Airline Industry Overview
It is important for affiliates to have an understanding of the industry’s current state to efficiently promote. One of the most important changes occurred to the industry’s image. Before, flying on a plane was prestigious, as was being a pilot. Today, flying isn’t rare. Low-cost carriers have made it possible for people to travel on a budget, and the overall picture has changed. Here are more insights into the industry’s challenges:
- This is a market of high prices: fuel, maintenance, staff, computer systems and more. For example, the cost of an Airbus A320 is 100 million US dollars, so to generate income, the company has to operate more flights or keep the flight ticket cost high.
- There are strict regulations on everything from the pilot’s license to the noise that a plane engine produces. It ensures safety and hampers innovation at the same time.
- Flight tickets are getting cheaper, which decreases the profits of airlines and therefore affiliates commissions.
- Flights are available for everyone today, and most people choose a ticket depending on the flight price and schedule but not the airline. Instead of a luxury, flying has become a commodity.
- The industry is subject to shocks. Any drop in oil price or plane crash leads to airlines immediately losing profits.
- There is a mistrust of intermediaries.
- Another distinctive feature is the slowness of innovations.
- Finally, the airline industry negatively influences the environment with its carbon emissions.
Changes in the booking process
The booking process, along with the industry itself, has changed a lot. Your parents used to buy tickets through agencies, but internet access is all you need today. We can only imagine now what the booking process will be in a decade. Naturally, a simplified booking process influences the profits for airlines. To understand how it all works, let’s take a look at a so-called love (hate) triangle for airline ticket booking in the screen below.
There are three main participants:
- Airlines provide flights and set ticket prices.
- Online travel agencies (OTA) represent demand. OTAs take over some marketing costs for airlines, and in some countries (e.g. China) they represent up to 80% flight ticket sales.
- Global distribution systems (GDS) are responsible for processing transactions in real-time and connecting supply side and demand. There are three major players today: Amadeus, Sabre and TravelPort.
As the booking process changes, this established relationship among airlines, OTA and GDS starts to fall apart:
- Airlines don’t want to use the old distribution system and incentivize customers to buy tickets on their official websites by increasing the ticket price for booking through an OTA.
- Airlines are adopting a new retail focus to better present themselves to their customers.
- Companies develop a personalized approach to clients, offering real-time tailored deals in order to extinguish OTAs.
- Tech giants put on weight. Google is a major business partner of most online travel agencies and their threat at the same time.
- Meta-search engines who reinvent themselves and adopt new business approaches, just like OTAs.
- Regulators can interfere and ban innovation, like NDC for instance. Google and Facebook might also become regulators.
Kiwi.com was founded in 2012 as Skypicker. The affiliate program available on Travelpayouts has a 3% CPA, which is higher than the average rate.
What makes Kiwi.com different from competitors is the virtual interlining feature allowing you to connect flights of different airlines in one booking. Thus, providing almost unlimited flight combinations. In the screen below, you can see an example of a flight ticket with virtual interlining, comprising flights from Adana to Antalya and from Antalya to Prague.
The Kiwi.com guarantee eases the typical worry about connections. If you’re late for your second flight, the company will reimburse your ticket or offer an alternative flight.
Naturally, Kiwi.com is not the only innovator in this niche. There are even more companies with great ideas:
- Skiplagged shows hidden rates, which is especially useful in the United States. For example, if you want to fly from New York to Atlanta, it might be cheaper to buy a ticket from New York to Los Angeles via Atlanta and skip the second flight rather than flying directly to Atlanta.
- Omio compares prices for flight, railway and bus tickets in Europe. For instance, if you want to go from London to Paris, you can check various transportation modes and choose the option that suits you better with Omio.
- Rome2Rio allows you to find the best way to get from point A to point B, which is similar to Google maps.
- Hopper predicts flight ticket prices with the help of artificial intelligence (AI).
- Hipmunk is a meta-search engine that has gained popularity over the past few years. It filters flights from the perspective of both pricing and convenience for passengers.
Predictions for Airline Industry Development
- Amazon, Google, Facebook will become major players in the travel niche in the future.
- Airline consolidation will continue to grow, especially in Europe. For instance, 2019 saw Premier Air, WOW air and Thomas Cook disappear.
- Meta-search engines and OTAs will converge, or meta searches may even replace OTAs.
- Airlines will revolutionize their brands, expanding their range of services.
- Premium options will gain popularity. For instance, Emirates has recently unbundled their class fares, allowing passengers to choose the services that they need and not pay for the whole set of services
- GDS and NDC will fight over the leadership, which can either work to the advantage of the airlines or fragment the market.
- We can see “air taxis,” hyperloop and the return of Mach 2.
Here is what affiliates might face:
- Airlines will disappear along with their affiliate programs, which results in affiliates losing their commission. To avoid this risk, it is important to follow the news in the niche.
- Acquiring traffic will become more expensive, while organic traffic won’t suffice.
- Brands will evaluate affiliates on customer lifetime value in addition to sales.
- New affiliate payout models will appear, while last-click conversion won’t be used anymore.
- Companies will expect affiliates to develop their brand rather than just bring sales. Affiliates will become marketing partners.
- There will be diversification of commissions and higher reward on bundles, as companies start offering a package of services.
- Affiliates will be expected to take a more personalized approach or at least segment offers.
- More commercial opportunities for affiliates will show up.
Many successful affiliate partners of Kiwi.com are blogs featuring travel deals from different countries. They publish lucrative flight offers on a daily basis, which helps Kiwi.com associate with low-cost carriers and great promotions.
Here are some more detailed examples:
- Weather2travel is an affiliate from the United Kingdom. This blog offers suggestions on where to go on holidays to find good weather.
- Jack’s Flight Club is a subscription service, which is a unique business model. You subscribe to the website and regularly receive newsletters with the best flight deals.
- FlightConnections shows a map with direct flights all over the world. This website features decent traffic.
- Turning left for less is a website with business-class deals.
- The Points Guy offers tips on how to collect air miles to fly business class for free.
- KelBillet is a French website, which was a platform for reselling train tickets first, because in France you can resell your train ticket. You can also buy flights or bus tickets or catch a ride there.
Here are some more ideas for affiliates:
- Travel-only cashback websites allow you to get more premium commissions.
- The business and first-class flight deals segment has good potential as companies unbundle their class fares for people who are ready to pay more for a great deal.
- The ancillaries segment includes all services besides the seat on a plane, for example, priority pass, lounge access, etc.
- Websites about environmentally-friendly travel offer alternatives to flying, for example, bus or train tickets for those who are conscious about the environmental impact.
- Selling dreams and not just products by creating inspirational travel content, which is what influencers do today.
- Websites with natural language search. For example, on Zaptravel you can type “I want to go on a holiday and go surfing,” and it will match with a holiday package.
- Flights and holiday gifting. Buy tickets or a hotel stay as a present.
- Travel tips and advice. For example, the British website Money Saving Expert shares best practices on how to travel on a budget.
- Boost sales with the help of on-site CR optimization partners.
- Niche-specific websites that target a particular group of customers rather than everyone. For example, journeys to holy sites, trips for seniors, etc.
Promoting products with the help of influencers is an increasingly popular marketing strategy. More and more companies have started allocating budget to influencers and brand ambassadors.
However, there are some issues, like how to measure campaign success for example. The main platforms for influencers are Facebook and YouTube, but other websites like TikTok, Pinterest or Snapchat present fresh opportunities. It might be a great idea for those who use social media.
Among Kiwi.com’s affiliates, there are many cashback websites. The European market, Great Britain in particular, shows that cashback models converge.
For example, cashback websites and vouchers, cashback and content, etc. Using a comprehensive approach is crucial for the whole industry, as it allows you to not only boost sales but also grow brand awareness.
- The airline industry is actively changing which has a direct impact on affiliates. Remember to follow the news to be aware of the current situation.
- Pay attention to company development strategies. For example, if an airline focuses on creating brand equity, think of the ways you can help achieve this goal to grow as an affiliate.
- The biggest opportunities are now with ancillaries, for instance, priority pass and lounge access, as well as integrated transport.
- There are an infinite number of ways to make money on flight tickets, you just need to scratch beneath the surface.
- Analyze the niche and target audience. People will always travel, so you need to have a good understanding of your potential clients goals and pain points to be able to address them properly and find new growth opportunities.