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These 5 Airlines Had the Most Innovative Ancillary Strategies This Year, Says IdeaWorks

IdeaWorks Company published its end-of-year ancillary strategy champions among the world’s airlines.

The consultancy recognises airlines which “have shown the greatest prowess in ancillary revenue, a la carte pricing, and loyalty marketing” during 2016.

While baggage fees and airline charges still contribute significantly to airline revenue, what these top five wining airlines have in common is that they have found revenue streams in value-added and brand-enhancing products and services.

1. Ranked first among all global airlines reviewed by IdeaWorks is Jazeera Airways. This Kuwait-based carrier, which operates seven aircraft, has maintained solid profits and an operating margin over 20%.

In September 2016 Jazeera Airways opened a new Park & Fly facility which lets passengers drive up and leave their cars for valet parking at one of 500 covered parking spaces, protecting them from the sun. The airline maintains separate check-in in a dedicated air conditioned facility which includes a cash machine, news agent, currency exchange and a Starbucks. “It’s an exceptional example of an airline building ancillary revenue from services and retail activity, while gaining even more by attracting higher yield business travellers,” IdeaWorks states.

2. Ryanair ranks second among its peers, with the new “My Ryanair” personalised merchandising initiative earning special mention by IdeaWorks. The airline has now had 11 million customers signing up online to create individual accounts. Ryanair further incentivised registration for “My Ryanair” this September with a €10 flight credit.

“My Ryanair encourages consumers to describe the ‘who, what, why, where, and how’ of their journeys,” IdeaWorks says. “The Preferences section uses a breezy and speedy style to ask more than 15 questions to build the customer’s profile. The data collected allows Ryanair to create offers designed to boost ancillary revenue. But the information also undoubtedly helps the consumer experience a higher plane of personalised travel.”

3. Delta Air Lines earned nearly $3.8 billion in ancillaries in 2015, according to the annual ranking of ancillary revenue published by IdeaWorks and CarTrawler this summer, and ranked third among IdeaWorks’ best ancillary strategies of 2016. This is the second year in which IdeaWorks gives the airline special recognition as an ancillary revenue innovator.

Delta’s new bag-tracking initiative earned special mention.

“The airline has broken ranks with most others by investing a healthy $50 million of the revenue windfall from bag fees to actually improve service for the customer. Delta now attaches RFID tags to bags everywhere the airline flies. The tags transmit a bag’s whereabouts to the traveler via a mobile phone app. Reading the message ‘your bag has been loaded’ provides a sense of tranquility that truly allows travellers to ‘sit back and enjoy the flight’,” IdeaWorks states.

4. IdeaWorks likens IAG’s low-cost carrier Vueling to Delta for its innovative approach to building fresh ancillary revenue streams.

“Savvy airlines use a la carte methods to meet customer service needs with new products. But Vueling’s new ‘Pending Passenger’ feature is beyond savvy, because it fills a need that’s not yet anticipated by consumers. Imagine you are looking to book a flight for a trip with a good friend . . . but you don’t know which pal is going to say yes to the invitation. For the easy-to-digest price of €2, Vueling allows you to book and confirm the seat and return within 72 hours to provide the travel companion’s name. Pending Passenger entices consumers to book Vueling . . . even when all the details of a trip are not yet confirmed,” says IdeaWorks.

5. Qantas makes it to the top 5 for its lifestyle branding ancillary strategy.

The airline turned to Hollywood star Christopher Walken this year in a clever campaign to promote its Qantas Assure health insurance. The airline encourages customers to stay active and track their performance using Qantas Assure’s dedicated fitness app and popular wearable devices. Qantas’ loyalty program members can earn points for signing up for the insurance and up to 15,000 points a year for reaching key milestones of physical activity. The program is endorsed by Australia’s National Heart Foundation.

“[It] provides a powerful combination of benefits for Qantas by encouraging frequent flyer participation, generating policy revenue, and building the brand as one that cares for its customers,” IdeaWorks states.

7 thoughts on “These 5 Airlines Had the Most Innovative Ancillary Strategies This Year, Says IdeaWorks”

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  6. Nearly two years later, ancillary costs and services have seemingly become even more important to airline industry and business model. But I still can’t figure out if the play is to essentially break even on the airfare and make their margins in the ancillary revenue–or if the ancillary programs are still primarily about loyalty strategies.

    1. You’re right, Mike. Airlines are depending on ancillaries more and more to fill the gap left by low-yield discounted fares. I’d say that they are a bit weighted towards punitive charges rather than experience-enhancing up-sells, and I’d hope that airlines correct that imbalance as they become more sophisticated retailers.

      Thanks for reading and sharing your thoughts!


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