OK, so I work for a competitor, and I know I normally try not to be too negative in this blog, but I couldn’t avoid commenting on some research released by SITA. It’s been a while since I’ve picked apart some dubious survey data, and this case from SITA is minor by comparison to previous examples, but it still interesting to look at.

Extra income from ancillary services

Meanwhile, airlines are increasingly developing sources of ancillary revenue, with 63% planning major IT investments to facilitate this over the next three years. Sources of ancillary revenue include unbundling current services such as baggage handling, priority boarding or meals, non-air services ( hotels, car, insurance) as well as up-selling through fare types.

What is wrong with the above paragraph? Upselling into a higher fare family is NOT ancillary revenue. The real story here is that increasing RASK / RASM is the real metric we should be concerned with and not looking at ancillary revenue in isolation. But that is not what gets headlines, so everyone keeps pushing the ancillary revenue story in isolation of the the bigger picture. A couple of notable exceptions to this being Southwest and Frontier. Remember this: if you really get your merchandising right and your fare families branded correctly, then it is possible that ancillary revenue may actually drop (at least in short term), even though you will be upselling into higher fare families more often and overall passenger revenue and profitability will increase. But upselling into a higher fare family is not ancillary revenue, it is ticket revenue.

The report from SITA continues

“A lack of standards and ambivalence in the relationship between airlines and GDSs could be the reason for the airlines giving much more attention to earning ancillary revenues through direct sales rather than through GDSs,” notes Kölle.

“This year’s survey results clearly show the airlines’ desire in this respect.” This is not surprising: GDS account for more than 50% of ticket sales, but fewer than 17% of responding airlines are selling unbundled services via their GDS.

Once again, I know I work for a GDS, even though I am not on the distribution side of the business. But that last statistic is quite misleading. I actually think the true number today might be below 17%, but it is not comparing apples with apples. Rather than go on here, I might save that point for the panel in am hosting on ancillary services at the Horizons conference next month. 

And to finish off with a company that in contrast has hit the mark – for hiring a marketing manager from well outside the box, credit must surely go to Gatwick based charter airline the Astraeus – impressive move hiring the lead singer of Iron Maiden into an executive role!

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