Ancillary Revenue: A Win-Win for Your Guests And Your AirlineOctober 7th, 2016

Rustom BirdieAncillary Products Manager, Virgin America

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Agenda

• Ancillary 101

• The Virgin America Story

• The Future of Airline Ancillary Revenue

• Five Key Learnings

First, A Bit More About Me

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• Originally from Karachi, Pakistan

• UCLA 2012 (B.A., Economics and B.A., Human Biology)

• L.E.K. Consulting (management consultant with focus on Aviation & Travel practice)

• Virgin America since April 2015

• If you find this talk interesting, connect with me!

@zebirdman

wwww.rustombirdie.com

@zebirdman

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Agenda

• Ancillary 101

• The Virgin America Story

• The Future of Airline Ancillary Revenue

• Five Key Learnings

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The Virtuous Cycle of Ancillary Strategy

Better

merchandized

offers

Enhanced

choices for

guests

Capture

guest

preferences

Higher

customer

satisfaction

Ability to

reinvest in the

product

Improved

competitive

positioning

Increased

brand loyalty

More high-margin

revenue for VX

YOUR

BRAND

Ancillary 101

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Example Ancillary Strategy Roll-out

Build a platform to drive

consumption &

acceptance

Change the customer

mindset through effective

merchandizing

Better merchandize

existing optional

services

Focus on new high-

value “no regrets”

ancillary options

Near-term ‘core’ of ancillary options

Fully merchandized

‘core’ suite of

ancillary options

Growing set of

guest vetted

ancillary options

Long-term ‘portfolio’ of ancillary options

Over time, develop and

test additional options

New concepts

Ancillary 101

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What’s Holding Us Back?

Ancillary 101

No standardized unit of measure

(Lack of) Organizational Design

Technology Investment

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3

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Agenda

• Ancillary 101

• The Virgin America Story

• The Future of Airline Ancillary Revenue

• Key Learnings

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Express: A Successful Ancillary Bundle

The Virgin America Story

Express

Priority

Security &

Boarding

Preferred

Seat

Selection

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But We Saw An Opportunity to Further Maximize Revenue

While Addressing Growing Guests Needs

The Virgin America Story

Want ability to choose either only

seat or priority access

“I’m willing to pay a bit more for a

window seat on my red eye”

“I hate having to pay last minute

change fees”

Unbundle

Charge for seat assignment

Create a new change / insurance

product

Guest Needs VX Opportunity

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Thus We Replaced Express With A Suite of Unbundled Products

The Virgin America Story

Express

Priority security &

Boarding

+

Seat

Selection

Priority

Security &

Boarding

Preferred

Seat

Selection

OR

Before After

Priority

Security &

Boarding

Preferred

Seat

Selection

Plans

Change

Pass

Checked

Bags

A La Carte Bundle

Denotes free benefit for Elevate Gold & Silvers

Power Trip

(30-50%

savings)

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These Products are Sold in the Booking Flow, Only on our Website

The Virgin America Story

Flight

Selection

Seat

SelectionPayment

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Power Trip: Bundle For Business Guests, Ensuring Upsell & Limiting Dilution

The Virgin America Story

Clear message

of savings

(% or $)

Bulleted, concise

list of benefits

Bundle more popular than a la carte products!

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Priority Security & Boarding: Why Do Guests Want to Board Early?

The Virgin America Story

$19 vs. $20

Easy selection for each flight

Convincing messaging makes

significant change in up-take

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Checked Bags: How Can We Incentivize More Guests To Check Their Bag?

The Virgin America Story

Discount to

encourage pre-sales

More incentives to test:

(1) Time guarantee

(2) Bag Valet

Convincing messaging makes

significant change in up-take

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Plans Change Pass: Unique Product That Improves Competitive Advantage

The Virgin America Story

Convincing messaging makes

significant change in up-take

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Preferred Seats: How Much To Charge & For How Many Seats?

The Virgin America Story

Free

middle seat

in

discounted

back zoneHigher

priced front

zone

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Agenda

• Ancillary 101

• The Virgin America Story

• The Future of Airline Ancillary Revenue

• Key Learnings

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Ancillary Fees Are Not Limited to LCCs Anymore

The Future of Airline Ancillary Revenue

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Next Big Opportunity? Personalize the Inflight Experience

The Future of Airline Ancillary Revenue

• Why do we offer the same content

regardless of who’s eyes are looking?

• Using a FFP sign-in and dynamic retailer

products, we can personalize the IFE

experience

- Opportunity to push offers for F&B,

wifi, destination events, etc.

• Needs: IFE technology and omni-channel

database of customer purchase behavior

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Next Big Opportunity? Improve Merchandizing of Existing Products

The Future of Airline Ancillary Revenue

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Agenda

• Ancillary 101

• The Virgin America Story

• The Future of Ancillary Revenue @ Airlines

• Key Learnings

Key Takeaways From Today

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1. Merchandizing is key – hold your guests’ hand

- Right product, at the right price, at the right place, to the right person, at the right time

2. Be Nimble, Be Flexible

- Ability to make quick changes and create at least three customer segments

3. Unbundling can provide revenue upside, but guardrail yourself from dilution risk

4. Align ancillary strategy to support channel, distribution, and marketing goals

5. Create a truly cross-functional team

Five Key Learnings

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Agenda

THANK YOU!

Rustom BirdieAncillary Products Manager, Virgin America

@zebirdman

wwww.rustombirdie.com

@zebirdman