If seats become an effective point-of-sale, will airlines give passengers more room to shop in comfort?
Aviation and aerospace technology giant, Thales, and satellite communications giant, Inmarsat, have joined forces to take advantage of airlines’ connected services to introduce solutions aimed at increasing airline revenue through sales of ancillary services on in-flight entertainment (IFE) screens.
Thales’ AVANT in-flight entertainment (IFE) system’s smart menus, built on an Android-based platform, can sell premium entertainment content, in-flight meals, duty-free items, and travel services. Citing figures from GuestLogix, Thales argues that airlines could make millions using their seat-backs as the point of sale.
In 2013 ancillary revenue for international airlines represented $14.3 billion, GuestLogix has reported; with international carriers selling the most at 34.2% of the market, U.S. major airlines taking 33.7% of the market, and low-cost carriers 14.4%.
The remaining 17.6% (approx. $2.5bn) is divided between the top four ancillary revenue generating airlines: Air Arabia, Jetstar, Germanwings, and Spirit Airways—the so-called AR Champs. Ancillary revenues, Thales references GuestLogix figures again, “represented on average over 21% of revenues for the AR Champs.”
The ancillary revenue streams are broken down into five distinct sources:
- Excess baggage: 15%
- On-board Retail (including food where relevant): 15%
- Travel retail (car hire, hotel insurance, etc): 30%
- Other à la carte services: 10%
- Sale of extra miles: 30%
Baggage fees can only be purchased prior to departure, but Thales says the remaining ancillary revenue streams can be offered in-flight using its IFE as the point-of-sale. In part due to a lack of secure and appropriate payment methods for on-board payments, airlines have hesitated to expand their in-flight sales activities.
But previous concerns over cash-handling and credit card fraud are address by recent technology introductions, such as NFC payments, with live payment authorizations on connected aircraft.
Thales has also completed an agreement with Inmarsat to offer Ka-band internet speeds of up to 50Mbps, as a global value added reseller of Inmarsat’s GX Aviation connectivity solution. Connected IFE increases the range of entertainment and products airlines can sell on their IFE.
“Connectivity now forms part of every conversation we have with airlines about inflight entertainment,” said Dominique Giannoni, Thales Vice President and CEO of the In-flight Entertainment and Connectivity activities.
By selling on connected IFE screens, Thales argues, airlines can “break the barrier of the flight attendant model of revenue generation.” Passengers can scan a menu on their IFE screen point and click on what they want to buy and pay for it with their NFC-enabled smart card or smartphone. Thales estimates total revenue from IFE at $17.6m a year for small/mid-sized carriers, up to $397m a year for large carriers.
“By bundling all revenue-generating products into one package available on all its IFE systems,” the company indicates, “Thales is able to offer airlines a package, that will greatly enhance their product. Through partnership with GuestLogix, providers of the industry’s leading Payment Card Industry (PCI)-compliant payment application, Thales IFE can now offer the best payment protection in the market.”
GuestLogix’s payment application is reputed to “irreversibly encrypts credit card numbers and offloads all sales transactions to an airline’s selected payment gateway on the ground.” Enabling payments to take place in real-time when a satellite connection is available, and in offline mode with a ceiling limit and hotlist verification, says Thales, referencing information from GuestLogix in a presentation. “Because its more secure and more versatile, Thales can now open up a whole host of revenue streams to the airline.”
“We are very pleased to be working with GuestLogix as many of our airline customers are requiring financial transaction processing via our IFEC systems eliminating previous parallel transaction hardware and infrastructure. With the integration of the Guestlogix TPE, Thales TopSeries systems delivers financial transaction processing in a safe and secure manner as part of our functional baseline. The GuestLogix solution is a proven approach to satisfying market demand and we anticipate both airlines and their passengers will be comfortable using the secure, streamlined solution,” said John Darvell, VP of Systems Business Unit.
Thales is also the innovator behind the spooky eye-control IFE featured in the Business Class smart seat of tomorrow. Combining all these technologies, passengers could buy just by looking. Window shopping onboard could soon become an expensive in-flight diversion.
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Photo credit: 3-D Render of Tomorrow's Business Class Smart Seat. Thales