Guestlogix (GXI.V) Introduces OnTouch - What does it mean?

Earlier today, Guestlogix announced that it has deployed an new onboard suite of services branded OnTouch, which packages 5 product bundles into value-added destination services for passengers. GXI has essentially organized its platform to allow airlines to bundle services with maximum appeal to passengers. For North American airlines, where GXI has approximately 90% contracted penetration, this takes onboard selling beyond alcohol and food, and is designed to actually improve the travel experience for passengers. In-flight attendants, who are trained to e provide safe positive travel experiences for passenger, find selling the service bundles a natural extension of what they do. Who wouldn't want to make a passenger's life easier once they leave the plane? Plus, inflight attendents share in the upside by receiving a commission from the airlines for completed sales.

The packages are bundled as:

1. OnTouch(TM) Box Office - In-flight offerings of theatre, concert, theme park and attractions tickets associated with destination cities - purchased in the air. As previously disclosed, these currently include CityPass, broadway tickets, and Disney theme park tickets. Expect more partnerships to be announced throughout the year for this service.

2. OnTouch(TM) Ground Connections - In-flight offerings of airport transfers via taxi, bus, train, limo and more for a destination city. Currently there is a deal for Heathrow Express - although company officials believe that this service could be expanded to as many as 30 major cities by the end of the year. This appears to be the killer offering.

3. OnTouch(TM) Shopping & More - In-flight catalogue sales with home and/or destination delivery in a variety of product categories; As previously disclosed, this is offered through a partnership with SkyMall. Notably, GXI has also partnered on in-flight entertainment offerings with a carrier in Singapore.

4. OnTouch(TM) Minutes on the Go - In-flight offerings of prepaid phone cards, phone top-ups, rentals, and web connections; No partners have been announced yet.

5. OnTouch(TM) Concierge Everywhere - Personal itinerary management and destination-based travel updates and offers via mobile SMS and email. Partners could be announced soon.

The bundling makes it easier for passengers to understand the various value propositions, and also makes it easier for in-flight attendents to sell the services, for which they are re-inbursed through commissions. For the airlines, who are suffering from reduced capacity, these value-added destination services deliver more ancilliary revenue opportunity than would otherwise be unattainable without the bundled Guestlogix platform.

The company expects significant uptake for these offers because:

- for the most part, passengers would be spending money on destination travel services anyway, and OnTouch offers better convenience and less hassle at the destination - which actually improves the travel experience. This is not new spending that needs to be induced (like ordering another beer), it is simply disintermediation of a transaction that would otherwise need to be completed at the destination airport terminal.
- passengers can get access to destination events and entertainment that they may have not been able to access easily via alternative means once they land. For example, CityPasses are really valuable for tourists in major cities like Chicago, New York and Toronto, but they are hard to find on the ground.

There is evidence from Europe that passengers are willing to spend onboard if the products and services are offered to them. The company believes that for every $1.00 increase in revenue per passenger trip in North America represents approximately $16.5 million in additional revenue to Guestlogix. On a flight with 100 passengers, this would mean that only 3 or 4 passengers would need to purchase ground connection services, and only 1 or 2 would need to purchase a destination event ticket. Modest uptake should result in meaningful positive impact on Guestlogix financial performance. The current deployment with one major airline has performed ahead of expectations in terms of uptake and customer experience.

Investors should view this announcement as a significant positive step forward for GXI, especially considering that the current deployment appears to be going well. After announcing its most recent quarter, the stock experienced a significant step-up in price in early April, since then it has plateaued in the 90 cent range. As these OnTouch services get rolled out and mature, there is more high margin revenue growth potential on the horizon, which should reflect in earnings leverage going forward. As a result, investors may become more comfortable that there is room for the stock price to continue on an upward trajectory.
If only Guestlogix could find a way to reduce the time that it takes to get checked bags from the plane to the luggage carousel...travel would be civilized again. Notwithstanding, I can't wait to finally be able to bypass the taxi lineup.
Disclosure: I do not own shares of GXI.

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