Ancillaries are a bane of travel managers' existence. They are not always booked in advance and often paid for in different ways, making them difficult to measure in a consistent fashion. But given that their value as a revenue source for carriers is increasing all the time, there is no doubt that ancillaries are here to stay.
IdeaWorks and CarTrawler's annual survey forecasts airline ancillaries in 2015 to be worth US$59.2 billion, an 18.6% increase from 2014's $49.9 billion and a whopping two and a half times the $22.6 billion registered in 2010 which represented 4.8% of global airline revenue at that time. In contrast ancillaries are forecast to comprise 7.8% of global airline revenue in 2015.
IdeaWorks believes that ancillaries will grow further and faster in Europe (see table below) than elsewhere because of the prevalence of branded fares. Lufthansa, Swiss and Austrian all offer these packages which include an option for flight only with additional charges for everything from seat selection to checked bags.
And this kind of fare is growing in popularity. British Airways this week announced new short-haul fare classes: Basic, Plus and Plus Flex. Plus Flex is comparable to business class, offering the ability to change a booking without incurring an extra fee, but those who opt for a Basic Fare potentially face extra charges, in other words ancillaries, for everything from a checked bag and seat selection to any booking change.
So European travel managers are facing increasing pressure to find solutions for booking and monitoring ancillary services and this week ATPCO and Farelogix announced an NDC-based solution.
Farelogix is a well-known GDS disruptor, offering low-cost distribution through APIs. US airlines file fares with ATPCO (the Airline Tariff Publishing Company) who in turn provides the information to the GDSs, OTAs and other computer reservation systems (CRSs), all of which benefit from a single source of content.
They have now partnered to create an ancillary offer engine which will enable airlines to have merchandising offers on both their direct and indirect distribution channels, ie GDS, corporate booking tools, airlines' own websites and mobile platforms. They will be offered via an NDC web service which eliminates the need for separate development by any airline or aggregator. More importantly, it creates a standard offering on the same platform regardless of booking channel.
This joint initiative should make the job of those travel managers keen to collect comprehensive data on their air spend much, much easier. And carriers will welcome initiatives which are easy to implement and facilitate the selling of their 'extras', everything from seat selection to checked baggage.
All the evidence is that intermediaries are not going to disappear. But as travel managers seek different services from them, they are going to continue to evolve.