Supporting characters gradually become protagonists In Aviation Finance Episode.
Total airline revenue exceeded pre-pandemic levels last year, reaching $918 billion, according to the agency. The 2024 CarTrawler Ancillary Income Yearbook was recently published.
Ancillary services have played a big role in this growth, with passengers increasingly willing to pay for personalized experiences such as more legroom, early boarding or checked luggage. The CarTrawler report shows that 57 airlines' combined ancillary revenue increased by $7.4 billion in 2023, an increase of more than 25% from 2022 – which is Increased by 50% compared to 2021.
Since ancillary services are an obvious revenue driver for airlines, why aren't more airlines branching out beyond common offerings?
Well, they're working on it.
Flyer announced on wednesday Riyadh Air Create a booking experience that includes ancillary services as part of an “all-in-one” offering.
The partnership will allow travelers to book flight add-ons including hotel bookings, activities and experiences, insurance and third-party services such as car transfers, as well as more typical baggage, extra legroom and lounge access options.
“Replace PSS with FLYR’s comprehensive quoting, ordering and digital customer experience capabilities [passenger service system] “Riyadh has become a forward-thinking airline,” said Cole Wrightson, chief technology officer at FLYR.
He continued: “Riyadh Airways not only provides customers with a seamless way to book flights, but also offers a full range of travel-related products and services, thereby enhancing the overall travel experience while opening up new revenue streams, allowing them to compete more effectively with more A vast tourism market.”
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FLYR isn't the only tech company making moves in this space. Amadeus New aviation retail solution Nevio launched in 2023 and Saber launches SabreMosaic, In May, it launched its own retail platform.
Innovation in this area has been somewhat slow to come, but experts say airlines are working to expand services well beyond the typical offerings most travelers think of today.
The “why” and “how” of ancillary services
Industry experts say airlines aim to create a comprehensive retail environment that offers a variety of products and services to meet travellers' needs.
“The dream for airlines is the market — the travel market,” said Eric Léopold, founder and managing director of Aviation Consulting. Three o'clock.
This means selling hotel bookings, car rentals – entire travel itineraries in one booking.
In Leopold's estimation, the idea made sense. Many travelers buy their flights first – so airlines are the first to know about these travelers' plans.
“They know what you eat because they serve the meals [on the plane],” Leopold said. “So if you could choose your meal preference, they'd say, 'Oh, we noticed you like Italian food, and by the way, when you get to your destination, this is your Top 5 Italian restaurants on arrival, here are your top 10 Italian restaurants on arrival. If you're coming on our behalf, you'll get a % coupon discount. “
The airline's dream is the market – the travel market.
Eric Leopold, Three Points
Progress has been slow in part because of the systems needed to support such retail strategies.
“The assistive world, once you start digging into it, is a pretty complex world,” said founder Sinead Finn. Affinity Airline consulting agency.
This is complicated because in order to offer new ancillary services, airlines must change their technology stack. Changing airline systems – many of which have been in place for quite some time – requires a lot of preparation, especially when running a business that operates around the clock.
It goes beyond the challenges of ongoing operations. Airlines' systems need to be compatible with partner systems (at airports and elsewhere).
Ancillary services were initially provided through direct airline channels, but as technology advances, distribution through third-party channels has become possible. But many airlines are currently focusing on ensuring that their basic booking and service capabilities are up and running through NDC and APIs. travel portafter these things are resolved, there may be more interest in adding a la carte aids to help personalize the traveler’s journey.
“Global distribution systems, online travel agencies, travel management companies, online booking tools, custom user interfaces for travel agencies, back-end and mid-end applications, etc. all need to speak the same language so that shopping, booking and service can run smoothly,” Hickey explain.
“Then, to add to the complexity, each airline has its own schedule, has its own technical challenges, and is implementing its own unique strategies for its NDC journey. Nothing is 'standard'.”
NDC itself can add another layer of complexity.
The purpose behind NDC is to allow travelers to benefit from NDC, including airlines providing more competitive airfare offers, personalized services and improved sales. But airlines use NDC in different ways – so some airlines offer customers the same product selection whether they are buying travel directly or indirectly, while others use NDC to push customers into their own channels, Stay away from third-party sellers.
“This approach adds more layers to the technical complexity challenges of travel, making shopping and booking more complex for buyers and ultimately travelers,” Hickey said.
“Consumers don't need to know what NDC is or how it's different from EDIFACT. What matters to them is information like price, flight times, baggage allowance, Wi-Fi options and whether they get a free toothbrush – To them, the mechanism of distribution is irrelevant.”
Leopold said things had been moving forward before the pandemic shut down the travel industry, with airlines starting to make profits again in many parts of the world after three years of the pandemic.
Now, progress in ancillary services is picking up.
Finn attributed the progress to the airline's work on its systems during the pandemic.
“It gives them an opportunity to really look at technology,” Finn said. “I think that's why we're seeing assistive devices perform better now than they did before COVID.”
Other things to note
It can be challenging for airlines to change the content of ancillary services they sell as customer expectations change, impacting how much they are prepared to pay.
For example, low-cost airlines may have an easier time Selling simple bookings, but requiring purchase of ancillary services due to the consumer's perception of the travel experience. On the other hand, if established legacy airlines incorporate customer-expected fees into surcharges, they may not get the same treatment even if the base fare is lower.
While ancillary services may seem like an easy option to increase revenue, the obstacles extend beyond an airline's internal operations and customer relationships.
Regulation also comes into play, creating challenges, Leopold said. U.S. seeks regulatory ancillary feesthe Travel Technology Association opposed the move, and European Package Travel Directive.
Multi-modal connectivity also poses challenges for third-party assistive devices.
“The next phase will be, how do you connect rail to air? How do you incorporate rail into airline agreements to serve passengers?” Leopold said, IATA Policy on Passenger Rights. “Otherwise, things are going to get messy. Either way, you're going to have hundreds of people stuck in the city looking for hotels.”
