Brand consultancy IdeaWorksCompany has compiled a guide that identifies the strongest airlines in terms of ancillary revenue, a la carte pricing and loyalty marketing. The top five ‘Revenue Innovation Champs’ for 2014 according to IdeaWorksCompany are as follows:
1. Vueling Airlines
Since this airline was born in 2004, it has experienced a merger, been acquired by a global holding company, and achieved robust growth. Year after year, the carrier has also demonstrated a knack to create, market and deliver remarkable ancillary revenue products. Its most recent addition is the My25% program, which delivers a simple 25% discount to subscribers who pay an annual fee. Earlier innovations included a price lock feature and the Vueling Pass, which sells an annual package of benefits for business travelers. All these have since been adopted by other carriers around the world.
2. Delta Air Lines
This carrier has certainly created a strong tailwind for itself. Profits are at record levels, corporate debt is declining, lie-flat seating has been introduced globally to business class, and the cash dividend has been increased for investors. Its inclusion in this list is due to the bold move to switch the SkyMiles frequent flier program to revenue-based accrual. Starting in 2015 distance-based accrual is out and members will earn miles based upon how much they spend with the airline. This nicely aligns the financial objectives of the company with its loyalty program.
3. Wizz Air
The sneak peek offered by the airline in its pre-IPO financial documents demonstrates this historically secretive airline is among the most profitable in Europe, with a fiscal 2014 earnings margin of 24% (EBITDAR). But that was hardly a surprise to those in the ancillary revenue profession, who regard the carrier highly for its continuous roll out of a la carte services and a very transparent and effective online booking process.
The airline that defined ancillary revenue is included because it demonstrated a huge change of heart during 2014. The “Always getting better plan” introduced by CEO Michael O’Leary will fix the things “our customers don’t like,” such as relaxing the carry-on policy and lowering bag fees at the airport. The plan seeks to end the conflict between front line staff and passengers. Profits increased nicely during the year, with half year results announced on 3 November 2014 revealing a stunning profit increase of 32%, proving that kindness can pay dividends.
5. Jeju Air
This Korea-based low cost carrier is profitable, growing, and hopes to become a public company in 2015. Its marketing approach is fresh and young as evidenced by sponsorship of top K-pop music groups. Jeju Air demonstrated real innovation with the opening of “Free Travel Lounges.” These in-city lounges specialize in the booking of commission-based services for travelers and operate as “ancillary revenue incubators.”
IdeaWorksCompany’s Airline Ancillary Revenue and Loyalty Guide for 2014 is set for release on 15 January 2015. The 204-page guide is priced at US$449 and will be available for purchase at the bookstore of the IdeaWorksCompany.com website.