The future of flying is very much at stake as the air travel industry considers how it will move forward following the Covid-19 pandemic.
In June, IATA estimated the industry would collectively lose $84 billion by the time 2020 comes to a close. In that news release, IATA Director General Alexandre de Juniac said, “Financially, 2020 will go down as the worst year in the history of aviation.”
Recovering from those losses will be the biggest challenge the industry has ever faced. Not only is it a financial exercise, but it also requires balancing global health, a patchwork of international laws and requirements, and the delicate trust of passengers. That means airlines—from luxury liners to ULCCs—have the tough task of looking for new revenue streams in ways that don’t overextend the limits of their relationships with customers.
Low-Cost Carriers, An Interesting Test Case
Airlines such as RyanAir, EasyJet, Wizz Air, and Southwest will be ones to watch as the travel industry recovers. These short-haul, regional airlines are among the first to resume service as more countries start to permit domestic and “international bubble” travel zones.
However, these airlines have historically made their money by offering rock-bottom fares, scheduling frequent flights, and the highest seat counts possible. How will that model survive in an era that will, at least for some time, include physical distancing inside the aircraft? As IATA’s de Juniac said in an April media briefing, “It is very clear that if social distancing is imposed inside the aircraft we will need to neutralize a huge proportion of seats—at least a third for short and medium-haul aircraft.” De Juniac continued, adding that budget-minded airlines will either have to charge 50% more per ticket or face enormous losses.
Solving this is a perplexing quandary.
Some in the industry have suggested reimagining these airlines as business-friendly carriers, which would permit them to serve business class clientele at business class prices. However, it still remains to be seen just how quickly the business world will return to international flying. Many people around the world are now working from home, and are using video conferencing as a way to do meetings they would have otherwise done in person. This could be a new norm the airline industry has to contend with, at least for a while, especially if quarantine measures stay in effect for international travel.
On the flip side, some have argued it will be these airlines that recover first. A recent Al Jazeera article explained how these revenue savvy airlines have received only a fraction of government support compared to flag carriers and legacy airlines. That means they have had to be nimbler and savvier about their business strategies—which could give them a competitive advantage as travel continues to gradually resume.
Traditionally, such airlines haven’t offered IFE to passengers. But in the post-Covid world, they may need to rethink this choice for business sustainability reasons, as well as to help reassure and connect passengers who feel apprehensive about traveling amid a pandemic. It’s clear from the timing that airlines are seriously considering the value, and ancillary revenues, that even a PED-driven IFE system can drive.
How to Capitalize On IFEC Systems
Long-haul, international carriers are in a better position than domestic airlines to maximize digitally driven, just-in-time ancillaries because they’ve already made sizable IFEC investments that can be tweaked and topped up to drive revenues. It just takes a holistic vision and some creativity to make them work in concert. Here’s what we know and can help with.
Many airlines have invested in IFEC solutions, but use them for only their base services: showing movies and moving maps. These solutions can be extended through little to no additional investment to include premium paid services to passengers. For instance, airlines can reconfigure their inflight Wi-Fi service offerings and price points to increase uptake and improve customer satisfaction. Airlines can also monetize premium live television options. As professional sporting events resume, so too will demand to view these as they’re happening on the ground.
Retailing is becoming a critical component of recovery, as airlines look to delve deeper into ancillaries that don’t rely on drip pricing. More and more airlines are working together with third-party vendors to put together comprehensive commission-based retail marketplaces on seatbacks and companion apps for personal electronic devices.
These digitally-driven shopping experiences can replace in-person duty-free shopping, help passengers coordinate ground transportation and destination services, and support tourism operators looking to reach travelers more effectively. This targeted approach to selling is a genuine win-win: Passengers appreciate being approached with contextually relevant, timely offers, and airlines have a better chance of earning sales commissions because of that.
Inflight shopping infrastructure can also be used to drive sales of inflight goods like food and beverage. “Pair and pay” by LEVEL—IAG’s LCC that operates select flights between North America, Latin America, and Europe—allows passengers to pay for inflight meals, drinks, Wi-Fi, and duty-free by pairing their mobile phones (and mobile wallets) to the IFE network to complete payment.
Considering inflight services on many carriers’ flights might be moved to an on-demand format to reduce person-to-person interaction, maximizing IFE, optimizing Wi-Fi, and developing smart companion apps are how savvy airlines will gain an advantage.
Further on the food note—IFEC systems can do more than simply make it easier for passengers to order food inflight. In fact, a good smart cabin solution linked to an inventory system and powered by IFEC can be a huge game-changer for airlines looking to cut costs. A streamlined approach to managing inflight food and drink will empower airlines to do a better job of predicting demand and buying strategically. Not only that, but a cabin-connected inventory system can, via IFE, deliver just-in-time promotions while still in the air. It could look something like a pop-up advertisement for a food-and-drink reduced-price combo towards the ends of a flight, which would both reduce spoilage and increase revenues.
IFE Critical to Recovery
During an April FlightPlan webinar, Inmarsat Aviation’s VP Retail Revenue Management Asbjorn Christoffersen said IFE was a cornerstone to how airlines can “reposition their business going forward”—if the opportunities are well-designed, and properly communicated and promoted to customers.
The above are just some ideas on how airlines can approach ancillaries and value-add services in the post-pandemic era in a way that will comfort passengers and help them not to feel as though they’re getting nickel-and-dimed. These strategic approaches will assist all carriers in rebuilding the air travel business and bringing it to new heights.