Perspective

As we celebrate the 10-year anniversary of Ascend magazine, two prominent airlines have reason to celebrate as well. I would personally like to congratulate Alaska Airlines and JetBlue Airways for earning the highest scores in the J.D. Power and Associates 2012 North America Airline Satisfaction Study.

On a 1,000-point scoring system, JetBlue Airways earned the highest score on the low-cost carrier side. Among traditional network carriers, Alaska Airlines was the highest rated.

This signifies the exceptional care and service levels these carriers consistently provide to their customers, and I am proud to partner with them as they continue to make a difference in air travel.

There are many opportunities for airlines, like Alaska Airlines and JetBlue Airways, to differentiate themselves and enhance their customers' travel experiences. One area receiving focus is merchandising. Last year, ancillary sales produced around US$22.6 billion for the global airline industry. Within the next three years, it is expected to reach more than US$50 billion. If done correctly, it could have an enormous impact on an airline's bottom line.

Of course, airline merchandising is nothing new. It has been in practice for years. Many started with various à la carte products and services and branched out from there. With time, it has become a staple of the successful airline.

However, true merchandising is much more than selling certain products on aircraft and charging for checked bags. An end-to-end merchandising strategy is imperative. And, the biggest key to a successful strategy is the shift from service provider to retailer. Like retailers, airlines must analyze their customers and modify their products and services inventory to address their segment.

When ancillary products and services are presented in the right way at the right time, customers feel like they are in control of their travel experience and the amount of money they spend. This is critical to the overall merchandising strategy.

Unfortunately, there have been certain negative connotations surrounding ancillary sales. For example, when some airlines introduced fees for checked bags as a way to offset the rising cost of fuel, the traveling public could not see a direct link between the price of fuel and the price of bag fees. They felt like they were being nickel and dimed. So promoting ancillary products and services in the right way makes a tremendous difference in the way an airline is perceived by the traveling public.

Also vital to any end-to-end merchandising strategy is an airline's ability to position and sell its ancillary offerings through the most effective channels. An omni-channel merchandising approach focuses more on creating a seamless customer experience through all shopping channels. An "omni-channel consumer" wants to use all channels and airlines, practicing as retailers, using an omni-channel approach will track customers across all channels, not just one or two. This approach enables customers to experience an airline's brand regardless of the channel rather than being just another channel within the brand.

As airlines take on the role of retailer and become more sophisticated in selling and fulfilling ancillary offerings, they should be meticulous in applying decision support to their merchandising strategy. As technology and business processes progress to aid this new strategy, the optimization of ancillary revenue and branded fares provides a significant opportunity for securing a larger share of revenue in an ever-increasing competitive market.

Finally, effective revenue reporting is essential to the success of a complete merchandising strategy. Combining historical revenue accounting data with business intelligence and advanced analytics provides carriers with valuable insights into customer behaviors and preferences. This strengthens and refines their entire merchandising strategy.

Like any major area within an airline, merchandising can be quite complex. With a strategic plan in place and a retailer mindset, merchandising will simply become another vital component to an airline's day-to-day operations.

I hope you enjoy this issue of Ascend, and I look forward to working with you as you implement a comprehensive, long-term merchandising strategy and make a difference in your customers' travel experience.

Hugh

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