Toronto-based GuestLogix Inc. (TSX-V:GXI) a leading provider of on-board retail systems to the passenger travel industry, today provided its outlook for Q2 fiscal 2008 and commented on the impact of escalating fuel costs on its business. Despite the operating volatility experienced by its airline customers, resulting from record-high jet fuel prices, GuestLogix remains on track to report record revenues that will fall within analysts’ estimates for the second quarter which ended May 31, 2008.
“It’s obvious that airlines are going through tough times right now with the rise in fuel prices,” said Tom Douramakos, president and CEO at GuestLogix. “However, through the combination of our on-board retailing technology platform, merchandising programs and back office control system, we enable airlines to become effective retailers. This introduces new on-board revenue streams that help offset rising operating costs. We believe that the current industry challenges provide a growth opportunity for GuestLogix, and we continue to successfully execute our business plan to capture one billion passenger trips under contract by the end of 2008.”
GuestLogix has signed some of the biggest names in the airline industry, such as American, Delta, and Ryanair . It has captured more than 50% of the passenger trips represented by the top 20 airlines in North America. The Company has deployed its proprietary Mobile Virtual Store(TM) technology platform to support 200 million passenger trips among airlines and has a backlog of 400 million passenger trips, which the company expects to have fully deployed by the end of the summer travel season.
High fuel prices have forced airline operators to begin upgrading their old fleets more rapidly with newer, more fuel-efficient planes, as well as adopt on-board retail programs incorporating the sale of snacks, non-alcoholic drinks such as bottled water and coffee, and virtual merchandise such as attraction tickets and airport transfers. Many airlines are developing retail programs that span all the customer touch-points starting with flight reservation on the airlines’ web sites and ending with the passenger’s return home. GuestLogix has created an on-board model that allows operators to get into retailing in as little as four weeks depending on the fleet size.
With passenger ticket prices returning 2% to 4% margins and non-ticket revenues delivering 40% or more in profits, GuestLogix anticipates that airlines worldwide will work to continue to introduce new revenue building programs. North American airline operators are currently generating about 50 cents per passenger from on-board sales. However, GuestLogix believes there is potential for this to grow to $5 or $6 per passenger, to be more in line with on-board revenue generated by European-based innovator Ryanair.
GuestLogix has established an expansive footprint spanning Europe, Asia Pacific and North America. It has also partnered with the world’s largest caterer and logistics provider to airlines, Lufthansa Group’s LSG Sky Chefs. In addition, the Company is working to integrate third-party products and services to offer new on-board merchandising options. GuestLogix recently announced exclusive deals with SkyMall, the largest on-board catalog advertiser, and Ticket-Ops, an online attraction ticket service, both of which the Company expects to launch on flights this summer in the US.
“Airlines have demonstrated that by providing choices, such as flight features, meals, hotel, car rental, and even insurance through their booking Web sites they can yield substantial incremental and profitable revenues,” said Michael Smith, managing director at SeaMountain, a U.K.-based airline marketing consultancy. “Operators can enhance their value proposition with ancillary sales, and most customers are quite receptive to these services if they are well thought out and executed through a continuum of experience.”