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Airlines learn to navigate the path to ancillary revenue growth


As ancillary revenue becomes increasingly important to their bottom lines, many airlines are finding that determining which products and services to offer is a learning process.

Philippine LCC Cebu Pacific, for example, generates 14% of its revenue from common ancillaries such as seat selection and food sales, and is considering other options.

“We need to see what is necessary. Not everything is relevant to sell,” Cebu Pacific director-ancillaries Apple Ignacio told ATW at the Future Travel Experience conference in Istanbul. “However, we don’t want to always increase fares, so ancillary is very necessary to generate more revenue.”

Airlines do not have to become retailers like Amazon, SunExpress manager-digital distribution and solutions Marcus Motzkuhn said.

“I would like to see us as travel companions for our passengers,” he said, adding that ancillary revenue generation is a learning process and many airlines are still trapped in their old systems.

“Very often products are not offered at the right time, through the right channel,” Motzkuhn said.

SunExpress, a joint venture of Lufthansa and Turkish Airlines, has carefully developed its ancillary strategy, he said.

“I do not understand the hysteria about unbundling business-class products,” Motzkuhn said. Offering a basic business class without lounge access or limousine service should be standard, he said. “Everyone has their own desire,” he said.

Emirates Airline, for example, recently said it will offer unbundled business-class fares on certain routes, based on seasonal trends in demand.

Indian LCC IndiGo is another airline looking for ways to increase its relatively small ancillary income.

“We generate only 10% of our revenue with ancillary sales. But without it, many airlines would be not able to survive. It becomes increasingly important,” VP-ancillary revenue, business development and distribution, Niraj Batra said, adding that the airline also manages to keep its fares and unit costs low.

Turkish LCC Pegasus Airlines plans to grow its already significant ancillary revenue.

“Twenty-four percent of our total revenue comes from ancillary. Our ancillary revenue per passengers is €12.90 [$13.66],” SVP-marketing and e-commerce Omur Dedeköylü said.

New services the carrier is considering include travel-related products and onboard catering through IFE systems.



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