Annual Report 2020

Business Review In 2021, AirAsia Philippines will continue to support all efforts to stimulate domestic travel by opening more routes in line with demand. Firm in the belief that innovation and collaboration will be key in the new normal, the team will strengthen its internal and external engagement to enhance efficiency and productivity as well as to come up with new ideas and strategies for solutions that benefit everyone. AIRLINE ANCILLARY Ancillary forms an important source of revenue for AirAsia and is something we have been working on conscientiously over the last few years. Using data and machine learning to better understand our guests’ behaviours/preferences, we are able to engage with them on a more personal basis via online channels to encourage maximum take up of the products and services offered. Digital tools have also enabled us to significantly enhance our product/service innovations and to develop dynamic pricing to match demand. This, in turn, has resulted in steady improvement in our total airline ancillary revenue as well as revenue per passenger (RPP). In 2020, however, the 74% drop in total number of guests who travelled with AirAsia meant a reduction in ancillary income. This was further exacerbated by restrictions on in-flight sales, affecting the take-up of items such as food & beverage (F&B), duty-free and merchandise. For the year, we achieved total ancillary revenue of RM128.6 million, which was significantly less than the RM2.1 billion in 2019. As always, the top ancillary performers were Baggage (which accounted for 47.4% of the total), Fees (29.2%) and Pick-A-Seat (12.7%). Pick-A-Seat With Pick-A-Seat, guests are able to choose their seats when booking their flights to ensure they get their preferred window or aisle seat, for example, or to be able to sit with their travel companions. Seat selection was the best performing ancillary offering, its RPP and take-up rate dropping only 6% and 11% respectively year on year. Revenue outperformed the take-up rate due to the application of a revamped dynamic pricing strategy by our airlines in Malaysia, Thailand and Indonesia. Initial A/B (or split) testing on the new system predicts an RPP uplift of 13%. Baggage Guests are required to pay a fee for checked-in baggage. As with seats, we implemented a revamped dynamic pricing model for baggage in our Malaysian, Thai and Indonesian operations, which produced an RPP uplift of 14% in A/B testing. This has been further supplemented by a Baggage Recommendation Engine which automatically recommends the most suitable baggage option for the guest. The upselling strategy has been shown to enhance RPP by 18%. We also established a retargeting framework incorporating data science capabilities to deliver personalised offers based on guests' profiles. The initial pilot showed a 13% uplift in conversion for guests who are likely to pay for baggage but have yet to make a purchase. In addition, we introduced two new baggage services. Xpress Baggage, launched on 15 June, ensures guests’ baggage appears before the others at destination airports. This service is currently available for travel to Australia, Bangladesh, Cambodia, China, Macau, Malaysia, Myanmar, Singapore, South Korea, Sri Lanka, Taiwan, Vietnam and the US. Meanwhile, Xtra Carry-on, introduced on 8 December, allows guests to carry an additional 7kg of cabin baggage on top of the free 7kg allowance. The facility is offered for travel to Bangladesh, Cambodia, China, Japan, Hong Kong, Laos, Macau, Malaysia, Maldives, Myanmar, the Philippines, Singapore, Taiwan and Vietnam. 78 AIRASIA GROUP BERHAD