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Insights / Aviation

Leadership insights on digital ancillary revenue recovery

August 27, 2021
About the author Kian T. GouldKian T. Gould
CEO & Founder AOE, Chairman Omnevo

5 Reasons Why Digitalization is Aviation’s Best Route to Revenue Recovery

From major FSCs to small LCCs, digitalization provides the most effective, low-cost path to new levels of operational efficiency and revenue recovery to all airlines. Kian Gould, Chairman of digital revenue innovators Omnevo, explains 5 reasons why.

Let’s start on the bottom line: any airline – including everything from flagship FSCs to small regional LCCs – can now cost-effectively digitalize their attack on the recovering market and seize the digital route to recovery. Let me explain why.

Digitalization - A low-cost solution to a high-cost problem

Omnevo, created from the merger of AOE’s multi-award-winning aviation e-commerce solutions and supply-chain and in-flight expert SHIFTEO, was born out of crisis and was specifically created to give all airlines a viable, low entry cost, digital end-to-end solution for revenue recovery in F&B, Retail and Experiences, including omnichannel commerce, buy-on-board and supply-chain management. We spent most of 2020 merging our two operations into one company remotely to provide a new model for operators to respond as the recovery takes shape.The crisis changed everything and made traditional aviation revenue models even more unstable, so we’ve had to think differently, work differently, become more agile and adaptable in creating solutions that reach the pain points that the aviation sector is facing.

Some airlines, such as premium FSCs, might look to adopt a fully comprehensive omnichannel model but, for most airlines, the key is the flexibility to tailor a digital model to their needs, starting small and scaling fast. They can digitalize their priority issues first and have the future-proofed control option to expand where and when they wish.

Of course, the harsh reality is that many airlines feel in no position to invest right now, so we’ve also developed a unique subscription and revenue-share based approach that enables them to develop their digital path with minimized risk – a low cost solution to a high cost problem. On the bottom line, the investment cost is no longer a barrier to airlines increasing their ancillary revenue streams and becoming digital revenue leaders.

Your customers want you to digitalize

The crisis has changed many things but not Rule No.1; listen to your customer. They increasingly expect a high quality, reliable digital experience. Any operator ignoring that will face an even tougher recovery challenge. The crisis accelerated digital living by a decade in less than a year, creating powerful shifts in what passengers will expect from their travel experience. They expect hugely expanded choice within seamless, sophisticated, personalized digital experiences in everything from grocery orders to configuring their new car – and these experiences are no longer exceptional, they are embedded in daily life.

Airlines must understand that they’re competing with those digital experiences in getting the customer’s attention and persuading them to spend time and money; they’re certainly not a captive audience. Consumers are actually surprised when an operator or brand fails to provide a coherent digital experience. Pioneering airlines and airports – such as Singapore Airlines and Frankfurt and Heathrow airports – have already digitalized and have proven to deliver far-greater engagement, stronger loyalty and much higher revenue, and that pattern continued even in the midst of the crisis. They’ve radically extended the window of opportunity (customers don’t even need to fly) and strengthened their visibility and power as brands, enhancing their long-term revenue potential.

Traditional ancillary revenue models cannot adapt to the post-COVID climate

Traditional revenue models are already suffering the burden of declining conversion, low spend and back-end inefficiencies and simply do not have the capacity to adapt to the customer’s needs. They cannot deliver core elements such as extensive, relevant product and brand choices, personalization, 24/7 access, pre-order selection, and delivery and collection services etc. and this will be a heavy burden on airline performance in the recovery phase.

 As travelers return, the contrast in their online experiences versus their travel experience might well feel abruptly different, provoking frustration, confusion, and drive them even further away from the offer. Also, don’t forget, this is all on top of the impact of the already disruptive COVID-driven changes in the passenger journey, affecting both passenger mindset and the capacity for airlines to operate their inflight offers.

Digitalization delivers operational gains for FSCs and LCCs

Although many airline managers are aware of the capacity of digitalization to create that quality of customer experience they’re often surprised by its potential for new efficiencies and cost saving – including lower overheads, better forecasting, less waste and less weight - while actually selling much more. FSCs can adopt a digital path that includes luxury offerings, premium positioning and brand perception while LCCs and small airlines can focus on selling more and more efficiently; and both gain significant operational efficiencies.

The on-demand consumption model means you’re loading onboard only items that will actually be consumed. Transporting tons of unsold or unused products as your most ‘frequent flyers’ cannot be part of any credible sustainability or ESG strategy!  On one LCC airline partner, for example, our pre-order F&B solution enabled a 30-minutes improvement in crew time; that’s a huge opportunity for crew to enhance the passenger experience and sell more on-board.

The most effective first step to digitalization

Our team contains extensive experience within airline operations and logistics, so we truly understand the challenges faced right now but it’s crucial that airlines shift their focus above survival and look ahead. In the challenge to revolutionize the passenger experience and drive revenue, pre-order is the single most critical element; whether it’s luxury goods on-board an FSC or sandwiches on an LCC, give them new options and choices designed around their needs and they will spend so much more. Spend per head can soar well ahead of the pace of traffic recovery. It’s readily implemented. All our solutions are modular, fully-integrated, work out-of-the-box and are adjustable to any existing software regardless of whether we serve e-commerce, ePoS, or logistics and operations.

Already encountering the most turbulent phase in its history and the prospect of fierce competition in the recovery phase, the aviation sector has the added pressure of seismic shifts in customer behavior. It’s a perfect storm, but there is a safe revenue path through it. The customer is increasingly living in a digital world – the world’s airlines urgently need to join them.

Aviation

How airlines can regain trust, loyalty and revenue by taking control of the digital customer journey.

December’s World Aviation Festival in London was a great opportunity to bring the industry together and, although attendance was inevitably lower than normal, there was a strong conference program that carried a mood of guarded optimism. Best of all, I was delighted to see just how strongly the focus was on real action to drive ancillary revenue and recovery.  Much of 2021 has been spent waiting for a recovery to be established and many airlines have understandably been hesitant (or unable) to commit to new investment or major change in their customer operations. The long hoped-for recovery has been impossible to forecast accurately and many airlines opted to simply ‘hunker down’ and wait until a clearer path can be seen through the storm. That strategy carries deep risks. We now face a new phase of crisis as Omicron sadly develops its global presence but the fact is that the world will continue to turn, people will continue to travel, the crisis will eventually recede, and traffic will return. Airlines need to be preparing right now to create the customer experience that the recovery will demand.  Yes, the picture of how the 2022 travel market will look in recovery is still blurred right now - but the key point is that we do already know exactly what the returning customer looks like and what they want. We have a clear understanding of the experience they want - and we have the digital tools to deliver that experience.