Substantial progress has been achieved in reducing the airline cost base in the past five years. However, the gap between achieved load factor and breakeven load factor remains wafer thin. For both network and low-cost airlines, that necessitates strong downward pressure on overhead costs.
Figures from IATA for 2006 show that European airlines’ work in reducing costs by pursuing direct distribution, online sales and simplified fare structures yielded more than three times the cost savings of similar efforts to cut costs in areas such as maintenance and passenger services. There remains substantial scope for further cuts in distribution costs across the industry worldwide.
This will be reinforced by emerging trends such as mobile marketing, online flight change services, up/cross-selling through websites and kiosks – and great product differentiation through strategies such as clustered fares for distinct product categories and segment requirements.
Routes to lower costs
One route is through advanced fare management systems, such as SITA’s Airfare suite of services, part of the Horizon portfolio. These can help an airline become more market responsive, track competitors’ pricing strategies, simplify its fare management and pricing policies and benefit from new revenue streams, such as charges for online ticket modification.
Another is through implementation of a coherent online strategy, supported by a product such as SITA E-Commerce Platform. Recent research has shown that the cost of an online booking as a proportion of total ticket value is about five percent. This compares to about 14 percent for call centres and 16 percent for travel agency bookings via a GDS. This is a substantial differential which has had to be set against the very strong benefits of multiple channel availability.
However, SITA’s E-Commerce Platform now includes a new Airline to Agent (A2A) module that supports direct relationships with travel agents and corporate travel agents. Encouraging agents to book direct will provide the double benefit of eliminated GDS distribution fees and enhanced loyalty between agent and airline.
The A2A module allows airlines to manage agencies simply and effectively, including management of commission and discount schemes. Comprehensive reporting and data export facilities also allow sales and commission data to be fed effortlessly into other airline systems.
These and other innovations to cut costs while enhancing service options will be discussed in detail at SITA’s 2007 PTS Passenger and Travel Management Conference, to be held from 6-9 November in Lisbon, Portugal. Details can be obtained from info.pts@sita.aero.
100% e-ticketing by 2008 – fact or fiction?
IATA 100 percent e-ticketing policy is now due to come into effect May 2008. What does the industry deadline really mean to your business? Listen to how this and other e-ticket business drivers impact your bottom line as part of your wider cost-base – and how you can overcome roadblocks while driving e-ticket implementation through your organization.
A SITA e-ticketing webinar will be available from 27 June, with the involvement of Rob Drotar, Head of Product & Portfolio Management, PTS Reservation Solutions, SITA and Bryan Wilson, Director E-Ticketing Programme at IATA. For details see www.atwonline.com