Round Trip is your weekly roundup of what’s been happening in the passenger experience and airline ancillary revenue space. Here are the top stories from this past week:
United Airlines recently became the last of the “Big Three” US airlines to drop duty-free retail onboard. In the past few years, American Airlines and Delta have also removed duty-free retail from their flights. Getting rid of duty-free means a few things for airlines. Removing the stock from planes will lighten up flights by about 200 pounds. It will also lighten paychecks of crew members. Flight attendants received commission for duty-free sales so this change will take that away but this isn’t necessarily seen as a bad thing by FAs. On average, commission was around only $10/month for duty-free sales so flight attendants aren’t too sad to lose that extra money in exchange for ridding the flight of what can be seen as a disruptive service.
While US airlines are saying adios to duty-free, international duty-free sales are still going strong. Scandinavian and Asian airlines are still pulling good numbers for duty-free onboard retail. Most notably, Korean Air duty-free sales brought in nearly $170 million in the past year.
In complete opposition to the previous article, duty-free retail helped AirAsia Berhad boost its total ancillary revenue by 15% year-over-year. The airline’s ancillary revenue now makes up 20% of its total revenue. AirAsia plans on growing its “Big Duty Free” program by utilizing data to boost onboard delivery as well as airport pickup. In a seasonably weaker quarter, AirAsia was still able to serve more passengers and increase their load factor in almost all markets. Thai AirAsia’s profits declined, but the company is optimistic that this is temporary as Thai AirAsia was the only profitable airline in Thailand during the quarter.
Despite the rise of in-flight wifi available on flights, satellite communications company, Inmarsat, doesn’t believe it will replace in-flight entertainment systems. However, as more and more airlines offer increasingly reliable and fast wifi, it will soon become a requirement rather than a nice-to-have. In the annual Inflight Connectivity Survey, 60% of passengers see in-flight wifi as a necessity. Inmarsat’s Asia-Pacific VP, Otto Gergye, sees wifi as a huge potential win for low cost carriers. Since the time to install (just a few days) is so insignificant and the potential to create recurring ancillary purchases, he doesn’t see why an airline wouldn’t add wifi to their planes.
After its take-over by Asset Management Corporation of Nigeria over debts earlier this year, Arik Air could potentially be changing hands again. Ethiopian Airlines are looking to acquire the Nigerian airline. The bid was submitted to the Nigerian government and awaits approval. However, Ethiopian Airlines foresees international competition for the acquisition. Arik Air currently services half of Nigerian air passenger traffic.