- On September 18, 2018
The expansion of low cost activity in Latin America has prompted the region’s major carriers to adopt new pricing models very similar to the tiered fare structures implemented by their US counterparts. They are engaging in product unbundling of non core services in selected markets, while retaining essential components such as loyalty programs, premium seating and free in flight entertainment in the bundled product. It is a form of price discrimination aimed at segmenting the market according to customers’ willingness to pay, thereby maximising the potential revenue. But the success of the strategy hinges on carriers’ willingness or ability to cut non fuel unit costs – for example by lowering distribution and airport costs and increasing aircraft utilisation – and how effective they are in educating passengers on the ancillary model.
- Where are Latin American carriers in this process, and what is the reception for product unbundling in Latin America?
- Is the merchandising and sales capability at an optimal standard to enable proper product unbundling?
- Is product unbundling sustainable in the long term?
- Have the network carriers been able to achieve any corresponding reduction in unit costs?
- Do passengers understand the product attributes, or lack thereof, associated with tiered fares?
- What are the expected ancillary revenue gains given the historically low penetration rate of ancillary sales in the region?
Moderator: Oliver Wyman, Partner, Scot Hornick
- Amadeus, VP Airline Commercial, Victoria Huertas
- LATAM Airlines Colombia, CEO, Santiago Alvarez
- Lufthansa Group, VP Airline Sales, The Americas, Tamur Goudarzi Pour
- Plusgrade, VP Business Development, Mike King