The price of fuel is top of mind for airline leadership teams right now, and raising ancillary fees for items such as checked bags is viewed as one way to mitigate some of that cost.
Delta CEO Ed Bastian said recently that increasing fares, baggage fees and other charges were part of the strategy to “recapture” $2 billion in added fuel costs. Other airlines have announced similar measures.
Given how susceptible commercial aviation is to global shocks you could be forgiven for wondering why carriers haven’t progressed further with modern retailing, knowing its revenue potential. Thin margins have always been one of the reasons, and the International Air Transport Association (IATA) said net profit margin was 3.7% in 2025.
Technology constraints are also often cited as a key barrier.
Ann Cederhall of aviation industry consultancy LeapShift described the gap between wanting to be retailers and being retailers as "operational capability."
"Many airlines still rely heavily on legacy infrastructure built around PNRs, SSRs, EMDs and traditional fare filing systems. There is no problem retailing despite this infrastructure but you need to build or buy a retail environment.
"To sell more sophisticated products—flexibility options, dynamic bundles, personalised offers—airlines need orchestration capabilities behind the scenes. They also need to be able to service those products properly through refunds, exchanges, modifications and fulfilment."
She added that airlines can't evolve into true retailers without that infrastructure.
A white paper titled 'The State of Modern Airline Retailing 2026', a collaboration between LeapShift and Airline Information, provides some insight into current airline thinking.
The airline employees who participated in the research cited selling products on partner airlines, interaction between systems and seamless integration with passenger service systems (PSS) as their top challenges in retailing.
Tech vendor reliance
Wider feedback from respondents predominantly centered on fragmented systems, legacy technology and a feeling of being held captive by technology partners.
“The industry has made strong progress in ancillary revenue generation, digital channels and retail mindset transformation. However, legacy systems, fragmented distribution, integration challenges and slow implementation of industry standards continue to limit full retail transformation,” said one respondent.
“Airlines are generally cash poor so unable to invest full in tech stacks, which leaves them reliant on the legacy providers, building products that are not very good into the PSS deal,” said another airline.
Their responses also revealed scepticism around industry initiatives to facilitate airline retailing. With modern airline retailing, for example, about 30% of carriers assessed as really good or good while more than 40% described initiatives as needing improvement or a lot of improvement.
Figures from the study revealed challenges remain around servicing ancillary products via airline channels. Relatively low percentages of airline respondents said their carriers' channels could handle these elements.
- Airline website: Cancel 30%, amend 37%, refund 29%
- App: Cancel 30%, amend 37%, refund 30%
- Call center: Cancel 31%, amend 37%, refund 31%
- Email: Cancel 18%, amend 21%, refund 41%
It's worth noting that global ancillary revenue was worth almost $150 billion in 2024 and accounts for up to 20% of an airline’s annual revenue according to figures from IdeaWorks.
When asked about IATA's New Distribution Capability technology (NDC) standard, almost 40% of respondents described it as really good or good, while more than 44% said needs improvement or a lot of improvement.
The study also focused on the technology airlines are using or plan to use going forward. Almost 70% are not using an order management system to bring together all the elements of an order. However, 29% said their PSS will deploy the functionality in the future.
Other products and services related to retailing that carriers already have in development or plan to introduce include:
- Discounts using loyalty: 58% in production, 13% plan to introduce
- Dynamic pricing of ancillaries: 58% in production, 18% plan to introduce
- Digital wallets: 36% in production, 20% plan to introduce
- Shopping basket: 36% in production, 29% plan to introduce
- Bundled product discounts: 27% in production, 33% plan to introduce
- Model Context Protocol (MCP) server: 9% in production, 13% plan to introduce
The lack of activity around MCP is not really surprising given airlines' tentative approach to artificial intelligence (AI). Accenture research earlier this year revealed only 12% of carriers link AI directly to revenue and the technology is being treated as more of an add on.
Airline report card
The respondents were asked to grade their airline on how they are doing with retailing. More than 41% said they felt they were doing a very poor or poor job while almost 29% felt they were doing neither a good nor a bad job. Some expressed the belief that were doing a good job considering legacy technology constraints.
"The biggest issue is the pace of implementation and that is why it is critical to look into vendor capabilities and what you can achieve in-house. And airlines that own the PSS have an advantage and don't rely on the PSS timetable," Cederhall said.
She added that airlines should make the PSS "a simple delivery of content and orchestrate on top."
"What I mean by that is that you need to remove the PNR friction and rely less on what happens in the PNR and rather orchestrate the PNR," she said.
Respondents were also asked to rank areas of importance in helping their airline on the road to retailing, with vendor technology that delivers, addressing legacy technology debt and resources/budgets emerging as the top three.
The research was carried out online between the end of January and the beginning of March and attracted 213 responses in total, of which 111 are from airline employees.
Among the airline respondents, 45% work for an airline that carries more than 25 million passengers and 28% represent a carrier serving 10 million-25 million passengers. Most responses (85) came from employees within traditional carriers, 16 represent low-cost carriers and 10 work for hybrid airlines.