Airline retailing remains constrained by legacy systems

Ancillary revenues are growing, but many airlines still lack the infrastructure needed to operate like modern retailers

Airlines continue to push ancillary revenues higher as fuel costs and economic pressures weigh on already thin profit margins. Yet despite years of discussion around “modern retailing,” many carriers remain constrained by legacy passenger service systems, fragmented technology environments and slow implementation cycles. Industry research suggests that airlines increasingly understand the commercial importance of personalized offers, dynamic pricing and bundled products, but operational limitations continue to slow progress. The findings highlight a widening gap between retailing ambition and actual execution across airline distribution and servicing systems.

Key takeaways

• Fuel costs are accelerating retailing pressure: Airlines are increasingly relying on baggage fees, ancillary charges and fare increases to offset rising fuel expenses and protect profitability.
• Legacy systems remain the biggest obstacle: Many carriers still depend on infrastructure built around traditional airline booking concepts such as PNRs and fare filing systems, limiting their ability to offer flexible and personalized retail products.
• Operational servicing is still weak: Large portions of airline channels struggle to handle changes, cancellations and refunds for ancillary products, exposing significant gaps in the customer servicing experience.
• Airlines feel dependent on technology vendors: Respondents frequently cited fragmented systems and reliance on legacy technology providers as barriers to innovation and faster retail transformation.
• Ancillary revenue has become strategically important: Global ancillary revenue reached nearly $150 billion in 2024 and can account for up to 20% of annual airline revenue, reinforcing why carriers continue investing in retailing capabilities.
• NDC adoption remains mixed: While some airlines view IATA’s New Distribution Capability (NDC) positively, many respondents still believe the standard requires substantial improvement before it fully supports modern retailing ambitions.
• Order management adoption is still limited: Nearly 70% of surveyed airlines are not yet using an order management system, suggesting the industry is still early in building unified retailing infrastructure.
• Dynamic pricing and loyalty integration are advancing faster than AI: Airlines are actively deploying dynamic ancillary pricing, loyalty-based discounts and bundled offers, while AI-driven retailing capabilities such as Model Context Protocol (MCP) remain in very early stages.

Source: PhocusWire

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