1

Ancillary Revenue

Ho Hoong Mau, Director, Airline Distribution Abacus International

2

3

4

• All Airlines are in the game

• Low-cost carriers in the forefront for ancillary

• USA drives the highest published ancillary revenue.

• Asia is slowly awakening

Ancillary Revenue – Who is in the Game?

5

Ancillary Revenue Is Not The Top Priority For Asian Airlines’ Leadership Team For 2010

6

Most Of The Asian Airlines Surveyed By Abacus Had Tied The Contribution Of Ancillary Sales To A Nominal Amount Of Less Than 5% Of Their Total Sales.

What do you estimate your carrier percentage of sales would be from Ancillary Sales?

7

8

• IATA projects airlines to earn US$58 billion in 2010 from ancillary revenue

• This will make up 12% of their total revenue

• LCCs outstrips the network carriers – reporting almost 20% of the revenue from ancillary revenue

Ancillary Revenue – Changing the Airline Landscape

Table 1: Revenue from Ancillary Fees to U.S. Airlines in Q3 2009 (Million USD)

 

3rd Quarter

2009

3rd Quarter

2008%

ChangeDelta 447.5 262.2 70.6American 261.2 242.5 7.7US Airways 230.8 129.6 78Northwest 223.2 165.5 34.9United 168.5 152 10.9Southwest 155.7 143.4 8.6Continental 130.5 55.7 134.3AirTran 68 38 79JetBlue 48.7 53.1 -8.4Alaska 47.3 34.3 37.9US Industry Total 1954.7 1432.7 36.4Source: Bureau of Transportation Statistics, Form 41; Schedule P1.2. Q3 2009

9

Even In Asia – Slow But Increasing Focus On Ancillary

10

Travel Insurance 40%Travel Insurance 40%

Advertising 20%Advertising 20%

Airlines Have Implemented These Strategies

11

Airlines Have Implemented

Travel Insurance 40%Travel Insurance 40%

Advertising 20%Advertising 20%

Image source: Tiger Airways

12

Our Track Record

Travel Insurance 40%Travel Insurance 40%

Advertising 20%Advertising 20%

Image source: Singapore Airlines

13

Branded Fares 53%Branded Fares 53%

Advance Seat Assignment 42%Advance Seat Assignment 42%

Airlines Are Considering Implementing The Following:

Premium Seat Assignment 40%Premium Seat Assignment 40%

14

Branded Fares 53%Branded Fares 53%

Airlines Are Considering Implementing :

Advance Seat Assignment 42%Advance Seat Assignment 42%

Premium Seat Assignment 40%Premium Seat Assignment 40%

Image source: Malaysia Airlines

15

Branded Fares 53%Branded Fares 53%

Airlines Are Considering Implementing :

Advance Seat Assignment 42%Advance Seat Assignment 42%

Premium Seat Assignment 40%Premium Seat Assignment 40%

Image source: AirAsia

16

Branded Fares 53%Branded Fares 53%

Advance Seat Assignment 42%Advance Seat Assignment 42%

Airlines Are Considering Implementing :

Premium Seat Assignment 40%Premium Seat Assignment 40%

Image source: JetStar Asia

17

Lowering base fares result in positive revenue impact

Ancillary Revenue Boost

18

A Vital Strategy

19

20

Opportunities – B2B Channel is under Leveraged

Internet on-board

In-Flight Entertainment

F&B On Board

Upscale Amenities

Unbundled Choices (eg, Bag check, seat selection)

Lounge Access

Advertising

Mileage Redemption

Hotel Partnerships

Financial Services

Surveys/Data Collection

Rental Cars

Vacation Packages

‘Window Shopping’ (On-line Stores)On-line

Gambling

Business –to-Consumer Business –to-Business

Source: L.E.K Analysis

21

Shifting Zone of Play

Low Cost Carriers

DIY Price Sensitive Leisure Segment

Full Service Carriers

Managed CorporateSegment

22

Shifting Zone of Play

Low Cost Carriers

DIY Price Sensitive Leisure Segment

Full Service Carriers

Managed CorporateSegment

23

24

25

26

Consumer Tipping Point

Now, I have to pay extra for everything!

My Elite status is being diluted by all comerswho pay a small price to“buy” status…

27

Customers’ preference and

choices

Consumer Tipping Point

2828

Email Email

Ancillary Revenue

1. Ancillary services adoption is patchy and uneven

2. Battle of the two forces

3. Time is right to get onboard…..with the right partner

Summary

29

Travel Insurance

Pay for 2nd checked bag

Pay for 1st checked bag

Premium seat assignments

Advance seat assignments

Branded Fares

Meals

Lounge access

Inflight entertainment

Elite flyer status

Call center reservation

Advertising

Web booking fee

Evolution

Oxygen

Luggage stow space

Using the toilets

Leg rest

Reading materials

Internet access

Transfer to gate

Amenities, eg, toothbrushLate check –in/boarding

Special mealsReading light

Current Future

30

Thank You