A report by Valour Consultancy has revealed that IFEC-driven onboard ancillary revenues are projected to skyrocket to an impressive $29 billion by 2031. The transformation comes after a difficult period affected by the COVID-19 pandemic but now sets the stage for robust growth.
The Decline of Manual Trolley Services
The report shows that manual trolley services, once a staple of air travel, are losing their appeal. Several factors contribute to this decline, including environmental and security issues. These challenges allow digital technology and omnichannel retail channels to take center stage in generating onboard revenue.
Skyrocketing IFEC Revenues
With digital transformation in full swing, IFEC systems are becoming crucial in onboard retail. These systems are projected to account for 95% of all onboard ancillaries by 2031, a significant leap from just 15% in 2022. This growth is especially noticeable among low-cost carriers (LCC) and leisure carriers, increasingly leveraging IFEC platforms for in-flight engagement, allowing passengers to make transactions using their devices.
Alex Preston, the report’s author, highlights the strong desire of passengers to use digital services to simplify their journey and enhance their in-flight experience. “Air travel has been more than just the flight for some time. Airlines are realizing it is about engagement, including the ability to offer products and services passengers want. The capacity to do this has hitherto been hamstrung partly by a lack of onboard connectivity, but these are exciting times as more carriers deploy in-flight Wi-Fi services, allowing for improved payment security and faster processing alongside a larger and improved retail catalog,” Preston says.
The Reign of Food & Beverage and Duty-Free
Although the trolley service is losing its sheen, food and beverage sales remain robust. The key difference is the introduction of in-seat ordering, which offers a more personalized experience. Duty-free is transitioning from a traditional to a digital platform, offering a wide variety of choices and increasing convenience for passengers.
Advertising and Destination Services
As highlighted in the report, one of the most promising areas for onboard ancillary revenues is advertising and destination services. With connectivity, programmatic advertising is now more attainable than ever, and airlines can offer dynamic, bookable destination services like attraction tickets.
Investment in Digital Retailing
The absence of connectivity should not deter airlines from investing in digital retailing technology. Particularly among LCCs, buy-on-board options are being offered that are not dependent on connectivity.
Valour Consultancy’s recent report is a treasure trove of insights for airlines looking to capitalize on the future of onboard ancillary revenues. As we approach 2031, the $29 billion market that awaits is up for grabs for airlines willing to invest and innovate in IFEC platforms and digital retailing technology.
- The Market for Onboard Ancillary Revenues and Payment Solutions – 2023
- Valour Consultancy’s aviation research portfolio
This is a new era for the aviation industry, one where technology and passenger experience go hand in hand, paving the way for unparalleled revenue growth.