ancillary revenue: innovation and collaboration in the new travel landscape
DESCRIPTION
Abacus, Airline Distribution Director, Ho Hoong Mau, shares on how airlines can best harness the potential of ancillary services to boost profitability, gain market share and enter new markets at the Travel Distribution Summit Asia 2010.TRANSCRIPT
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Ancillary Revenue
Ho Hoong Mau, Director, Airline Distribution Abacus International
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• All Airlines are in the game
• Low-cost carriers in the forefront for ancillary
• USA drives the highest published ancillary revenue.
• Asia is slowly awakening
Ancillary Revenue – Who is in the Game?
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Ancillary Revenue Is Not The Top Priority For Asian Airlines’ Leadership Team For 2010
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Most Of The Asian Airlines Surveyed By Abacus Had Tied The Contribution Of Ancillary Sales To A Nominal Amount Of Less Than 5% Of Their Total Sales.
What do you estimate your carrier percentage of sales would be from Ancillary Sales?
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• IATA projects airlines to earn US$58 billion in 2010 from ancillary revenue
• This will make up 12% of their total revenue
• LCCs outstrips the network carriers – reporting almost 20% of the revenue from ancillary revenue
Ancillary Revenue – Changing the Airline Landscape
Table 1: Revenue from Ancillary Fees to U.S. Airlines in Q3 2009 (Million USD)
3rd Quarter
2009
3rd Quarter
2008%
ChangeDelta 447.5 262.2 70.6American 261.2 242.5 7.7US Airways 230.8 129.6 78Northwest 223.2 165.5 34.9United 168.5 152 10.9Southwest 155.7 143.4 8.6Continental 130.5 55.7 134.3AirTran 68 38 79JetBlue 48.7 53.1 -8.4Alaska 47.3 34.3 37.9US Industry Total 1954.7 1432.7 36.4Source: Bureau of Transportation Statistics, Form 41; Schedule P1.2. Q3 2009
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Even In Asia – Slow But Increasing Focus On Ancillary
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Travel Insurance 40%Travel Insurance 40%
Advertising 20%Advertising 20%
Airlines Have Implemented These Strategies
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Airlines Have Implemented
Travel Insurance 40%Travel Insurance 40%
Advertising 20%Advertising 20%
Image source: Tiger Airways
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Our Track Record
Travel Insurance 40%Travel Insurance 40%
Advertising 20%Advertising 20%
Image source: Singapore Airlines
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Branded Fares 53%Branded Fares 53%
Advance Seat Assignment 42%Advance Seat Assignment 42%
Airlines Are Considering Implementing The Following:
Premium Seat Assignment 40%Premium Seat Assignment 40%
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Branded Fares 53%Branded Fares 53%
Airlines Are Considering Implementing :
Advance Seat Assignment 42%Advance Seat Assignment 42%
Premium Seat Assignment 40%Premium Seat Assignment 40%
Image source: Malaysia Airlines
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Branded Fares 53%Branded Fares 53%
Airlines Are Considering Implementing :
Advance Seat Assignment 42%Advance Seat Assignment 42%
Premium Seat Assignment 40%Premium Seat Assignment 40%
Image source: AirAsia
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Branded Fares 53%Branded Fares 53%
Advance Seat Assignment 42%Advance Seat Assignment 42%
Airlines Are Considering Implementing :
Premium Seat Assignment 40%Premium Seat Assignment 40%
Image source: JetStar Asia
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Lowering base fares result in positive revenue impact
Ancillary Revenue Boost
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A Vital Strategy
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Opportunities – B2B Channel is under Leveraged
Internet on-board
In-Flight Entertainment
F&B On Board
Upscale Amenities
Unbundled Choices (eg, Bag check, seat selection)
Lounge Access
Advertising
Mileage Redemption
Hotel Partnerships
Financial Services
Surveys/Data Collection
Rental Cars
Vacation Packages
‘Window Shopping’ (On-line Stores)On-line
Gambling
Business –to-Consumer Business –to-Business
Source: L.E.K Analysis
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Shifting Zone of Play
Low Cost Carriers
DIY Price Sensitive Leisure Segment
Full Service Carriers
Managed CorporateSegment
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Shifting Zone of Play
Low Cost Carriers
DIY Price Sensitive Leisure Segment
Full Service Carriers
Managed CorporateSegment
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Consumer Tipping Point
Now, I have to pay extra for everything!
My Elite status is being diluted by all comerswho pay a small price to“buy” status…
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Customers’ preference and
choices
Consumer Tipping Point
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Email Email
Ancillary Revenue
1. Ancillary services adoption is patchy and uneven
2. Battle of the two forces
3. Time is right to get onboard…..with the right partner
Summary
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Travel Insurance
Pay for 2nd checked bag
Pay for 1st checked bag
Premium seat assignments
Advance seat assignments
Branded Fares
Meals
Lounge access
Inflight entertainment
Elite flyer status
Call center reservation
Advertising
Web booking fee
Evolution
Oxygen
Luggage stow space
Using the toilets
Leg rest
Reading materials
Internet access
Transfer to gate
Amenities, eg, toothbrushLate check –in/boarding
Special mealsReading light
Current Future
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Thank You