It Takes Two (or More): Ancillary Alliances
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How can airlines recover from the largest business model shift in the history of commercial aviation? When it comes to important ancillary revenue streams, industry leaders agree that digital platforms are key. But no company can deliver the promised land alone. Savvy partnerships, on the other hand, just might. This article originally appeared in the Expo Daily Experience: Preview. Read the full issue and register for FTE APEX Virtual Expo.
With the ongoing need to reduce onboard interactions and a shift in consumer demand for ancillary products due to COVID-19, airlines and service providers have had to reevaluate the in-flight retail experience to meet current and future challenges. That means tapping into the power of digital platforms, industry leaders say.
But thus far, digital has largely been absent from the in-flight retail landscape. Several partnerships, inspired or accelerated by the pandemic, are changing that.
Portable in-flight entertainment (IFE) company AirFi recently entered into a sales partnership with IFE content provider Spafax that will combine the platform’s passenger and behavioral data with Spafax’s expertise in advertising and media. It’s the key that “will finally unlock the huge growth potential in onboard digital revenues,” says AirFi CEO Job Heimerikx. Together, they’ll be able to deliver targeted and more personalized digital opportunities that will result in better and higher-yielding conversions, he adds.
In October, streaming IFE supplier Bluebox Aviation Systems announced an agreement with the catering arm of dnata to integrate its food and beverage services into the Bluebox system.
Providing passengers with a seamless experience and embedding catering logistics into an IFE platform can be quite technically complex, says Duncan Greeney, dnata’s general manager for Retail. “In the present climate our customers need solutions that are simple and quick to deploy. This is an opportunity for airlines to minimize contact and dialogue between passengers and cabin crew but still deliver an excellent service and a full range of food, drinks and retail goods that are such an essential part of the ancillary revenue income.”
Bluebox had been eyeing this type of partnership for some time. “We’d begun discussions on the integration with several onboard retail providers prior to COVID, but the rapid change of circumstances with the restrictions and safety protocols required by COVID accelerated these conversations. Everyone concerned recognized the significance very quickly. The practicalities and the commercial opportunity expedited the partnerships,” says the company’s marketing director, Catherine Brown.
Direct to Consumer
Ancillary sales are a key component of easyJet’s business model, contributing just over 20 percent of total revenue for fiscal year 2019. A data-driven approach has allowed it to continually improve that share.
In the coming months the airline will take this approach even further by launching a trial of Gategroup’s digital retail solution, ePax, which will allow passengers to order and buy in-flight retail services straight from their personal devices.
It’s a significant shift for easyJet, says a Gategroup executive. “We have access to a huge amount of onboard retail data. Combine that with the behavioral and e-commerce data we’re now able to access via ePax, and the data that easyJet is sitting on and we’re able to generate some really interesting insights to make retail offers smarter and more personalized.”
To obtain those insights, Gategroup partnered with Black Swan Data, whose expertise will enable it to go deep on data at levels the airline industry has historically failed to realize. Beyond the straightforward parameters of flight destination, duration and time of day, ePax can identify specific flights and passenger cohorts to deliver more relevant content – a major step forward from the general adverts and in-seat menu cards that the industry has relied on to sell these revenue opportunities until now.
Partnerships aren’t new to aviation. They existed before COVID-19, but companies that were once slowly and incrementally improving their products internally now recognize that in order to capitalize on the profitable promise of digital, they’re going to have to look outward.
Virtual Expo Connection – Event Agenda
Panelists discuss “Creating new tech-led revenue streams to support new business models”
Dec. 8, 10:30 a.m. GMT