25 January 2010

Ancillary Revenue - BREATHE IN..... Now.....

There is a lot of talk about merchandising and Airline based ancillary revenue. If you hear some people talk (like me for example) it could be considered the second coming.

I am a huge fan of it from a commercial perspective and absolutely despise it from the user side. Mostly because of the poor way it is implemented. So I am on a personal crusade to improve this.

In one of the discussions Martin Collings and I had over that excellent Rioja on Friday, we discussed the issue of what defines Ancillary Revenue. He too has been a strong advocate of the greater precision in definition. At least he gets to talk about this in his day job over at 1A.

So I would like to try and draw a clear line of separation between the different types of Ancillary Revenue.

For me the most important element is to distinguish between TRIP related ancillary revenue and additional revenue streams for airlines. If we believe CAPA - the total category is worth $58 billion (The link is to a good article over there BTW). However I suspect the direct airline TRIP related revenue is at a run rate closer to $10 billion.

The differential is due to the high value items that have become staples for airlines such as frequent flyer miles. So deals like the Delta Airlines $2Billion arrangement in 2008 with American Express does not fall into the TRIP related revenue category.

In the coming weeks and months I will be writing more and more about the mechanics of Ancillary Revenue. Let me be clear about one thing though. Anyone who believes that Ancillary Revenue will wait for laborious process of standards does rate the desire - call that lust if you like - of the airlines who by necessity must drive ancillary revenue from the closed points of service delivery and the airlines websites into the general sales channels. Legacy GDSs have been saying that they will have to wait. However when challenged in public - it seems that Q5 2009 was the favoured date. That is not soon enough. I too believe that faster and more aggressive adoptions are required.

Now you can breathe out..... for now.


1 comment:

Martin said...

Not a bad drop of wine at all, so maybe consolation for the fact that we can't resolve the ancillary revenue classification issue on our own!