Stanley Lim Peir Shenq, CFA    January 19, 2017

The budget airline industry in Southeast Asia is one of the most vibrant industries in the reigon. Due to the geographical landscape of Southeast Asia and its fast-growing population, budget airlines have been growing very quickly over the past decade.

It may be easy to lump budget airlines with full-service carriers into a homogeneous group. But, budget airlines actually have a business model that’s different. Most budget airlines, such as AirAsia Berhad (KLSE:5099.KL) or Singapore Airlines Ltd’s (SGX: C6L) Scoot, focus on selling seats on a plane with the bare minimum services while trying to upsell to passengers to earn auxiliary income.

I think AirAsia can be considered as one of the more innovative airlines when it comes to finding more avenues for auxiliary income. Here are three trends that I have observed over the past few years on how budget airlines have been trying to increase their auxiliary income.

Advertising space

Some budget airlines have been attempting to grow their business by selling space for advertising.

For example, besides the traditional advertising found in their in-flight magazines, some budget airlines have been selling advertising slots inside their aircraft, on their aircraft, and even on their annual reports. This is a way for the budget airlines to take advantage of the attention they can capture from the millions of passengers they fly each year.

Entertainment

In-flight entertainment is something most full-service airlines provide on their flights at no additional cost for their passengers. But it’s not the same for budget airlines. Some budget airlines have started to earn auxiliary income by providing optional in-flight entertainment services.

Online duty-free shopping and merchandising  

If you’ve been on flights, you’d notice the traditional way that duty-free and merchandise sales are done in an aircraft: Stewards and stewardesses will be pushing shopping carts up and down the aisle of an aircraft at certain times. That’s not very effective.

What some budget airlines are starting to do is to offer online portals from which passengers can pre-order items and collect them onboard flights. There may be even more innovation done the line in terms of how budget airlines try to increase duty-free and merchandise sales.

https://www.fool.sg/2017/01/19/3-trends-happening-in-the-budget-airline-industry-investors-should-know/