No 2000/7 - Wednesday, November 15, 2000
|Online airline ticket sales are expected to soar in 2000|
producers, let's congratulate Delta.com
for its great online performance, the site just announced that its online
ticket sales alone would surpass $1 billion.
Judging from those figures, the airline company expects its total online sales to exceed $2 billion during 2001.
If Delta.com managed to reach such target, it would rank among the top world eTourism sites.
Delta.com has sold approximately two million tickets to date in 2000, which represents one ticket sold every 15 seconds.
You might also like to know that Delta.com welcomes an average of 110.000 unique visitors per day.
Last but not least, as far as customization is concerned, repeat visitors usually engage in six online sessions a month.
The situation is looking rosy for Southwest Airlines too since the company's net income increased by 45.1 percent during third quarter 2000 in comparison with third quarter 1999, even though there was a 27 percent increase in jet fuel prices.
The Southwest "Low Fare formula" also proved profitable since operating revenues increased by 19.7 percent compared to the previous year, and its net income more than doubled to reach $184.3 million, which represents $1.478 billion for third quarter 2000.
Two factors explain such good results: an online sales increase linked to a decrease in the commission rate perceived by travel agents. Indeed, for a 20% online sales increase, the corresponding increase for the commissions payable to the travel agents was no more than 5.8%
But the first rate Low Cost champion today appears to be Ryanair since its direct online bookings represent 90% of its sale. Please bear in mind that only eight months only, nearly 60% of its turnover was made through travel agents!
This online growth also enabled the company to reduce commissions payable to the travel agents from 7.5 percent to five percent.
The result of this online strategy is clear for Ryanair: a 45% rise in pre-tax profits in the six months to 30 September, to reach 63.4 euros.
None knows its competitor's results just yet but it is rumored that Easyjet's online results would represent 70% of its total sales.
Easyjet is already considering moving to an Internet-only-booking strategy, which would no longer allow customers to make a booking via their call center so that the staff could concentrate entirely on customer service.
Easyjet confirmed only a few days ago that it still was in the midst of its flotation in which it is seeking to raise $271 million in an initial public offering of new shares.
But let's not forget that at the same time the British Airways subsidiary "Low cost" was announcing a loss of £21.8 million for a total net income worth £100.6 million.
Cheaptickets.com just announced a 66% net profit increase for the last quarter of 2000, compared to the same period in 1999.
For the first nine months of 2000, Cheaptickets' revenues went up to $350 million when they were only $273 million for the same period last year. Net income for the first nine months was $11.5 million compared with $6.8 million for the same period in 1999.
Internet airline ticket bookings increased dramatically once more since Cheaptickets revealed a 58% increase for its Internet bookings over a year. Such figure should be compared to the total growth rate (online and offline) for the bookings made by Cheaptickets that was no more than 20% for the same period of time.
Internet bookings for Cheaptickets were $71.2 million for the third quarter of 2000.
And finally, let's not forget Hotwire.com which was the last to become part of the Low Cost actors, whose site is already launched and who intends on disturbing a little the other actors.
For the time being, Hotwire.com only offers flights departing or entering the States but some sites such as Travelocity.com and Expedia.com are already starting to be worried when they see the prices that are offered on the site.
Hotwire.com makes it clear that it aims at competing with those two sites since it does not hesitate to communicate the differences that exist between the prices proposed on its site for some itineraries and the ones offered by Travelocity and Expedia.
It goes without saying that those prices cannot be compared since it only concern the unsold tickets and not the usual public prices.
Nevertheless, Hotwire.com represents a real threat for Priceline.com and other Bargain Huntering sites.
In my opinion, Hotwire.com has got three major assets that might make it successful:
Even though in Europe, companies such as Air France that are not just yet engaged in a cut-throat Internet competition, keep on favoring traditional distribution channels, they should be careful since such situation will not last long and it is high time that the traditional European airline actors realize take the web distribution channel a bit more seriously.
Fast success such as the one achieved by Ryanair and Easyjet may seem ridiculous to big entities such as Air France and yet the constant growth of their turnover and their benefits should prompt those big companies to imitate the online dynamism shown by their American airline cousin companies before it is too late.
We are faced here with the attitude of producers who are convinced that they can keep on controlling their distribution channels as they have always done, with or without Internet.
the fact that more and more customers are becoming customized on sites
that are not those of the traditional airline companies represents a major
risk of de-customization that should not be minimized too much