With remarkable timing, Lufthansa talks up its merchandising strategy
Last week, as Lufthansa announced a change in commercial direction from its German HQ, half the way around the globe an exec talked of the airline’s first steps in ancillary revenue.
It’s a bit of a stretch to bring the word juxtaposition into the proceedings, but the reality that carriers need to find ways to boost revenue is not lost on most of the airline community right now.
During the Amadeus Airline Digital Merchandising conference in Thailand, Lufthansa’s online sales and mobile services chief Sebastian Riedle sums the situation it up nicely:
“In times of declining yield, ancillary revenues represent the chance to strengthen profitability.”
The airline ancillary revenue trend is no longer something carriers can ignore, he says, describing it on a couple of occasions as a circus and admitting the airline is trailing in the game.
“In the mid-term, selling a ticket might be nothing more than your ticket into the ancillary circus.”
So, how is Lufthansa doing?
According to Riedle, the challenge is that as a legacy carrier it feels it has a relationship with customers meaning that to take elements away and charge for them is difficult so, it needs to figure out what it can sell on top.
Branded fares have been in the bag since March and there are other “catch-up” products in the pipeline.
The airline is also gaining ground in car-hire sales – it claims to have almost doubled sales if you compare the first quarter of 2014 to the first quarter of 2015, helped by bringing the ancillary into the booking flow.
Insurance sales, also in the primary booking flow, have also seen substantial growth according to Riedle.
But there are still many challenges such as where to place extras in the booking process. Others include trying to identify the right product not only for each market but also for each customer segment as airlines strive to bring some personalisation to services.
While it’s early days for the carrier, Lufthansa has decided there is airline ancillary revenue to be gained or, as Riedle describes it, a bit of “magic” for all.
And, the rest of the industry?
Before launching into his presentation, Riedle took a snapshot from the audience of where they think their airline stands when it comes to ancillary revenue.
· Ancillary what? – 2%
· Working on it with some good results but still a way to go – about 81%
· Making the most of it already – about 15%
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