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Airlines: Customer loyalty and retention has most positive impact.
Monday, 19th October 2009
Source : Web-in-Travel
APAC carriers say multi-channel distribution and merchandising important -

While airlines are still grappling with concerns over fuel instability and revenue/yield issues, they are also now more focused on positive areas of impact such as customer loyalty and retention.

Although controlling skyrocketing fuel prices is still a chief concern for airlines, creating positive customer experiences to build customer loyalty has now risen on the list of priorities for airlines.

A survey conducted by Sabre Airline Solutions of 90 airlines across the globe revealed that while fuel cost instability and revenue management are among the top challenges for carriers over the next 18 months, it is customer loyalty and retention efforts that are viewed by an overwhelming majority of survey respondents (86 percent) as having the most positive impact on their business.

Customer experience was ranked by nearly 50 percent of those surveyed as the primary issue related to customer loyalty and retention. 

A similar survey done by Sabre two years ago revealed that carriers in Asia Pacific found barriers to change were limiting their progress with merchandising strategies. This year’s survey, however, show that APAC carriers seem to be pushing through these challenges, citing multi-channel distribution and merchandising as being positive factors – more so than carriers in the other regions.

“Airlines in APAC are perhaps beginning to realise that offering merchandising options to customers can be a win-win situation – it gives customers a more complete and personalised way to travel, and it can also generate additional revenues for airlines. We will likely to continue seeing more such moves among airlines here,” said Gordon Locke, vice president of Airline Marketing for Sabre.

According to 58 percent of those surveyed, merchandising and ancillary revenue will help airlines’ bottom line results. Baggage fees, travel insurance, and vacation packaging were rated among the highest in the survey to generate revenue. 

Multi-channel distribution is another area that airlines in APAC are seeing as positive, both for the airlines and the customers. While budget carriers have in their early days shunned the travel agency channel, opting to sell only direct to the customer via the Internet, for example, are now slowly coming back to the agency channel, realising the value of that distribution channel.

“When these value-focused carriers start entering interline agreements, and flying further afield, the value of the travel agency channel becomes more apparent. While the direct online channel is suitable for selling point-to-point tickets, it becomes less so when a customer has to buy a multi-segment ticket, using more than one airline,” said Locke. “Additionally, many value-focused carriers are now working to attract more business travellers and they recognisze that global distribution systems (GDSs) are the preferred channel by business travellers.”

This year’s survey also revealed that the majority of airlines in APAC (69 percent) will be focusing on increasing revenue in tandem with reducing cost. Some 16 percent said they would focus only on increasing revenues, and another 15 percent will focus on reducing costs.

The primary tactic that airlines will use to increase revenues is through effective revenue management, followed by maintaining a distribution mix (travel agents, direct, etc) and ancillary revenues.

Reduction of costs will be done largely through staff/crew optimisation, flight planning optimisation, and fuel optimisation.

Other key Sabre survey findings:

  • Previous concerns over rising fuel cost has now evolved into 57 percent of those surveyed saying fuel price instability is the biggest challenge facing their business.
  • Increasing revenue and reducing costs is among the most significant challenges in managing airline profits over the next 18 months, according to 67 percent of those surveyed.
  • Managing revenues (44 percent) and distribution mix (12 percent) are the top two tactics survey respondents plan to use to increase revenues.  Ancillary revenues followed closely behind with 11 percent of those surveyed planning to employ this tactic.
  • Government regulations were identified by 55 percent of survey respondents as problematic. Specifically respondents view airport and passenger security (21 percent) and environmental standards and regulation (21 percent) as top government regulatory concerns.
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