Airline Ancillary Services: The Next Evolution of Air Merchandising

Exponential growth in the passengers traveling through airways is majorly influenced by the rapidly emerging middle-class segment in developing economies. The remarkable increase in the working group in the developing region has resulted in up surged disposable income and freight traffic. Majority of the rising middle class was witnessed in China and India (as described by the United Nations). Furthermore, as the world continues to recover from previous economic contractions, the demand for air travel is projected to vary widely. The rise in air travel demand has subsequently resulted in increased demand for low-cost airlines. Here the airline ancillary services market players are grabbing the opportunity to make more revenue through ancillary services so that they can cater to low-cost as well as exclusive service demand of their consumer diversity.

The lost cost airlines across the globe are collaborating with theatres and car hire services in order to expand their airline ancillary revenues. Ryanair for instance in the year 2018, had begun selling tickets for theatre (musicals for wicked and Les Miserable). In addition, low-cost carriers like Spirit Airlines of the U.S accounted for the ticket revenue of US$ 328Mn in 2017 and non-ticket revenue of US$329m, this showcases that the low-cost airlines are highly emphasizing on ancillary revenues for their growth, subsequently fueling the global airline ancillary service market.

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In commercial departments at airlines around the world, analytics have taken hold and inform more decisions than ever. Those decisions include how, where, when, and at what price to offer options as diverse as checked baggage, pre-assigned seats, onboard meals, and hotel bookings, all of which fall broadly under the category of ancillary. Revenue from ancillary options has almost doubled as a percentage of total airline income from 4.8% in 2010 to 9.1% in 2016. Some airlines book more than 40% of their passenger revenue from these options. As the percentage grows, and airlines recognize the competitive importance of ancillary, the need for optimization increases. Ancillary merchandising, the art and science of creating and communicating the optimal mix of options at the right price, at the right time, represents a key driver for airline revenues.    

There has been constant growth in airline ancillary services industry. Recently, Air Seychelles partnered with Booking.com in order to facilitate accommodation option to its customers. The collaboration further aimed to provide more options to company’s guests who were looking to book their flights and accommodation in one go when travelling. In addition, Singapore Airlines (SIA) partnered with DFASS and SATS in order to establish a joint venture that would engage into travel-associated retail operations in Singapore under the brand names of Scootlogue and KrisShop.

Some of the leading Airline Ancillary Services market include, United Airlines, Delta, American Airlines, Southwest Airlines, Air France/KLM, Ryanair, easyJet, Lufthansa AG, Qantas, and Emirates Group among others.

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