The airline industry could create up to $40 billion in additional revenue annually by 2030, according to a new report.
The rosy future is painted by a McKinsey study which bases retailing principles around New Distribution Capability, One Order and dynamic offers.
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Various scenarios are laid out by which large airlines would make one-off investments in technology and reap varying levels of value through increased spend from consumers.
The majority of the value created (70%) is expected to come from additional revenues while the remaining 30% is anticipated from reduced costs.
These include:
- Global distribution companies become aggregators of NDC and airlines gain income from producing offers with more ancillaries. The scenario suggests a $3 billion investment by the industry and $15 billion in value.
- Large airlines become travel platforms catering for more elements of the customer journey with McKinsey estimating a $15 billion investment and $39 billion in value.
- Online intermediaries get bigger through consolidation and much better in terms of the consumer experience and distribute enhanced airline offers. This scenario estimates a $12 billion investment for $22 billion in value.
- Greenfield platforms, such as Amazon, become global retailing powerhouses which own the customer relationship. They use the data at their fingertips to create rich customer profiles with requests are sent to airlines to bundle enhanced offers. The scenarios suggests an investment of $12 billion and $17 billion in value.
The report notes that “investment is based on a five-year increase above existing IT spend as a percentage of revenue for airlines investing in major IT architecture.”
It also goes on to note the major sources where value would be created, including new offers, enhanced revenue management and optimizing the distribution mix.
The report allows for different carriers developing at different speeds as well as the maturity of markets.
It’s worth noting that total airline ancillary revenue is predicted to hit $109.5 billion in 2019, up 18% on 2018, according to the latest CarTrawler Ancillary Revenue report.