It was on my last long-haul flight back home: premium economy cabin – half empty. And I thought: “Why didn’t they offer those empty seats to passengers in economy for some additional comfort in the next 10+ hours?! Can’t they do it now?”
70% of airline ancillary revenue today (or $65 Million!)1 is generated from a-la-carte products and services. This includes upsell with seats, bags, onboard sales in addition to the travel experience. So, bottom line passengers do not end up always buying the cheapest fare. In fact, they’d rarely do on long-haul. They are open to spend more and fly better.
Let’s go back to the empty premium economy cabin. I can think of at least 3 occasions that my preferred carrier could have sold those seat upgrades not as a fare but as ancillaries. It’s inventory that an airline should be able to offer at any time – hours before departure, when you are willing to fly back home in a more comfortable seat; at bag drop – when your price elasticity is higher; or on the monitor in the aircraft just before take-off?
The art of ancillary upsell is not something airlines are pros at. It is part of digital retail techniques that I see airlines beginning to experiment with. In the context of expected economic downturn that CAPA projected during their Airline Leader Summit 2019 in Dublin, making money and keeping margins is vital.
So, let’s take a look at some ways to grow airline ancillary revenue.
- Start with the journey. Leading airlines share their digital transformation journeys at PROS annual conference Outperform. This year Cathay Pacific shared that they are rethinking the dotcom, mobile, in-flight and disruption experience around the customer. What do your passengers need when they shop and at post-booking and where are the friction points? Are there other touchpoints where you could enhance the customer experience with products and services? Like offering a discounted seat selection through your mobile app? Or ranking the airline ancillary catalogue in order of likelihood of purchase?
- Differentiate. Your dotcom is not the OTA website. And your mobile app is not the metasearch. Make sure that you can differentiate ancillary content not only depending on the time of purchase but also across your channels. If your strategy is to push direct sales, then why not offer seat selection at preferential rate on the dotcom and only middle seats via indirect channels?
- UX and UI. According to PhocusWright, 35% of online travel market is for airline eCommerce. However, that does not necessarily mean ancillary sales via the dotcom/mobile app are easy if the user experience is poor. UI matters, and it is a key success factor for platforms like Airbnb, Ryanair, Uber. Do passengers really need 10 pages to book a flight and the extras? Or can a few tabs make it a much sleeker experience?
- Know your customer & get AI to help. It is up to 10% more expensive to acquire a new customer than to retain an existing one.2 If Joe is a frequent flyer then you already have a history with him. Learn from the passengers that are brand loyal. They might be more willing to test new product bundles that open their second wallets. After all, they have a history of trust with your brand and AI can help you identify better what offers are more relevant. Use machine learning to identify and capture these insights and automate the learning.
- Seize ancillary revenue opportunities. Not only for the sake of making money. But also, for making flying with your carrier a more pleasant experience. If 20 of your premium economy seats are empty this is not necessarily a revenue loss. It is an opportunity to upsell passengers that are willing to pay extra for these spacious seats (not for the fare!). And make more revenue from happier flyers. Because the most expensive seat on a plane is the empty one.
1 IdeaWorksCompany / CarTrawler 20182 Criteo panel “Can AI build brand loyalty?”, PhocusWright Europe 2019