08 Jan 2017

Air Travel Market Disruption

Ancillaries becoming a mainstream hit hard on airlines with archaic PSS platforms. Global increase in the gross ancillary revenue has been an eye opener for Legacy Carriers.

The LCCs and Legacy Carriers are shifting towards a similar approach to meet the ever-changing customer demand in air-travel. Yet, there is a significant gap between the offerings of these approaches and we see Legacy Carriers are trying to utilize low-cost methods to minimize that gap. British Airways removed free meal offerings in short-haul flights and started selling M&S supplied sandwiches. Turkish Airlines started offering Exit Seats as an ancillary. These are clear signs of this trend for the near future.

The gap however, is still a big one. When Legacy Carriers start to unbundle their offerings or if we encounter comfortable business class like seats with low fares and frequent routes, this gap will start shrinking.

However, there can’t and won’t be a one size fits all approach for air transportation. Where there is commoditization there is the need for diversification. With the rise of customer experience and personalization, airlines who take advantage of flexibility and a rapid move towards the trends of the industry will capture the substantial share of the market that is formed by this gap and turn the tides in their favor.

Low-Cost Carriers should take advantage of their mobility to increase their market zone by expanding into up-scale ancillary services, business traveler offerings, low-cost alliances, personalization, exploiting NDC to their benefit and setting up more codeshare and direct interline agreements. The flexibility of LCCs allows them a faster way towards expansion. However, if Legacy Carriers can find their way around unbundling without splintering their service structure they can turn the tide and stop losing ground, though, none of the major PSSs nor the GDSs got over themselves and improved their capabilities towards that.

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Source : Hitit Computer Services

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