in Aerospace

Airlines focus on ancillary revenues

Posted 12 January 2017 · Add Comment

The rapid growth of the global airline industry has been offset by falling cargo revenues and passenger yields, prompting airline companies to focus on enhancing their ancillary revenues.

According to Frost & Sullivan's Aerospace Growth Partnership report Strategic Analysis of Major Global Airlines - which provides a 10-year competitive profiling of 15 global airline and airline groups in terms of financial performance, major traffic, capacity metrics, and key strategies to assess the financial health of the airline industry and the wider aviation supply chain - while airlines have tried to achieve cost and operational efficiencies by employing digital solutions, typically part of a larger digital transformation programme, revenue growth has mostly been a result of the innovative marketing of attractive ancillary products. These insights on airline fleet expansion trends, operating costs, and revenue trends will be beneficial to airline IT suppliers, on-board retailers, and aircraft manufacturers.

"Digital transformation is emerging as a disruptive force in the aviation industry, with airlines investing in business intelligence solutions, digital marketing projects and overall modernisation of IT infrastructure," said Frost & Sullivan Aerospace & Defence Research Analyst Priyanka Chimakurthi. "Industry concepts and standards such as intelligent loyalty management platforms and IATA's New Distribution Capability have the potential to alter dynamics in the highly competitive industry."

Even though airlines are rapidly moving towards digitisation, the overall unpredictability of oil prices greatly affects their strategising. Moreover, the industry continues to be governed by a strict regulatory framework and is highly cyclical and vulnerable to global economic trends.

"To succeed in a challenging operating environment, airlines are increasingly relying on advanced digital solutions, as well as strategic partnerships," noted Chimakurthi. "Additionally, airline consolidation is intensifying with more than half the airlines covered in the study having engaged in significant merger and acquisition activity over the last 10 years."

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