Christian Baillet, Regional Director Airline IT Sales, Amadeus IT Group
The airline industry is a notoriously tough place to make money, but 2015 has arguably been a bright spot in a grey world. Oil prices slumped in the first half of the year and have stayed low, and every year we seem to break a new record for the number of travellers boarding planes – for which Asia Pacific can claim much credit. As a result, many airlines have moved back into black.
But profits come and go, especially when they ride on the back of something as unpredictable as fuel prices. And overcapacity, geopolitical instability and aggressive competition are ever-present threats that sit just around the corner.
So as I look back on the shifts that have taken place in the Asia Pacific airline industry over the past year, it makes a lot of sense that the airlines are hedging their bets instead on longer term strategies. And in a twist of irony, many are going back to basics, and putting the focus on the customer.
Full-service airlines zoom in on personalisation
Full-service Asian airlines have always made their name on exceptional customer service, especially within the domain of the aircraft cabin. Most if not all continue to invest heavily in creating experiences that travellers want – an example of which is the revival of the premium economy offering – and this focus is now also expanding into the merchandising space.
As more airlines wake up to the reality that travellers today – more informed, more individualistic, more powerful, and with more choice – are in the driver’s seat, we are seeing a shift away from focusing on merchandising solely as revenue maximisation, to a greater emphasis on creating positive ‘purchasing experiences’ that cater to individual needs.
After all, for many travellers, price is no longer the only factor influencing purchasing decisions. Many will pay more for specific service offerings that meet their needs – extra leg room and ticket flexibility for example. So airlines are rushing to adapt to provide a more flexible product offering that can be better tailored to traveller needs. We’ve seen sales of ancillaries through Amadeus rise by 85%, generating average incremental revenues of 10-15% per booking for airlines that have implemented Amadeus Ancillary Services. And more than 30 airlines have signed up for Amadeus Fare Families – launched just last year – to differentiate their offers by packaging booking classes, fares and services into branded products.
LCCs cast their net wider
LCCs too are redefining the experiences they deliver to travellers. LCCs have in the past thrived on targeting the budget-conscious leisure traveller – often creating new demand from segments of the population that could not previously afford to fly. As a result, over the past 5 years, we’ve seen point to point short haul traffic in Asia Pacific move rapidly to the low cost carriers. But today – as the market growth from first-time travellers slows, and LCCs grapple with overcapacity in the region, many are moving away from the traditional “cheap and simple” product model towards a wider and more complex range of offerings that target sophisticated, higher-value travellers.
Cebu Pacific and Nok Scoot are entering the long-haul sector, and AirAsia markets connecting flights through its hub in Kuala Lumpur. Frequent flyer programmes from LCCs are also increasingly common, and Jetstar today offers products that are targeted at the corporate travel market.
Even in India, one of the most price-sensitive markets in the world, LCCs are moving towards a greater focus on customer experience. Many have begun to offer services their customers want to buy like hand baggage only fares, fast boarding and lounge access.
In a nutshell, 2015 has seen a major shift for airlines towards creating products and experiences that are more attuned to the wants and needs of travellers. Some come at it from a low cost model, and add perks that new traveller segments may want. Others come at it from an all-inclusive upmarket model, and unbundle part of the offer to give customers the flexibility to pay only for what they need.
What will we see in 2016? I expect a sustained push in the same direction, with personalised servicing and personalised merchandising becoming front and centre for airlines. They will need to think about how to respond to emerging traveller behaviours, to build a more rewarding and connected journey, from ‘inspiring to arriving’. Data will become the most important resource available to airlines – delivering the competitive advantage.
With our vision of personalisation in the global travel ecosystem, Amadeus can help airlines reach every customer, while delivering a premium, branded, experience throughout the entire travel lifecycle, seamlessly and consistently across all touch points they interact with. Truly, the airlines that will come out on top are those that can create a more rewarding, connected, and seamless traveller journey.