The growing significance of IFEC platforms in driving forward overall onboard ancillary revenues is revealed in a new report from Valour Consultancy. The report — The Market for Onboard Ancillary Revenues and Payment Solutions — 2023, shows that after a fallow period caused by the effects of the COVID-19 pandemic, onboard ancillary revenues are set for sustained growth as the investment in omnichannel retail channels and digital technology starts to yield results.

The manual trolley service will lose much of its lustre between 2021 and 2031, due, in the main, to environmental and security issues, as well as the continued rollout of new and improved in-flight connectivity and wireless in-flight entertainment systems. And interest in so-called in-flight engagement platforms that are less about traditional movies and TV shows and more about allowing passengers to transact from the comfort of their own devices is growing all the time — particularly among the LCC and leisure carrier crowd. As such, revenue generated via IFEC systems is projected to account for 95% of all onboard ancillaries by 2031 — up from 15% percent in 2022.

According to report author, Alex Preston, there is already a strong desire from passengers to use digital services, not only to simplify their journey, but to enhance their in-flight experience. “For some time, air travel has been more than just the flight. Airlines are realising it is about engagement, which includes the ability to offer products and services passengers actually want. The capacity to do this has hitherto been hamstrung in part by a lack of onboard connectivity, but these are exciting times as more carriers deploy in-flight Wi-Fi services, allowing for improved payment security and faster processing alongside a larger and improved retail catalogue.”

Food and beverage sales continue to make up the largest share of demand, helped by the introduction of in-seat ordering as a complementary rather than competitive option to the trolley service, and the availability of better-quality food and drink and products that cater for passengers’ different price needs. Duty-free will continue to offer significant opportunities, however, the traditional onboard duty-free experience will be replaced by digital platforms showcasing a wider variety of shopping choices and convenience. Fulfilment will also increasingly move to the ground.

However, it’s in advertising and destination services that the report projects the greatest opportunities. With connectivity, the long-held promise of programmatic advertising becomes more of a reality and bookable, dynamic destination services, such as attraction tickets or onward travel can be now offered rather than just pre-flight.

While connectivity should certainly be considered as part of an effective onboard ancillary revenue strategy, its absence onboard should not deter airlines from investing in digital retailing technology says Preston, adding that we are seeing airlines, particularly LCCs, offer buy-on-board which isn’t contingent on connectivity.

According to Preston, adding a retail component to IFEC platforms is “allowing airlines to trial certain products and services before committing to a wider rollout, making onboard ancillary revenues available to all carriers, regardless of fleet size, aircraft type or business model.”

Valour Consultancy is an award-winning provider of high-quality market intelligence and consultancy services. The firm’s latest report, The Market for Onboard Ancillary Revenues and Payment Solutions – 2023, is the most recent addition to their highly regarded aviation research portfolio and a must-have resource for individuals, companies and airlines seeking a deeper understanding of onboard ancillary revenues, and the broader market for digital technology and payment solutions. The study contains over 70 pages of qualitative analysis, and provides commentary upon the evolving competitive environment, technological trends, and drivers of growth. This is supported by more than 30 data tables, containing market estimates and forecasts out to 2031.

For a full table of contents and report scope, please visit: www.valourconsultancy.com/commercial-aviation/ancillary-revenues

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