With more legacy airlines unbundling their products and LCCs distributing through B2B, booking of ancillaries through the GDS has become more seamless

How different are ancillaries booked on LCCs vs full-service carriers (FSCs)?
Today, most FSCs are just selling baggage and pre-reserved seats, while LCCs offer the full suite like meals, comfort kits, in-flight entertainment and early boarding. The main difference is fulfilment. For FSCs, the issuance of EMD-A is needed by the agencies for fulfilment. EMD-A is clearly not needed for the LCCs.

Why have airlines been slow in making ancillaries available to agencies?
For FSCs, unbundling to itemise ancillaries and charge for them separately is retrospective, and so, much more costly and involved. In many respects, their response has therefore been pretty fast.

The defence from some quarters is that Asians like all-in packages and that ancillary strategy and full-service brand strategy don’t mix: in a recent poll we conducted with Asia-Pacific carriers, almost eight in 10 still experience resistance

from travellers in paying for services that used to be included in the fare. Asian carriers are also hesitant as they don’t see a net revenue gain on ancillaries yet, once the operational adjustments have been costed in.

But ancillaries are now gaining momentum, given the strong competition from LCCs with their more flexible fare structures; ancillary-friendly industry standards being developed by ATPCO and IATA; GDSs’ ability to support the ancillary-friendly industry standards via evolving technology as well as sale of ancillaries via XML connectivity; and ease of fulfilment of ancillary sales via EMDs.

Around half the LCCs based in Asia-Pacific are now integrated with Abacus to access the B2B channel for ancillaries.

Why have agencies been slow in booking ancillaries through the GDS?
They have not been slow. They are responding to customer demand for ancillaries and are providing them as a value-add to their offering, within the ancillary provision of the GDS. They are selling these ancillaries without any incentive or commission from the carriers.

Where we need to move faster, however, is in integrating the ancillaries into the more complex workflows, as with the managed travellers gaining pre-ticket approval and then adding ancillaries post-ticketing. We are working on it.

The alternative for some full-service airlines – the introduction of premium economy class, has gained immediate traction. Currently, up to seven per cent of Abacus bookings are premium economy.

How are you encouraging bookings?
With Abacus Air Extras, ancillary options are visible to agencies during the shopping and pricing workflow. Agencies are able to offer the specific product attributes customers want using Abacus point-of-sale technology, without having to check other sources like the airline’s website. The graphical interface allows easy sale of excess baggage, pre-reserved seats, lounge access, Wi-Fi and more. These ancillaries can then be fulfilled easily with the Abacus EMD-A document.

Many carriers have chosen to bundle ancillaries into fare families, presenting them to Abacus agencies as branded fares. It’s a tactical marketing tool for the
carriers to compete more effectively. Travellers are given more packages to choose from, priced accordingly. Our research shows that the majority of carriers are choosing to package ancillaries rather than present them in an à la carte menu, so branded fares have their place.

How many airlines do you have selling ancillaries?
So far, we are working with nine carriers on Abacus Air Extras, with many more offering fare families.

What is the most-booked ancillary by agencies?
Pre-reserved seats.

What is the most profitable ancillary for agencies?
Agencies are not making any profit from ancillary products at present. There’s no commission given by the carriers for ancillary sales. In one respect, they are profiting from the confusion among consumers over what is included or excluded online. Travellers are more inclined to use a travel consultant when it begins to look complicated and they want advice.

How can agencies make money from ancillaries?
Either add a mark-up or service fee.

How different are ancillaries booked on LCCs vs full-service carriers (FSCs)?
LCCs have been ‘creative practitioners’ of the ancillary revenue art, while FSCs are still catching up.
LCCs typically rely upon a mix of à la carte fees to generate good levels of ancillary revenue. FSCs’ ancillary activity, on the other hand, may consist of fees associated with excess or heavy baggage, and limited partner activity for frequent flier progammes.
However, we have also noticed that FSCs are also moving towards adopting à la carte fees. All Nippon Airways, for example, is testing the sale of upgrading meals to economy class passengers on longhaul routes.

Why have airlines been slow in making ancillaries available to agencies?
Airlines are facing some of the most challenging times in the history of aviation. With increasing fuel prices, cut-throat competition and rising traveller expectations, airlines are looking to opportunities like ancillary services to drive new revenue.

Travellers’ appetite for ancillary services is growing as well. The IATA’s 2013 Global Passenger Survey found that nearly half (48 per cent) of passengers bought ancillary products in the last 12 months, compared to 34 per cent in 2012.  In the beginning, ancillaries were primarily offered via an airline.com website, but today, airline sales strategies have evolved to include B2B channels like the GDS. Technology advancement has been crucial to enable the successful sale of ancillary services via a B2B channel.

Why have agencies been slow in booking ancillaries through the GDS?
Ease of booking, system reliability, cost efficiency and content aggregation are top concerns for travel agencies. Historically, booking ancillary services could mean learning new commands, more time investment without necessarily any financial gains.

However, as travellers today expect a more personalised service, travel agencies must be able to advise quickly and efficiently while being able to book a completely customisable ticket. This often means being able to offer clear value-added services from the airline, such as extra leg room, advanced seat selection or a comfort kit, and depending on the travel agency’s preference, being able to charge for this value-added service via service fees.

How are you encouraging bookings?
Amadeus believes that the ability to advise and book a completely personalised  fare allows travel consultants to deliver far greater value to their customers. Our role is to make this process as seamless as possible.

The Amadeus Selling Platform is a fully integrated solution that completely incorporates ancillary services into the booking flow, ensuring that the booking and pricing of ancillary services is as simple as booking airfares.

Additionally, we are also integrating ancillary services into Amadeus Web Services and our online corporate travel booking tool, AeTM, to enable ancillary sales via the online travel agency channel. We have also invested heavily to evolve our solutions to ensure they are built in the same way that travel agencies think.

How many airlines do you have selling ancillaries?
To date, 56 airlines are using Amadeus to power their ancillary service sales, including Tigerair, Qantas and AirAsia, with 25 already selling ancillaries across 108 markets.

What is the most-booked ancillary by agencies?
Advanced seat selection. This is largely because airlines have not only started to unbundle seat reservations from their lowest booking fare, but also because travellers have come to appreciate seat reservation as an ancillary option.

How can agencies make money from ancillaries?
Travel agencies will be able to provide an enhanced level of customer service through the personalised ancillary offering – differentiating them in a highly competitive travel landscape while also providing them with an opportunity to enhance their service fee strategy.

How different are ancillaries booked on LCCs vs full-service carriers (FSCs)?
Traditionally, LCCs have opted for a more unbundled product offering and hence, ancillaries are booked more often and played a bigger part in an LCC revenue stream.

However, we are now seeing hybrid and FSCs unbundling their ancillary products. An example are those airlines that distribute fares on industry standard (like ATPCO) while distributing ancillaries via a more flexible direct API connect.

Why have airlines been slow in making their ancillaries available to agencies?
Airlines have been slow due to the lack of flexibility in distributing ancillaries. Previously, airlines were limited to distributing ancillaries through industry standard such as ATPCO.
According to a study by SITA, 87 per cent of airline ancillary revenues come from direct channels although indirect channels account for nearly half of the ticket sales. This presents great opportunity for the airline to capture additional ancillary revenue by making their offering more available through the B2B channel.

This is changing with the Travelport Merchandising Platform, which enables airlines to distribute and differentiate all of their content and products via the agency channel, connecting to Travelport exactly how they choose to – whether it be industry standard, direct API connect, or a hybrid of both.

Why have agencies been slow in booking ancillaries through the GDS?
Traditionally, agencies have to go outside of their normal booking flow to the airline’s website to book ancillaries for their customers. Not only is this extra process time-consuming, it also makes the accounting, payment and fulfilment process more complicated.

However, this does not mean that agencies don’t want to sell ancillaries. In a series of interviews conducted by Travelport in November 2012 with 33 global corporations – 88 per cent of agencies want to offer baggage allowance, 87 per cent want to offer seat upgrades.

This has again changed with Travelport Merchandising Platform, which enables agencies to fully understand and compare products and offers from those airlines within the agencies’ existing desktop environment.

How are you encouraging bookings?
Travelport Merchandising Platform has three core components, which are accessible from our Smartpoint desktop:

• Travelport Aggregated Shopping – aggregates LCC content alongside those of traditional carriers, all on the same screen.
• Travelport Ancillary Services – allows agencies to sell airline ancillaries or ‘optional extras’, such as lounge passes, seats and bags, within their existing workflow rather than via an airline website.
• Travelport Rich Content – enables airlines to fully differentiate themselves with graphical content and product descriptions to help agencies become more informed about their offering to increase upsell and cross-sell opportunities. This component is currently in alpha testing.

How many airlines do you have selling ancillaries?
FSCs like Air Canada, KLM, Qantas, Air France, Alitalia, Air New Zealand, Aegean and Air Berlin, as well as LCCs like EasyJet, Jet2.com, Transavia.com, Tigerair and AirAsia.

What is the most-booked ancillary by agencies?
Checked baggage and seats with extra leg room.

What is the most profitable ancillary for agencies?
The key is not to focus on ancillary profit, but the overall service they can offer to customers, who expect a one-stop-shop from the agencies.

To be profitable, agencies need to satisfy the increasing demands of today’s consumers within the same workflow; upsell through easy access to detailed product and fare information; and improve customer loyalty.

How can agencies make money from ancillaries?
By providing a high-value service. The opportunity always exists for mark-ups for value-added services. Some airlines do pay commission on ancillaries.

Travel agencies weigh in…

Additional reporting from Paige Lee Pei Qi and Kathy Neo

This article was first published in TTG Asia, September 12, 2014 issue, on page 18. To read more, please view our digital edition or click here to subscribe.