Merchandising in the Airline Industry - Towards a Retail Model

November 30, 2011

Download the full Travel Technology Research white paper at www.datalex.loc.

The airline industry is in a period of profound change in its business processes. In this report we will examine the impact of the changes, which may be summarised as:

  • Merchandising is a critical growth avenue for travel companies
  • It will significantly transform the travel distribution model
  • Disruptive technologies are enabling the growth and transformation

Airlines have already done a heroic job in cutting costs. Most continue to lose money on operations, but last year there was a glimpse of profitability, largely as a result of new revenue from ancillary fees. Airlines that want to maximise the opportunity to retail more products and services are now focused on re-engineering their business and overhauling the distribution model to enable better communication with the customer. The concept of ‘ancillary revenue’ is fast being replaced by ‘merchandising’. This will transform the model for those airlines that are able to exploit it. They will derive revenue from all phases of the customer journey but to do so they will have to reinvent themselves as retailers. Airlines already have a huge amount of customer knowledge and context of traveller profile, purchase intent, history, value - they need to better leverage it and they need to win the battle for customer ownership/wallet share (GDS/Direct Connect).

The size of the prize for those airlines that can transform their business is enormous. LEK Consulting projects that merchandising opportunities for the global airline industry will exceed $50bn by 2015. So far airlines have only reached the tip of this iceberg. Their opportunities for growth include selling a much broader range of products and services before, during and after the flight – through the full range of direct and indirect distribution channels...

To continue reading, download the full Travel Technology Research white paper at www.datalex.loc.