Survey shows airlines most concerned with revenues, not retention

Airlines are more concerned with generating revenue from additional products and services than any other sector, according to new research carried out by incremental revenue specialists Collinson Latitude.

85.7% of airlines currently offer add-ons or enhancements, such as priority boarding and onboard food & beverage sales, to their core business – more than any other sector. 45.5% of respondents cite additional revenue generation as the main reason for developing these products. This compares with 40% of travel businesses, 33.3% of telco businesses and 9.1% of hotel businesses that view additional revenue as the central reason for offering enhancement products.

Airlines generate well over US$3billion annually from ancillary revenue, however, this is a small percentage of potential revenues from this stream. It is predicted that this figure could rise to nearly US$17 billion by 2011 if airlines have the right ancillary strategy in place.

The study also revealed that acquisition of new customers is the main priority for airlines at present, with 53.8% of respondents regarding this as ‘very important’. Surprisingly, over a third (35.7%) of respondents view retention of existing customers as ‘not very important’.

Janet Titterton, Business Development Director, Collinson Latitude said: “Airlines have long been pioneering in the field of ancillary revenue, in particular unbundling core products and services as a way to generate additional revenue. However, as customers start to value more than just the lowest prices, it is likely that we will see a shift back to ‘bundling’ these products.

With that in mind, it is essential that airlines put in place a well-informed and properly structured ancillary revenue programme that provides relevant benefits and will drive both loyalty and revenues.”

Over 180 marketing and brand professionals from a range of industries, including airlines, financial services, hotels, publishing, retail, telco and utilities, took part in the survey, which sought to identify what value-add processes brands have in place and whether brands believe that these are beneficial to their customers.