The Future for Airline Retail in a

Decade of Change

Airline Retail Conference

London

June 30th 2011

Rohit Talwar

CEO - Fast Future

rohit@fastfuture.com

www.fastfuture.com

Contents

Presentation p 3

Background Notes p 46

About Fast Future p 80

Image Sources p 89

Where’s the Growth?

Share of Wallet?

PassengerConversion?

Extending Relationships?

Growth is not Guaranteed…Growth is not Guaranteed…

…Thinking is Back in Fashion

Transformational Change?

It’s Only Just Begun

Demographic Destinies 2 billion more people in 40 years –

Demographics is Driving Economics

1998

448 691

729

5231

4157

739

1030

344

585

Source : United Nations2010 2050

Life Redefined –

Lifespans are Increasing

Under 50’s have 90%

chance of living to 100.

Aubrey de Grey suggests

we could live to 500 or 1000

What are the health,

consumption and resource

implications?

What kind of opportunities

will be created?

Size of Global Middle Class

Millions of Asians with $3,000

Disposable Income

570

945

0

100

200

300

400

500

600

700

800

900

1000

2010 2015

Asian Consumer Spending -$32 Trillion by 2030?

Telephony• Voice

• Messaging

• SIM card

• Phonebook

• Ring Tones

• Security

Connectivity• Cellular

• Up to 14 bands

• WLAN/BT

• GPS

• NFC

• FM

Data/

Enterprise• 100Mbps

• Email

• IMS

• Browsing

• VPN

• PIM

• Ecommerce

• Payments

Software• Protocols

• Middleware

• Applications

• User Interface

• Minimize fragmentation

Multimedia• Camera 8-16M

• Camcorder

• 24M Color Display

• Memory (160GB)

• Multiformat A/V • HD Video/TV out

• Games

(50-100M Tps)

• DRM

TMT – Convergence and Immersion

What I Want – When I Want

Next Generation Smart Phones

Holographic Laptops

Gesture Interfaces

Personalization

Intensified Global Competition

Today - US – 3 Seats per head / China 0.3 / India 0.1Asia – a third of all flyers (2013) and travel spend (2020)

Redistribution of Aviation

Profit Pools

Duty Free Market Innovation

Catalog Extension

Kurt Geiger

Duty Free Innovation: Entertainment

The Future –

From Cabin to Cash Register

Leveraging Wi-Fi

Integrating Physical and Virtual

Leveraging Customer Insight

Daily Social Media Offers e.g. Twitter

Passenger Centric Retail

Passenger Centric

The Virgin Red Store

Single swipe ‘open tab’

Context Related Services

Personalised Advertising

Partner Tie-ins

Pullman Bangkok King Power Hotel

Rethinking the Experiencee.g. Korean Air

Tie-ins with Airport Retail

e.g. Booking / Boarding Pass Offers

Pop Up Stores

Mixed Format

In-flight Travel Agency

Auctions - The $17,739 iPad

Air Sahara/Jetlite

Leveraging Apps

Attracting Brands

e.g. Virgin / Courvoisier

In-flight Partnership

Brand Marketing Partnerships

Outsourcing In-flight Duty Free

e.g. BA / Tourvest

Conclusions

• Huge untapped potential

• Technology is a key enabler

• Encourage innovation

• Experiment

• Work with the value chain

Background Notes

The Future –

From Cabin to Cash Register• The Airline Weekly GXI Onboard Retail Benchmark 2009, the world‘s largest

collection of aggregated data for onboard retail sales, has been released.

• Onboard retail service can mean very different things depending on where a

carrier is based. According to the benchmark analysis, while North American

carriers have shifted their models to selling food, drinks and so-called

comfort items—blankets, pillows, headsets etc.—the Asian market remains

resistant.

• Only 10% of passengers boarding Asian carriers can purchase food or

beverage on board. That figure compares with 68% in the Americas. In

Europe, the Mideast and Africa (EMEA), 32% of carrier traffic has made the

leap.

• The numbers are almost opposite when it comes to duty free sales. In Asia,

74% of carriers have a duty free onboard retail component on their

international flights. In EMEA, it‘s 79%. In North America it‘s only 54%. Note

that these numbers are weighted on total passengers and duty free

offerings only apply to international flights.

Source: Airline Weekly, February 2010 http://www.airlineweekly.com/AWSR1.pdf

The Future –

From Cabin to Cash Register• Apparently it‘s tough to squeeze an extra dollar out of a passenger. Across

the industry, the average carrier with an onboard retail component (that is,

selling any combination of food, beverage, IFE, and comfort items) earned

$.72 per passenger in 2009.

• However, when looking at carriers in the top 10 percentile, that average

climbs to nearly $2. What are the top performers doing differently?

• Industry wide, 6% of buy-on-board sales are from soft drinks and other non-

alcoholic beverages such as juice, water and coffee. Among top performers,

the number rises to 31%. When looking at beverage sales only, top

performers earn more than three times the industry average of $.29. The

key factor, according to the report, is that top performers are charging for

non-alcoholic beverages.

Source: Airline Weekly, February 2010 http://www.airlineweekly.com/AWSR1.pdf

Leveraging Wi-Fi

• Row 44 provides inflight broadband connectivity for the passengers, cockpit

and crew of commercial aircraft.

• Howard Lefkowitz, Row 44‘s chief commercial officer says he thinks that

airlines, eager for new revenue, will sign onto a new ‗private labeled portal,‘

the details of which Row 44 will announce sometime in 2011.

• It‘s a ‗walled garden,‘ branded and designed by Row 44 for a particular

airline.

• It will offer live interactive concierge and retail services, including

destination-specific reservations for hotels, restaurants and shows says Mr.

Lefkowitz.

Source: New York Times, May 2011 http://www.nytimes.com/2011/05/24/business/24road.html

What Will the Future of

Onboard Retail Look Like?• In surveying travellers globally, GuestLogix found that more than half would

take advantage of destination-related offers onboard a flight. The company

expect items such as tickets to entertainment, ground transportation,

attractions, tours and other offers that add immediate value to a trip to be in

demand, not just in Asia, but around the world.

• ‗In response, leading onboard duty-free concessionaires will evolve their

business models to include broader shopping categories with the

convenience of home delivery. This will represent the next wave in onboard

innovation that will usher in other important changes in the onboard

experience.‘

• ‗Airlines will need to upgrade their existing POS systems to meet more

stringent global payment standards. As connectivity slowly takes its place

onboard aircraft, payments will incorporate real-time credit card

authorisations to support higher-value transactions.‘

Source: Retail in Asia, April 2011 http://www.retailinasia.com/article/tech/retail-systems/2011/04/boardroom-inflight-retail-20-catching-asia-says-guestlogix

Future of In-flight Retail

• By Brett Proud, GuestLogix

• ‗The new in-flight retail environment will be distinguished not by the reselling

of once-included products and services, but rather by embracing and

extending the relationship between airline and passenger. It will be marked

by accurate assessments of consumer needs and wants and by the

fulfillment of these at any (and every) touch point of the journey. It will be

defined by customer experience and framed by retail-informed strategies of

merchandising and product mix.‘

• ‗Creating and promoting a successful customer relationship may be second

nature for ground-bound retailers but for airlines it means re-conceptualising

the passenger.‘

• ‗While the unbundled airfare relies on presenting fee-or-no-fee options to

passengers for basic, almost compulsory, products and services – a

checked bag, a seat assignment – the new approach to in-flight retail puts

the emphasis on the passenger.‘

Source: Travel Tourism Middle East, June 2011 http://www.ttnworldwide.com/GeneralNews.aspx?artid=10521

Future of In-flight Retail

• ‗While the customisation of a flight experience during the booking process

certainly leverages the power of choice to deliver ancillary revenue, it does

not extend through the duration of the flight, much less after disembarkation‘.

• ‗The onboard store attempts to answer the questions: ‗Beyond the basics,

what does a customer on an airplane want? And what will they want or need

before and after their flight?‘ That answer is found in research and data

mining but ultimately it is found in a relationship with a passenger.‘

• ‗This is not to say that airlines have no relationships with their passengers;

on the contrary, much effort has been spent over the years in promoting

loyalty and extending the airline brand beyond the flight (with cobranded

credit cards etc). What the new in-flight retail approach does, however, is

apply different principles to the business of onboard retailing to extend that

relationship with the customer beyond the core product offered by the airline

(a ticket) – which is precisely why this approach is the future of the industry.‘

Source: Travel Tourism Middle East, June 2011 http://www.ttnworldwide.com/GeneralNews.aspx?artid=10521

Future of In-flight Retail

• ‗Within the onboard store, virtual shelves replace physical shelves with

great effect. Products are offered based on predetermined tastes and

preferences, flight duration and destination. A brand can be established and

extended through interaction with this onboard store – much as it has for

most of the retail success stories in the past decade. But in a controlled Wi

Fi-enabled environment or through the use of smart wireless point-of-sale

devices, passengers can explore the onboard store from the comfort of their

seat as well as interact with in-flight entertainment systems through their

own personal electronic devices.‘

• ‗Airlines also have information on their passengers‘ demographics, itinerary

and immediate purpose (i.e. business or leisure) readily

available. Traditional retailers would have to spend countless weeks

collecting data – and probably paying market analysts to interpret it – to get

the sort of valuable information airlines have at their fingertips. Utilising this

data to develop a compelling retail experience is central to the onboard

store approach and bound to become industry standard very soon.‘

Source: Travel Tourism Middle East, June 2011 http://www.ttnworldwide.com/GeneralNews.aspx?artid=10521

Passenger Centric Retail

• Australia‘s Qantas Airways is set to deploy a touchscreen technology

solution for use in its onboard store.

• ―Speed and ease are fundamental in enabling us to deliver a new level of

customer service to our travellers,‖ said Mr. Eric Jelinek, Head of In-flight

Services at Qantas. ―We believe the implementation of an onboard retailing

technology and merchandising platform, through Alpha and GuestLogix, will

help us to enhance the in-flight experience for our customers.‖

• In addition to enhancing its current onboard duty free program, the

GuestLogix deployment provides Qantas with tools to create, manage and

control a more comprehensive branded onboard store.

• Qantas will be able to develop strategic offerings that evolve

standard onboard retailing initiatives into much more passenger-driven,

travel-relevant, destination based programs.

Source: Enterprise Innovation, October 2010 http://www.enterpriseinnovation.net/content/qantas-airways-use-touchscreen-onboard-store

Passenger Centric

The Virgin Red Store• Virgin America‘s award-winning Red™ entertainment platform, has been

updated to allow travelers access to a host of new amenities, including next

generation, enhanced terrain view Google Maps, an open tab service for the

airline‘s one-of-a-kind on-demand menu and the first ever seatback in-flight

digital shopping platform.

• With the Red store, Virgin America and SkyMall have teamed up to give

flyers the chance to shop from their seatback at 35,000 feet from hundreds

of top brands like Sony, Canon, Sharp and Michael Kors.

• The debut of the Red Store marks the first time that SkyMall has developed

a product line designed specifically for purchase through an airline seat-

back entertainment system. In addition to a unique in-flight shopping

experience and a range of best-selling products, purchases made in the sky

via the Red store will allow guests to earn two points toward the airline‘s

Elevate Frequent Flyer Program for every one dollar spent.

Source: Virgin America, July 2010 http://www.virginamerica.com/press-release/2010/Virgin-America-Upgrades-Red.html

Passenger Centric

The Virgin Red Store• The system also includes:

• Google Maps upgrades: Virgin America‘s previous Google Maps platform

led the industry with interactive maps with multiple levels of zoom. The

enhanced system will feature terrain view maps with fresher images and

eight levels of zoom functionality, so travelers can see the actual

topography over which they are flying.

• An "open tab": Guests can now swipe their credit card just once per flight

and order food, cocktails, movies and more – and keep a tab running during

the flight. With one swipe, travelers can peruse and purchase items,

including bar hopping (or ordering drinks for the plane), order from the food

menu and watch latest release Hollywood movies on demand.

• Premium food pairings: Virgin America is now providing suggestions on

pairings that come at a discounted price via their Red in-flight menu

system. Pairing examples include a Pacific brie and turkey sandwich,

paired with PopChips and Peach White Honest Tea available for $13.60.

Source: Virgin America, July 2010 http://www.virginamerica.com/press-release/2010/Virgin-America-Upgrades-Red.html

Building the Infrastructure

• Emirates‘ signature ―ICE‖ (information, communication, entertainment)

platform, powered by Panasonic Avionics‘ eX2 system, is a Strategy Award

Winner from 2010.

• In addition to offering near endless entertainment choices, ICE uses

Inmarsat L-band satellite-based connectivity and a standard ACARS

datalink to provide passengers with news and sports updates in-flight.

Passengers also have access to seatback dial-up e-mail and SMS

communications, as well as satcom telephony.

Source: Airline Strategy Awards, 2010 http://www.strategyawards.com/strategyawards2011/winners-2010

Building the Infrastructure

• Emirates vice-president Patrick Brannelly doesn‘t believe that connectivity

poses a threat to its IFE system. Instead, the carrier sees huge potential in

leveraging ICE to connect on a more personal level with passengers.

• ―We don‘t see [ICE] as embedded IFE. These systems aren‘t just [about]

entertainment. They‘re so much more. They are the portals through which

we communicate with our customer, and through which they communicate

with the world. As we go forward in the future, we‘ll be doing more and more

with those systems. Some of that really good stuff in the future is about

making that person‘s life easier.‖

Source: Airline Strategy Awards, 2010 http://www.strategyawards.com/strategyawards2011/winners-2010

Rethinking the Experience

e.g. Korean Air• Premium passengers on Korean Air's upcoming Airbus A380 superjumbo jets will be able to take

advantage of an onboard duty-free shop, reports FlightGlobal.

• The Korean carrier will begin operating its first A380 jet on June 10 of this year, with nine other

aircraft entering service soon afterward. Korean Air will reportedly become the first airline in the

world to feature a flying duty-free shop.

• "The shop replaces 13 seats on the aircraft so you're losing a lot of revenue, but the Korean

mentality is that they buy all the duty free on every flight," said Chris Wetter, the sales director for

AIM Aviation, the company that designed the new duty-free stores.

• Each onboard shop will be equipped with five display units, each of which can hold up to 66

pounds of merchandise. Overall, the store has room to display up to 64 different individual items.

• Once the jet is off the ground, full-time sales staff will take products out of storage and set up the

store. First class passengers are then given access to the shop's wares, after which the business

class travelers are allowed to peruse the merchandise.

Source: Access Fares, April 2011 http://www.accessfares.com/news/airline-cabins/korean-air-to-offer-onboard-duty-free-shop-to-premium-passengers-3753.html

Background Note

Tie-ins with Airport Retail

e.g. Booking / Boarding Pass

Offers• Pullman Bangkok King Power hotel, the first Pullman hotel in the world, is offering more value for

travelers to enjoy upscale lifestyle and shopping experiences with the 'Shopping Spree Special'

promotion. Commencing today, travelers will enjoy a complementary 1,000 Baht King Power Duty

Free Shopping voucher for every night they stay at the hotel. The promotion was first valid from

June to September 30, 2010 with a minimum 1-day advance purchase (1).

• Valid from 15 February to 30 June 2011 is a variant whereby every 5000 Baht spent at duty free

gives 1000 Baht cash-back to use at the hotel (2).

• The hotel is attached to the city‘s only duty free shopping mall.

Source (1): PR Syndacast, June 2010 http://pr.syndacast.com/gb/press-releases/3767-pullman-bangkok-king-power-hotel-offers-duty-free-shopping-spree-special.html

Source (2): PR Web, February 2011 http://www.prweb.com/releases/2011/2/prweb8141693.htm

Background Note

Air Sahara/Jetlite

• Jetlite, in its previous iteration as Air Sahara, started an onboard auction

named ‗bid n win.

• One form per passenger was handed out and a booklet displaying various

products divided into three categories.

• One passenger can bid for one product only.

• The bidding started from one - fifth of the market price of the product. The

auction involves writing your bid down on a from and handing it to the crew.

The highest two bidders won the prize.

• The product was then collected at the airport upon payment of the

submitted price. The practice has carried over to Jeltlite (2).

• JetLite is effectively facilitating a value added service for its guests.

Source: MouthShut, June 2005 http://www.mouthshut.com/review/Jet-Lite-formerly-known-as-Air-Sahara-tqoqttpqs

Source (2): JetLite, retrieved June 2011 http://www.jetlite.com/in/tnc_onboardauction.aspx

Attracting Brands

e.g. Virgin / Courvoisier• Maxxium Travel Retail has announced a new inflight partnership with Virgin

Atlantic which will see Courvoisier served to the carrier‘s Upper Class

passengers both onboard and in the airline‘s Clubhouse at London

Heathrow Airport.

• Courvoisier will become the new pouring Cognac onboard and bottles of

Courvoisier VSOP will be available for purchase, with a pre-order service for

Courvoisier XO and L‘Essence de Courvoisier. Marketing support includes a

3D film about the heritage of Courvoisier on the inflight entertainment

system.

• At the Virgin Atlantic Clubhouse bar, passengers can enjoy Courvoisier XO

and Courvoisier Exclusif, served neat or in cocktails. Bartenders will

undertake training on the Courvoisier brand and specifically Courvoisier

Exclusif, the marque designed specifically for cocktails.

Source: Moodie Report, January 2011 http://www.moodiereport.com/document.php?c_id=31&doc_id=26155

Attracting Brands

e.g. Virgin / Courvoisier• A dessert paired with Courvoisier has been specially created for passengers

dining in the Clubhouse, which will also feature a competition to win a bottle

of L‘Essence de Courvoisier.

• Virgin Atlantic Director of Sales and Marketing Paul Dickinson said: ‗We are

delighted to be working with Courvoisier. We are always looking for ways in

which to enhance the passenger experience and are sure that the addition

of this premium brand will be popular in our Clubhouse and onboard.‘

• Maxxium Travel Retail Managing Director Glen Williams added: ‗Together

with Beam Global, we are delighted to offer its customers a unique travelling

experience with Courvoisier from the Clubhouse right through to the flight.

Travel retail is a key market for Courvoisier and our aim is to become the

number one Cognac by 2013. This alliance will play an important role in

achieving that goal.‘

Source: Moodie Report, January 2011 http://www.moodiereport.com/document.php?c_id=31&doc_id=26155

In-flight Partnership

• Emirates has partnered with Montblanc to offer customers the opportunity to

win a luxury trip to Hamburg and an exclusive Montblanc Skeleton A380

limited edition writing instrument worth US$19,640.

• Customers on board all Emirates flights who purchase the Montblanc

StarWalker A380 fineliner from Emirates‘ Duty Free, can register for a raffle

draw to win a trip to Hamburg, Germany, where they will receive the

Montblanc Skeleton A380 Limited Edition.

• "Once again, we are delighted to team up with Emirates for another

prestigious onboard campaign,‖ said Karl-Heinz Handke, President Western

Hemisphere, Montblanc. ―With its premium services and exclusive customer

base, Emirates is the ideal partner for Montblanc to showcase a precious

and unique writing instrument.‖

Source: Travel Trade New Zealand, January 2011 http://www.traveltrade.co.nz/LatestNews/NewsArchive/tabid/342/articleType/ArticleView/articleId/1284/Default.aspx

Brand Marketing Partnerships

• Diageo Global Travel & Middle East Managing Director Phil Humphreys

believes that the inflight channel can be a key driver of his vision to double

travel retail liquor sales in the next five years.

• The DFASS-produced Singapore Airlines inflight shopping guide for

September–November features a stunning five-page section on Diageo‘s

Johnnie Walker portfolio, complete with an exclusively produced two page

insert, culminating in an opportunity to win two flights to Singapore for the

F1 race, plus event tickets and a lavish accommodation package. ―We paid

for the flights, Diageo paid for the passes,‖ FASS Singapore President John

Garner says of the collaborative approach.

• Singapore Airlines‘ set-up ensures that carts can be tailored to individual

routes – Korean and Indian flights, for example – opening up all sorts of

possibilities for the star-studded Diageo portfolio. ―I can work with John to

specifically target certain profiles,‖ explains, Mr Humphries, noting that such

an approach had led to a six-fold growth in inflight sales of Ketel One vodka.

Source: Digital PC, retrieved June 2011 http://mag.digitalpc.co.uk/Olive/ODE/themoodiereport/LandingPage/LandingPage.aspx?href=VE1Sb2RlLzIwMDkvMTAvMDE.&pageno=MjUy&entity=QXIyNTIwMA..&view=ZW50aXR5

Brand Marketing Partnerships

• So can a ‗strategic partnership‘ really make such a difference in volume

terms? ―Totally,‖ Humphreys replies. ―Already since we commenced our

strategic partnership we have seen volumes grow significantly, and value

enhanced. This gives me even more confidence that this business is built

on stone, and early investments will reap their rewards going forward.

• ―We have some amazing ideas to drive purchase, working side by side with

John Garner and his team,‖ he says. ―I am very excited about this channel –

to me it‘s the hidden jewel of travel retail.‖

Source: Digital PC, retrieved June 2011 http://mag.digitalpc.co.uk/Olive/ODE/themoodiereport/LandingPage/LandingPage.aspx?href=VE1Sb2RlLzIwMDkvMTAvMDE.&pageno=MjUy&entity=QXIyNTIwMA..&view=ZW50aXR5

Transport Synergies

• GuestLogix, Inc. has been awarded the 2011 ―Innovation of the Year:

Implementation‖ at the 2011 Global AirRail Awards.

• GuestLogix received the award for OnTouch® Ground Connections; a

technology and merchandising platform that allows airlines‘ passengers to

purchase Heathrow Express tickets through their network in a secure and

highly accessible manner.

• As the airline industry continues to battle against price commoditization,

operators have looked to find new ways to generate revenues while creating

a true value-add to their passengers

• GuestLogix generates revenues for both parties andgives increased service

to travelers, providing the sale of Heathrow Express tickets to airlines‘

passengers prior to arrival at the gate.

• GuestLogix‘ platform also provides access to additional sales channels.

Source: GuestLogix, May 25th 2011 http://www.guestlogix.com/pr/pr_05-25-11.html

Outsourcing In-flight Duty Free

• The world's second biggest inflight duty free programme at British Airways is

to be outsourced to Tourvest Duty Free in the second half of 2011, following

an internal review of the business, according to a circulated communiqué to

suppliers from BA Retail Manager Nigel Smith.

• According to Generation Research, BA's inflight business was worth an

estimated $128.4m in 2009 (-13.5% on 2008 in US dollar terms: +2.5% in

£), placing it second among the world's airlines behind Korean Air at $170m,

but ahead of Thomson Airways (UK) at $112m and Thomas Cook Airlines

Scandinavia at $103.6m.

• BA's programme is acknowledged as one of the best in the world and

Tourvest is also a good inflight retailer which currently operates Virgin

Atlantic's inflight concession out of its bonded warehouse at Gatwick.

Tourvest also operates the inflight concessions with South African Airways,

Kenya Airways, Interair and South African Express.

• Tourvest Duty Free has won various awards in the past, including the

Frontier Award for Inflight/Marine Retailer of the year in 2009.

Source: Trend, January 2011 http://www.trend-news.com/default.asp?newsid=9337

The Sky Isn’t the Limit…

• King Power Traveler President Rakhita Jayawardena issued a rousing call

to action for the inflight retail industry in his closing keynote address at the

2011 ARC Asia-Pacific in Macau.

• ―Can we not sell a Patek Philippe watch? Can we not sell a pair of Jimmy

Choo shoes? Imagine a Patek Philippe watch at US$10,000. With a 20%

saving on tax from the domestic price, topped off with a discount of 5% for

being a Platinum Gold Card member would mean a whopping 25% or

US$2,500 off the high street price. Would not a passenger like to make

himself available for this opportunity to buy and save? Similarly, why can‘t

we sell a pair of Jimmy Choos offering great savings? This type of

transaction would contribute enormously to the overall growth in sales per

passenger.‖

Source: The Moodie Report, 2011 http://www.moodiereport.com/document.php?c_id=40&doc_id=26281

A Useful Start

• Results in the 12th annual SITA/Airline Business IT Trends Survey (2010)

show that the airlines which carry the bulk of the world's air traffic, are on

course to sell the majority of airline tickets direct to passengers by 2013.

• The record 129 airlines who responded to this year's survey carry over one

billion passengers and are currently selling 40.8% of tickets directly to the

public which breaks down as: over the internet, 25.8%; through call centres,

10.7%; and interlining, 4.3%.

• These 129 airlines intend to bring their level of direct sales up to 55.1% by

2013. While sales through airline call centres and interlining will remain

largely static, direct channel sales through websites are expected to jump to

37.9%.

• In order to increase online sales, airlines are prioritizing the implementation

of new functionality on their web sites in the following ways: online shopping

tools (61% have already implemented this); change/cancel/rebook (52%);

and frequent flyer redemption functionality (51%).

Source: SITA, June 2010 http://www.sita.aero/content/new-survey-finds-airlines-turning-retail-powerhouses

A Useful Start

• This is in line with overall airline strategy to migrate passengers to self-

service including a multi-channel check-in environment. The airlines stated

ambition is to reduce the number of passengers processed via agent check-

in from 50.7% to 28.9% by 2013. Passengers use of kiosk check-in is

expected to remain static at just below 20% while web check-in options will

grow from 21.6% today to 35.5% in 2013. Airline implementation of mobile

check-in will advance from 28% today to 80% by 2013.

• Although the proportion of passengers using check-in kiosks remains static,

the survey confirms the important role of kiosks in a multi-channel

environment. 47% of airlines plan to increase the number of kiosks they

deploy as they gradually move towards the next step of adoption by adding

new functionality for flight transfers and disruption management.

• The survey also found that 80% of the largest airlines plan to use kiosks as

sales points.

Source: SITA, June 2010 http://www.sita.aero/content/new-survey-finds-airlines-turning-retail-powerhouses

A Useful Start

• The next wave of implementation will be around booking portals for travel

agencies which 41% have already done and a further 43% plan to do by

2013; while 44% have already implemented booking portals for corporate

customers and a further 38% plan to do so by 2013. By comparison, just

21% of survey respondents have integrated social networking capabilities

while 45% have no plans to do so.

• In addition, 70% of airlines have a strategy in place to use the passenger's

mobile phone as a further distribution channel to sell air tickets. Currently,

18% of airlines sell tickets over mobile phones and the ambition is to reach

70% by 2013. Some 85% of the largest airlines responding to the survey

plan to offer such services by 2013.

Source: SITA, June 2010 http://www.sita.aero/content/new-survey-finds-airlines-turning-retail-powerhouses

A Useful Start

• The mobile phone will become an essential tool for airline travel by 2013

with 86% of airlines planning to offer flight notifications; 80%, online check-

in; 76%, send electronic boarding passes to mobiles; and 68% using the

mobile phone to target passengers with travel offers.

• Airlines are becoming increasingly adept at upselling, using fare families

and marketing types; unbundling fares, by charging for services such as

meals and baggage management; and selling non-air services such as

hotels, car hire and insurance. Most of this revenue generation takes place

direct on line: 63%, upsell; 41% unbundle; and 51% sell non-air services. In

2013, 91% of survey respondents will have implemented at least one of

these ancillary revenue strategies via their own direct web channels.

Source: SITA, June 2010 http://www.sita.aero/content/new-survey-finds-airlines-turning-retail-powerhouses

What Lies Ahead…

• Passengers in the future can expect much-maligned airline fees to be

replaced by a wide variety of in-flight retail choices and in what is perhaps a

surprise, travelers will have more choices to book low-cost airlines.

• Those were among predictions of three air travel experts asked by

TravelMole to peer

• ―We expect to see much more revenue-generating activity through in-flight

retail (enabled by in-cabin Wi-Fi and controlled web portals),‖ said Brett

Proud of GuestLogix. He envisions en evolution away from fees towards

more innovative airline marketing such as catalogue sales. Airlines are

moving towards ―virtual onboard stores‖ with products and services that

might include an Orlando family able to buy theme park tickets on a plane or

business travelers enroute to London‘s Heathrow able to buy a rail ticket

while in the air.

Source: Travel Mole, December 2010 http://www.travelmole.com/stories/1145574.php

What Lies Ahead…

• The future of the airline industry is not more fees because travelers will not

spend hundreds of dollars for new ones but instead passengers can expect

new retail moves, says Raphael Bejar of Airsavings.―Airlines are looking for

value-add services that will not only increase their profits but which improve

the customer in-flight experience,‖ he said. He predicts airlines acting as

retailers is an evolving trend that will ―become a normal part of the customer

in-flight experience.‖

• As for the prediction that the end is near for low-cost airlines, Roger

Williams of Airline Information says that is not the case.―In fact, I would say

this is only the beginning of low cost airlines,‖ he said. He makes the point

that a distinction has to be made between a low cost airline that keeps

operating costs low and budget airlines that offer low fares ―thanks to a low

cost structure.‖That‘s the case in part because traditional old-time airlines

with higher cost levels ―have learnt valuable accounting lessons from low-

cost airlines.‖

Source: Travel Mole, December 2010 http://www.travelmole.com/stories/1145574.php

What Lies Ahead…

• Passengers might expect airlines to continue to find new avenues for fees,

but their ―future lies in redefining (and in some cases, reimagining) the

customer's experience, with an emphasis on promoting sales and value, not

extracting fees,‖ said Proud.

• The expected move towards selling various products should be successful

for the airlines because they already have such metrics as destination and

demographic information that ―traditional retailers would kill for,‖ Proud said.

―As with any product and service offerings, customers‘ adoption is

important, but with the detailed information and captive audience an airline

already has, high adoption and purchase rates are very likely, "he said.

• A good news item for passengers in the future is that they will increasingly

have choices of products they wish to buy or can reject and not have to pay

more. If a passenger is not hungry, he or she skip food offerings, for

example.

Source: Travel Mole, December 2010 http://www.travelmole.com/stories/1145574.php

Travel Sales Trends

Source: Airline Retail Conference 2010 http://www.airlineretail.com/cms/wp-content/uploads/2010/07/ARC2010-Day-2-1-Doug-Benham.pdf

Source: Generation Research, Sweden

Travel Sales Trends

Source: Generation Research, Sweden

Source: Airline Retail Conference 2010 http://www.airlineretail.com/cms/wp-content/uploads/2010/07/ARC2010-Day-2-1-Doug-Benham.pdf

Travel Sales Trends

Source: Generation Research, Sweden

Source: Airline Retail Conference 2010 http://www.airlineretail.com/cms/wp-content/uploads/2010/07/ARC2010-Day-2-1-Doug-Benham.pdf

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