A REVIEW OF ANCILLARY SERVICES IMPLEMENTATION IN THE REVENUE MANAGEMENT SYSTEMS

Abstract

Ancillary services in air transport represent a set of services provided to passengers to choose from, enabling them to enhance their travel experience while accumulating additional airline revenue. Low-cost airlines pioneered the practice, but the separation of ancillary services from the basic service has become an intensely growing trend in the air transport industry over the last decade. This practice has enabled low-cost airlines to significantly reduce the price of the basic service. To remain competitive in an era of transparency provided by search engines, traditional airlines offer ancillary services in addition to the basic service. To meet the passenger’s needs, a whole range of ancillary services has been created. However, existing revenue management systems do not take this ancillary revenue into account when calculating reservation limits. If the airline knew that an individual passenger is willing to pay more for ancillary services, the system would be able to adjust the availability of the service for that passenger during the booking process. A review of research on passengers’ willingness to pay for ancillary services is presented in the paper, as well as a review on research on the personalisation of ancillary services and challenges of integrating personalised pricing into existing revenue management systems.