20 March 2009

The Ancillary Revenue Well to Run Dry?

Good piece from Reuters and published in USA Today - march 18.


There is no doubt that Ancillary Revenues have definitely saved the Airlines in 2008 and now into 2009 this is of major value and has become a mainstay of airline gross revenues. However there is a sense of foreboding that seems to be permeating the revenue managers of the airlines. Perhaps the well has run dry and the unbundling of the product has reached its logical conclusion. There is only so much that you can ask a customer to pay for separately before he suffers from wallet fatigue. There are a good number of people who firmly believe that they are being ripped off for things like taxes, service fees, surcharges and fuel fees etc.

For LCCs particularly the master of this - Ryanair - the issues are pretty straightforward, they are totally transparent about the issue. However even Ryanair may have reached the end of that limit if they proceed to force a 100% online checkin fee. At least you know where you stand with FR.

However contrast this with the Full Service Network Carriers. They are offering frills for pay and there is a lot of confusion around how these frills are offered or not as the case maybe. Further the inability to purchase some of these things through the traditional environments such as a GDS powered travel agency has become a major frustration on all sides.

Case in point. Why would you make your most frequent flyers pay for change fees at the same time opening up such previously hard won privileges such as lounge passes or priority status for fees. I urge you to go hang out in some of the frequent flyer forums if you want to see some venom being spat out on these subjects.

One thing is for certain the low hanging fruit of this ancillary revenue is done. Now the hard things have to be worked out and made to work. That is going to cost money and the issue of whether the revenue justifies the additional costs come into play.

Of course what this does to your brand proposition and your customer loyalty is a very open question.

As always - don't expect money for nothing - "and your chicks ain't for free!". For those of you running off to yet another ancillary revenue conference be careful. All that glitters is not gold.

Be warned and be careful - all of you.


1 comment:

Ian said...

Well said sir. Couldn't agree more. I started to feel this way at the ancillary revenue conference in DUB about 18 months ago.