Post on 10-Jul-2019
transcript
HOW TO INCREASE AIRLINE REVENUES THROUGH TRENDING PRACTICES
S. ARAS KUBILAY, AVMP HITIT CS
OWN YOUR PLANESS. ARAS KUBILAY, AVMP
HITIT CS
WAIT A SECOND, THEY ARE ALREADY OUR PLANES?(ALRIGHT SOME OF THEM ARE LEASED, BUT STILL…)
Every Airline Here Right Now
OR ARE THEY?
LET’S START WITH JUST ONE
Others%9
Boeing 767%4
Embraer E190%4
Airbus A330%5
Boeing 777%5
Boeing 747%6
Airbus A320%29
Boeing 737%37
Source: Boeing, Airbus, Embraer, Bombardier
MARKET SHARE OF CURRENT PASSENGER JETS
184 Passengers (1-Class) 162 Passengers (2-Class) 189 Passengers (Max. Seating)
Source: Boeing
AVERAGE LOAD FACTOR: 80%
Source: ICAO 2015 Annual Report
147 SEATS FILLED 37 SEATS EMPTY
IF I COULD FILL THAT PLANE 100%, WOULD YOU GIVE IT TO ME EXCLUSIVELY?
SO AN IMPORTANT QUESTION TO ASK IS…
WHO FILLS YOUR SEATS?
IS IT YOU?OR GDS, OTA, METASEARCH, AGGREGATORS?
20FOR AN AIRLINE, IT IS
TIMES COSTLIER TO SELL THROUGH GDS/OTA THAN DIRECT.
Source: Atmosphere Research Group, IATA
20
THAT IS DISTRIBUTION COSTS
+OPPORTUNITY COSTS
AIRLINES EARN 9 TIMES MORE ANCILLARY REVENUE WHEN SELLING DIRECT.
Source: EyeForTravel
AND THAT’S A LOT OF MONEY!
Source: EyeForTravel
0
200
400
600
800
2010 2011 2012 2013 2014 2015
703,7696,1665,4630,9544,5451,4
59,249,942,636,132,522,6
AncillaryTotal Revenues
Source: IdeaWorks, Air Transport World
AIRLINE REVENUES ($ BILLION)
SO HERE IS A VERY ORIGINAL, TOTALLY UNHEARD OF IDEA: “UNBUNDLING”..!
…OF COURSE, EVERYONE IS DOING THAT NOWADAYS. BUT DO THEY DO A GOOD JOB?
Air37,6
Non-Air21,6
ANCILLARY REVENUE BREAKDOWN ($ BILLION)
Source: IdeaWorks
ANCILLARY REVENUE BREAKDOWN ($ BILLION)
Source: Hitit Research, IdeaWorks
2,80,92,6
3,1
12,4
15,8
BagSeatOnline / CC FeesB2C FFPUMNR / Sport etc.Others
11,89,8
B2B FFPCommissions
$$$ IS FINE, BUT THERE IS ANOTHER BENEFIT TO SMART UNBUNDLING
WHAT DO THESE THINGS HAVE IN COMMON?
Post-It
THEY ARE ALL VICTIMS OF “COMMODITIZATION”EVERY SUV IS A “JEEP”, EVERY PHOTOCOPIER A “XEROX”, EVERY STICKY NOTE A “POST-IT”
IF YOU DON’T DIFFERENTIATE FROM YOUR RIVALS, YOUR BRAND JUST BECOMES A GENERIC CONSUMER PRODUCT.
IN SUCH A PICTURE, CONSUMERS DON’T SEE THE AIRLINE BRANDS AT ALL
DIFFERENTIATION IS IMPORTANT, BUT…
“TOO MANY” CHOICES ARE ALSO BAD FOR BUSINESS
BETWEEN 2007 - 2012, MENU CHOICES AT MCDONALD’S INCREASED BY 70%.
Source: Bloomberg
IN 2013, THEIR SALES DECLINED FOR THE FIRST TIME IN 10 YEARS.
Source: Wall Street Journal
UNBUNDLINGUNBUNDLING SOME BUNDLING
OFFER EASY TO UNDERSTAND VALUE ADDS (OR AT LEAST THE ILLUSION OF IT!)
1) PARIS HOLIDAY WITH 5* HOTEL
2) ROME HOLIDAY WITH 5* HOTEL
3) ROME HOLIDAY WITH 4* HOTEL
YOU HAVE WON A FREE HOLIDAY! CHOOSE ONE:
1) PARIS HOLIDAY WITH 5* HOTEL
2) ROME HOLIDAY WITH 5* HOTEL
3) ROME HOLIDAY WITH 4* HOTEL
2) ROME HOLIDAY WITH 5* HOTEL
YOU HAVE WON A FREE HOLIDAY! CHOOSE ONE:
WHEN FACED WITH “FUZZY” OPTIONS, PEOPLE TEND TO CHOOSE BASED ON PERCEIVED WORTH (5* ROME IS BETTER THAN 4* ROME)
“ASYMMETRIC DOMINANCE EFFECT”
DECOY EFFECTA “BAD” OFFER WOULD MAKE SOMETHING ELSE LOOK GOOD IN COMPARISON, AND MAKE PEOPLE MORE LIKELY TO GO FOR IT
✔
ENCOURAGE FREEDOM OF CHOICE BY ALSO OFFERING “HORIZONTAL” VALUES
VERT
ICA
L VA
LUE
HORIZONTAL VALUE
ECONOMY
BUSINESS
FIRST
FLIGHT BAG MEAL SEAT LOUNGE
BASIC
PREMIUM
SPECIAL THANKS TO SOME OF THE AIRLINES THAT MOVEDTO “SOME BUNDLING” SINCE WE FIRST MENTIONED IT…
…FROM BOTH ENDS OF THE LEGACY / LCC SPECTRUM!
REMEMBER THIS GUY?
147 37
$$$
REMEMBER THIS GUY?
37?
CURRENT REVENUE PER SEAT: 0(OR EVEN NEGATIVE, GIVEN THE FUEL COSTS)
IF THE PLANE LOOKED LIKE THIS, IT WOULD ACTUALLY MAKE MORE MONEY!
PARIS, 2 ADULTS, 3 NIGHTS AVERAGE HOTEL PRICES
716 USD
603 USD
Source: Respective websites, booked 8 weeks in advance, average for Top 10 Rated hotels
WHAT IF…YOU COULD OFFER LOWER RATES
ANDINCLUDE THE FLIGHT TICKET
ANDSTILL TURN A PROFIT?
…AND DO ALL OF THESE USING YOUR UNSOLD SEATS?
THREE “MAGIC” NUMBERS:
65.6% 52.5% 22.5%
AVERAGE GLOBAL HOTEL OCCUPANCY RATE
AVERAGE OPAQUE DISCOUNT OVER PUBLISHED RATES
AVERAGE HOTEL COMMISSION RATE FOR SELLERS
Source: 1- Statista 2015 Report, 2/3- Hitit Research
THAT MEANS YOU CAN SELL A 650 USD HOTEL FOR AS LOW AS 308 USD, AND STILL KEEP 70 USD FOR YOURSELF.
BUT WAIT! THERE IS A CONDITION FOR SELLING OPAQUE RATES!
YOU HAVE TO PACKAGE THEM WITH OTHER SERVICES… … SUCH AS FLIGHT TICKETS (I WONDER IF WE CAN FIND SOME UNUSED SEATS SOMEWHERE)
70UNUSED SEAT REVENUE: USD
SELL A $650 HOTEL FOR $308, KEEP $70.
UNUSED SEAT REVENUE: USD
SELL A $650 HOTEL FOR $308, KEEP $70.SELL A $650 HOTEL FOR $308, KEEP $70.
SELL A $650 HOTEL FOR $500, KEEP $262.
SELL $20 WORTH OF ANCILLARIES, KEEP ALL.
282
HOTELS ARE NOT THE ONLY ONES WITH OPAQUE PRICES.THERE ARE ALSO RENTAL CARS, TRANSFERS, SAFARIS, GUIDED TOURS…
UNUSED SEAT REVENUE: USD
SELL A $650 HOTEL FOR $308, KEEP $70.SELL A $650 HOTEL FOR $308, KEEP $70.
SELL A $650 HOTEL FOR $500, KEEP $262.
SELL $20 WORTH OF ANCILLARIES, KEEP ALL.
SELL $100 SERVICES FOR $80, KEEP $25.
307
$307$000REVENUE PER 2 SEATS THAT WOULD OTHERWISE NOT BE SOLD AT ALL.
AND FINALLY..!
$$$ $$$
TAKE CONTROL OF YOUR PLANES:
1- ENHANCE SEAT REVENUE WITH VALUE ADDED BUNDLES AND SERVICES
2- LEVERAGE YOUR IDLE CAPACITY WITH PACKAGES AND TURN IT INTO PROFIT
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