The transformation in the rapidly evolving travel industry must be embraced. Disruption is scary and painful, then vague and exhausting but when goals are finally achieved, they are sweet and rewarding. Expanding the airline business model to beyond travel is the key for their success.
The travel and aviation industry is one of the world’s largest industries with a global economic contribution (direct, indirect and induced) of over 7.6 trillion U.S. dollars in 2016. Several countries, such as France and the United States, are consistently popular tourism destinations, but other, less well-known countries are quickly emerging in order to reap the economic benefits of the industry.
Online travel sales worldwide from 2014 to 2019 were increasing in an average of 10% every year. In 2016, global online travel sales totaled 564.87 billion U.S. dollars. This figure is projected to grow to 755.94 billion U.S. dollars in 2019 and to 817.54 billion dollars in 2020.
Those enormous numbers are very alluring, but we can’t ignore the fact that the aviation industry is also considered very risky and challenging, and that thousands of travel and airline businesses close their doors every year all over the world. There are four main reasons for this:
- The high value of the product (flight tickets are expensive)
- The time gap between purchasing the service until it is actually provided (plenty of time to regret or to find a better deal)
- Instability of airline companies – when an airline company is out of business it’s affecting also the travel agents, cleaning services, catering services, ergonomic designers and many other related businesses.
- Rapid changes in the industry as a result of technological developments and the global nature of aviation
Who are the survivors?
Thomas Cook, one of the world’s oldest tour and airline companies went out of business last September. Founded in 1841, it changed the face of British travel. Its ubiquitous storefronts specialized in low-cost package holidays that put beach vacations in exotic locales within the budgets of middle-income Britons. Beyond the chaos and disappointment for travelers, the company’s collapse put 21,000 jobs at risk. Analysts said Thomas Cook, struggling with a debt pile of nearly $2.5 billion pounds, had failed to adjust to the changing times. While other airlines companies went totally online, for instance, Thomas Cook held onto its extensive chain of storefronts.
“It is not the strongest or the most intelligent who will survive but those who can best manage change”.
How? By redefining aircraft as a retail space, where revenue comes from in-flight purchases and the flight itself is considered a service.
The behavior of travelers when they are at the airport or on the plane is no longer the same: airports are no longer a waiting room or simply a place from where you catch a flight… they are becoming retail paradise!
When Heathrow airport opened, in 1946, the only retail facilities were a bar with chintz armchairs and a small newsagent. The first terminal was a tent, a far cry from the four halls, resembling vast shopping malls, at the London airport today. Nowadays passengers spend their time shopping while at airport. The “non-aeronautical” revenue (shops, parking, car rental, etc.) is the source that kept afloat airports for the last decade.
A flying shopping mall
An airplane is a retail space 45,000 feet in the air. People are obligated to sit there for long hours with a great potential for boredom and lots of spare time to shop. In other words, airplane is the ultimate shopping place.
Now airline companies just need to find ways to adjust their planes for the shopping needs and to create a great user experience for their travelers:
- Embed e-Commerce platform in flights – today’s technology is totally there
- Offer a wide range of products with selection of exclusive products
- Offer special prices or duty-free offer that someone can buy only when he flies
- Offer memberships and loyalty programs
- Integrate with logistics system, in case of selling products that are not on the plane
Airports are betting everything on retail. Airlines can get plenty of inspiration from this business model. If retailers invest more and more money to attract customers to their shops, airlines have an ace up their sleeve: their customers are already there, seated with the seat belt fastened, with no chance to be distracted by any competitor for several hours in a row.
So – clients are there, ecommerce is set up, products are added to the shopping basket… what’s next?
How to maximise conversions?
A customized payments infrastructure is key to support this shopping ecosystem. The payment system technology should be super simple and accessible. Whether it’s an online payment page, mobile app, a link for payments or a POS terminal, payment methods should be local and diverse. These potentially new clients will likely expect to use payment methods they are familiar with. Once the shopper finds his favorite familiar payment method to be offered by the flying shopping mall he is in, most likely that he will complete his purchase and do it again on his next trip. Airline companies should be looking for a payment provider that will give them diverse, local and global acquiring solutions with better rates, quick payment cycles and fully secured fraud management system.
To sum up the new generation of aviation: airlines have a great opportunity to become a new retail space. Technology is becoming ready to sell in the air, not only face to face but also online. Optimal user experience with preferred local payment methods has a potential to flourish this new trend of flying shopping malls. If you need more information about e-Commerce or payment solutions for the aviation industry, contact us, and a SafeCharge expert will get in touch with you.