LCCs shoring up ancillary revenues

As Indian low-cost carriers (LCCs) try to fight increasing losses, they are making a renewed effort to shore up their ancillary revenues.
So, you have a SpiceJet or GoAir trying to bundle you travel insurance with an air ticket or Air Deccan mining its customer base to cross-sell third-party medical insurance to its customers.
Airlines earn ancillary revenues from freight, sale of food, drinks and gifts onboard, sale of travel insurance, hotel rooms and car rentals, through frequent flier programmes, and by trying to cross-sell other products like credit cards and medical insurance. Globally, airlines make 4-5 per cent of their revenues from ancillary sources.
These ancillary services allow the airlines to offer the lowest possible fare, encouraging people who want the so-called extras to pay for them.
Taking a cue from SpiceJet's offering of a travel insurance product, GoAir on Monday unveiled its travel insurance product in alliance with Tata-AIG, which offers to insure passengers against trip cancellations, baggage loss and flight delays, besides loss of life and medical reimbursement, all for Rs 129 or $3. Simplify Deccan, which sells hotels and car rentals and space in its in-flight
magazine, is trying to mine its customer database and sell medical insurance scheme of third-party companies.
11/03/08 Ranju Sarkar/Business Standard

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Categories: Low Cost General Mar 2008