Ancillary Revenue: Innovation and Collaboration in the New Travel Landscape

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Abacus, Airline Distribution Director, Ho Hoong Mau, shares on how airlines can best harness the potential of ancillary services to boost profitability, gain market share and enter new markets at the Travel Distribution Summit Asia 2010.

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Ancillary Revenue: Innovation and Collaboration in the New Travel Landscape

  1. 1. Ancillary Revenue Ho Hoong Mau, Director, Airline Distribution Abacus International
  2. 4. <ul><li>All Airlines are in the game </li></ul><ul><li>Low-cost carriers in the forefront for ancillary </li></ul><ul><li>USA drives the highest published ancillary revenue. </li></ul><ul><li>Asia is slowly awakening </li></ul>Ancillary Revenue – Who is in the Game?
  3. 5. Ancillary Revenue Is Not The Top Priority For Asian Airlines’ Leadership Team For 2010
  4. 6. 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. What do you estimate your carrier percentage of sales would be from Ancillary Sales?
  5. 8. <ul><li>IATA projects airlines to earn US$58 billion in 2010 from ancillary revenue </li></ul><ul><li>This will make up 12% of their total revenue </li></ul><ul><li>LCCs outstrips the network carriers – reporting almost 20% of the revenue from ancillary revenue </li></ul>Ancillary Revenue – Changing the Airline Landscape Table 1: Revenue from Ancillary Fees to U.S. Airlines in Q3 2009 (Million USD)   3rd Quarter 2009 3rd Quarter 2008 % Change Delta 447.5 262.2 70.6 American 261.2 242.5 7.7 US Airways 230.8 129.6 78 Northwest 223.2 165.5 34.9 United 168.5 152 10.9 Southwest 155.7 143.4 8.6 Continental 130.5 55.7 134.3 AirTran 68 38 79 JetBlue 48.7 53.1 -8.4 Alaska 47.3 34.3 37.9 US Industry Total 1954.7 1432.7 36.4 Source: Bureau of Transportation Statistics, Form 41; Schedule P1.2. Q3 2009
  6. 9. Even In Asia – Slow But Increasing Focus On Ancillary
  7. 10. Travel Insurance 40% Advertising 20% Airlines Have Implemented These Strategies
  8. 11. Airlines Have Implemented Travel Insurance 40% Advertising 20% Image source: Tiger Airways
  9. 12. Our Track Record Travel Insurance 40% Advertising 20% Image source: Singapore Airlines
  10. 13. Branded Fares 53% Advance Seat Assignment 42% Airlines Are Considering Implementing The Following: Premium Seat Assignment 40%
  11. 14. Branded Fares 53% Airlines Are Considering Implementing : Advance Seat Assignment 42% Premium Seat Assignment 40% Image source: Malaysia Airlines
  12. 15. Branded Fares 53% Airlines Are Considering Implementing : Advance Seat Assignment 42% Premium Seat Assignment 40% Image source: AirAsia
  13. 16. Branded Fares 53% Advance Seat Assignment 42% Airlines Are Considering Implementing : Premium Seat Assignment 40% Image source: JetStar Asia
  14. 17. <ul><li>Lowering base fares result in positive revenue impact </li></ul>Ancillary Revenue Boost
  15. 18. A Vital Strategy
  16. 20. Opportunities – B2B Channel is under Leveraged Rental Cars Vacation Packages ‘ Window Shopping’ (On-line Stores) On-line Gambling Business –to-Consumer Business –to-Business Source: L.E.K Analysis Internet on-board In-Flight Entertainment F&B On Board Upscale Amenities Unbundled Choices (eg, Bag check, seat selection) Lounge Access Advertising Mileage Redemption Hotel Partnerships Financial Services Surveys/Data Collection
  17. 21. Shifting Zone of Play Low Cost Carriers DIY Price Sensitive Leisure Segment Full Service Carriers Managed Corporate Segment
  18. 22. Shifting Zone of Play Low Cost Carriers DIY Price Sensitive Leisure Segment Full Service Carriers Managed Corporate Segment
  19. 26. Consumer Tipping Point Now, I have to pay extra for everything! My Elite status is being diluted by all comers who pay a small price to “ buy” status…
  20. 27. Customers’ preference and choices Consumer Tipping Point
  21. 28. Email Email Ancillary Revenue 1. A ncillary services adoption is patchy and uneven 2. Battle of the two forces 3. Time is right to get onboard…..with the right partner Summary
  22. 29. Evolution Travel Insurance Pay for 2nd checked bag Pay for 1st checked bag Premium seat assignments Advance seat assignments Branded Fares Meals Lounge access Inflight entertainment Elite flyer status Call center reservation Advertising Web booking fee Oxygen Luggage stow space Using the toilets Leg rest Reading materials Internet access Transfer to gate Amenities, eg, toothbrush Late check –in/boarding Special meals Reading light Current Future
  23. 30. Thank You

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