Digitising duty free to boost airline revenue | Bangkok Post: tech

With margins being squeezed tighter and tighter, and low-cost, no-frills carriers on the rise, airlines are having to find new ways of generating revenue. One avenue is duty free sales and Guest-Logix offers solutions for airlines and trains to tap into their captive audience and monetise them.

GuestLogix Asia Pacific head John Devins.

John Devins, who heads up Asia-Pacific for GuestLogix, explained how more airlines across the globe are turning to his company to help boost sales and manage the in-flight store now that margins are thinner than ever.

GuestLogix is a Toronto-based company and its core business began in providing systems for airlines to process sales and payments on board. Now, it has grown into providing systems for the actual on-board stores on aircraft or trains.

Airlines are all challenged with meeting revenue goals. Seat prices are very competitive. Travellers on a plane are a lucrative demographic and they are captive for anything up to 12 hours or so for an intercontinental flight.

Duty free has traditionally been generic. A bottle of Chanel No. 5 is the same anywhere. What GuestLogix has done is taken duty free to a new level and now offers six categories.

First is ground transportation. When people go somewhere on a plane, their purpose is not to visit only the destination airport, so there is the opportunity to take a train, bus or taxi into town. For instance, American Airlines flying into Heathrow sells Heathrow Express train tickets through GuestLogix.

Second are local attractions. For example, people flying into Orlando, Florida, can buy tickets to Disneyland on board many flights and the company is working to sign up more partners around the globe.

Third is telecommunications. On some flights you can now buy cellphones, Sim cards and calling credit for the country you are landing in.

Fourth is the option for on-board shopping with home delivery. This allows airlines to sell bottled wines or spirits or other high value or bulky items.

Fifth is what it calls "Travel Buddy", a paid-for SMS service with alerts and information of the city for the time you in a country.

Finally, GuestLogix sells advertising space. For instance, flights landing in Singapore could see Tang's department store ads printed on every receipt printed from the system. Because of the demographics and the targeted market, this type of advertising can make up quite a bit of revenue for the airline.

By accepting credit cards instead of cash, studies have shown that sales rise by up to 25 percent and ticketing sales double. The system has safeguards so that shrinkage of both cash and products is down by 40 percent. Shrinkage is an industry term for stealing.

Currently, virtually every airline in North America has at least piloted Guest-Logix systems and many are rolling it out across their fleet. In the Asia-Pacific region, the key markets are Australia, Singapore, Hong Kong and China.

"I would dearly love to work with Thai Airways," added Devins.

Technically, the system consists of a back-end database and handheld devices. Data is transferred to the handheld and sales are uploaded once the plane lands.

Integration with in-flight entertainment systems is difficult as one airline has multiple systems in place, but Guest-Logix is working with British Airways on this for some of its planes. There is also the security aspect as credit card companies require a dedicated device that can carry out encryption in order to capture credit card data.

Looking into the future, GuestLogix is waiting for the day of affordable communications. It is doing a pilot project with a train customer. Currently all tickets sold are general admission tickets. An online system would allow the system to sell hotel rooms and rental cars. It all boils down to cost as the economics of satellite communication while airborne become cheaper and cheaper. Devin says he expects a tremendous variety of permutations and services to be available once flights are online.

In-flight duty free sales currently have a fraud rate of between 1 to 1.5 percent, slightly higher than usual retail but still manageable. But it is because of the difficulty and cost of checking credit card information that many airlines are forced to limit the amount of duty free sales per customer, or in some cases, offer home delivery, so that there is time to verify the card details first.

The economic crisis was a blessing in disguise. With many airlines operating marginally before the crisis hit, they were forced to find alternative ways of generating extra revenue and many turned to GuestLogix for help.

Asia still has many more full service airlines than North America, where these days almost everything is chargeable, including in some cases the use of overhead lockers. But even here, full service airlines such as Singapore or Qantas have created low-cost sister carriers. But all have the same common desire to generate revenue on-board. The difference is that budget flyers would want to buy tickets to full service theme parks, while full service flights might like to watch the opera instead.