Abacus recently completed interviewing Asian
airline executives in a merchandising survey. The surveyed results show
that airlines across the region will be stepping up their efforts
to capture new revenue growth through ancillary revenue.
The Abacus Merchandising Survey 2010 found that 75% of airlines’
management teams were either ‘very’ or ‘somewhat’ committed in
making ancillary services as one of their key priorities for 2010.
More than half these airlines were already somewhat or heavily
involved in merchandising strategies such as branded fares or
ancillary products and services.
Abacus Vice President of Marketing, Brett Henry,
said, “The survey has made it clear that airlines in all segments
across Asia, not just LCCs, are making ancillary revenues a key
component of their future revenue growth strategies.”
Another key insight from the survey Asian
airlines shows that travel agencies will play a key role in their
ancillary revenue efforts. 60% of the airlines indicated the
agency channel as a pivotal part of their merchandising expansion
plan, and they look to work more closely with the agencies to
drive greater ancillary revenue this year.
Regarded as a high-yield revenue stream,
industry analysts think the unbundling of services can offer
airlines opportunities for brand image enhancement, product
differentiation and sustainable competitive advantage. A recent
report by the Centre for Asia Pacific Airlines (CAPA) predicted
that airlines worldwide are expected to generate US$58 billion in
ancillaries this year. For leading low cost carriers in mature
markets, ancillary revenue already accounts for more than 15% of
However, 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.
“In the U.S., traditional network carriers now
fill the top three positions in annual total ancillary revenue
instead of budget airlines. There is a huge revenue opportunity
for Asian airlines in cultivating ancillaries as part of their
overall business strategy,” continued Mr Henry.
“We have seen some of the world’s top carriers
applying a-la-carte fees to business class travel and premium
seatings over the past year, and these moves have set the industry
thinking about ancillary products as a viable revenue source. What
is key to the success of introducing this new revenue strategy to
the market lies in careful management of customers’ expectations
without hurting the brand integrity of the carriers.”
The top ancillary revenue category cited by
Asian airlines in the Abacus survey was the selling of travel
insurance. Other key strategies cited included onboard
advertising, premium seat assignments, branded fares adoption,
advanced seat assignments, paying for the first checked bag and
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