< PreviousNOVEMBER 2024 40 INTERVIEW | SITA of their operations,” Lavorel states, highlighting that the solution also allows airports to monitor and report energy usage, emissions from aircraft and other vehicles, and their overall carbon footprint. The platform has already made an impact, he shares, citing SITA’s collaboration with Toronto Pearson Airport as a key example. “Last year—we deployed a prototype of Total Optimizer that was integrated with the Greater Toronto Airports Authority’s data sources. Staff were able to dynamically optimise stand allocation plans, simply by setting the relative priorities of the airport, resulting in savings and greater operational effi ciencies—this is just the tip of the iceberg in terms of the platform’s potential benefi ts,” he says. Looking ahead, Lavorel sees signifi cant opportunities for growth in the adoption of intermodal travel solutions. “65% of travellers expect to book an intermodal trip in the next year,” he points out. In response, SITA is harnessing technology to offer travellers a seamless multi-leg journey by combining check-in for various modes of transport, from airlines to rail and cruise systems, providing passengers with real-time updates and seamless baggage tracking across all phases of their journey. Leading the charge The Middle East has emerged as a global leader in airport technology adoption, driven by strategic growth visions and substantial investments. “According to SITA’s 2023 Air Transport IT Insights research, airport CIOs in the Middle East and Africa boosted their Digital technologies allow airports to provide passengers with greater autonomy SITA’s common-use biometric platform at Frankfurt Airport has sped up passenger processing time by 30% AVB_Nov2024_36-41_Interview - SITA_13429006.indd 4025/10/2024 17:4041 NOVEMBER 2024 SITA | INTERVIEW IT spend as a percentage of revenue in 2022 and 2023—signalling how crucial a role technology will play in the next-generation travel experience,” Lavorel shares, emphasising that the UAE and Saudi Arabia, in particular, are at the forefront of this digital transformation. “Digital transformation is a key component of Saudi Arabia’s Vision 2030, making the kingdom the fastest-growing in airport technology [adoption] in the Middle East—this vision is supported by robust budgets and the development of new airports, facilitating the rapid and strong implementation of global technological advancements,” he states. Furthermore, Lavorel points to Abu Dhabi’s AUH as a trailblazer, implementing biometric solutions that streamline the passenger journey. “By embracing these cutting-edge technologies, the Middle East is setting a benchmark for the global airport industry,” he notes. Challenges and opportunities While the Middle East is pioneering technology adoption, it has not been without its unique challenges, Lavorel emphasises. “One major challenge is managing the sheer volume of seasonal traffi c at peak times; two recent examples are Hajj season at Jeddah King Abdulaziz International Airport and the number of World Cup visitors circulating through Hamad International Airport in a very short time in 2022,” he says, asserting that SITA’s flexible, scalable and interoperable solutions were critical in managing these peak periods, ensuring that passengers moved smoothly through the airport. With international travel constituting the majority of airport operations across the Middle East, checking passenger documentation can be a burden on airlines and airport operators. To address this challenge, SITA is collaborating with stakeholders across the region to digitise these processes. “[We are] working closely with partners in the region on implementing Digital Travel Credentials, where a passenger’s identity and all travel documents are linked to a secure credential trusted by governments, airlines, and airports alike, paving the way to a true Digital Travel vision,” Lavorel highlights. Vision for the future Looking ahead, SITA’s strategic priorities in the Middle East are clear: investing further in biometrics, digital technologies, and sustainability initiatives, as well as bolstering its partnerships with regional stakeholders. “Our investment in cloud-based solutions and AI-powered operational tools like Total Optimizer is aimed at enhancing efficiency and reducing environmental impact. These initiatives are part of our broader strategy to lead the aviation industry towards a more sustainable and technologically advanced future,” Lavorel concludes, underscoring SITA’s commitment to driving innovation in the Middle East and beyond. Airports today face a number of shifting circumstances, which also present clear opportunities for innovation and reshaping the travel experience Smart Path allows passengers to use facial biometrics for identity verifi cation AUH has pioneered biometric solutions to streamline the passenger journey AVB_Nov2024_36-41_Interview - SITA_13429006.indd 4125/10/2024 17:41NOVEMBER 2024 42 REPORT | ANCILLARY SERVICES BEYOND THE TICKET THE ANCILLARY SERVICES AIRLINE PASSENGERS VALUE MOST AVB_Nov2024_42-47_Report-Ancillaries_13428955.indd 4225/10/2024 17:4243 NOVEMBER 2024 ANCILLARY SERVICES | REPORT Gone are the days when air travel was a one-size-fi ts-all proposition. Today, airlines are constantly enhancing their offerings and tailoring their services to better meet passenger preferences and elevate the end-to-end travel journey. To maintain a competitive edge and minimise the impact of fl uctuating ticket prices and rising operational costs, airlines are increasingly shifting their focus towards ancillary services to not only boost profi tability but also create a personalised, unique fl ying experience. Beyond the point-to-point fl ight, passengers are now offered a range of extras that cater to their needs, from seat selection and extra legroom to in-fl ight Wi-Fi, additional baggage allowance, and access to exclusive airport lounges. This marks a fundamental shift in the industry’s approach to profi tability and revenue management. Once considered optional, ancillary services are no longer viewed as mere add-ons, they now play a central role in shaping the passenger experience and, more importantly, boosting airlines’ revenue and unlocking new opportunities for enhanced profi tability. But which of these services matter most to passengers, and how can airlines leverage them to boost their bottom line? The changing face of airline revenue Traditionally, airlines relied on ticket sales as their main source of revenue. However, as the industry grappled with the impacts of the COVID-19 For many passengers, staying connected in the air is no longer a nice-to- have add-on; but an expected, essential part of the travel experience ANCILLARIES ARE KEY TO ENHANCING THE PASSENGER EXPERIENCE AND BOOSTING AIRLINE PROFITABILITY, BUT WHICH DRIVE THE MOST VALUE FOR TRAVELLERS, AND HOW CAN AIRLINES CAPITALISE ON THEM? AVB_Nov2024_42-47_Report-Ancillaries_13428955.indd 4325/10/2024 17:42NOVEMBER 2024 44 REPORT | ANCILLARY SERVICES pandemic, carriers faced a host of challenges, from rising operational costs to fluctuating fuel prices, wafer-thin margins, geopolitical instability, and economic downturns. While the narrative has changed, and airlines have achieved record profi ts, their avid appetite for fl eet upgrades and aggressive expansion— fuelled by strong travel demand—rising aircraft leasing costs, and increasing training costs for pilots and crews have pressured carriers to explore new avenues for profi tability, without incurring additional costs. Ancillary services emerged as a key opportunity, especially as airlines increasingly turned to non-ticket revenue streams to boost profi tability and enhance their value proposition in a crowded marketplace. According to Research and Markets’ Airline Ancillary Services - Global Strategic Business report, the global market for airline ancillary services was estimated at $118.3 billion in 2023 and is projected to reach $330.9 billion by 2030, growing at an annual CAGR of 15.8% between 2023 and 2030. But what services are considered most valuable by passengers? Is it the the fact that passengers are willing to pay extra for it shows a clear opportunity for airlines to enhance the customer experience while also boosting revenue. Many airlines, including Emirates, Saudia, Etihad Airways, and Qatar Airways are capitalising on this demand by offering different seating options and allowing passengers to select their preferred seats for an added premium. This not only enhanced passengers’ overall travel experience but also enabled these airlines to maximise profitability while delivering what travellers truly want, at a price. Additional baggage allowance Expectedly, additional baggage allowance remains a key revenue driver, with 26% of respondents viewing it as the most valuable ancillary. This is especially true for long- haul extra legroom, additional baggage allowance, seamless connectivity in the air, or the luxury of unwinding in a quiet lounge before boarding? For airlines, answering this question is critical to best capitalise on this evolving trend and optimise revenue generation. Seat selection According to a recent survey by Aviation Business Middle East, seat selection and extra legroom topped the list as the most valuable service for passengers, followed by additional baggage allowance, in-fl ight Wi-Fi, and airport lounge access. Passengers today expect more than just transportation; they want their travel experience to align with their personal needs and preferences, and few ancillary services can address this need more than seat selection, as indicated by 39% of respondents. For business travellers, frequent fl yers, and even leisure passengers, the comfort and convenience that come with choosing their preferred seat, especially on long-haul fl ights, can make all the difference. While some may argue that seat selection should come standard, Passengers today expect more than just transportation; they want their travel experience to align with their personal needs and preferences Many airlines allow passengers to select their preferred seats for an added premium AVB_Nov2024_42-47_Report-Ancillaries_13428955.indd 4425/10/2024 17:4245 NOVEMBER 2024 ANCILLARY SERVICES | REPORT travellers, families, and those embarking on extended trips, who value the convenience of bringing more luggage without the hassle of paying higher last-minute fees at the airport. To capitalise on this, airlines, such as Saudia, have introduced dynamic pricing for baggage allowances, offering passengers the ability to pre-purchase extra weight at a discounted rate of up to 30%, compared to what they would pay at the check-in counter. This ancillary is particularly attractive for airlines with different operating models, as it requires minimal operational cost and can be dynamically priced based on demand, offering a signifi cant opportunity for revenue growth. Furthermore, as airlines, especially budget and ultra-low-cost carriers (ULCCs), increasingly adopt unbundled fare models where checked luggage is no longer included in the base ticket price, monetising additional baggage offers further control over revenue generation, allowing them to maximise profi tability by strategically pricing the service during peak travel times or on high-demand routes. Moreover, it offers passengers the fl exibility to tailor their experience according to their travel needs. For example, those travelling light can opt for lower-cost tickets, while others willing to pay for the convenience of additional luggage can do so at a premium. Connectivity in the clouds While seat selection and baggage allowance remained the top preferences, in-fl ight connectivity also gained signifi cant ground, with 24% of respondents deeming it the most valuable ancillary. For many passengers, especially business travellers, staying connected in the air is no longer a nice-to-have but an expected, essential part of the travel experience. Similarly, leisure travellers are increasingly expecting fast, uninterrupted and reliable connections akin to what they have on the ground. Recognising this, airlines have invested heavily in advanced broadband systems to enhance their in-fl ight Wi-Fi services and deliver seamless connectivity on board their fl ights. Furthermore, carriers have tailored their services by offering tiered Wi-Fi packages, allowing passengers to choose the level of connectivity they need, from basic messaging to full browsing and streaming capabilities. Travellers value the convenience of bringing more luggage without the hassle of paying higher last-minute fees at the airport AVB_Nov2024_42-47_Report-Ancillaries_13428955.indd 4525/10/2024 17:43NOVEMBER 2024 46 REPORT | ANCILLARY SERVICES revenue streams, but also enhances customer satisfaction and loyalty, especially among frequent flyers and business travellers who often choose airlines based on their in-fl ight connectivity offerings. Lounge access Although airport lounge access ranked as the least valuable ancillary at 11%, the value it brings cannot be underestimated. Lounges offer a quiet space away from the hustle and bustle of crowded terminals, along with premium amenities such as meals, business centres, and even spa services, all valuable offerings for frequent fl yers and business travellers seeking a more exclusive, productive, and comfortable travel experience. For airlines, lounges are a powerful tool to reward loyalty and offer passengers a premium experience long before they board the aircraft. Furthermore, they offer carriers a unique opportunity to upsell premium services, as passengers who experience the comfort of a lounge may be more inclined to upgrade their seat class on future fl ights. That said, the value of lounge access varies greatly depending on the airline and the airport. Some lounges are luxurious havens, while others may be little more than a quiet room with basic refreshments. For airlines looking to expand or improve their lounge offerings, the challenge lies in consistently delivering a premium experience that justifi es the cost for passengers. Some airlines, including Emirates, have enhanced their offering by providing access to complementary Wi-Fi packages to passengers in all classes upon signing up for its loyalty programme, Emirates Skywards. Meanwhile, Qatar Airways offers passengers up to 20% discounts on high-speed internet packages purchased before their trips, as well as one hour of complimentary high-speed Wi-Fi to its Privilege Club loyalty programme members, allowing passengers to stay productive and entertained throughout their journey. As passengers increasingly prioritise staying connected, airlines that invest in reliable, high-speed Wi-Fi services have a signifi cant edge. Not only does this unlock new Lounges are a powerful tool to reward loyalty and offer passengers a premium experience long before they board the aircraft AVB_Nov2024_42-47_Report-Ancillaries_13428955.indd 4625/10/2024 17:4347 NOVEMBER 2024 ANCILLARY SERVICES | REPORT The future of airline ancillaries As travellers’ expectations continue to rise and airlines continue to search for new ways to ensure passenger satisfaction while driving additional revenue, the role of ancillary services is set to only grow further. In the coming years, we are likely to see more advanced personalisation tools, allowing airlines to offer even more tailored services based on passenger data, travel history, and preferences. From personalised meals to tailored in-fl ight entertainment and VIP airport transfers, the future of ancillaries promises to be both innovative and profi table. With passengers becoming increasingly willing to pay for services that add real value to their travel experience, airlines that tailor their ancillary offerings to meet their passenger preferences will not only boost their bottom line but also ensure passenger loyalty and satisfaction. The future of ancillary services promises to be both innovative and profi table, with airlines offering even more tailored services based on passenger data, travel history, and preferences Extra baggage allowances can be dynamically priced based on market demand For many passengers, staying connected in the air is an essential part of the travel experience AVB_Nov2024_42-47_Report-Ancillaries_13428955.indd 4725/10/2024 17:44REPORT | IN NUMBERS 48 NOVEMBER 2024 DOMESTIC DEMAND GLOBAL DEMAND The aviation sector has experienced sustained growth in passenger demand for August 2024, according to the International Air Transport Association’s (IATA) latest report. Globally, total passenger demand, measured in revenue passenger kilometres (RPK), was up 8.6% compared to August 2023. Total capacity, measured in available seat kilometres (ASK), saw a 6.5% year-on-year growth, while the global load factor reached a record high, at 86.2%. On domestic routes, demand saw a 5.6% rise and capacity grew by 1.2%, while the load factor improved by 3.6%, reaching 86.9%. INTERNATIONAL DEMAND International demand surged by 10.6% year-on-year, mirroring a 10.1% growth in capacity, and a modest 0.4% improvement in the load factor to 85.7%. IN NUMBERS AVB_Nov2024_48-50_In Numbers_13410773.indd 4825/10/2024 17:47IN NUMBERS | REPORT 49 NOVEMBER 2024 NORTH AMERICA HIGHEST LOAD FACTOR EUROPE SECOND PLACE In North America, passenger demand experienced a 4.3% year-on-year increase, with a 3.8% capacity rise and a 0.4% improvement in the load factor to 88.2%, the highest across all regions. European airlines posted a 9.1% increase in demand and an 8.5% growth in capacity. Meanwhile, the region’s load factor climbed to 87.2%, up 0.5% from August 2023. The Europe-Asia route was the fastest-growing. However, it remains markedly below its 2019 peak. ASIA-PACIFIC THIRD PLACE Asia-Pacifi c carriers saw a 19.9% increase in demand year-on-year, alongside an 18.8% rise in capacity and a 0.8% improvement in the load factor to 85.2%. The region maintained its strong growth momentum, with traffi c levels now just 8% below pre-pandemic volumes. AVB_Nov2024_48-50_In Numbers_13410773.indd 4925/10/2024 17:48Next >