Anti-airline thinking delivers growth amid travel slump
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The most successful airline in the US this year is Allegiant. While the industry has cut back capacity, Allegiant has boosted its size by 30% and grown passenger trips by 18% through May, one of the worst months on record for the industry. Moreover, the company has seen profits soar 200% in its first quarter report. The secret; Allegiant doesn’t see itself as an airline but more a vertically integrated travel company. A recent Fast Company article refers to Allegiant as the anti-airline.
The operator has modeled itself after Ireland’s discount carrier Ryanair. Like Ryanair, it has focused on connecting popular tourist destinations to empty airports in third string cities. Rather than trying to steal other carriers’ passengers, it has stimulated new traffic with cheap fares. In short, Allegiant has developed a business model that allows it to serve smaller airports infrequently, with flights that are often 90% full.
Another key is Allegiant’s adoption of a la carte sales. It charges to book a ticket (like Ticketmaster), the first checked bag, and seat assignments. Like Ryanair, it also uses the lure of $9 teaser fares to sell passengers complete vacation packages with hotel, sun towels and suntan oil included. Last year the company sold 400,000 hotel rooms through its Web site.
It’s no surprise then that Allegiant’s ancillary revenue per passenger rose 52% in the first quarter, to US $34, comprising nearly a third of the company’s business. This growth is more impressive than Ryanair’s.
US legacy carriers have also been cognisant of Ryanair’s methods. Unlike their counterparts in Europe and Asia, they were the first in their class to recognize the value of a la carte selling and in the past 18 months most of them have launched onboard sales programs using the GuestLogix onboard retail transaction platform. So while, US legacy carriers are able to eke out EBITDA profits during this downturn, Asian airlines, in particular, are still struggling because they have yet to seriously rethink their existing full-service models.
The global average onboard spend per passenger trip today ranges US $1.00 to $1.50 based on recorded sales representing over a half billion passenger trips currently deployed on the GuestLogix onboard retail platform. To grow the average spend, airlines must continuously think outside the box, think anti-airline, and use destinations as their onboard merchandising focus.
The revenue growth potential has been made all too clear by low cost carrier tactics and particularly by airline Web sites where the only inventory to manage is one’s seats but through partnerships one can deliver a myriad of related travel services digitally. The same is now possible onboard with new products and services that are designed to let passengers get more out of their trip. With no physical inventory to manage, the revenue possibilities with the GuestLogix OnTouch™ merchandising platform are endless.
GuestLogix’ new merchandising initiatives that can be integrated with the booking path, onboard, and post arrival activities will be a topic of high interest at the upcoming GuestLogix User Group Conference.
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