90 different countries, giving them access to new opportunities. In addition to this, another 30 airlines have also signed up and are working on implementation as we speak.
Agents are also starting to generate direct revenues from airlines for booking ancillaries by getting commissions and charging service fees. We already facilitate this revenue flow by enabling features to support this model. In September 2013, Corsair set a new industry precedent being the first airline to pay commissions to travel agents selling ancillaries.
Additionally, airlines are experimenting with different methods to better sell air travel. We see the emergence on the GDSs of "fare families" – branded bundles of fares that share the same conditions and include the same services and options. Fare families are an opportunity for airlines to differentiate and upsell in a way that can enhance yield, while agents can give clients transparent, relevant and policy-friendly options.
Amadeus already helps over 110 airlines sell fare families on their website, and now makes it possible for them to sell fare families through agents . After the launch of the display module back in February 2014 with two customers, Finnair and Brussels Air, more than 10 airlines have joined the list of customers that are waiting for implementation. This reflects a strong pick-up, probably thanks to the participation of airlines AND travel agents in its design, ensuring the adoption and the maximum return for all industry players.
A strong relationship between airlines, the GDS and the agent benefits everyone including the passenger, and as an industry, we should continue to work together to optimise revenues across all channels. For agents, the ability to book ancillaries and fare families from airlines through one system and one booking flow saves time, improves customer service and, where applicable, allows travel agents to charge for this so that travel agents can stay competitive and profitable.
For airlines, their enhanced presence in the agency channel can open new markets, including higher-yielding business travellers who still prefer to have their travel managed through travel agencies. And for passengers it means that their trip is fully customisable, regardless of how they have booked it. Win-win-win!