Airlines have made smart moves to grow their ancillaries, but they may soon be reaching a plateau.
According to the latest projections from ancillary consultancy firms IdeaWorks and CarTrawler, ancillary revenues were projected to be $82.2 billion in 2017 — a 264 percent increase from 2010 — generated through à-la-carte fees, frequent flyer and commission based revenues. However, fee-based ancillaries have their limits.
Airline’s advertising revenue, by comparison to other ancillary categories, has had less attention in the past. With the right strategies and technology, however, its potential is unlimited. “Inflight advertising is a growing segment that has been around for over 30 years, generating more than $300M annually. Over the next decade, airline advertising will see the largest exponential growth of any other ancillary revenue category due to the vast digital opportunities that exist across the entire travel thread,” says Chris Hartley, Global Advertising Sales Director at Panasonic Avionics.
Airlines are already world-class marketers and advertisers, competing for consumer attention through creative omnichannel strategies to gain a greater share of their market and build brand awareness. They can benefit further by applying that same creative energy inwards and transforming themselves into powerful digital ad channels for leading brands around the world.
Airlines long ago learned that inflight magazine advertising could help pay for the production of editorial content and generate moderate revenue. They then experimented with a number of other ways to generate more revenue — from ad partnerships, branded coffee cups or banners on overhead bins, to sponsored liveries and ad placements on the seat back screens. But these advertising strategies have generally been limited in scope.
“The same ad creative would be sent over and over again to every passenger during a single flight, and across the airline’s fleet for a calendar year. It had no targeting, reporting or frequency capping,” explains Hartley.
Fortunately, there’s positive momentum in the inflight advertising industry today with both airlines and brands. Airlines are open to having a variety of digital advertisements embedded natively across their passenger experience, which ultimately makes brands happy.
With consumers’ changing content consumption habits and online advertising still somewhat underutilized, brands are eager to tap into a reliable and verified medium to reach their intended audiences — especially those in a captive environment.
This environment presents the perfect opportunity to offer passengers meaningful content, in advertising and elsewhere; the vegetarian seated in 13F en route to Barcelona gets information about a new vegetarian restaurant in the city, while the shoe lover seated next to her gets an ad about this summer’s most trending sandals. Additional targeting like demographic, seat class, destination or origin, can also be applied across hundreds of airlines on a single ad platform for one brand.
Airline’s digital advertising channels are mature and reliable. “Airlines already have a vast amount of data about their passengers. It’s the best digital inventory in the world,” says Hartley. “It’s a brand safe environment with high viewing rates and no ad blockers.”
Today’s leading IFEC technology can support unlimited advertising possibilities by enabling real-time, dynamic delivery of targeted ads, with the added benefit of clear demographic data and well-aligned content.
Advertisers who are learning of these IFEC data-based advertising capabilities welcome the opportunity to reach billions of consumers who fly. Brands and media agencies have been highly engaged when learning about the new digital airline strategies and the number of video, display and sponsorship opportunities they are opening up to advertisers. They haven’t seen this in front of them for the past 30 years. It’s powerful and it’s happening now.
“Advertisers who are learning of these IFEC data-based advertising capabilities welcome the opportunity to reach billions of consumers who fly,” — Chris Hartley, Global Advertising Sales Director at Panasonic Avionics.
“Airlines can easily convert their IFEC systems into revenue-generating assets by leveraging the data they’ve got on airline passengers to conduct smarter, more personalized ad messaging. They could also form strategic partnerships to boost advertising opportunities,” Hartley adds. In addition to growing their ancillaries, airlines can capitalize on their assets, which is crucial for their long-term survival. The right strategy could make seat-back screens and onboard Wi-Fi pay for themselves.
The reason for this is simple: airlines need reliable advertising partners.
“The unlocking of data-driven insights is enabling airlines to propose ancillary products and services to their customers in an increasingly sophisticated way. This application of data is fueling the continued growth of the sector, while at the same time unearthing further potential for building loyalty by identifying when, how, where and what to offer customers when they visit your website or app,” said Aileen O’Mahony, Chief Commercial Officer at CarTrawler.
Airlines, agencies and IFEC companies like Panasonic Avionics are already working together to deliver maximum revenue, though, this strategy needs to scale to the scope of an alliance.
The success of inflight advertising will rely on airline marketers’ vision to convert their seat-back screens and integrated connectivity into revenue engines.