How any LCC can drive ancillary revenue through digitalization: A three-part series of blogs showing how LCCs of any size have a proven, low-cost entry option to seize the digital initiative in driving their ancillary revenue recovery.
Why digitalization of ancillary revenue is now a viable, low-entry-cost strategy for LCCs of any size in their recovery strategy.
In this three-part series, I want to detail how LCCs of any scale and budget can exploit the power of digitalization to grow, control, and protect their ancillary revenue streams. From SIA’s global fleet of over 140 aircraft to SKY Express with just 19 planes, Omnevo’s digital solutions are powering transformations in passenger experience, operational efficiency, and ancillary revenue levels. Ancillary revenue digitalization has been democratized and recovery brought a digital step nearer.
The industry’s focus has long been on premium FSCs as digital revenue pioneers but, at Omnevo, we have developed cost-effective technical solutions (including adaptable pricing models) that make digitalization the optimal route to revenue recovery for airlines of absolutely any size. In targeting recovery, LCCs can fully maintain their strategic market focus while expanding their ability to grow ancillary revenue through digital solutions for F&B and Retail.
In such a uniquely challenged and volatile market, why should your LCC digitalize right now? There are three key reasons why I believe that every airline needs to look towards digitalization in its ancillary revenue recovery strategy:
Recognizing these challenges and the transformed market, Omnevo was created in the midst of the crisis to support the changed needs of airlines. The company name is a portmanteau of ‘omnichannel’ and ‘evolution’, reflecting both the power of digitalization and the evolution of the market.
While Omnevo has developed an expanded portfolio of new solutions for airlines, these are built on the foundation of a solid, trusted platform, including previous adoption and proven performance by leading airlines and airports such as Singapore Airlines’ (SIA) KrisShop, Virgin Atlantic, and Auckland, Frankfurt and Heathrow airports. Tailored to each operator’s needs and target customers, these sophisticated, multi-channel ancillary revenue platforms emphasize luxury and exclusivity – but the core technology is equally effective whether tailored to target a customer with a luxury Swiss watch or with a panini, creating new revenue opportunities for airlines of any size to target their key passenger profiles.
While legacy carriers will likely retain their luxury retail emphasis as their traffic returns, Omnevo’s solutions enable LCCs to be similarly effective in exploit digitalization by tailoring their offer to the needs and budgets of their passengers. Whether FSC or LCC, the airlines that innovate and shadow the returning customer’s digital needs can seize the initiative as traffic recovers.
As digital innovators, Omnevo shares the mindset and agile working approach that is characteristic of LCCs in the fast-moving budget airline sector. Our team, including myself, hold in-depth, direct experience across airline and catering operations and we saw a crisis-driven opportunity to develop new entryways into ancillary services and products (especially in F&B operations) for LCCs, with the flexibility to start small and focus on key priorities but always with the full freedom of future options to expand at will.
In early 2021 Omnevo integrated the operations of catering management and supply chain experts Shifteo, bringing sector-leading capabilities in ERP and ePOS to our expanded product suite and greatly expanding the menu of digital capabilities for any airline. This ready-to-deploy, integrated and vendor-agnostic platform reaches end-to-end, including flight scheduling, seat upgrades and inflight meals to pre-order, boutique shopping, buy-on-board and crew meals.
These platform options are customized precisely to each airline’s priorities, timing and budget, especially in enabling direct sales inflight to customers and the creation of a powerful range of new operational efficiencies - raising performance in everything from sustainability to crew time.
For most LCCs and smaller airlines, we find that their opening focus is primarily on the development of the inflight offer of Onboard Retail & Catering, especially re F&B (complimentary service or sold) and F&B pre-order, which enables major impacts in operational costs and waste/loss reduction.
Complementing those platform options, the new Omnevo ePOS system creates a series of onboard performance gains - including enhancements to passenger service, time-saving functions for crew, and the power to drive stronger ancillary revenue streams. The airlines we work with know that they retain the option to later expand into e-commerce, fully controlling the scale and timing of their digital development.
As the industry’s only seamless, end-to-end solution, the platform generates real-time analytics throughout the entire supply-chain, including precise identification of what is consumed, purchased, wasted and lost - creating significant cost-savings and customer service improvements as well as potentially huge sustainability savings in weight and waste, especially if a pre-order function is utilized.
Working with LCCs, we find that they almost invariably have relatively modern systems, enabling a more modern technical setup and clearer integrations, minimizing any migration challenges in the existing programs.
Typically, the LCC operational mindset often also includes shorter communication channels, avoiding the often siloed structures apparent at many legacy airlines that place a challenging block on optimizing the effectiveness of digitalization programs. We also often find them to be more flexible and versatile in their capacity for crew to adapt to new processes.
Many airlines love the idea of digitalization of ancillary revenue but instantly dismiss it on cost grounds. LCCs inevitably face huge financial pressures right now so we’ve also developed easier routes to entry, including MVP options and a move from license-based to a revenue share based model, removing the burden of CapEx requirements. By sharing the risk and reward with the customer, we create a much reduced risk for the airline compared to traditional models.
From our partnerships with a number of LCCs and smaller airlines, we have seen significant performance gains, ranging from system-wide incremental gains to truly transformative improvements in some areas, accumulating new efficiencies across the airline’s whole operations system:
In the second blog in this series, Omnevo’s Project Manager Johannes Moll will share a case study detailing how a relatively small but forward-thinking LCC, SKY express, partnered with Omnevo to seize the digital initiative to strengthen its attack on the opportunities of the recovery and beyond. For any LCC considering a digitalization strategy, this case study demonstrates how any carrier can achieve new levels of operational efficiency, stronger passenger engagement and powerful new revenue streams.
The post-COVID recovery will undoubtedly be a huge challenge for LCCs and will demand new thinking, new methods, and new performance standards; the digitalization of ancillary revenue delivers those needs, placing the digital adopters in pole position for recovery.
Aviation & Travel
One of the biggest emerging trends I have seen in the airline sector over the last couple of years is the concept of passenger self-serve onboard or order to seat. Despite the almost constant discussion at every industry event, the funny thing is, this isn’t really new at all – almost 10 years ago, a former CEO of an onboard retail technology provider proclaimed: “Over time the duty free model will shift to 100% passenger self-service transactions. One of the biggest reasons being the fact that the trolley only comes down the aisle once a journey, for half an hour – in essence the duty free store is only open for half an hour. If I can make transactions myself, through self-service technology, the store is open for the entire flight.” And yet, a decade later, this isn’t even close to the reality on-board most aircraft. During the pandemic, with the need for social distancing, coupled with a desire for innovation, self-service again bubbled to the fore – it gained a new level of relevance. With passengers across all demographics accustomed to ordering everything from groceries to new cars via their phones, digital transactions onboard an aircraft look to be a natural extension of what has become an everyday digital experience. The aviation sector is obsessed (but occasionally intimidated) by digital answers, and there is much that can already be done. Making a digital store available for browsing and even purchasing is achievable, both on IFE and passengers own devices. The process raises a number of operational implications, such as how crew learn of and deliver orders, how payments are handled (particularly if there is no air-to-ground connection) and how this sits alongside the existing cabin service. All of these issues require significant thought and, in some cases investment; and there lies the heart of the problem.
WIESBADEN, GERMANY, 19 JANUARY 2023 - Omnevo opens 2023 on a high with the announcement of two new airline projects following the launch of digital platforms with Fly Arna, Armenia’s national airline, and Fly Jinnah, a low-cost domestic carrier connecting main cities across Pakistan.
Aviation & Travel
In his two previous blogs in this three-part series looking at digital revenue adoption by airports, Daniel firstly outlined the compelling commercial rationale of ‘Why?’ airports should develop a digital revenue platform. He then explained the ‘How?’ - detailing the phased program in the creation of a digital revenue platform. Now he explains ‘Who?’ – highlighting the key roles required across the joint airport-Omnevo team to make the project a success.