ANCILLARY REVENUES

Inflight Ancillaries: How airlines can monetize their inflight engagement platforms

As ancillary revenues are on the agenda of every airline, much has been written and said about the grand vision of airlines as omni-channel retailers, in which the in-flight part is just another touchpoint in an end-to-end, personalized, seamless, digital travel eco-system.

However, as airlines are only just embarking on this merchandizing journey, we take a look at the current state of inflight retail, which sees the opening up of a cabin environment that was previously ‘closed’ because of proprietary IFE platforms and the lack of Internet connectivity.

From In-Flight Entertainment to In-Flight Engagement platforms

Android-based in-seat IFE platforms, wireless IFE, Internet connectivity, plus the large number of passengers – and increasingly cabin crew as well – that carry a digital device, provides airlines with much more control how to move beyond providing just entertainment to new opportunities to generate ancillary revenues in-flight.

Jeff Standerski from Rockwell Collins summarizes this evolution nicely: “Passengers’ expectations have evolved from a passive ‘Please entertain me’ to a proactive ‘I want to entertain myself’. Our industry needs a new term to describe a holistic experience that is equal in every way to how people leverage their devices on terra firma. The future of the passenger/cabin interaction is beyond one of mere entertainment and can be more accurately described as one of deep and ongoing engagement: In-Flight Passenger Engagement.”

A similar vision is painted by Thales CFO Fred Schreiner: “We are going to go into a period where it’s about engagement. How do we move from an in-seat system, where an airline is looking at cost line, to an in-seat solution coupled with connectivity that moves to a revenue line?” Schreiner said families will be able to plan their holidays from the seatback: booking restaurants and exploring street level views of a city’s sights.

Eventually this means that this new ‘inflight engagement platform’ – be it seatback systems, inflight wireless portals or mobile apps – will become another touchpoint in the airline travel ecosystem. Read full article »

China Airlines mobile app lets passenger pre-order duty free, pre-select meals, and book high-speed rail tickets

Passengers, spoilt by availability of user-friendly apps on their smartphones that allow them to manage many parts of their daily life, are raising the bar for airline apps to become more relevant as well.

Digital travel companion
At the same time many airlines are working to evolve their app into a ‘digital travel companion’ in order to extend their service beyond just flying passengers from A to B, and generate some ancillary revenues in the process.

Describing its mobile app as a “personal travel secretary,” China Airlines’ app features innovative functionality that goes beyond the regular airline app basics of searching, booking, seat selection, check-in, and flight status.

Ancillaries, recommendations
Besides offering passengers the option to purchase ancillary services such as excess luggage and in-flight Wi-Fi, the China Airlines app provides recommendations on destinations and duty free items. The suggestions are based on the data of passengers who are logged into the app and uses elements such as the flight history and duty free purchasing records of members – as well as data of members with similar attributes – to generate personalized recommendations.

Duty free items can be purchased via China Airlines stand-alone SkyBoutique duty free app, which is accessible linked to the main China Airlines app.

Pre-select Business Class meal
Many airlines today – ranging from Singapore Airlines to American Airlines – give passengers in Business with the option to pre-select their meal. This gives frequent travellers more meals to choose from, while it allows the airline to plan and load more efficiently and reduce waste.

However, several airlines still only allow passengers to pre-select their meal via the website, or even the phone, while this kind of service is a typical mobile app feature, as it offers passengers a convenient way to add their preferred meal to their booking in the run-up to their flight.

Similar to Qantas and Qatar Airways (among others), China Airlines Business passengers can select their preferred meals via the mobile app and choose from 10 different meals to pre-order 14 days to 24 hours before departure. Read full article »

Transavia offers passengers the option to order a breakfast box for pick-up on arrival

Much has been said how airlines should evolve/transform into travel platforms that provide passengers with relevant products and services during their journey from door to door. Think airport transfers, baggage pick-up and delivery, duty free delivery on arrival, etcetera.

These kind of convenience-based services are taking off in a response to the expectations of customers used to manage their life from their smartphone in an ‘on-demand’ economy.

Beyond the flight: Groceries
A new example of how airlines are thinking beyond the flight is a pilot between Dutch LCC Transavia and Holland’s major retailer Albert Heijn which aims to ease the woes of travellers who find an empty fridge and a closed supermarket when returning home, for example in the evening or on a Sunday.

Similar insights have led retailers such as Tesco to trial a QR shopping wall trial at London Gatwick back in 2012, while Lufthansa has held trials with German supermarkets Rewe and Edeka to let passengers order groceries via its FlyNet inflight wifi portal for home delivery.

Appie Fly
Appie Fly is a joint experiment by Albert Heijn and Transavia that allows passengers on all inbound Transavia flights to Rotterdam The Hague Airport to order fresh breakfast boxes and then collect them after arrival. The breakfast boxes can be picked up from the Appie Fly collection point, which is located at the Illy Coffee Corner in the arrival hall of the airport.

Passengers can place their orders online when checking in for their flight to the Netherlands via Transavia’s mobile responsive website. The ‘Welcome Home’ boxes, which are sufficient for two people, offer two varieties of breakfast and are priced at euro 12.50 each. Read full article »

Jeju Air offers passengers on overnight flights the option to stretch out

Moving beyond the low hanging – and very profitable – ancillary fruit of checked bags, advance seat reservations, extra legroom seats and last-minute upgrades, airlines are becoming more creative in generating revenues beyond just the ticket fare.

One way to approach ancillary innovation is to look at the different needs passengers travelling in the same class may have. For example, SWISS has recently introduced a fee to pre-reserve one of the popular solo business class seats on its A330 and B777-300ER aircraft.

In Economy, airlines are increasingly offering passengers options for more comfort at a time when seat density is increasing and load factors are high.

Empty Seat Option
South Korean low-cost carrier Jeju Air – which flies between South Korea and Japan, China, Taiwan, Guam, Saipan, The Phillipines, and Bangkok with a fleet of 26 single class B737-800s – has come up with a clever, hands-on, way to generate last-minute ancillary income, low-cost style.

About two years ago, Jeju Air introduced a ‘Side Seat’ offer, which is similar to OptionTown’s ‘Empty Seat Option’ (adopted by airlines such as AirAsia X, Vietnam Airlines and Spicejet), and lets travellers purchase one or two seats next to their own seat, in an effort to sell last-minute seat inventory.

Whereas the Empty Seat Option lets passengers purchase an option to a possible empty seat for a small fee and be notified if an empty seat is available 1 to 3 days before their flight, Jeju Air’s passengers can only book the additional seats at their departure airport on the day of the travel (up to 1 hour before boarding).

Jeju Air’s ‘Side Seats’ are priced at USD 10 for domestic routes, USD 25 on routes to and from Japan and China’s Shandong region, USD 30 on flights between South Korea and Southern China and Taipei, whereas the fee for a last minute extra seat is USD 50 on routes to and from Southeast Asia (Philippines, Vietnam, Thailand) and Oceania (Guam, Saipan). Read full article »

Lufthansa uses VR to sell last-minute upgrades to Premium Economy at the gate

Airlines are becoming more creative in selling ancillary services to passengers in order to increase revenues per seat. For example, many airlines today offer passengers the option to place their bids in a blind auction for an upgrade to a premium seat, while airlines such as KLM and Emirates invite passengers to contact the tablet-equipped crew if they want upgrade to another cabin at the very last minute onboard.

Selling upgrades at the gate
Lufthansa has recently trialled an innovative way to sell upgrades to Premium Economy at the departure gate. Earlier this year, the airline used virtual reality (VR) glasses at its Frankfurt Airport hub as a way to tempt Economy Class passengers to purchase an upgrade to Premium Economy right before their departure.

By inviting passengers to put on some VR glasses and take a 360 degrees view of how the Premium Economy seat and cabin looks, Lufthansa hoped passengers booked in Economy would become more interested to purchase an upgrade.

As Lufthansa put it: “Because what legroom and premium service really mean in Premium Economy can be best demonstrated in three-dimensional form.”

For two weeks flights were selected for the VR-based promotion on a daily basis, choosing those where there were still enough seats free in Premium Economy. Up until 40 minutes before departure, passengers were given the chance to virtually try out Lufthansa’s new travel class in 3D. Read full article »

Lufthansa partners with Nespresso to offer passengers quality coffee at the gate


images by Raitis Steinbergs, Alessandro Teglia

For years, Lufthansa has been one of the very few airlines – if not the only one – to offer passengers waiting for their flight at the gate complimentary coffee, tea (image), and newspapers at main airports around Germany, including its Frankfurt and Munich hubs.

Or as Lufthansa has stated in the past: “Offering hot beverages to passengers prior to departure is a long Lufthansa tradition. Lufthansa first began offering hot coffee and tea from large thermos flasks in the mid-80s and the first automatic vending machines serving freshly brewed coffee were installed at airports in 1993.”

However, similar to any other full service carrier around the globe who is looking to rationalize every cost item, Lufthansa has to rethink these kind of free amenities. Instead of cutting costs by simply terminating the free hot beverages and print newspapers the airline has come up with a smart alternative that taps into trends such as ‘paid premium’ and digitalization.

Coffee at the gate
Following trials in the first half of 2015 at selected gates at Frankfurt and Munich airports, Lufthansa a few months ago partnered with Nespresso to bring the ubiqituous coffee capsules to the gate area.

The premium Nespresso coffee doesn’t come for free though. Passengers can choose from regular coffee, espresso, cappuccino ior latte macchiato (the latter with fresh milk), each at the cost of 2 euros. For those passengers who might consider bringing their own coffee pods: For the business market, a different pad-shaped system of Nespresso pods exists which are not interchangeable with the consumer capsules.

According to Lufthansa, a total of 20 Nespresso Coffee Points have been placed throughout Frankfurt and Munich airports so that passengers from different gates can access the machines. Read full article »

FlightPath3D lets passengers book an airport taxi via the IFE flight map

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THIS ARTICLE FIRST APPEARED ON FUTURE TRAVEL EXPERIENCE

Known for its highly interactive, 3D ‘geotainment’ moving maps – which are featured on the IFE systems onboard airlines such as Air France, KLM, Virgin Atlantic, Norwegian and Finnair – FlightPath 3D showed Future Travel Experience at the recent APEX EXPO in Singapore how it can now help airlines tap into “aircraft-to-door” ancillary revenue opportunities with its new ‘In-flight Travel Planner’, which is supported by multiple patents.

Book airport transfer
As Duncan Jackson, President of FlightPath3D, demonstrated to FTE, passengers can enter their final address (hotel, home, etc.) into the moving map in order to access myriad personalised features.

For instance, rather than simply displaying the estimated time of arrival at the destination airport, the In-flight Travel Planner can draw upon historical or real-time traffic data to provide an accurate time of arrival at the passenger’s final destination.

Partnerships with the likes of Uber and SuperShuttle also allow passengers to view and book ground transportation options while they are flying to help make the arrivals experience more seamless.

After booking their ride in-flight, passengers receive an SMS upon landing to confirm their booking and pick-up location. Read full article »

Finnair turns its inflight wi-fi portal into an e-commerce platform

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By Marisa Garcia

Last year, Finnair committed to a fleet-wide investment in inflight connectivity, valued at USD33 million. The service was first made available on the airline’s new A350 aircraft (of which it currently has five in service), and further installations will continue through 2018 on both Finnair’s long- and short-haul fleets.

While some airlines still ponder the business case in favour of giving customers the wi-fi connectivity they want onboard, Finnair provides passengers in Business Class with free inflight wi-fi and has put its new ‘Nordic Sky’ inflight portal to work as a channel to offer new services to flyers, as well as boost ancillary sales.

The portal can be accessed on passengers’ own devices and gives all passengers free access to finnair.com, plus Finnair services such as destination information, customer care and pre-order duty free shopping— with items purchased being delivered to the passenger’s seat on their return flight.

Reviving duty free sales
This onboard retail strategy is a departure from the tired trolley product push which has been part of the in-flight experience for decades. Technology allows Finnair to promote shopping opportunities while letting passengers enjoy the journey and letting cabin crew focus on more critical functions of passenger service and cabin safety.

“That’s why we’re using technology, the IFE, the portals we have. So that, if you want to shop, we enable that through the technological platforms we have onboard,” Finnair’s chief commercial officer Juha Järvinen told APEX last year. “We shall not increase the number of trolleys going back and forth in a corridor. That’s what you don’t want. The IFE technology and the wi-fi platforms enable you to do your shopping when you want, at your discretion.” Read full article »

Try before you buy » Brand collaborations and aircraft cabins as showrooms

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This article also appears in the March/April 2016 edition of Onboard Hospitality Magazine

By Raymond Kollau, airlinetrends.com

As ancillary revenues have become a major revenue source for airlines – if not the lifeline for many – airlines are thinking of more ways to derive revenue from all phases of the customer journey. For example, a growing number of full-service airlines now monetizes seat selection and checked luggage, while some offer Economy passengers the option to pre-order paid gourmet meals on long-haul flights.

Another revenue opportunity lies in making the onboard retail offering more appealing. Or as trendwatcher James Woudhuyzen put it in a straightforward way in Onboard Hospitality Magazine: “Sell things people actually want to buy, so when the flight attendant announces ‘Duty Free Goods’ it isn’t in a tone that shows she fully expects zero sales.”

Try before you buy
One tactic that airlines may consider is the concept of ‘tryvertising’. Coined years ago by trend research agency TrendWatching, the idea is to take product placement to the real world by integrating products into the daily life of consumers so they can make up their minds based on their actual experience with the products.

Hotels were among the first to embrace this ‘tryvertising’ approach. Most of the major hotel chains now have an online store selling everything from bubble baths to beds. The concept received a boost when Westin in 1999 introduced its Heavenly Bed, which received very positive reviews from guest who often inquired whether they could purchase the bed they had just slept in. Recognizing that its hotels could also serve as a showroom for mattresses and other comfort items, Westin says it has sold over USD 135 million worth of Heavenly Bed-related goods in the past 15 years, including 100,000 mattresses and 175,000 pillows.

A similar concept is the Almost@Home Lounge at Helsinki Airport. Visitors of the lounge can purchase any item – artwork, furniture, glass and tableware – found in the lounge that takes their fancy, making it a ‘tryvertising’ space for home decoration. Read full article »

Airlines and airports let passengers pre-order food via mobile apps

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This article also appeared in the December/January 2016 edition of Onboard Hospitality Magazine.

By Raymond Kollau, airlinetrends.com

Consumer behavior is changing. Smartphones make it quick and hassle-free to order goods online, or flag a taxi via Uber. This always-on, on-demand economy has generated a sense of entitlement to fast, simple, and efficient experiences as it taps into consumers’ appetite for greater convenience, speed, and simplicity. For example, analysis from Uber shows the longer Uber has been in a city, the less willing to wait for a car everyone becomes.

In the food and beverage industry, ordering and paying for food and beverages via tablet devices has become the new normal at casual dining chains such as Applebees and Chili’s across the USA, while airport restaurateur OTG has installed thousands of food-ordering iPads at half a dozen U.S. airports.

And a growing number of airlines – including Virgin America, Air New Zealand, Norwegian, Azul and Finnair – allow passengers to order meals, snacks and drinks via the IFE system in between regular meal services, while passengers onboard leisure carrier TUI Netherlands can order drinks and duty free via their own smartphone.

Skipping the queue
Saving consumers even more time, Starbucks this fall rolled out an order-ahead mobile application across all of its 7,000 stores in the USA, as well as across 150 Starbucks locations in London. As soon as people have ordered, the app gives them an approximate pickup time, and Starbucks estimates customers can save between 10 and 15 minutes using this option. A similar service is being tested by fast food chains McDonalds and Wendy’s.

At multiple airports in the USA, passenger can pre-order meals from airport restaurants, using mobile apps such as Grab, AirGrub and HMS Hosts’ B4 You Board, which saves them having to queue up for food and drinks, and provides some peace of mind for those who are running late for their flight.

Passengers using these pre-order apps select an airport restaurant, place an order, pay and schedule a time to pick up their meal. When they arrive at the restaurant in the departure hall the freshly made meal is waiting to be collected. Orders can be placed days in advance, or even when passengers are queuing at the security checkpoint. Read full article »

TUI first airline to let passengers order food, beverages, duty free via their own devices

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Images from MI Airline. Arke’s ‘TUI Cloud’ is branded in the airline’s colours

By Raymond Kollau, airlinetrends.com

Earlier this year we reported on MI Airline’s AirFi box – a portable, battery-powered and self-scaling wireless local network. The AirFi solution is based around a small box which can be stowed in a luggage locker – instead of having to be installed in the aircraft, hence no certification is needed.

Launch customers of the AirFi box are Estonian Air, Transavia and Arke (part of tour operator TUI) – who are using the portable wifi network for inflight entertainment, and/or to connect the tablet devices of cabin crew.

TUI Cloud
Netherlands-based leisure carrier Arke – which later this year will be rebranded as TUI – has installed the AirFi box onboard its fleet of 3 B787, 1 B767 and 5 B737 aircraft for wireless entertainment purposes. The service is branded as ‘TUI Cloud’ and allows passengers to use their own devices to watch video content, read newspapers and play games.

Arke’s managing director Hans van de Velde tells TravConnect that the wireless service is appreciated by passengers. For example, on some flights 40 percent of passengers is reading De Telegraaf (the largest newspaper in the Netherlands) via TUI Cloud and the airline is considering not to carry the paper edition of the newspaper anymore.

According to Arke, the content and functionality of ‘TUI Cloud’ will be expanded with e-books, magazines (in partnership with publisher Sanoma) and newsfeeds in the coming months.

Ordering drinks, snacks and duty free
Arke is also the first airline in the world to let passengers order food, snacks and duty free items via their own devices for delivery to their seats. The airline is currently trialing the on-demand service on a select number of long-haul and short-haul routes. Read full article »

HK Express lets passengers make contactless in-flight payments with their mass transit smart card

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By Raymond Kollau, airlinetrends.com

In many Asian cities, smart cards – prepaid rechargeable contactless payment cards – are a common phenomenon. For example, in Hong Kong, consumers use the Octopus smart card to make electronic payments offline and online. Launched in 1997 to collect fares for the territory’s mass transit system, the Octopus card is the second largest contactless smart card system in the world, after South Korea’s Upass, and has also led to the development of London’s Oyster Card.

Many smartcards in East Asia have a wide variety of uses. For example, besides public transportation fees, the Octopus can also be used for payments in many retail shops in Hong Kong – from convenience stores, supermarkets, fast-food restaurants, parking meters to vending machines. Other systems, such as Suica in Japan, EasyCard in Taipei and EZ-Link in Singapore, can also been used for many non-transportation purposes.

Now, two airlines in Asia are allowing passengers to make in-flight payments with the same smart cards they use to make everyday payments on the ground.

HK Express x Octopus Card
Hong Kong-based low-cost carrier HK Express recently partnered with Octopus Cards to launch an in-flight Octopus-based payment service. Passengers on all HK Express flights can use their regular Octopus card to purchase in-flight items, including food, beverages, discounted transportation and event tickets, and onboard upgrades for HK Express’ extra legroom ‘sweet seats’.

To accommodate the Octopus card, HK Express obtained new payment terminals with Octopus’ sensor technology. To make a payment, passengers simply hold their card near the sensor and within seconds the payment is made.

Commenting on the initiative, HK Express Deputy CEO Andrew Cowen stated, “Octopus is part of the fabric of Hong Kong life and transportation. HK Express is proud to be the first Hong Kong-based airline in bringing this much-loved Hong Kong icon into the skies, offering our guests the ultimate on-board ease and convenience.” Read full article »

Heathrow Airport launches ‘onboard picnic’ service, offering F&B from 118 outlets

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By Raymond Kollau, airlinetrends.com

Realizing that a segment of passengers in Economy is willing to spend a bit more money in order to have a proper meal when flying, about ten full-service carriers around the world currently offer passengers in Economy the option to upgrade their meal for a fee, mostly on long-haul routes.

Austrian Airlines’ catering partner Do&Co has even opened a last-minute ordering desk at Vienna Airport where passengers can pre-order their meal up to just one hour before the departure of their flight.

Onboard picnic
Looking to take a (small) piece of the revenues that airlines generated with their buy-on-board F&B offerings, London Heathrow Airport has introduced a buy-before-you board initiative that offers passengers an ‘on-board picnic’ dining option where they can bring a bespoke ‘hamper’ (British for a meal takeaway box) with them on their flight.

The Daily Mail reports that the move from Heathrow comes after figures reveal about 20 per cent of passengers snub plane food, bringing their own airport-bought snacks on board a flight instead. A survey by the airport also showed that 70 percent of (British) passengers want flexibility about when they eat during their flight.

Available from all restaurants at Heathrow
Introduced by Gordon Ramsey’s Plane Food at Heathrow T5 a few years ago – and expanded earlier this year to some 70 restaurants – the service is now available at all of Heathrow’s 118 restaurants across its five terminals, which range from from chain cafés such as Pret a Manger and EAT, to restaurants including Heston Blumenthal’s The Perfectionist Café and Gordon Ramsay’s Plane Food, as well as Caviar House and The Gorgeous Kitchen. Read full article »

Passengers in Delta’s JFK T4 lounge can order paid meals and drinks via iPads

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By Raymond Kollau, airlinetrends.com

In 2010, Delta and food and beverage operator OTG launched a novel restaurant concept at New York JFK Airport that allows passengers to order food and drinks via iPads installed at dining areas at the gate. A server then delivers the food to the customer’s seat within 10 minutes. The concept has since then been rolled out by OTG to other airports around the USA, including New York LaGuardia, Chicago, Minneapolis St Paul, Orlando and Toronto Pearson.

JFK T4 Sky Club
Last year, Delta opened its new Terminal 4 at New York JFK Airport. The new Delta T4 also features a 24,000 square feet Delta Sky Club where passengers can work, relax and dine at one of the more than 400 seats, 50+ work spaces and a ‘Sky Deck’ outdoor terrace (video tour and images of the lounge here and here).

Premium meals and drinks
Responding to passengers requests for more substantial meal options in its lounges, Delta in 2010 introduced a paid dining concept at four Delta Sky Club lounges at New York JFK Airport. The new full-service concept offers made-to-order breakfast, sandwiches, salads, small plates and desserts for purchase, as well as premium beverages. Meals are USD 10-15 and premium drinks USD 12 and the Delta Sky Club ‘Café’ includes dedicated seating areas within the lounge, but visitors also can order from the menu and dine anywhere in the lounge.

Tablet-based ordering
In its JFK T4 lounge, Delta has added a self-service element to its premium meals and drinks offering. Those who want to eat more than what is available on the buffet can order via iPad ordering stations, which is a similar concept to the Delta/OTG iPads that are installed at the public gates. Read full article »

Dutch Railways promises passengers a guaranteed on-time arrival at the airport

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Dutch rail operator NS and Amsterdam Schiphol Airport are trialling an innovative new service, called Schiphol Warranty Service, that provides train passengers – who signed up for the service – a guaranteed on-time arrival at the airport so they will catch their flight.

Travellers who have signed up for the service and have paid the euro 5 fee will be monitored for any disruptions throughout their journey from the NS rail station of departure until the check-in desk at the airport. Passengers have to choose one out of three schedule options suggested by the Dutch Railways which all should transport them to airport arriving at least 2 hours (Schengen countries) or 3 hours (non-Schengen) before departure.

Their journeys will be monitored via an app that will track the participants’ departure station, date and time of the departure flight, flight number, number of people travelling and how many suitcases they carry. NS then will check for any travel disruptions and/or changes along the way.

If anything will go wrong during the journey, the app will notify passengers with alternative routes or any travel advice. If there are no train options available in time to bring customers to the airport, NS will then search for other travel options via bus or taxi.

Then, as soon as passengers arrive at the airport, they will be picked up by customer service staff and escorted to the nearest check-in desk. In worst case scenario, if the guarantee cannot be met and passengers miss their flight, NS then will organise hotel stay and rebooking or refund of the flight.

“If there are any failures along the way, we will ensure that passengers catch their flight, even if it means calling them a taxi,” says Commercial Director of NS Hans Peters.

More than 10,000 NS customers have received a letter inviting them to participate in the trial which takes place between mid-July and September 1st. NS hopes that eventually some 1,500 customers will take part in the programme.