25th April, 2022
Is it time certain airlines get rid of the “cost-cutting” approach, and rather look at revenue generation?
“Cost-cutting is of paramount importance for airlines, but has it gone too far?” questioned Oliver Ranson, during a webinar on ancillary revenue, conducted by Ai last week.
If only one cost leader, then what about others?
“There can only be one cost leader,” pointed out Gavin Eccles, during the same webinar.
The focus here tends to be on competitive advantage based on low costs (minimize operating costs and optimize profit margins), resulting in commoditization. Referring to Ryanair vs. Wizz Air, Eccles said carriers look at “selling more” and garner revenue from “extras”.
Differentiation
What if you can’t gain such competitive advantage or differentiate?
Airlines can consider the entire trip needs and more importantly, rather than relying on 3rd party for fulfilling the same, why not look at managing the same.
As Eccles shared, points to consider – why not look at the holiday packages, why not package better than the way it is being done, why to outsource packages and work with OTAs for the same etc.? Instead why not do the same via owning and managing within the group, with own P&L.
“Research shows that airlines, and particular the LCCs, have very high level of spontaneous awareness but not when it comes to booking accommodation. So why not try and convert existing users to look at you as an alternative to visiting OTAs,” suggested Eccles, adding that airlines can assess selling more to existing prospects and better utilization of seat inventory, and gaining access to deal from partners that allow great package prices.
Control
From passengers’ perspective, Ricardo Pilon added that customers are increasingly attracted to opportunities to control their own experiences by being able to personalize and tailor their journey to their needs. Referring to unbundling he said that airlines need to look at inconsistency in shopping and rather let look at ways to let the passenger be in control of the entire journey, be it for shopping or servicing.
By Ritesh Gupta,
Ai Team
