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ANCILLARY:
Leading the Broadband Wagon
In 2014, AirAsia created a first in Malaysia
by making wifi available on board our
flights. Today, others have joined the
bandwagon, but we still maintain our lead
by having the most aircraft – 45 – that
offer the service. Using it, guests can
browse the web, connect with others via
social media, email and chat. They can
also access films, music, news and games.
On top of that, they get to enjoy exclusive
inflight shopping deals.
When it was launched, ROKKI was a
coup for AirAsia. Not only was it the first
for an airline in the country, it had also
been developed in-house. There were,
however, certain speed and bandwidth
limitations, and in 2017 these were
addressed. In September, we signed a
deal with Inmarsat Aviation which will
see GX Aviation high-speed broadband
installed in more than 120 of the Group’s
aircraft starting 2018. Our memorandum of
understanding (MoU) marks yet another
industry milestone; it is one of the largest
orders for high-speed broadband service
by any airline in the world.
ROKKI, as our wifi and inflight
entertainment service is called, is one of
the many ancillary offerings we present to
guests to enhance their flying experience.
While providing them ‘fringe benefits’,
these services also represent a significant
additional revenue stream for us, one
moreover that grows with every passing
year. In 2017, ancillary made up RM1.93
billion of AirAsia Berhad’s
1
revenue,
accounting for 20% of the total. Revenue
from ROKKI itself grew by 137% year on
year, from RM503,000 to RM1.2 million.
The biggest ancillary contributor, however,
continues to be baggage allowance.
Baggage has always represented a
major source of revenue, and in 2017
its contribution was enhanced even
further following the implementation of
a dynamic pricing mechanism. Under the
new system, we increased the number
of pricing tiers from 15 to 45 in April,
and upped it again to 60 in October. The
pricing mechanism now is more sensitive
than before to route demand and the
time of booking, with earlier pre-booked
baggage allowance commanding a lower
price. With the new mechanism, revenue
per guest from baggage increased 9% to
RM27.
A similar dynamic pricing mechanism
was also implemented for seat selection,
increasing the number of tiers from 25
to 70 with more seat row groupings. This
contributed to an 11% increase in revenue
per guest to RM4.50. Recognising the
value of dynamic pricing, we are currently
in talks with a couple of leading vendors
with technologies geared specifically for
airline ticket and ancillary pricing.
While pricing is a key concern of our
ancillary team, much focus is also trained
on the continuous innovation of products
and services we offer to increase their
take-up by guests.
Among the innovative services that
have caught our guests’ attention is
Fly-Thru, which allows them to connect
seamlessly from one AirAsia flight onto
another. Fly-Thru traffic increased by
37% year-on-year in 2017 to 3.01 million
guests. We now offer 1,845 city pair
connections, adding 497 pairs during
the year itself. Although Fly-Thru is
an important source of revenue, it also
forms a critical component of our overall
expansion strategy, as it allows us to link
two separate flights within the Group,
either short-haul – short-haul or short-
haul – long-haul, to effectively create ‘tag
1
AirAsia Berhad’s financials comprise the consolidated AOCs, namely AirAsia Malaysia, AirAsia Indonesia and AirAsia Philippines.
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AirAsia Group Berhad
BUSINESS REVIEW
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