US carrier Spirit Airlines is a global leader in producing non-ticket revenue, with ancillary revenues representing roughly 50% of its total revenue. The company has several initiatives under way to drive its non-ticket revenue up even further, and predicts 3% growth year-on-year in 2020 in its non-ticket revenue per passenger segment.
The non-ticket revenue per flight segment in 3Q2019 was USD55.37, a +1.7% increase year-on-year. For the 9M ending Sep-2019, the company’s-non-ticket revenue grew at a similar rate to USD55.58. Spirit projects its non-ticket revenue per flight segment basis should grow +1% to +2% in 4Q2019. For FY2019, its non-ticket revenue should range between USD56 and USD57, a sizeable increase from the airline’s 2016 performance.
Spirit has recently revamped its website and released a new version of its app. It now has push notifications live on its app, and expects to improve take rates on sales of its Big Front Seat extra legroom product soon, company chief commercial officer Matt Klein recently stated.
“…we finally got to a place where we feel like we’ve modernised a lot of where we are, and that gives us the ability to really start getting into the merchandising, and from an analytics perspective, what’s going on on the site”. Mr Klein concluded.
CHART – Spirit Airlines has recorded double-digit year-on-year growth every year of the current decadeSource: CAPA – Centre for Aviation
The improvements to Spirit’s website and app have been more than a year in the making as part of the airline’s goal of improving its merchandising and becoming more of an e-commerce company.
Unsurprisingly, Spirit’s goal is to drive as high of a conversion rate as it can from the revamped website. The airline is also in the final stages of placing new hotel and car content on the platform, which has also been a focus for the airline for most of 2019. Previously, Spirit executives have explained that the airline was making technology changes to its vacation packaging business as well as altering its content providers.
Once the new content is firmly in place, Spirit can focus on better merchandising its vacation packages. However, the airline has remarked it would take some time to determine when different customers shop for various destinations, and how to create the proper offer at the right time for a shopper.
Spirt has also been engaged in dynamically pricing its ancillary product offerings, which has taken hold in the US industry. But just how dynamic pricing works can be open to interpretation.
CHART – Spirit’s low-cost operation spreads to 73 points across North and Central America, but Florida’s is currently home to its largest network pointsSource: CAPA – Centre for Aviation and OAG (data: w/c 18-Nov-2019)
With respect to dynamically pricing bag fees, Mr Klein explained that “we’re not talking about individualising different price points for individual people, we’re talking about different kinds of price points based on the profile of a search request”.
For example, he explained a leisure customer planning a seven day trip purchasing a ticket three months out might have a different price point for bags than someone traveling on a quick weekend trip to Las Vegas. “We may have different price points and how we think about take rates on that,” said Mr Klein.
He remarked that Spirit was “getting into the weeds” with respect to how it refines its analytics. “There are a lot of new ways to analyse our data and bring in new thoughts around matching learning that can really help how we move forward,” Mr Klein concluded.