I’ve written before about Sabre and Datalex pushing their respective ancillary revenue credentials, but today it is coming from an up and coming player that seems to be getting quite a few runs on the board in the airline IT systems space. IBS are an Indian outfit with a background in systems across a number of transport industries, but after getting into crew management, fleet management, cargo handling and staff bookings for airlines, they are now picking up more customers with frequent flier management systems, and the lastest news is that they have just signed MASholidays (Malaysia Airlines tour operator until recently known as Golden Holidays) to use their iFly Tour product.  

“IBS chairman and CEO V K Mathews said ancillary revenue was an important source of income for airlines in the current economic context, and that iFly would enable MASholidays to realize this income.”  

In the article he doesn’t actually say how, but who cares, it sounds good! (Just prior to posting I saw a better article on the MASholidays deal with the quote “The system will also facilitate ancillary revenue for the airlines by packaging their air seats with hotels, transfers, car rental services, tours etc.” For airline.com I’d call this ancillary, but for a tour operator selling packaged holidays, this is more likely just part of the package, but once again, who really cares). No doubt whatever they are saying and doing it is working with customers, as looking at a list of their milestones, you can see airlines like  Sri Lankan and BMI for Loyalty, and many more for various other parts of their iFly family of airline technolgy. Air New Zealand was a key part of developing this iFly system a few years ago, and much of the functionality was apparently built around their requirements.

In the press release announcing Sri Lankan as a loyalty customer, IBS write:

“iFly Loyalty will also help generate greater ancillary revenue for SriLankan with its sophisticated partner management module.”

I’ve decided to put my zeal for getting a consistent treatment of the term ancillary revenue on the backburner for now, but I would have thought selling points/miles to partner companies was a core part of any loyalty system these days and far from ancillary; maybe this is just splitting hairs. There is one much more interesting line from that same press release:

“It is estimated that 5 to 6% of an airline’s revenue can be attributed to a successful frequent flyer program.”

I’ve never looked at loyalty programs in terms of what share of total revenue they bring in, but it is interesting food for thought. The highest number here would not neccessarily indicate the best run program, as it would be relatively easy to negotiate receiving big upfront new partner incentives and/or give away many times more points/miles than it was ever possible in total to redeem, but neither of these would bode well for the long term viability of an airline or its loyalty program.

To date loyalty systems have never been a major focus of mine, but as I’m planning on spending quite a bit of time this week with a group of developers building one, it will give me a bit more insight to post on this topic going forward. So get ready for more on frequent flyer programs in future – it is after all, another direct sales channel.

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