Introduction
Ancillary revenue contributes up to 56.4% of total airline revenue for some low-cost carriers. (Source: IdeaWorks Company)
Maximizing revenues in the highly competitive airline industry doesn’t just involve selling tickets. It is equally important to capitalize on ancillary merchandising for profitability and improving passenger experience. Successful airlines must be proficient in their ancillary sales strategies by offering the relevant add-ons at the ideal moment to the target customers.
With AI-driven personalization and dynamic pricing, airlines can upsell their ancillary services—baggage, seat selection, priority boarding, in-flight meals, and lounge access—by creating personalized offers that drive revenue and enhance customer satisfaction.
Problems of Ancillary Retailing in Airlines
Although there is an opportunity to increase revenues, airlines face several challenges in additional sales:
1. Customer Segments
Travelers are different; business, leisure, and group travel customers have specific needs.
Shifting trends in consumer expectations make predicting preferences difficult.
Segmentation failure leads to lost revenues.
2. Contextualizing Offers
Airlines struggle to offer relevant ancillaries at the right time.
Insufficient integration into the booking flow.
Missed opportunities for post-booking sales.
3. Constructing Personalized Ancillary Bundles
Difficulty in creating relevant offers for different travelers.
Absence of AI-driven recommendations leads to low conversion rates.
Generic pricing strategies result in customer dissatisfaction.
How Airline Distribution Optimizer Solves These Problems
Modern AI-enabled airline platforms like the Airline Distribution Optimizer can effectively address ancillary merchandising challenges. Here’s how:
1. Best Customer Segmentation with Contextual Customer Attributes
Clusters customers based on their travel behavior.
Utilizes historical purchase data, booking channel, and trip types.
Identifies which ancillaries matter most to each customer type.
2. Intelligent Bundle Engine
Automatically creates personalized bundles such as:
Seat + Meal + Baggage
Premium Seat + Lounge Access
Holiday Special Packages
AI recommends the best bundle based on route, season, and traveler type.
3. AI-Based Dynamic Pricing
Adjusts ancillary pricing dynamically based on:
Demand patterns
Load factor
Time to take off
Ensures competitive pricing to maximize revenue.
4. Seamless Booking Flow Integration
Offers ancillaries at the right moment via integration with airline PSS, OTAs, and GDS.
Enables contextualized upselling before, during, and after booking.
5. Post-Booking Upsell and Personalized Offers
Uses customer behavior insights to provide personalized ancillary offers via Email, WhatsApp, and SMS.
Implements time-based touchpoints for upselling:
24 hours after booking
72 hours before departure
On the day of travel
Conclusion
Ancillary merchandising is essential for airlines to maximize revenue and improve passenger experience. The Airline Distribution Optimizer enables airlines to tackle ancillary merchandising efficiently through AI-driven solutions:
Customer segmentation: Target the right customers with relevant offers.
Smart bundling: Create intelligent combinations of ancillaries.
Dynamic pricing: Optimize rates and availability dynamically.
Seamless booking integration: Ensure smooth upselling throughout the booking process.
With AI, airlines can offer the right ancillaries at the right time to the right passengers, leading to higher revenue and greater customer satisfaction.
Transform your ancillary merchandising strategy today with Airline Distribution Optimizer.
