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S'pore Airlines exploring ways to grow new revenue
Publication Date : 31-01-2014
Singapore Airlines (SIA) has set up a new team to look for new ways to make money from travellers, instead of relying mainly on the sale of plane seats.
This could see the carrier offer services such as travel insurance and introduce fresh ideas to boost in-flight duty-free sales.
The Straits Times has learnt that a "new revenue" unit was formed at SIA last month.
Spokesman Nicholas Ionides confirmed this, but stressed that it did not mean the airline will start charging for services already included in the ticket price.
He said: "We are a premium full-service airline, and we do not charge for extras such as in-flight meals and beverages."
Instead, the plan is to explore "untapped opportunities" to generate revenue.
Digital platforms such as online and mobile applications, on which passengers can add "extras" to their flights, will drive the new initiatives.
Further details will be unveiled later, Ionides said.
As competition in the airline industry grows fiercer, carriers have started to explore new ways of making money, said industry experts, and stake their claim to a rapidly growing revenue stream.
A recent survey by industry consultancy IdeaWorks Company and car rental firm CarTrawler showed that airlines earned an estimated US$42.6 billion (S$54.4 billion) worldwide in ancillary revenues last year.
This is about 90 per cent more than in 2010.
While budget carriers have traditionally led the way in driving this additional income, full-service carriers are climbing onto the bandwagon.
Increasingly, they have begun offering services that aim to make travel more convenient - from priority security screening to early boarding, as well as single-visit access to airport lounges and VIP treatment at the airport.
British Airways and Qantas, for instance, are already offering travel packages on their websites.
CarTrawler chief executive Mike McGearty said: "Today, airlines are not just competing with each other for a share of the passenger market, they are also competing for a cut of each passenger's total travel budget."
Apart from paid Wi-Fi on some flights, SIA already earns extra revenue from the sale of "preferred" seats in economy class, which offer more legroom.
Introduced in 2008 at a flat rate of S$50 (US$39.20), the paid upgrade
service is now available on all flights except those on Boeing 777-200ER aircraft.
Passengers now pay between US$20 and US$100 for the upgrade, depending on how far they are flying.
With its latest new revenue unit, experts said they believe SIA could be looking into tie-ups with insurance firms and other service providers such as operators of tourist attractions.
More partnerships to sell packages that include hotel rooms and rental cars are also likely.
But SIA will also have to look into how it markets its new offerings and persuade passengers to buy in.
"It is simply not enough to add travel products to your website and expect customers to purchase," said McGearty.
Airlines would need to pick the right partners and right products to suit customers' needs.
McGearty said: "The airlines that will win the ancillary revenue race will be those which adopt a pro-active approach to online retailing by focusing on satisfying the needs of the customer."