GuestLogix says it is profiting off of the current airline rush to "up-sell" passengers with duty-free products, on-board digital entertainment, ground transportation, and at-destination activities.
All of which form part of a multi-billion-dollar market in ancillary sales that grew 11% last year.
It's not a giant company. Last year, the Toronto-based firm only earned $26 million in revenue, and it processed merely about $700 million in onboard retail from 64 airline and rail clients.
But the company stands out as the leader in its market, commanding 90% of market share of onboard retail sales by airline passenger volume in North America, and 60% market share by passenger volume in Europe, the Middle East, and Africa.
Since they got their start a decade ago, GuestLogix employees have long been known as "the device guys," because they famously sale custom-made, hand-held devices and software that flight attendants use to process transactions on flights.
The company's number one revenue generator is, not surprisingly, Ryanair -- where passengers are subjected to a barrage of upsells for products, lottery tickets, magazines, ground transportation and the like for the entire duration of the typical pan-European flight. Yet Delta, Southwest, Qantas, United, and US Airways are all major customers, too.
Last Thursday, GuestLogix announced that Cathay Pacific, which had gone out to market for bids, had re-upped an agreement to continue to deploy the company's point-of-sale (POS) devices. GuestLogix also added Dragonair as a client.
Moving away from devices
Airlines are increasingly eager to sell products that are more complex (and that have higher margins), such as at-destination ground transport and tours and activities -- all of which require more explanation and sales savvy than flight attendants holding POS devices can muster.
Airlines see in-flight entertainment (IFE) systems -- a.k.a. seat-back TVs -- that have touch-screens, card-swiping capabilities and on-board retail and entertainment offerings as a better venue for selling more complex and expensive products. Transaction volumes go up three to five times when self-service on-screen stores replace flight attendants hawking goods and tickets.
GuestLogix is trying to respond to this market demand.
Its current goal is to transition into become the premier payment technology and settlements provider for IFE systems. Last September it signed a contract with Panasonic Avionics, the top seller of IFE systems to airlines. Tnooz can reveal that GuestLogix also has signed a partnership with Lufthansa Systems, whose BoardConnect's payment processing is handled by GuestLogix.
In the past year, GuestLogix has debuted software and systems to enable it to become a global payments transaction provider, capturing, processing, settling and reconciling payments globally. It has received 37 payment certifications worldwide and feels it has the back-end technology to scale up this vertical.
The company only earned about $2 million from such seat-back options last year, but the vertical could grow fast.
The company has also experimented with software that can be used by the crew on devices that run on iOS, Android, and Windows Mobile operating systems.
Strategic review
Achieving the goal of becoming the top global payments processor for onboard retail will require more capital investment.
GuestLogix will need to invest in its own technology and sales team or it will have to make acquisitions, such as its purchase last September of Initium Onboard, the UK seller of retail technology for airlines and trains, for $5 million in cash and stock.
In light of this, the company launched a strategic review last October, overseen by a committee of four independent directors working with investment bank Canaccord Genuity.
The company also reduced its headcount late last year to save $1.6 million in personnel costs, and it terminated $1.3 million in projects that weren't in its core competencies.
Q&A with CEO Brett Proud
"By mid- to late- May, the strategic review will result in one of three actions: The company will opt to raise more capital to invest in organic growth, grow through acquisition, or sell itself.
I don't know how it will turn out, but I believe that many of the shareholders who have joined us in recent month hope that we stay as an independent operation....
In many ways, our leading competitor is the airlines' internal information technology (IT) departments," says Proud, who is betting that airlines will prefer to outsource to his company as specialists in the field.
"We eat, sleep, and drink payments processing for ancillaries and can handle all types of payment all over the world," he says, noting that it would be a distracting expense for most airlines to try to duplicate GuestLogix's effort.
One of GuestLogix's secrets for inking deals has been to form partnership with larger players. Its recent Cathay Pacific deal piggybacked on the sales and negotiating savvy of its partner, duty-free concessionaire, Inflight Sales Group Hong Kong (ISG).