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Lesley's Column

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26th September 2016

Monetising airline ancillaries

Travellers could soon be allowed to pay £5 to skip passport queues at some UK airports; the charge is an attempt to cut long queues at airport immigration.

Already passengers have the option to pay for priority boarding, and fast track security. How are these costs accounted for in corporate travel? The travel manager will analyse air fares but what about these additional costs, where are they captured and accounted for in order to determine total cost of travel?

Then there are the airline ancillary services and costs. Airlines collected $40.5 billion in ancillary revenue in 2015 comprising 8.7% of total sales. It’s a considerable figure and shouldn’t be ignored.

As ancillary revenues have become a major revenue source for airlines – if not the lifeline for many – airlines are thinking of more ways to derive revenue from all phases of the customer journey. Over the past few years, airlines have monetised baggage, seat selection and meals, and have come to recognise there is a wide array of merchandise they can sell onboard.

Technology allows the airlines to sell more things to the customers, whether the product is in-flight entertainment, food and drink, or products at the destination, including hotel packages, sports and concert tickets, or restaurant and theatre reservations.

It appears that airlines have only reached the tip of the ancillaries’ iceberg, as their opportunities for growth include selling a much broader range of products and services before, during and after the flight.

Getting to grips with unstructured data is a perpetual challenge. Obtaining reliable data about airline ancillary fees has not been resolved to date.