Low-Cost Carriers vs. Full Service Carriers
Ancillaries are the fastest-growing revenue stream for airlines. There’s no end to what they can up-sell or cross-sell after seats. Moreover, IATA’s New Distribution Capabilities (NDC) is ushering in an era of how airlines will sell them. videc’s App in the Sky examines Android apps of 20 low-cost carriers (LCCs) and 45 full-service carriers (FSCs) globally to see how many offered the below unbundled products in 2Q19.
It is evident straight-away that LCCs are adding features on their apps faster than the FSCs are. At 85%, LCCs lead the way in terms of offering priority check-in in 2Q19. Meanwhile, 66% of the FSCs have incorporated priority check-in in their apps. Either way, both types of airlines are rolling out the red carpet to deliver this option at a fee. Offering this via their app allows users who are not part of their high-value frequent flier program to buy this.
PREPAID SEAT SELECTION
There is a significant gap between the number of LCCs that offered the option of paid seat selection on their Android app in 2Q19 versus the number of FSCs. While 75% LCCs offered the paid seat selection, the percentage for FSCs was at 55%. Most seat selection purchases happen at the time of booking but the fact that a lot of airlines, whether it is LCCs or FSCs, are offering the paid seat selection option on their app indicates how pervasive and popular this option is among fliers.
ADVANCED BAGGAGE PURCHASE
The option to pre-purchase additional baggage ranks third in the overall scheme of ancillary products that airlines sell via their mobile apps. The 2Q19 survey shows that more LCCs are taking this feature seriously with 70% of them adding it into their apps as against 39% for the FSCs. This could be because often times, the extra luggage allowance purchase happens over-the-counter while checking-in. Also, some FSCs already offer higher baggage allowance. Either way, if airlines want users to utilize this app option more frequently, they will need to cross-sell the advantages of pre-buying this – on the app itself.
ADVANCED MEALS PURCHASE
There is disparity between the number of LCCs that offer the option of meals purchase on their Android app as against the number of FSCs that do. While 55% of LCCs offered this feature in 2Q19, this dropped to 32% for FSCs. But again, this could be because FSCs typically include meals in their bundled fare rather than upselling. In case of LCCs, meals purchase also happens either post-booking or directly on the flight. Both types of airlines have done rather little to upsell meals via this channel.
Of the total number of airlines studied for this 2Q19 report, 50% of LCCs has this feature on their app while 20% of the FSCs offered it. These numbers should ideally match or at least be close to that of priority check-in but we see a huge gap in between. This is probably because the first option is more popular with business travelers who don’t have luggage to check in.
ADVANCED INSURANCE PURCHASE
Even though flight disruption poses a significant threat to airline operations and expense line – particularly in Europe, which has stringent Air Passenger Rights – not many airlines offer this. Overall, airlines have some more ways to go in integrating travel insurance in their mobile shopping path. Survey indicated that 40% of LCCs offered insurance purchase on their apps in 2Q19 while the figure for FSCs rested at 23%.
DUTY FREE/ RETAIL SHOPPING
Airlines are either retailing onboard or tying up with partners on the ground, especially at airports. But a few are taking e-retail a step further and are incorporating shopping within their apps. Think of it as Amazon or Etsy baked within the airline apps, but at a limited scale. Here, the percentages between the two types of carriers are almost the same. While 15% of the LCCs studied for this 2Q19 report offered duty-free shopping option to their app users, the number was at 14% for the FSCs. The retail opportunity is vast and those doing it right stand a chance to gain further insight into their travelers’ lifestyle.
Wi-Fi passes haven’t reached mainstream due to a combination of factors. Chief among them are massive capital expenditure on part the airline, and varying telecom regulations by country in case of overseas flights. Just 10% of the LCCs offered Wi-Fi purchase in 2Q19 as against 7% of FSCs. These figures are surprising but it’s fast quarter-on-quarter growth gives this service hope and is a sign that more airlines need to join in to not just make this a more popular service but also to make the rates more competitive.