Skift Take
Airlines have reaped huge rewards in recent years from sales of ancillary products. But as we discovered during this Skift Global Forum panel, their future success is by no means assured. Airlines will need to learn to think more like retailers, using what they know about customers to deliver the right products and services that meet passengers’ constantly changing needs.
Business has never looked better for the global aviation industry. Carriers around the world are reporting record profits as more airlines get smarter about marketing and selling “ancillary” products that passengers add to their basic fares. In fact, industry-wide ancillary revenue is expected to grow by 15 percent between 2017 and 2021. But for all their recent success, today’s airline industry sits at a critical crossroads. That’s because the same tactics that are helping carriers increase their ancillary revenue can also have a negative impact on customer satisfaction, potentially impacting an airline’s long-term brand image.
In order to sustain their recent success with ancillaries, airlines need to adopt a more retail-oriented mindset in their offer creation process. This means that simply “unbundling” products and services from airfares will no longer be enough. Instead, carriers will need to embrace the concept of “hyper-relevance,” meaning that they understand and serve customers differently based on their constantly-evolving needs. However, many airlines have been slow to make this link between relevance and offer creation. How can airlines be ‘smarter’ with their offers? And are there new techniques that forward-thinking airlines are using to increase ancillary revenue while remaining focused on customer satisfaction?
These questions were at the heart of a recent panel discussion at the 2018 Skift Global Forum, presented in partnersh
