Airlines-recovery-path

Airline’s Recovery Path To Profitability After The Pandemic – Reduced Distribution Cost And Increased Ancillary Revenue

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After months of lockdowns and travel curbs, the aviation sector is on the path to recovery, but profitability seems to be out of reach for many airlines. Airlines are especially finding it hard to fill seats due to many passengers’ hesitancy to board flights (only 61% of passengers are comfortable flying in the next six months). 

Further, airlines must combat unreasonably high distribution costs, which are among their most significant expenses, thanks to the oligopoly of the three most prominent GDS companies. To make matters worse, ancillary sales, an important revenue driver, have fallen by 73% year on year.

Consequently, airlines’ chances of returning to pre-pandemic levels of profitability will depend entirely on whether they can drastically cut distribution costs and come up with ancillaries that passengers will care about in the era of COVID. 

As you read on, you will find out exactly how airlines can go about achieving this. 

The value proposition of NDC

The New Distribution Capability (NDC), an XML-based standard for data transmission, put forward by the IATA, can disrupt the vice-like control that the major GDS companies have on airline distribution.

By letting airlines control their offer, ticketing, and settlement processes without the GDS across all channels, NDC enables them to cut costs significantly. Moreover, if airlines partner with multiple NDC aggregators globally, competition between the aggregators will bring down distribution costs to around $ 2-4 instead of the $14 – 25 that airlines are currently spending. 

In addition to this, airlines can cut back on distribution costs with an automated group revenue management solution that ensures that group bookings are made in a manner that brings in the most revenue while spending the least possible amount on distribution. 

There is also the option of partnering with various governments to serve as the official carrier of the nation. This means that without any indirect and expensive distribution channel, you can reach hundreds of high-yield passengers.

Boosting revenue with ancillaries

Ancillary sales are way down now that customer priorities have changed. Mainly, passengers are looking for safety from covid, personalization, and great value for money. As a result, the ancillaries you offer need to reflect these realities. 

For instance, many airlines have found great success by offering comprehensive covid insurance covering quarantine, telemedicine, screening, etc., if passengers test positive for the virus. Also, you can make it a point to offer immunity-boosting kits and baggage wrapping for enhanced protection from the infection.  

Notably, you can offer passengers the ability to book the seats next to them to ensure social distancing. 

Another ancillary that passengers will be delighted by is the ability to cancel free of charge if they catch covid.

Meanwhile, your corporate passengers can benefit from Wi-Fi, easy seat upgrades, access to business lounges, shuttle service to their destination from the airport, etc.

With tourists, a surefire way to boost revenue is by offering fully packaged trips to places, such as religious destinations. Specifically, you can provide food, hotel bookings, car rentals, bus services, etc., which will enhance your profit margins.  

Airlines can further offer ancillaries, such as relaxation and well-being packages, given how people have endured a lot of stress and trauma during the pandemic

Conclusion 

There is a lot of uncertainty ahead regarding when passengers will regain confidence in traveling. However, by following the double-pronged approach of bringing down distribution costs and boosting ancillary sales with personalized offers, airlines can return to profitability in no time. 

If your airline needs an IT partner for implementing Direct Distribution Solution or any Consultancy to generate the maximum possible revenue from every seat, reach us at marketing@infinitisoftware.net 

Check-In Counter of An Airline - A Blog Banner for the Future of Customer Segmentation

Customer Segmented Distribution – The Future Of Airline Distribution

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For airlines around the world, developing a comprehensive, 360-degree view of their customers is vital. As the travel industry limps back to normal after a couple of years of travel curbs, airlines will benefit massively if they can figure out what triggers an individual’s purchasing decisions. 

To do this, and turn customers into assets, airlines need to create and cater to segments based on value, behavior, and needs. 

Enhancing the travel experience through segmentation 

For everyone from corporate customers to retail customers to large packs of tourists, airlines can apply segmentation to provide optimal fares, offers, and ancillaries. The segmentation can be based on anything; flying frequency, demographics, etc. are all considerations.

But how does such segmentation help airlines to the extent that it is embraced as the future of airline distribution?

Maximizing the revenue from retail customers

Retail customers are generally low yield fliers but viewing them as a segment with specific needs will go a long way in maximizing the returns from each seat. The key is ancillaries, such as food options, drinks, covid insurance, etc. 

Within retail customers, you can have segments based on paying capabilities, which is an approach that has been successful for Delta Airlines and many others. Notably, Delta managed to offer enhanced personalization with the help of products, such as Delta’s Economy Plus, which targets affluent couples.

To optimize its revenue, the airline tailored its NDC content, pricing, and retailing channel based on the requirements of the target group.

Making the most out of corporate travel

Generally, corporate customers don’t mind surge fees for late bookings, and they will also prefer to fly with comforts, such as priority boarding, checked bags, onboard meals, etc. Some airlines even provide Wi-Fi and business lounges for this passenger segment. 

With highly granular segmentation and insights from customer behavior, airlines can further provide business travelers with stellar customer service. For instance, when the airline knows that someone is a business passenger, they can offer easy flight cancellations, seat upgrades, and notifications during disruptions, which will go a long way in bolstering customer retention. 

Taking advantage of group bookings

Tourists, religious pilgrims, corporate group bookings, and mass requests from travel agents can all be treated as different segments that airlines can take advantage of with personalized pricing and product offers.

Flights like Malaysian Airlines have dedicated Hajj trips with flights that serve only specific meals that are consistent with the occasion, have prayers onboard at the prescribed times, etc. This has been a huge revenue generator for the airline. 

Further, travel agents may look for discounts in exchange for a large number of ticket bookings that will come in consistently every month. Airlines can make use of demand forecasting and seasonal tourism data to provide optimal pricing for them.

Apart from this, companies that have employees traveling in large numbers can be served with loyalty programs, access to premium business lounges, etc. 

A surprisingly underrated passenger segment 

In many countries, governments mandate their employees to only travel on their national carrier. This can be a lucrative segment for airlines if they can provide the government employees with a dedicated portal for bookings, cancellations, and unlocking rewards for flying frequently. 

NDC-enabled merchandizing 

As NDC adoption takes off, airlines can also segment customers based on shopping data and customer intent. Enhancing the NDC-shopping experience will go a long way in helping airlines enhance the conversion rate and customer experience. Moreover, this allows the airline to keep customer needs at the center while designing future products, bundling fares, and making marketing decisions.  

Conclusion 

Not all passengers are the same. As air travel becomes increasingly common, airlines need to figure out how to effectively cater to nearly 3 billion passengers from different backgrounds. With customer analytics, airlines can successfully implement value-based segmentation and consequently boost profits.  If you are looking for a solution that can handle customer segmentation for you and provide you with actionable insights on how to cater to them for optimal revenue, reach us atmarketing@infinitisoftware.net 

Should-airlines-create-a-specialized

Should Airlines Create A Specialized Online Storefront For Government Travelers?

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A government employee frantically trying to book flight tickets for official business runs into a variety of issues.  

Firstly, he cannot book tickets directly from the website of the country’s national carrier. Picking another carrier is also out of the question due to government mandates that their employees must only use the national carrier. He must rely on GDS and travel agents, who have no incentive for providing discounted flights.

There is also the possibility that tickets would have been sold out. Moreover, dependance on travel agents goes against the efforts by airlines to bring down their distribution costs using initiatives, such as NDC.

If this were a one-off situation, it could have been easily fixed. But unfortunately, this chaos and inconvenience, coupled with high commissions, is a reality across the globe, and it affects countless employees, departments, and entire governments as well.  

Speaking of the government, they are also in a bind due to this situation given that there are all kinds of fraud and policy violations being committed with the discounts reserved exclusively for government employees.  

How is this mess to be untangled? When the issue is viewed in its entirety, it seems to be impossible to fix. But what if we told you that there is a straightforward solution? 

Infiniti’s GOM portal—a secure and hassle-free booking platform for government business travelers

 After intense brainstorming, we have come up with the perfect solution— custom online storefronts for flight booking that airlines can create to attract government employees and help them bypass travel agents and GDS.

For such a system the benefits are unparalleled. Here are a few of the benefits that users of the solution have experienced. 

  • The travel expense has come down drastically. 
  • What is more, the process of getting approval for the trip and securing tickets has become seamless.  
  • Besides, government departments have reported that policy compliance has gone up substantially.  
  • Notably, government employees can actively track the status of their bookings. 
  • There is also the option of making payments or raising an invoice directly to the government. Without the hassle of going through the reimbursement process, employees can invoice their government for the various business expenses they have incurred.
  • Given how each airline can assign specific teams to deal with government agencies, approvals for employee requests are done much faster. 
  • Advanced analytics also provides the agencies with detailed insights on employee habits and whether they are complying with department policy. 
  • Bypassing travel agents and GDS further ensures that the airline gets to boost its bottom line and that the passenger pays lower ticket costs.  
  • Airlines also can accurately monitor how well ticket sales are going and optimize revenue by leveraging this information. 

Conclusion

Infiniti’s GOM portal can make the difference between you saving money while catering to government employees and you missing out on major revenue gains due to commissions to travel agents. Besides, it is the surefire way to gain a customer base that consistently uses your service and is bankrolled by governments with infinite spending potential.

Reach us at marketing@infinitisoftware.net to learn more about how our custom GOM portal can benefit you. 

Should-Airlines-Move

Should Airlines Move From Being An Air Transport Service Provider To Managing A Travel Marketplace?

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Just as a customer is booking a flight on your website, he gets an SMS. 

It is from your competitor, informing your potential passenger that he can save a ton of money by clicking on the link before it expires in 10 minutes. 

Without a moment of hesitation, your customer will click away, which means you have lost him forever. Your customer finishes his booking with another airline, confident that he has saved money, and proceeds to look for other services he may need during his trip. Depending on the trip your customer is taking, the ancillaries could be anything from hotels to cars to buses to food.

Is it possible to retain the customer with a discount and earn extra revenue by selling a bunch of relevant ancillaries? 

What if there was a way to even delight customers who come looking for information on flights by offering them exciting and affordable travel packages along with the flight? 

The good news is that it is perfectly possible.

The solution?

Transitioning from an air transport service provider to a travel marketplace.  

Why being an air transport service provider is insufficient

 Historically, all an airline has done is provide customers with flights and make money off ticket sales. The extra income was mainly generated through the sales of business class tickets, food, and other services that only extended to the period when the passenger was flying.  

Largely, this has led to dwindling returns for airlines.  

Some of the key reasons include intense competition, fluctuating fuel prices, and the seasonal nature of the business. With the COVID-19 pandemic raging all over the world, the ensuing lockdowns have further crippled the airline industry, leading to major losses. IATA estimates that in 2020 alone, the industry faced losses to the tune of $84 Billion.   

Given this scenario, there is enough reason for the airline sector to adopt newer strategies for optimizing revenue, such as shifting towards a travel marketplace model that is becoming increasingly popular.   

Pioneers of the ancillary sales landscape

Although this is happening slowly, there can be no doubt that airlines are teaming up with technology companies to develop their travel marketplaces that have become key drivers of their revenue.  

Ryanair, a Europe-based low-cost carrier, has been able to completely change its fortunes by embracing the concept of becoming a travel marketplace. Notably, in the period between 2016 and 2019, seat sale revenue increased by 15 % while ancillary revenue shot up by 86%. Owing to this, it would be fair to say that Ryanair’s growth and profitability have been powered by the sale of ancillaries. 

Ancillaries, in general, are thought to be extra charges applied to in-flight beverage and food, baggage, priority boarding, and airport check-ins, but Ryanair has managed to do so much more. 

Here are just a few of the ways the airline and other players in the industry make extra money by being a platform for various vendors. 

  • Car hires
  • Hotel reservations 
  • Bus and Rail tickets 
  • Covid testing and support
  • Travel medical consultation
  • Travel health insurance

Frankly, this is just the tip of the iceberg.

Airlines can do a lot more to tap into the endless pool of travelers who are looking for flexible travel packages and attractive pricing options. 

Now that you see how much potential the concept of an online travel marketplace has, let us explore it in more detail with an emphasis on the must-have features and the consequent benefits.  

So, what is a travel marketplace?

In the airline sector, it refers to a place where companies offering travel-related services, such as hotels, cars, etc. can connect directly with customers. They can offer these services individually or as packages. In turn, the customers can compare all the offers and customize their trip to their liking.

What makes a good travel marketplace?

To be useful as a means of boosting revenue, travel marketplaces need to have the following features.  

  • Manage bookings for flights, hotels, and other services included in the package. 
  • Manage personalized pilgrimage packages for different markets 
  • Provide customers with exceptional support via a self-service portal 
  • Manage multiple vendors
  • Have inbuilt content management system to handle website content and blogs
  • Configure travel policies for each scenario
  • Handle third party payment gateways
  • Manage a multitude of users with different privileges 
  • Effective ancillary management
  • Enable customers to have a comprehensive overview of the product’s performance

How airlines can benefit

When a potential passenger lands on your site looking for flight information and finds providers for all his travel needs, he is much more likely to make a purchase, especially when it is easy to compare different vendors. Besides, customers who are not comfortable with too much choice can opt for the packages on offer. 

Another major benefit to the airline is the increase in revenue brought about by targeted promotions that can be carried out for various customer segments. When it comes to selling packages, the ability to directly distribute them will lead to a reduction in operating costs. Additionally, airlines can satisfy customer expectations through personalized offers and packages.

Conclusion

In essence, as the “Amazon of travel,” a one-stop solution for all your passengers’ travel needs, you will have created a remarkable source of income that will help you gain an edge over your competition.