Monday June 19, 2017
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Budget airlines compete with legacy carriers by offering steep discounts and promotional fares. — Reuters file picBudget airlines compete with legacy carriers by offering steep discounts and promotional fares. — Reuters file picSINGAPORE, June 19 — When it comes to filling seats, budget airlines have given legacy carriers a run for the money, by offering steep discounts and promotional fares. Now, as low-cost carriers start flying long haul, biting into the mainstay of their full-service rivals, the battle for consumer dollars is quietly shifting to on-board sales.

Budget operator Scoot will begin flying between Singapore and Athens from today, marking the carrier’s first long-haul flight between Asia Pacific and Europe. Hot on its heels, Malaysia-based AirAsia will launch its Kuala Lumpur-Honolulu route a week later, on June 28.

With flight distances exceeding 10,000 kilometres, the two new routes will be among the longest flights operated by regional low-cost carriers.

Ellis Taylor, Asia finance editor of Flight Global magazine told TODAY that the intense competition among airlines has put pressure on keeping ticket prices low. With smaller margins, airline operators are now turning to inflight sales. For many budget carriers, their on-board sales are more profitable than the ticket sales, giving a real incentive to push sales during the flight.

The unbundling of services enables more choice and flexibility, allowing for more price-sensitive budget travellers to choose the add-ons that they want without having to pay for those they don’t, goes the reasoning.

Budget airlines are increasingly adopting innovative strategies to boost their on-board sales, including digital initiatives to make shopping on board more experiential. Customers can now access sales catalogues on their own screens and order gourmet inflight meals, high-speed Internet and other frills.

AirAsia says its passengers will soon be able to purchase inflight meals, merchandise, duty-free items and on-ground activities through their own personal devices from the comfort of their own seats.

“The highest growth rates we’ve seen have been in ancillary products, and we expect to maintain this upward momentum with our improved offerings. We expect ancillary revenue to improve as we go digital and make on-board purchases easier,” an AirAsia spokesperson told TODAY.

“By getting passengers to access systems through their own devices, it’s likely that they will feel more comfortable with the on-board retail experience and may buy more frequently. Similarly, by having a broader selection on offer, budget carriers are more likely to gain additional sales that might make a marginal route profitable,” Taylor said.

Last month, AirAsia introduced its new inflight menu “Santan” — a Malay word for the South East Asian ingredient coconut milk — with a focus on popular local dishes.

“Food is our passion. When people start saying they fly AirAsia because of the food, that would really be music to my ears,” AirAsia group CEO Tony Fernandes was quoted as saying at an event to launch the customised menu.

This view was echoed by European low-cost carrier Norwegian Airlines, which kicks off its long-haul services from London Gatwick to Singapore in September.

“Nice inflight meal options” are a perk, said a Norwegian spokesperson. “Our experience is that the customer prefers to choose a low fare and tailor his or her own travel experience based on needs and wallet.”

According to Scoot, it has seen good take-up rate for its inflight services such Wi-Fi on board and ScooTV, a service which allow its travellers to stream entertainment to their personal devices. For its Singapore-Athens flights, Scoot will offer Greek food options “to offer Greek guests a taste of home and visitors to Greece an additional opportunity to enjoy delicious Greek cuisine”.

Leslie Thng, chief commercial officer at Scoot said, “We have observed demand for innovative inflight products which enhance the inflight experience of our guests.”

Airport services operator and inflight caterer SATS says it has been approached by low-cost carriers with new requests for more innovative offerings. Using data analytics to understand passenger preferences, the company says up to 10 per cent more passengers tend to make on-board purchases on long-haul flights.

“This trend of low-cost carriers going long haul has led to new requirements such as greater demand for a variety of fresh and ambient meals, new food and beverage offerings and other ancillary opportunities to cater to the needs of the passengers,” noted Ranjiv Ramanathan, general manager, Asia Pacific Star, SATS.

“Not all passengers travelling on low-cost carriers are price conscious. Some feel they have benefitted from the affordable price of air tickets and can afford to spend more on purchases on board the flight,” he added.

According to the Centre for Aviation, the long-haul low-cost sector has surpassed 500,000 weekly seats. While this represents only 0.5 per cent of the global market, long-haul low-cost operations are growing rapidly and will account for more than 1 per cent of the global market within the next year or two, the research centre said.

Meanwhile, full-service carriers are also innovating. Gulf carrier Emirates, for instance, is exploring ways to equip its crew with goggles or augmented reality glasses that display a passenger’s name and travel preferences, allowing for more personalised service. Emirates passengers are also given interactive amenity kits which will enable them to access entertainment options on their mobile devices and navigate airports and browse food menus. — TODAY

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