Airlines becoming megastores

  • 2013-01-09
  • From wire reports

RIGA - Despite the forecast easing of oil prices, fuel remains the largest single cost item that pushes airlines to upgrade their fleets with all-new or re-engineered jet and turboprop aircraft, reports BNN.
With lingering debt challenges and continued austerity measures, the European economy is likely to continue to be challenging. For the aviation industry it means weak consumer confidence and also corporate travel budgets under constant review, where critical-only business trips are authorized.

The response from airlines to these challenges will be further efficiency gains through consolidation and restructuring to keep ticket prices low, and offering tailored products – low cost airlines will upgrade their service to appeal to the corporate traveler (e.g. assigned seats, more flexibility), while more traditional, hybrid and niche airlines will continue to diversify their offering, to include affordable and personalized travel products, based on individual needs, said airBaltic Corporate Communication Vice President Janis Vanags.
Furthermore, to insure against the potential dilution in corporate/business travel, airlines will focus on leisure destinations this summer.

Ancillary revenues are set to soar, however. Airlines acting as travel megastores and selling everything from luggage allowances and car rentals to insurance, sunglasses and lasagna have changed the fundamentals of the business. Ancillary revenues are critical for the financial viability of many airlines around the world as they offset cost increases elsewhere. Furthermore, they are behind a better and fairer service – passengers traveling light are not forced to subsidize the luggage of heavy packers, if the check-in luggage fee is charged separately from the flight ticket. And other products (tablet computers for in-flight entertainment, WiFi Internet, beverages, insurance, special meals, flowers) tend to have a better value-for-money, if offered for a fee to customers.

In 2013, airlines will offer a new range of ancillary products from personal airport check-in, hand luggage to fancy devices for in-flight entertainment, content for your own device, as well as various eye-catching new experiments to explore the sales potential of innovative future offerings.

Personalization is set to become an industry standard. With tens of flight-related and hundreds of ancillary products available from airline Web sites and on-board, personalization of service is not new to the airline industry. However, personalization options have so far been largely limited to airline Web sites. With the International Air Transport Association (IATA) currently developing new standards enabling airlines to offer their full product options also through other channels, including travel agencies, travel personalization is set to become a new norm in the industry, where every customer can tailor the service to his/her needs.

Despite the postponement of the EU ETS until a global solution is agreed, climate change policy remains a potential financial threat. Additionally, as government finances in Europe are worsening, airlines may become targets for new “green” taxes that merely fill the state coffers at the expense of air travelers. This, coupled with the high oil price, stimulates airlines to increasingly practice green flying. In 2013, there will be green flying initiatives from biofuels to state-of-the art navigation procedures and infrastructure, that aim to reduce flying time and circuitous routings, thus saving fuel.