What makes your flight unique?

Konstantīns Samoilovs has worked at airBaltic for the past decade. With a short detour in the middle, he’s been part of the airline’s revenue management team tending to ancillary services, which are considered an à la carte menu in the airline business to tailor very personalised journeys for passengers. But ancillary services are also a very important revenue stream for airlines, making up almost ten percent of all revenue. Samoilovs emphasises that the main task still remains to create products that are interesting and appealing for passengers in order to make their journeys as comfortable as possible.

First, could you briefly describe what your area of responsibility is at airBaltic?

As my position describes it, I’m the ancillary revenue project manager, which comprises my duty to tend to revenue from ancillary products. So, I observe how these products perform together and how they can be improved, if necessary. On the other hand, I’m also involved in developing new revenue streams related to ancillary products, from initial ideas to the realisation of projects.

When we speak about ancillary services, it should be stressed that this is an airline revenue generation source that differs from ticket revenues. We’re talking about all the products we do not sell as part of the ticket, but which we offer passengers when they buy their ticket or later on, closer to the time of their departure. These are the opportunities to personalise and make their journey as enjoyable as possible, from seat reservations, checked baggage, and the sale of food to the possibility of renting a car, booking a hotel, or maybe even booking an excursion at their final destination.

In total, I manage around 50 products. Of course, there are other departments that help to actually provide these services, but we work to create products that appeal to passengers, as well as offer them at prices they are willing to pay. For example, the fare for a Business class ticket already includes some of our ancillary products, so it’s important for us to find and offer additional services that are not included. Maybe insurance, maybe a hotel and car.

Ancillary products are an extremely important part of the aviation business in general.

Not only important, but also essential and integral. Because passengers no longer just want to board the plane at point A and get off at point B; they also need to take luggage with them, maybe they want to reserve a comfortable seat for themselves, and they also want to eat in-flight, or perhaps travel somewhere with their pet. Animal transportation is one of our ancillary products. Another department is responsible for ensuring that the carriage rules are strictly observed, but we set the offer and the price.

Does the price depend on how far away the destination is?

On the one hand, pricing depends on distance. That’s especially true of prices for baggage, because planes to more distant destinations consume more fuel, and the number of bags also affects the amount of fuel needed. On the other hand, pricing is quite a complicated process – sometimes it reminds me of sudoku (laughs). We price based on distance, market conditions, route and product portfolio, competition, and also according to various channels. There’s one price for those who buy a piece of checked baggage on our website at the same time as they buy a ticket, while another price might be for those who buy their tickets from travel agencies, and yet another price for when the customer has already bought a ticket and receives an offer later by email to add checked baggage. At the airport, the price is again different.

But even in this sense, airBaltic is using innovative approaches, including AI.

Yes, two months ago we launched a new pricing system precisely for reserved seats. We have six seat-price categories. For example, passengers who want to sit at the front pay more, and seats with more legroom are the most expensive because they’re more comfortable. Seats at the back of the plane are priced the lowest. This is called rule-based pricing, and the prices are based solely on the distance of the flight.

But we’ve now introduced an AI system that takes even more factors into account when setting prices, such as when a flight departs, how many passengers have reservations, and what the demand for seats on that particular flight is. The system collects data on demand and the willingness of passengers to pay, and the next day it proposes a new price based on these factors. It’s even conceivable that a different price could be offered every day for a certain price category of seats.

Does that make your job easier?

Of course, manual work has been greatly reduced, because the system itself now determines the price to offer according to demand. But initially, we needed to define the basic criteria for how the system should work. Now it’s just a matter of adjusting the criteria, for example, by defining a pricing scale from minimum to maximum on which the system will operate, or by guiding it into the right direction. One could, of course, set a maximum price of EUR 1000 for a specific seat and the system would start at EUR 1000, but then there would be no sales and we’d lose a lot of potential income while the system adjusts. So we have to define from the outset what outcome we expect from it.

We’re currently testing and seeing what the results might be, and at the moment they’re very promising. We’re seeing an increase on certain flights, and we’ve also discovered some very interesting things in relation to our passengers’ preferences. If indeed we see an increase in revenue after three months, we’ll also introduce this system for the pricing of baggage, special equipment, and heavy hand baggage, thus covering our largest product categories.

You mentioned interesting findings. Can you share some of them?

Well, there are passengers who are willing to pay more to reserve a particular seat on the plane than they paid for the ticket itself. That was a big surprise to me, even having worked in aviation for so many years and also having studied consumer behaviour trends. For example, someone who has paid EUR 30 for a ticket is prepared to pay EUR 40 or even EUR 50 for a particular seat. Of course, there aren’t very many people like that, but there is a category of passengers for whom certain products are very important.

So, the system has every chance of adapting to these passengers and offering them exactly the price they’re willing to pay. This relates to one of the basic fundamental principles of revenue management: offering the right price at the right time to the right customer. And, I would add, through the right channel.

Each number tells a story; you just have to know how to interpret it.

I agree. Numbers can always tell a story very accurately and give an objective assessment of the big picture. We then observe whether the data are the same as yesterday, or whether they’re better or worse than yesterday. And we always have to find out why. If there’s an increase in revenue, we need to understand why people are starting to buy more. Likewise, we need to understand why they’re not buying anymore, even if we’ve reduced the price. By understanding these patterns, we can design both the pricing structures and the product offering as well as make improvements to our products.

This is probably the last chance to refer to and compare situations with the pre-pandemic period, because a new era has in fact begun. So, what has changed in people’s buying habits in terms of ancillary products compared to before the pandemic?

One very interesting revelation for us was that right after the pandemic, people started travelling with pets a lot more because, apparently, that was a time when they acquired more pets. This just confirms that the whole aviation industry, as well as our own company, is closely linked to global societal processes which, in turn, impact our offer because people’s habits lead to a particular range of products. In addition, we observe not only our competitors in aviation, but also the sales and hospitality industry as a whole, following trends accordingly and introducing new ones ourselves.

Do you have any new, interesting products in the pipeline?

Yes, definitely. We’re always thinking about new products and looking at different options.

In the nearest future, we can expect to see upgrading to Business class via bidding. That’s in addition to other Business class upgrade options via our website during check in or at the airport before the flight. Through a bidding process, a passenger will be able to bid for a seat in Business class, and the highest bidder or bidders will get them. Gamification is one of the elements through which we can attract passengers’ attention, and besides, passengers like to be involved.

What are the products do you choose when travelling with airBaltic?

I’m a foodie. I love to eat delicious food, so I always pre-order food for the flight – that’s a must for me. Seat selection is not that important for me, but I like to get through the security check quickly, so I use the fast-track service to avoid queuing. I also really enjoy the time I have at the airport before a flight, browsing the duty-free shops, having a cup of coffee in a café. It’s a ritual for me. Even though we travel a lot, I still like to make every trip unique.