Ask the Expert: Think outside the box

Question: How can airlines benefit from GDS merchandising solutions?

Expert: Travelport GDS MEA , airline director Khalid Al Khalid

Changing economic conditions, fuel price fluctuations and increasing competition have prompted airlines to reconsider their revenue generation model. Against the landscape of a rapidly transforming industry, airlines are seeking new and innovative ways to boost sales and improve yields, including the distribution of optional services.

This new merchandising model not only helps airlines protect revenues, but empowers customers by giving them the ability to pick and choose the various ‘attributes’ they want to buy. Through the introduction of chargeable services, airlines can not only increase revenue across their distribution channels, but enhance the value they provide to their customers.

From premium seating and priority boarding, to special meals, extra baggage or even entertainment services, nearly every type of ancillary service can be unbundled into a product of its own. In fact, the new era of merchandising enables airlines to differentiate their product and move away from the simple price comparisons commonplace in the industry today.

With the internet prompting the need to make pricing more transparent and competitive, airlines have much to benefit from this new approach to selling. Cross and up-sell capabilities provide airlines with the opportunity to increase yield through the comparison of premium products, ensuring that travellers receive the most comprehensive travel choices throughout their journey.

GDS providers are incorporating these advanced travel selling capabilities into merchandising solutions that enable airlines to sell ancillary services through its distribution channels.

Travelport has introduced its own merchandising programme to provide a platform for suppliers to promote and distribute their products the way they wish to sell them, and to enable its subscribers to gain full access to product-related information so that they can offer their customers informed travel choices.

Several major carriers have already begun to increase their merchandising efforts with the support of the GDS platform. Low-fare airlines in North America and Europe, for whom it is estimated over 30% of revenue comes from ancillary services, have embraced the model, whilst a number of the legacy carriers are also adopting this new form of revenue generation.

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Air Canada is one carrier which took a major technology leap forward when it made ‘a la carte’ pricing available through the GDS in June this year with the launch of Agencia, Travelport’s revolutionary travel booking solution. This travel industry merchandising first enables travel agencies to not only display and book all of Air Canada’s fares with real time access to price and availability, but also to book any service from its ‘a la carte’ menu.

These services include among others, lounge access, pre-paid on board café vouchers, checked baggage and seat assignment. Travelport was able to help bring a blend of traditional airline content with the new manner in which Air Canada wants to sell its products, together into one user experience for the travel agency community.

Our focus on adapting GDS technology to reflect these new product attributes will continue to be a key part of our distribution strategy in 2010 and beyond.

As well as continuing to display the lowest air fare, we believe the GDS model also needs to evolve to incorporate the same feature comparison capability as hotels. For travel agents, it means delivering information beyond fares, including more information related to the breakdown of products in order to support the needs of their customers.

Agility, speed and simplicity are all vital for GDSs and other distribution systems to respond to the potential complexities of merchandising. At Travelport, we will continue to provide significant value by demonstrating we can distribute as, or more effectively than, other channels, and by providing the capability to promote and merchandise ancillary products and services through our desktop. We are therefore spending a lot of time and resources making sure this is a reality.

While it is still early days for the merchandising model, it is already clear that ancillary revenues are increasingly being integrated into how an airline does business.

Each airline is establishing its own version of merchandising, and we are enjoying a collaborative approach with the carriers.

It is perhaps only a matter of time before we start to see merchandising become more widespread amongst Middle Eastern carriers as they continue to discover the benefits of this additional and potentially lucrative revenue stream.