LCC Land-Grab?

The last 18 months have been a trying time for aviation, yet the leaders of some of the world’s largest budget airlines have been speaking publicly the opportunities they see in the current market and outlining how they intend to take advantage of this time of adversity.

Speaking after the release of the carrier’s third quarter results, Michael O’Leary Ryanair’s CEO said: “We’ll emerge with a much-lower cost base and where there is significantly reduced capacity, we’ll look to take advantage.”

He later went on to tell Travel Weekly that Ryanair would leverage this low cost-base to take “as much market share as we can cope with.”

Similarly, Hungarian LCC Wizz Air is making headlines with aggressive plans to expand rapidly into forfeited slots at London Gatwick and other UK airports, while at the same time launching flights to India. Group Chief Executive Jozsef Varadi says this expansion – at a time when many airlines are in distress – is owed to low operating costs and an efficient business model.

Low operating costs are clearly a major advantage when it comes to expansion in the new aviation environment, but revenues are the lifeblood of any business. Driving incremental ancillary revenue is the secret sauce to the LCC business model, which places great emphasis on cheap unbundled ticket pricing. As opportunistic leisure airlines expand with new routes into new markets, they’ll need to sharpen the ancillary pencil and be thinking about how they can boost revenue from other sales channels, particularly by understanding who is onboard and what they really want.

Inflight and Ancillary Revenues – what is the secret sauce?

The inflight environment has long held the promise of great ancillary revenue benefits, but now the time has come for these to be realised. That’s why AirFi is working with a number of partners to help airlines deploy digital inflight retailing and entertainment solutions that cost little or next to nothing to airlines, and which leverage objective data, analytics and intelligence to constantly fine-tune product mix for sale onboard.

Transaction and actual behavioural data are vital to truly understanding what passengers are willing to spend their money on, other than tickets,” says Vimal Kumar Rai, EVP Global Sales and Marketing at AirFi. “And the sad fact is that traditional, embedded seatback IFE systems do not capture this kind of data in any meaningful way. Most passengers might watch some movies or videos, and maybe turn on the inflight map, but other opportunities for engagement and content consumption – such as reading a book, browsing and buying products or even shopping for tours and activities – are just not ideal to perform on a seatback screen. That’s where AirFi’s technology becomes so powerful, because it is able to capture the granularity of passenger preferences and behaviour on their own personal devices.”

Going forward, LCCs will be looking for precisely these sorts of smart solutions that are future-ready, quick-to-deploy at minimum capex and zero aircraft downtime. Together with airlines and third-party partners, AirFi can use a mix of airline data (passenger personas, browsing behaviour, actual transactions, even what passengers are watching on the IFE system) and data from other cultural sources, like social media, to create a clear picture of what people are looking for.

“It really does need to be a blend of first, second- and third-party data which altogether allows for a deep level of analysis and intelligence around timing, pricing and merchandising of products and services to passengers. Identifying and recognising loyalty members inflight automatically and having the platform auto-assign offers or promotions to them – perhaps even based on past purchasing behaviour – is one example of how data can drive higher per passenger spend and a better passenger experience.”

AirFi is seeing that even the leanest of LCCs are now looking at these more advanced methods to nail the inflight selling opportunity. For many, it’s gone beyond mere experimentation and they’re ready to adopt and roll out solutions.

“The opportunity for the land grab has been clear for many months already,” says Rai. “But beyond adding new routes, LCCs are going to have to focus on differentiation and generating ancillary revenues far beyond ticket sales to reach peak profitability. We’re very excited about the potential of data in transforming onboard ancillary revenues, and solutions like AirFi’s are helping to make this kind of intelligence accessible to even the most cost-conscious of airlines.”