MIAMI — Airline ancillary services have introduced something previously unknown to the airline industry: fat margins.
Some of the ancillary services have profit margins approaching 100%, an anomaly in an industry that last year earned 21 cents per passenger emplaned, according to trade group Airlines for America.
Selling those ancillaries through travel agents could be a further game changer for aviation economics. Retail travel representatives at the UATP Airline Distribution Conference last week pointed out the value travel agencies offer, with their sale of high-margin airline tickets and their ability to influence travelers.
GDSs fill the front of the plane for airlines, with much of that business coming from travel management companies, noted Cory Garner, American Airlines’ managing director of sales and distribution.
Travel agencies sell 80% of international tickets, said ARC President Mike Premo in a presentation he made. And U.S. travel agencies sell $82 billion in air travel, said ASTA CEO Zane Kerby.
Airlines want these ancillary services on as many shelves as possible, said Graham Wareham, Air Canada’s senior director of distribution and consumer-direct sales for Air Canada. And airlines are willing to reward those who sell their products.
“Of course, travel agencies have a role in the current environment,” Wareham said. “Their relationship with an airline should involve compensation.”
Right now, agents have limited access to ancillaries, but that is changing. Delta recently began selling Economy Comfort seats in Travelport. US Airways Choice Seats have been in Sabre Red since last fall.
“We think agents will be better informed and provide more value to the customer,” said Chris Phillips, Delta’s managing director of distribution strategy, in a discussion about selling ancillaries through travel agencies.
It takes work on both ends, GDSs and airlines, to develop connectivity, said Craig Banks, Travelport’s senior director of global distribution sales and services. He said Travelport began investing in technology to support merchandising ancillaries "years ago."
“Several bits of the jigsaw puzzle are yet to come,” he said.
Airlines, for the most part, are using XML code to get their ancillaries in front of consumers on their websites. And IATA is trying to establish an XML standard for travel agency distribution with its controversial New Distribution Capability (NDC) initiative.
The airlines have said that legacy GDS technology cannot adequately present airline ancillary products to GDS users.
“We have different products and services that each carrier is putting an emphasis on,” Phillips said. “And we can’t bring that message to the marketplace the old way. All we’re trying to do is bring it to the travel agency community.”
Follow Kate Rice on Twitter @krtravelweekly.