An examination of ongoing trends in airline ancillary revenues

The airline industry seems permanently embedded in producing thin margins and continuously combatting downward pressure on yields. To perpetuate the problem, the industry remains eclipsed with high cost structures and low barriers to entry. However, a new sizzling concept continues to counterbalance these effects in the form of ancillary revenues. Globally, these revenues have increased by 121% from 2010 to 2014 – and the trend is set to continue as carriers are quickly implementing structural changes to accommodate these revenues streams. This paper examines the performance of the two core classifications of ancillary revenues, which are unbundled products and commission based income. It also investigates the willingness of passengers to pay for these services together with what type of ancillary items are acceptable at a particular price point. The study found that passengers value a narrow range of perceived ‘necessity’ products and services such as food and drink, checked baggage and seat assignment as opposed to perceived ‘optional’ unbundled or commission based products/services. It also found significant differences in WTP for specific ancillary services based on carrier type (FSC/LCC/Charter), length of flight (long and short haul) and journey purpose (business, leisure, VFR)

Development of intelligence-based ancillary revenues and products

Recent research has demonstrated that, despite the rising focus on ancillary revenues by airlines worldwide, only a few core secondary products and services have proven to be lucrative. This study investigates the benefits to airlines of using the pareto principle as a way to dedicate time and resources to the specific ancillary products that currently and potentially generate the most revenue. Combining the results of a 2015 survey of industry experts, with an application of the Pareto Priority Index (PPI), the merits of an intelligence based development of ancillary products is determined. It is found that, once the cost of investing and developing competencies in ancillary revenues are taken into account, it is often better to focus on the few core products and services that are most lucrative, although these ‘core’ products and services can vary by flight length (short/long-haul) and thus should be identified on a case-by-case basis

Effectiveness of a national quality improvement programme to improve survival after emergency abdominal surgery (EPOCH): a stepped-wedge cluster-randomised trial

Background: Emergency abdominal surgery is associated with poor patient outcomes. We studied the effectiveness of a national quality improvement (QI) programme to implement a care pathway to improve survival for these patients. Methods: We did a stepped-wedge cluster-randomised trial of patients aged 40 years or older undergoing emergency open major abdominal surgery. Eligible UK National Health Service (NHS) hospitals (those that had an emergency general surgical service, a substantial volume of emergency abdominal surgery cases, and contributed data to the National Emergency Laparotomy Audit) were organised into 15 geographical clusters and commenced the QI programme in a random order, based on a computer-generated random sequence, over an 85-week period with one geographical cluster commencing the intervention every 5 weeks from the second to the 16th time period. Patients were masked to the study group, but it was not possible to mask hospital staff or investigators. The primary outcome measure was mortality within 90 days of surgery. Analyses were done on an intention-to-treat basis. This study is registered with the ISRCTN registry, number ISRCTN80682973. Findings: Treatment took place between March 3, 2014, and Oct 19, 2015. 22 754 patients were assessed for elegibility. Of 15 873 eligible patients from 93 NHS hospitals, primary outcome data were analysed for 8482 patients in the usual care group and 7374 in the QI group. Eight patients in the usual care group and nine patients in the QI group were not included in the analysis because of missing primary outcome data. The primary outcome of 90-day mortality occurred in 1210 (16%) patients in the QI group compared with 1393 (16%) patients in the usual care group (HR 1·11, 0·96–1·28). Interpretation: No survival benefit was observed from this QI programme to implement a care pathway for patients undergoing emergency abdominal surgery. Future QI programmes should ensure that teams have both the time and resources needed to improve patient care. Funding: National Institute for Health Research Health Services and Delivery Research Programme

Effectiveness of a national quality improvement programme to improve survival after emergency abdominal surgery (EPOCH): a stepped-wedge cluster-randomised trial

BACKGROUND: Emergency abdominal surgery is associated with poor patient outcomes. We studied the effectiveness of a national quality improvement (QI) programme to implement a care pathway to improve survival for these patients. METHODS: We did a stepped-wedge cluster-randomised trial of patients aged 40 years or older undergoing emergency open major abdominal surgery. Eligible UK National Health Service (NHS) hospitals (those that had an emergency general surgical service, a substantial volume of emergency abdominal surgery cases, and contributed data to the National Emergency Laparotomy Audit) were organised into 15 geographical clusters and commenced the QI programme in a random order, based on a computer-generated random sequence, over an 85-week period with one geographical cluster commencing the intervention every 5 weeks from the second to the 16th time period. Patients were masked to the study group, but it was not possible to mask hospital staff or investigators. The primary outcome measure was mortality within 90 days of surgery. Analyses were done on an intention-to-treat basis. This study is registered with the ISRCTN registry, number ISRCTN80682973. FINDINGS: Treatment took place between March 3, 2014, and Oct 19, 2015. 22 754 patients were assessed for elegibility. Of 15 873 eligible patients from 93 NHS hospitals, primary outcome data were analysed for 8482 patients in the usual care group and 7374 in the QI group. Eight patients in the usual care group and nine patients in the QI group were not included in the analysis because of missing primary outcome data. The primary outcome of 90-day mortality occurred in 1210 (16%) patients in the QI group compared with 1393 (16%) patients in the usual care group (HR 1·11, 0·96-1·28). INTERPRETATION: No survival benefit was observed from this QI programme to implement a care pathway for patients undergoing emergency abdominal surgery. Future QI programmes should ensure that teams have both the time and resources needed to improve patient care. FUNDING: National Institute for Health Research Health Services and Delivery Research Programme

The impact of air policy on incoming tourist traffic: the contrasting cases of the Caribbean Community and the Middle-East

It is generally agreed that government ownership and participation in national carriers and regulated air service agreements can lead to inefficiencies and abuses of market power. This can result in poor carrier performance and service levels, impeding further growth in tourism markets. This paper contrasts this theory with recent case evidence from the Caribbean and the Middle-East. The former represents the mature exotic type beach holiday while the latter is a fast developing religious, cultural and multi-product form of tourism. In both cases multi-step relationships exist between the development of air transport policy and the number of incoming visitors. The strength and significance of these interrelationships are tested using two separate best-fit Structural Equation Models (SEMs) based on a panel data set of a selection of endogenous and exogenous variables for the period 2000–2007. It is found that, despite both regions’ continued government participation in national carriers, only in the Caribbean has this appeared to have resulted in the expected dampening effect on tourism output, whereas a reverse effect was found for the sample of Middle-Eastern states. Focussing on their formidable hub-and-spoke networks, state owned and vertically integrated Middle-Eastern carriers are still encouraged to offer competitive fare and service levels to capture 6th freedom traffic with the growing number of long-stay visitors being one of the main beneficiaries of this

An examination of the possible future trends in airline ancillary revenues

The airline industry seems permanently embedded in producing thin margins whilst continuously having to battle against downward pressure on yields. To perpetuate the problem, the industry remains eclipsed with high cost structures and low barriers to entry. However a new sizzling concept is beginning to counterbalance this effect in the form of ancillary revenues. Globally, these revenues have increased by 38% from 2009 to 2010 and by an even more impressive 44% from 2010 to 2011. This trend is set to continue as carriers are quickly implementing structural changes to accommodate these revenues streams. Could ancillary revenues be the next industry game changer? This paper examines the performance of three core classifications of ancillary revenues, which include unbundled products, commission based income and the sale of frequent flyer programs spread over the years 2010-2011. The results were shared with industry practitioners and were used to construct insights into the trending nature of such revenues and specific ancillary items that airlines should focus on and also avoid in the coming years

An investigation into traveler preferences and acceptance levels of airline ancillary revenues

This study determines traveler preferences and acceptability levels for a range of airline ancillary products and services by employing an on-line passenger survey to examine booking preferences as well as attitudes toward a selection of air and non-air travel components sold by the airlines. The survey results are combined with expert opinions collated from a recent international conference, along with secondary data, to generate an acceptance ranking which can be used by a range of airlines to formulate their ancillary revenue strategies. It is found that airport car parking and checked baggage charges proved to be the most accepted commission based and unbundled products for airlines to sell respectively. Despite the recent focus and successes in ancillary revenues, however, it can also observed that none of the ancillary products and services examined in this study achieved a high take up rating suggesting that airlines can do much more to convince travelers of the benefit and value in airlines selling non-core products and services to them

Air Policy and Incoming Tourism Demand: The Cases of the Caribbean Community and the Middle-East

It is generally agreed that government ownership and participation in national carriers and regulated air service agreements can lead to inefficiencies and abuses of market power. This can result in poor carrier performance and service levels, impeding further growth in tourism markets. This paper contrasts this theory with recent case evidence from the Caribbean and the Middle-East. The former represents the mature exotic type beach holiday while the latter is a fast developing religious, cultural and multi-product form of tourism. In both cases multi-step relationships exist between the development of air transport policy and the number of incoming visitors. The strength and significance of these interrelationships are tested using two separate best-fit Structural Equation Models (SEMs) based on a panel data set of a selection of endogenous and exogenous variables for the period 2000-2007. It is found that, despite both regions’ continued government participation in national carriers, only in the Caribbean has this appeared to have resulted in the theoretical dampening effect on tourism output, whereas a reverse effect was found for the sample of Middle-Eastern states. Focussing on their formidable hub-and-spoke networks, state owned and vertically integrated Middle-Eastern carriers are still encouraged to offer competitive fare and service levels to capture 6th freedom traffic with the growing number of long-stay visitors being one of the main beneficiaries of this

COVID-19 and the aviation industry: The interrelationship between the spread of the COVID-19 pandemic and the frequency of flights on the EU market

This study aims to investigate the contribution of aviation related travel restrictions to control the spread of COVID-19 in Europe by using quasi-experiment approaches including the regression discontinuity design and a two-stage spatial Durbin model with an instrumental variable. The study provides concrete evidence that the severe curtailing of flights had a spontaneous impact in controlling the spread of COVID-19. The counterfactual analysis encapsulated the spillover effects deduced that a 1% decrease in flight frequency can decrease the number of confirmed cases by 0.908%. The study also reveals that during the lockdown, the aviation industry cancelled over 795,000 flights, which resulted in averting an additional six million people being from being infected and saving 101,309 lives