Consumer behavior and clarity of merchandising: Creating a win-win for airlines and their customers

As ATPCO has engaged with its global airline network of 425+ partners over the years, we are encouraged by the growing interest in advancing modern airline retailing. Some airlines are ready to extract the maximum value from their business, and we are thrilled to be the strategic partner that helps unlock their revenue potential. Unfortunately, we have seen many airlines’ enthusiasm get quickly crushed by the reality of the process.

We’ve heard things like “it’s not in my budget” or “we’re waiting for NDC” that greatly limit airlines' potential. My response to these statements is “Good!” At least you are thinking about taking the next step toward modern airline retailing. However, the majority of these viewpoints fall under the category of sacrificing better for perfect, or they fall victim to arbitrary rules.

Having this type of outlook results in measurable margin improvements being sacrificed for the wrong reason while you wait for the “perfect-weather day.”  
 

Start addressing and closing the gaps 

I challenge every airline commercial leader to sit down with the analyst team and run some fundamental performance analysis in a matrix. Have fun breaking it down by geographies, points of sale, hubs, or even O&Ds:
 

If you are seeing gaps in these foundational performance metrics, think about the level of merchandising applied to each one. Use the matrix and run one more analysis of your business to determine the potential revenue that could close these gaps. Here is a sample to consider:  

Flights per day: 500  
Days: 1  
Seats per flight: 1
Avg value per seat: $10  
Total value: $5,000  

You may look at this and say, “I can find $5,000 in revenue just lying around the floor of my office.” Multiply that by 365 days and you have $1.825 million of potential revenue from just one seat on each flight per day. How? By upselling customers who have likely already chosen to book your airline.

Based on how much your airline has invested to get your products to market, how much would you be willing to invest to unlock this revenue opportunity? How many more days are you going to wait to capture this opportunity?  

The perfect product bundle: Progress, not perfection  

A Datalex study finds that 87% of airline executives say it’s important to have the flexibility to bundle or unbundle products and services the way they see fit. This makes perfect sense. The ability to create tailored product offerings, or to deliver completely à la carte shopping would appeal to customers who want more control over their experience and bring improvements to airlines. The more flexibility airlines have to not only bundle or unbundle airline products and services, but also harness insights, the more options they have to fine-tune that customer experience and improve their margins.  

A common challenge ATPCO hears on a daily basis is that an airline can’t just sell what they want and offer compelling product and service bundles until they get to NDC or some form of dynamic or continuous offers. We agree that this future is going to enable opportunities that may not exist today. But once again, we face a scenario where airlines may be sacrificing better for perfect and missing out on real revenue opportunities today while they wait for this future. This is not a one-or-the-other tradeoff. You can have both right now!  

The road to a better customer shopping experience has already been paved. A small number of airlines have realized they can leverage existing industry solutions like Branded Fares and Routehappy. They create more fare filing flexibility and bundled products to reap the rewards today instead of waiting for the future. These airlines are realizing the benefits of higher upsell rates, higher ancillary attachment rates, and as ATPCO has heard from many travel agencies, market share shift away from airlines who continue to sell in a commoditized world of just a schedule, a price, and the airline’s logo.  

If you have product offerings you believe you cannot sell until the stars align for you on NDC or some form of dynamic or continuous pricing, talk to us. Challenge us to help solve your problems. You do not have to sacrifice today for tomorrow or sit back and wait for the future. You can have both. Today. 
 

Start your merchandising journey today