The concept of "virtual interlining" has the potential to disrupt aviation in dramatic ways—possibly as significant as the rise of the same low-cost carriers that can now benefit from improved passenger connections.
Kiwi.com has been developing the platforms which supports this potentially dramatic change, growing its business from B2C to build up B2B services for airlines and airports.
Zdenek Komenda, chief business development officer at Kiwi.com about evolving its business model and facilitating airports to become more competitive by supporting easy transfers for long-haul routes.
The company’s new partnership with London Stansted Airport sets the foundation for seamless travel for passengers flying combined tickets of low-cost and full-service carriers without having to leave the terminal to re-baggage and with coverage for missed connections.
While Kiwi has offered services B2C and B2B for a while, it is only now that aviation stakeholders are beginning to understand the possibilities of virtual interlining. Komenda says:
“Finally we see that it is really a hot topic named and announced more heavily and more frequently around the industry—not only airlines but also the secondary airports are really on it because of the better capability to attract long-haul carriers.”
It is that empowerment of secondary and tertiary airports that could ultimately deliver the revolution. While full-service carriers have generally relied on hub and spoke routes, passing connecting passengers through interline and codeshare partners’ main hubs abroad, this strategy limits the types of connections and destinations available to customers.
The interline/codeshare approach also forces more traffic through over-crowded airports. Low-cost airlines have built strong point-to-point services, often relying on secondary and tertiary airports which offer more competitive fees. By facilitating connections between low-cost carriers and full-service airlines at secondary airports, virtual interlining can make a greater combination of O&Ds more competitive, while helping to distribute traffic more evenly, according to passenger preference and not airline logistics.
Komenda says the model is adaptable globally, but Europe offers conditions that have helped this combined service strategy thrive. He says:
“Europe is booming—the majority of our partners are there. European legislation isn’t holding back the airports...and there’s also a lot of private ownership. There are lots of low-cost airlines and the competition is very severe in Europe.
Asia is really a huge market, especially China, and we see increasing interest, even though the volumes are not that big.
The US is trickier because the airports are owned by the public and the airline market is really protected by the full-service carriers.”
On B2C, Kiwi has succeeded in offering global connections and earns revenue primarily from ancillaries this activity
“While some of the revenue comes from insurance banks, hotels and bundling more services with the flight, we offer 250 low-cost carriers combined with all of the full-service carriers—700 in all—and we offer even 80% cheaper fares than passengers would find elsewhere.”
UPDATED 1.10.2018 - Kiwi.com's primary revenue stream is the fee that it charges to passengers for creating the virtual interline and for other services it offers related to its core flight connection product. Some revenue does come from "ancillaries" in the usual sense of the sense of the word.
The company manages flight disruptions for B2C customers, making recommendations for alternative flight arrangements and even helping to cover overnight stays at hotels. It has a staff of 1,500 agents offering 24/7 customer support. All of this will roll-in to the Stansted package with Stansted taking responsibility for baggage handling while re-assuring airlines that they won’t have to worry about the cost-burden of re-accommodating passengers who do not make their connections.
Another feature which will appeal to airlines is the white label Kiwi product which airlines can choose to allow virtual interline reservations made directly on their brand website, with bookings backed and fulfilled by Kiwi.
“That’s what Stansted want to do. They want to have the airline.com flight with full-service carriers in order to keep the passengers on [the full service carriers’] side. They have millions of visitors every month, so they don’t want the visitors to leave.”
With virtual interlining, airports can move beyond infrastructure becoming travel agents and travel service providers. And, because the establishing and management of code-sharing partnerships and interline partnerships are expensive propositions, airlines can benefit from this too. In the end, the success of Kiwi’s B2C side shows that passengers like having this control over their connections, and wherever customers go, airlines and airports must follow.