Airlines collected over $36 billion in ancillary revenues last year, with 25% of that figure coming from a la carte or other on-board sales. This means that a la carte revenues dropped $9.02 billion onto the bottom line for airlines - a number that clearly has room for growth, as airports competing for that same spend invest heavily in their culinary selection.
A new report from IdeaWorks Company, entitled "Economy Class Meals Get an a la Carte Upgrade," highlights how some airlines are emphasizing their own increased investment in the culinary appeal of their in-flight offerings as a means to boost their share of per-traveler food revenues.
The report highlights efforts by several airlines to increase the quality of the in-flight dining menu in order to successfully position it as a premium value-add. The airlines claim a loyal following that appreciates the quality assurance and convenience of having a high-quality, prepared meal waiting for them on the plane.
The reality is that sometimes it is indeed more convenient to eat on the plane - with an awkward connection time, for example, that forces a traveler to eat at an off-meal time. The trade-off, especially given heavy investment into culinary atmosphere at airports, is that the meal is still consumed at a tight, possibly uncomfortable, economy class seat.
Airlines such as Austrian have leaned on their catering provider, Do & Co, to emphasize quality ingredients and to position the product as a premium upgrade. The catering company has even installed a gate-side, consumer-facing "a la carte" desk that allows travelers to "book" their meal for their upcoming flight.
Airlines are also slowly integrating these culinary up-sells into their e-mail marketing and app check-in funnels, allowing customers to purchase food alongside other fee-based items in advance of their trip.
The airlines have clearly been watching the culinary shakeout on cruise lines in the decade since Norwegian launched their "Freestyle Cruising." This effectively monetized existing assets, and led to ships being completed designed around a core/ancillary product mix that included free restaurants and per-diner premium experiences. The concept initially stumbled, but has since been adopted industry-wide - and delivers $52 per guest per day for Norwegian today, which is an impressive shift in the way that cruisers transact during their experience.
While planes can't quite match the large-scale options of a mammoth ocean vessel, they can most certainly segment their customers more fully by offering premium items to those who value them while keeping base prices lower for the price-conscious.
Rather than simply competing on included amenities - which is what happened in the decades after deregulation - the airlines have now focused on a fee-structure that offers a no-frills base followed by a slew of premium add-ons. This both allows customers to customize a trip and airlines to learn more about each customer to try to retail more effectively through mobile and online channels.
The technological integration is still nascent, especially as airlines could combine their content creation efforts with the meal offerings to add a more multi-media approach to selling food in advance of travels.
As far as lesson learned on building customer value alongside ancillary revenue, the report concludes that airlines need to marshal IT resources to better visually merchandise their food offerings while also more fully integrating the meal selection into both the booking path and the check-in process.
The full report can be downloaded here, and a video from In Flight Feed showcasing the realities of ordering food in-flight is below.