Ai Editorial: Way to being passenger-centric - making the most of old and new

First published on 26th October, 2016

Ai Editorial: Airlines need to drift away from their image of being technology or processes-centric. But it doesn’t mean old can be completely replaced, writes Ai’s Ritesh Gupta, who is attending  #MegaEvent16 conference in Toronto, Canada

 

Airlines need to break the shackles in order to gain better control of what they offer, and move on from being technology-centric entities to a passenger-centric one. But while certain areas, especially the issue of legacy technology can be tough to deal with, there are few that demand a certain level of swiftness to move in the right direction.

As it turned out from some of the key discussions that took place during #MegaEvent16 conference in Toronto, Canada, airlines need to blend traditional with modern means, be it for infrastructure, payments or targeted marketing:  

IT infrastructure: While the role of the PSS can’t be undermined, airlines need to work around specific areas like fully calculating their own availability, and gaining grasp over schedule building. Yes, as much as carriers would like to embrace retailing platforms that are meant for today’s era, but one needs to be pragmatic when it comes to dealing with 3rd party companies that continue to have a significant say in IT and distribution.

Experienced airline executive Dean Dacko acknowledges that airlines across the world are keenly looking at a passenger-centric evolutionary process but are having difficulties in moving in that direction and implementing that kind of capability. “The main challenges lie in leveraging the legacy environment, that database environment through the PSS, that has for most part handcuffed majority of airlines for many years. It is being envisioned that customers need to be at the forefront when it comes to all the way they engage, they communicate and market them relevant offers/ services.” But legacy technology that dates back to 60’s hinders such aspirations, involves processes and ways that you file fares, package and deliver, and qualify how you can sell and distribute those airlines tickets worldwide, that is not allowing airlines to put customers first. “Airlines need to take the quantum leap into the future, to recognize that time has come to continue to work on capabilities, build on technology that doesn’t necessary build on an existing PSS. One needs to gear up for digital first, customer first business environment,” said Dacko. “Lots of time and resources have gone into this, but in 2016 and moving onto 2017, we are now reaching a stage where lot more tangible steps are being taken to build the requisite technology, requisite capability to shape the desired customer engagement, customer communication and ultimately the kind of customer relationship that will demonstrate all of this in a much more meaningful way.”

So airlines need to continuously refine their merchandising, e-commerce and API capabilities, plus find a mechanism that would result in faster speed to market.  Airlines require platforms that offer business model control (rules based) and should feature modular open architecture.

Targeted marketing: Airlines need to look at every possible way of improving digital interaction. Ganesh Iyer, Senior Manager E- commerce, Qatar Airways, referred to personalization and behavioral data during the conference. “Behavorial data rather than static data is key, how do they (customers) react to a certain situation,” he said. Another executive referred to the significance of emerging XML analytics platform. For any carrier that is sending back an offer as per the request from an intermediary or a GDS (essentially this is what NDC is all about), there is also need to work with partners to understand how one can recognize a customer. So, for example, if a meta-search engine gathers information about a user, then what if membership number of a carrier is also collected for a user to benefit, then this piece of information can be read in the XML messaging flow. This way search data can be capitalized upon.

On another note, one also needs to assess how  the so-called traditional touchpoints can be strengthened. Do consider competitive intelligence through ‪email content - emails reveal consumer interest and behaviour. “Email is a unique identifier in the travel marketing ecosystem. There is a whole lot you can do with simple email, first name and last name to personalize the travel experience, to create unique micro-moments for your consumers,” said Dwight Sholes, ‪Senior Consultant, Travel and Hospitality, Return Path. You really don’t need to let your customers fill long forms or extensive data analytics to start personalisation. Rather email in itself is a strong weapon. For instance, it is used as a login avenue for many websites. You can go into overlays, plugging in additional information from 3rd party databases for psychographic and demographic information. Email can be a strong foundation for working on targeting marketing.

Payments: Payment specialists also acknowledge that when it comes to rewriting or migrating legacy infrastructure, this isn’t a workable scenario. The best plan is to adopt technology that is modular in nature and can work as a stand-alone solution with scale and scope. It’s imperative for airlines to have a thin but feature-rich and agile payments layer within the enterprise. With that flexible framework in place, airlines can enable easy on-boarding, omni-channel payments, multiple PSP/acquirer connectivity, improved acceptance rates etc. For instance, airlines need to look at Apple Pay and Android Pay. Both are now making it possible to use OS-Pay through a web browser. There is a need to assess whether Apple and Android can improve upon the shopping experience, without really escalating processing fees. It also needs to be highlighted that fraud risk is being combatted  when transactions are processed with ‘OS-Pay’ mobile wallets, as they avail biometric fingerprint technology to authorize a transaction.

Follow Ai on Twitter: @Ai_Connects_Us

Ai Editorial: What is driving digital commerce today?

First published on 24th October, 2016

Ai Editorial: Digital commerce is one journey, which every airline needs to explore on its own. Yes, mobility, cloud, social media, big data and analytics, and AI are universal for all sectors, but there are distinctive hurdles, too, writes Ai’s Ritesh Gupta

 

Consumers are starting to expect the gadgets they use, the experiences they indulge in and the brands they choose to understand them and deliver what they are seeking.

IoT or Internet of Things is paving way for an era of personal, contextualized selling opportunities.

Airlines, like any business, need to prepare for an extended ecosystem for consumer IoT to blossom.  For instance, if a traveller is waiting at the airport lounge, he or she decides to use personal digital assistant and asks: “Can I have mango pudding during the flight? Is it part of my breakfast or lunch?” Is it possible for technology to answer this question? And can the price be known if the same traveller wishes to buy and can it be bought, say via Apple Pay, via the same device? Is this what is going to define digital commerce? 

So today one needs to assess the prowess of mobility, cloud, social media, big data and analytics and artificial intelligence while gearing up for digital commerce.

When we talk of the travel sector, buying a book is quite different from booking a seat on an airplane, or even adding car rental and a hotel room to an itinerary. The IT set up that supports controlled-merchandising, the fulfillment part or consumption of the service is quite different. Yes, this simple analogy depicts how triumphing in two vastly different sectors - retail and travel - can be a different ball game. Overall, when we talk of digital commerce, no doubt airlines have to chart their own journey.  Of course, there are areas that are universal, and all sectors need to look at – say cross-device targeting or content optimization. As Microsoft’s CEO Satya Nadella recently mentioned: business leaders are looking at engaging their digital customers, wherever they are. For their part, airlines definitely to overcome certain sector-specific challenges. We take a look where airlines can improve in the arena of digital commerce ahead of #MegaEvent16 conference to be held here in Toronto, Canada:

1.     Content:  Today digital commerce thrives on understanding the intent and the profile of the customer. But what’s the point if airlines despite investing in their product are unable to show the same product the way it needs to be shown. Also, the timing of matching intent with content needs to be perfect, too. So say, if I am looking at a flight that departs at 8am, then a sumptuous breakfast rather than a generic picture might do the trick. I just flew from New Delhi to Toronto, Canada for this conference. I wasn’t shown the food menu hours before the flight as I checked in (may be it was there, but not in the check-in flow). But the moment I sat on my seat, the in-flight screen showed me the list for dinner and breakfast. This at least prepared for me what was to be served over a period of 14 hours!

2.     Omnichannel experience: How can airlines lay strong foundation for the same? One of the prudent moves is to invest in robust API strategy. This will also ensure consistency in what airlines have to offer. Recommendations are generally based on historical or real-time interactive information. Airlines intend to interact with their customers and prospective customers through a variety of touch points and timeframes. APIs enable efficient connectivity to these various touchpoints and value aggregators can utilize these airline APIs to enhance their value creation to their customers. 

3.     Technology: The utility of IT infrastructure, especially in legacy carriers, is being questioned. Be it for merchandising or payments, it is often recommended that its time for airlines to change. For example, every payment method has its own underlying technology. Every mobile device has its own operating system. And then airlines’ legacy infrastructure wasn’t set up for alternate payment methods. “As for rewriting or migrating legacy infrastructure, we’ve learned from others in the industry that this is not a workable scenario. The best plan is to adopt technology that is modular in nature and can work as a stand-alone solution with scale and scope,” said a source.  As of today, an alternative is to separate the core PSS capabilities, which are essential to running any airline, from technology that is enables true brand and product differentiation. Carries are opting to control their own merchandising, e-commerce and API technologies, using platforms that enable airline control, faster speed to market, and flexibility – and move away from solutions that are hard coded or community-model based, or tied to a particular PSS or channel.  Airlines requires platforms that provides extensive business model control (rules based) plus strong product and channel management capabilities. These platforms must have a modular open architecture that fosters a partner eco-system for collaborations.

4.     Being flexible to boost conversion: Conversions in digital commerce can take a strong beating if airlines aren’t flexible to let travellers buy the way they want. It generally takes lots of browsing sessions across various devices to complete one travel-related transaction. What if I am ready to share a date before which I wish to buy a particular travel itinerary – airplane seat, hotel, car rental etc.? Can airlines lead the process of offering me everything depending upon what all I searched for, originating from their website or mobile app? Or what about paying via Apple Pay? Have airlines been slow in embracing new payment options? If the customer elects Apple Pay, they wouldn’t have to worry about typing-in all of their cardholder information for each purchase; that data could simply be stored and recalled at will. As a result, customers would be less likely to abandon a transaction. Of course, this could also be a double-edged sword. There is a kind of balance between streamlining the process and encouraging customers to buy without first thinking through a purchase. As a result, this could lead to buyer’s remorse, which could mean returns or even chargebacks at a later date.

5.     Digital enterprise: Every business needs to gear up for behaviorally targeted, device-agnostic, user-journey-centric experience. As Oracle points out, this “seems part science-fiction, part psychology, and part technology”! The pursuit of personalisation means gathering data, and collecting it, and then making the most of first party, second party and third party data. Also, there is a need to look at new platforms that allow entities to leverage artificial intelligence, machine learning and advance analytics. All of this also means investment.  And this is where the difference also comes in when we talk of airlines vis-à-vis other sectors. While certain operational areas can be digitized, certain can’t be automated with the same pace.  With technology becoming more pervasive, airlines need to digitize customer interactions. At the same time, all processes and staff involvement needs to be crafted accordingly.

Even as airlines look at digital commerce, like any business organization, they need to ensure they don’t spoil the customer experience One needs to ensure messages or ads don’t annoy a buyer, say post purchase communication.  There is a need to use CRM, marketing automation or campaign management offerings to manage multichannel interactions. It can be a long journey, but a fruitful one too.

For tweets from our conference in Toronto, Canada (Oct 24 – 26, 2016) – follow #MegaEvent16

Ai Editorial: Managing “version control” as NDC evolves

First Published on 11th October, 2016

Ai Editorial: As NDC moves along there will be evolving versions of the schema that will impact the specific XML messaging, in that messages themselves will change over time – new ones added, existing ones modified, etc., writes Ai’s Ritesh Gupta

 

IATA’s XML-based data transmission standard continues to be in the limelight.

While a section of the industry, be it for airlines, meta-search engines, GDS companies etc. is marching ahead with pilots and deployments, it is also being questioned whether a set of standard messages are sufficient, why to rely on only one standard in XML, or even can there be any better messaging format.      

One way to assess the progress is to look into how various stakeholders are looking at projects using Offer and Order management messages whose schemas are compliant with the standard NDC message schema.

-       How are things coming along as far as capability to receive and send NDC messages is concerned?

-       How the schema from the airline will impact the established workflow?

It needs to be clarified that IATA certifies the messages, not the underlying architecture and processes or workflows.

Feedback:

·          Schemas for shopping and, order management: There are schemas for shopping and, order management, and the end result is creation of Offer ID and Order ID, featuring order creation, ticketing, issuance, payment authorization and BSP reporting. So when we say different airlines have different objectives/ expectations from NDC, does it mean some are only working on schemas for shopping and, some are working on schemas for both shopping and order management? So yes, certain carriers may opt to go end-to-end; others may only end up controlling the offer and wouldn’t execute. Or, the execution on the offer becomes more of a tactical/ economical decision rather that a strategy decision. As per my recent interaction with Farelogix, the company has 20 airline customers that have adopted the NDC schema for the API that the team has built for them. The actual schema version will vary from baseline to 15.2, but all 20 are controlling and creating the offer (Offer Management). These airlines are creating and delivering just over 1.4 billion airline offers annually through their NDC API. (Not all offers are accepted and executed as tickets).

·          Capability to receive and send NDC messages: It is vital to know how does the capability to receive and send NDC messages vary as per the version of a particular schema. Messages may change and improve with new versions thanks to the addition of new elements (e.g., sending video images) or enhancements to existing elements (e.g., split PNR improvement). Airlines will adopt new versions based on whether or not the newer versions address a required business need or if they simply want to update their version usage. In today’s world of deploying an NDC API between airline and intermediaries, there will be evolving versions of the schema that will impact the specific XML messaging, in that messages themselves will change over time – new ones added, existing ones modified, etc.  So if an airline has deployed NDC schema version 15.2 and a newer version becomes available (15.4), then the airline would need to work with all their intermediaries that deployed version 15.2 in making the upgrade to 15.4. 

·          Connectivity issues: The biggest issues are in understanding the various workflows that have been established by a GDS or OTA and understanding how the schema from the airline will impact the established workflow. “It is also being prepared to make what we refer to as “implementation accommodations” to how the GDS or OTA want to utilize the specific schema elements.  There is also the concept of the end user being able to “interpret” how a particular schema element is utilized.  This is why it is very important for either the airline, or it’s developer proxy such as Farelogix, to have the technical resources (people, documentation, etc.) available to support an NDC API implementation,”  says Farelogix CEO Jim Davidson.    

In one of our recent articles, Amadeus stated that the whole industry and airlines in particular, are coming to the realisation that having a set of standard messages is necessary but not sufficient. “Connecting systems with these standardised messages is the easier part, but it takes a lot of knowledge and industry understanding to turn them into successful distribution tools. Most vendors underestimate the complexity of the integration part,” mentioned Hazem Hussein, Executive Vice President, Airline Group, Amadeus Asia Pacific, Turkey and Eastern Europe.

 

Dealing with different versions of schema is all about change management.

Airlines must learn how to build, deploy, manage and upgrade APIs in a way that streamlines the task of developers. Proprietary APIs tend to create “one-off” implementations that make repeatability more complex and therefore more expensive. Carriers also need to upgrade their internal systems to be able to support API-based distribution. So as carriers’ set up is gearing up to process all distribution-related transactions, it isn’t going to alter the inherent proposition of GDS, i.e. the reach they deliver to airlines. Rather they need to move on from being a transaction focusing company to a supplier of enterprise-like applications to the agency communities, based on the effective aggregation of hundreds of airline APIs. As for NDC certification, it needs to be mentioned that certifying one NDC message for one single ancillary service as part of the existing, opaque and flight-centric shopping process is easy. Leveraging the full scope of airline APIs to re-think the search and booking process and the experience delivered to users (whether they are agents or the end-consumer) is another story. Lastly, talking of online travel agencies and to a certain extent flight search engines, these organizations also have to consider their ‘flights’ offering. With carriers pushing more ancillary services as stand-alone or as part of fare families, it is imperative for online intermediaries is to evaluate how to make flight search and shopping more transparent.  

Value proposition

How are airlines going about distribution of content via API connectivity, considering that different airlines and intermediaries can have different API gateways for exchanging XML messages?

Today there are IT specialists emerging as new aggregators and are also offering NDC adapters.  

It comes down to the value proposition that can be created between airline and intermediary. NDC is really only the catalyst to enable this new value proposition. If the airline can send new and relevant content via an intermediary that can display and transact on this content better than another intermediary, then competitive pressure gets created which is beneficial for the entire travel supply chain.

 

Where is NDC headed in the next 12 months? Hear from senior industry executives at the upcoming 7th Mega Event Worldwide 2016, The Event for Loyalty, Ancillary & Merchandising & Co-Brands, to be held in Toronto, Canada. (25 -26 October, 2016).

Twitter hashtag: #MegaEvent16

Follow Ai on Twitter: @Ai_Connects_Us

Ai Editorial: “Are a set of standard messages sufficient?” questions Amadeus

First published on 3rd October, 2016

Ai Editorial: Is airline IT and distribution status quo really evolving with NDC? Ai’s Ritesh Gupta interacts with Amadeus’ Hazem Hussein about NDC, and whether a set of standard messages is enough to bring about the change.

 

IATA’s NDC initiative is about to get into the last 12 months of the original 5-year timeline marked for this standard’s mass implementation.

But there is one pertinent question that continues to get raised. Why would travel B2B conglomerates, mainly Sabre and Amadeus, alter their synergistic and profitable distribution and IT businesses? Yes, NDC’s key objective is to improve upon selling via indirect channels, but why would these organizations alter their established volume-based, transaction-based business model?

So it all boils to assessing whether NDC can shape up change – right from inventory over distribution to sales.

If we look at the way the likes of Amadeus and Sabre are associated with airlines, how airlines are picking and choosing the available options available in the wake of direct connect strategy? For instance, in case of Lufthansa and Siemens, the new arrangement uses Amadeus Altea and Amadeus- owned Cytric OBT, and GDS being bypassed.

Considering that Amadeus and Sabre are deeply entrenched in the overall IT, distribution and sales, a couple of carriers challenging the status quo doesn’t seem enough. So if we talk of airlines being in control and what has changed (say the way fare filing, scheduling, availability etc. are accessed), then there is a mixed response as of today.

“With the exception of a few airlines, most of them are at the mercy of their PSS or CRS provider,” this is what a senior industry executive told me when I asked him about where do airlines, cumulatively as an industry, stand today in their quest of being in control of their inventory, distribution and sales.

GDS companies aren’t perturbed at this juncture. “The GDS gives airlines a geographical and industry reach that would be very hard for them (airlines) to replicate. 64% of all bookings outside home market come through the indirect channel,” said Hazem Hussein, Executive Vice President, Airline Group, Amadeus Asia Pacific, Turkey and Eastern Europe.

In order to get Amadeus’ perspective on NDC, Ai’s Ritesh Gupta interacted with Hussein.

“Everyone is working out how to optimise NDC implementation project timelines,” says Hussein. He pointed out that cost and difficulty of integration remain quite high and may be difficult for some parties to address. However, with experience, overall project lengths should be reduced. “The fastest way to bring a product to the market remains the traditional approach relying on ATPCo filing. On our part we aim to launch soon on the market our NDC-dedicated solution Amadeus Altéa NDC that will benefit from our level 3 NDC-capable certification granted by IATA,” shared Hussein.

NDC

·          “NDC is not only an airline topic”: The core mission of aggregators like Amadeus is to acquire content in many different ways. GDSs have been using EDIFACT and teletype messaging for many years, but Amadeus has also been distributing LCC carriers with XML connectivity since 2008. “Working with some key LCC customers, we found some specific ways to handle dual connectivity,” said Hussein. He says with the surge of interest in NDC, the industry has to think about the transition period. “We believe that airlines should be free to choose which connectivity makes the most sense to their business, constantly re-evaluating the cost-benefit ratio of changing connectivity. At Amadeus, we work hard not only to secure content acquisition the way airlines want but at the same time ensure that we minimise the impact to our subscribers. Travel agents obviously prefer to consume content that does not disrupt their processes, in particular when it comes to comparative shopping, mid- and back-office integration and customer servicing and this has a major impact on the success factor of any strategy involving the channel.” He added, “Amadeus recognises NDC is not only an airline topic but affects the travel industry across the board. We have the ambition to make it profitable for all parties.”

·          “A set of standard messages is necessary but not sufficient”: All stakeholders, including airlines, are coming to grips with the fact that having a set of standard messages is necessary but not sufficient, said Hussein. He said connecting systems with these standardised messages isn’t tough, but it requires certain expertise to turn them into successful distribution tools. “Most vendors underestimate the complexity of the integration part,” he said. 

·          NDC and standarisation: It is highlighted that not all airlines choose to participate in and utilize the same standards. Sabre and Amadeus need to support standards for all suppliers of content – including hotel, car, rail and cruise content for example. While a base level of standardization is valuable, there is always going to need to be some level of customization. Amadeus has managed several NDC-XML implementations. Airlines have different objectives and there are different versions of schema. NDC is still in its early stages and it will take time to reach full maturity, says Hussein. “There are concerns around the cost to support implementation, employee training to use NDC-enabled processes and ongoing product and technology support,” he said. There is a need to bring the economies of scale in the value chain. “So, yes, it is costly now but we expect easier integration in the future as all stakeholders’ needs are taken into account,” said Hussein.

·          NDC and merchandising: The ability to offer bundles has existed in the GDS. The only new element here is that this initiative is using NDC messaging to distribute these offers. NDC XML can bring advantages and efficiencies, acknowledged Hussein. One such efficiency is that it can allow for better automation in the distribution of airline products. Other types of connectivity deliver the same end result, but the process can be more efficient with NDC XML that also introduces the offer and order notions. As NDC XML is only a messaging protocol, it needs to be powered by advanced merchandising solutions that can serve traveller needs across their whole journey, and support travel agency requirements. This is where Amadeus has been investing to enable airlines and travel agents meet their travellers’ needs with the right offer, at the right time, at the right touchpoint.

Amadeus is also allowing carriers (for example, Etihad) to display images of its product and ancillary services, such as exit row seating.

Hussein said as an IT provider to airlines, Amadeus has been delivering NDC XML-specific enhancements to its leading product suite, and is already using NDC XML in its solutions, such as:

·          Amadeus Flexpricer uses the NDC XML AirShopping verb.

·          Amadeus Ancillary Services Catalogue uses the NDC XML FlightPrice/ServiceList verbs.

·          Amadeus Rich Content uses the NDC XML FileRetrieve verb

As for supporting ATPCo Branded Fares, Amadeus offers airlines the choice to file their branded fares centrally or directly in the Amadeus system. “And uniquely, Amadeus Fare Families includes a proactive up-sell prompt boosting the revenue potential for each seat sold,” said Hussein. “For travel agencies, the full mid and back office integration means no disruption to normal workflows.”

Catching up

As also Hussein acknowledges, having a standard for XML connectivity such as NDC XML will help standardise future such integrations, delivering greater efficiency across the industry.

The industry is witnessing GDSs consuming airline APIs but how much penetration of the same as of today? Or how much of it is part of point of sale agency volume?

Also, are PSS/ GDS specialists deliberately slowing down the movement till they are ready with their respective merchandising systems that will enable airlines to create their offering dynamically, refining of their retailing and distribution systems to enable the efficient and effective delivery of enhanced airline content at the point of sale, and complete integration of their merchandising, and retailing and distribution systems with their respective PSS suites?

A lot to look up to when NDC’s 5-year timeline gets over in the next 12 months.

 

So is such disruption deep-rooted or will GDS/ IT conglomerates find their way out? Hear from senior industry executives at the upcoming 7th Mega Event Worldwide 2016, The Event for Loyalty, Ancillary & Merchandising & Co-Brands, to be held in Toronto, Canada. (25 -26 October, 2016).

Twitter hashtag: #MegaEvent16

Follow Ai on Twitter: @Ai_Connects_Us

Ai Editorial: Airline tech issues - is mainframe legacy solely responsible?

First Published on 26th September, 2016

Ai Editorial: Talking of major outages this year, it is being pointed out that at no time was “any mainframe system down at Southwest or Delta”. So do we need to target mainframe, explores Ai’s Ritesh Gupta 

 

The efficacy of core airline IT systems is under scrutiny. Be it for routine operations or preparing for data-driven merchandising, airlines are expected to improve upon the current state of affairs. 

No doubt the industry on the whole has suffered owing to sudden cancellations and delays, and it is being underlined that the current crop of IT systems is susceptible to faltering because of the way they have been for decades. But is the industry really at risk today as legacy systems run core operations? Or there is some other way to look at the whole issue.

“I don’t think we can put the blame solely on technology,” asserted Roland Heller, Managing Director, TIK Systems.

“It’s a combination of technology, man-made complexity of business processes and human errors. For sure, mainframes are complex and difficult to configure and optimise, but availability wise they are as stable as new generation systems such as Navitaire, Radixx, HITIT, IBS, WorldTicket etc.,” said Heller.

Defending the “mainframe”

Recent well publicised system outages at Southwest Airlines and Delta have seen a wave of attacks on legacy mainframe airline systems.

Why is the mainframe the source of ire for many?

“Those two major outages that disrupted “000s of passengers” – the most important of all were network router and electric power (fire) related,” said an airline IT executive. He referred to a couple of key issues:

·          At no time was any mainframe system down at Southwest or Delta.

·          At no time was any mainframe system suffering from performance problems.

“In fact, in Delta’s case, it was experienced staff who knew how to use “green on black”, who could revert to native mode who saved the day because the “New Gen” front end was down – its famed Tier 0 reliability relegated to a statistic on a beancounter’s spreadsheet. So what is that people are so scared about?  Why was the “legacy” mainframe attacked so strongly after those major “outages”. One aspect is definitely risk. Managers are uncomfortable with the thought of a highly specialised “non-standard” programming workforce – normally highly trained in IBM Assembler and now often staff in their 40s and 50s, disappearing by attrition, retirement etc,” added the executive.

Heller also referred to an incident. “The main difference is the impact of an outage. When Virgin Blue had an outage of 21 hours no one really noticed, except for the passengers. Other providers offer system-availability of estimated 99.6% - that’s almost a 3 hours downtime a month. Does anyone notice? No!”

Senior management ignorance

Heller added, “Based on my experience the weakest point with all the systems is networking and not computers. I actually think that backend servers are stable and with a proper setup you can reach 99.999% up time and that’s pretty good. However, as soon as humans touch these boxes, issues emerge. Too many people think they understand what they are doing just because they know how to operate a mobile phone.” He emphasised that IT is no longer being taken seriously.  

The airline IT executive also mentioned that those that are firing bullets at the mainframe are almost with exception those who have never programmed on the IBM Mainframe, never studied Assembler language and in many cases never used a “green on black” interface. “In airline parlance, they are the “children of the magenta line” - they would follow the “magenta line” because they can’t fly without automation. For “automation” read “Server Farm” and “Java”. The world of ones and zeroes – pure Mainframe coding, is somewhat alien to them. Mainframes can’t do everything. But what they do they do better than any other IT Technology because there is nothing more pure than the world of ones and zeroes. Mainframes give high throughput, high performance, fast recovery and high reliability.”

Another executive referred to the possibility of a delivering “Amazon-like travel experience”. He questioned the involvement of e-commerce specialists in shaping up areas like modern retailing in this industry.  He says, essentially the industry is “building more complexity on top of complex systems most of the people do not even understand any longer – and then we blame the hardware or technology when the people do not really know what they are doing. How many people are still alive who understand the full scope of such systems?”

Way forward

Specialists point out to airlines like Air New Zealand. These carriers harness the full power of the mainframe and combine it well with other technologies.  They have in their mainframe system and they have invested in their staff. The way forward is to get a balance between mainframe and decentralised technology.

Those who believe in the power of mainframe recommend that one needs to invest in the mainframe, invest in the mainframe staff, who are committed to their jobs and use its capacity to the fullest. “Embarking on a mantra of “get rid of the mainframe, get rid of the mainframe” is doomed to failure,” summed up the airline executive.

In case of switching over to a new PSS, such projects are complex. And then there is debate around whether to go for best of breed offerings or not. Are airlines going to stick to a single partner/ vendor with an established presence stretching over decades or there is room for embracing change by being flexible?  

For instance, there has been talk of how to gear up for today’s data-driven omni-channel merchandising. As explored in our previous articles, featuring comments from e-commerce, IT executives and industry consultants, “extending PSS” or “Out of the box” approach seems to be a likely option for FSCs as of now. E-commerce specialists tend to assert on developing a new system instead of relying on the existing PSS. And at most, if one has to continue with existing PSS, they recommend real time PSS data reliable interfacing to external contemporary systems where the proper data aggregation could be maintained. This is where airline IT executives tend to agree and as one of them would say: “Offload as much data as possible.  But keep the mainframe for its phenomenal message processing capability. Use the data which is there on the mainframe, but do that analysis offline.”

It’s time we create something fruitful rather than playing the blame game.

Some of the questions that need to be answered at this juncture:

·          What are the reasons behind IT outages?

·          How prone are airlines’ IT systems to malfunctioning and how to prevent the same?

·          How to modernize existing IT set up? What is there to learn from a mainframe programmer?

·          How to ensure the journey or passenger experience isn’t negatively impacted in case there are delays and cancellations?

Among those who suggest change, this section of the industry recommends digital infrastructure based on core platforms that are highly flexible. Airlines are still using very inflexible platforms. These are either based on shared community models or platforms that require a lot of development / programming to facilitate every change. To create and manage rich omni-channel customer experience, airlines requires platforms that provides extensive business model control (rules based) plus strong product and channel management capabilities. These platforms must have a modular open architecture that fosters a partner eco-system for collaborations.

Interestingly airlines tend to mark 60-70% IT budget for running and maintaining existing IT set up in place.

As for coming up with a new IT system for a business like running an airline, can we expect IBM, HP, Unisys, Sabre, Amadeus etc. to deliver? Would there be a competitive edge for any carrier? How about reducing complexity, going after cost control and also bring up system availability to almost 100% - say counting on cloud!

 

How is the industry trying to shape up airline IT infrastructure? Hear from the cream of the industry at the upcoming 7th Mega Event Worldwide 2016, The Event for Loyalty, Ancillary & Merchandising & Co-Brands, to be held in Toronto, Canada. (25 -26 October, 2016).

Twitter hashtag: #MegaEvent16

Follow Ai on Twitter: @Ai_Connects_Us

Ai Editorial: Being in control with NDC - 3 issues that airlines need to sort out

First published on 19th September, 2016

Ai Editorial: When we talk of IATA’s NDC standard, the common agreement among airlines is in the enablement of controlling the offer. There are 3 pertinent issues that can result in control, writes Ai’s Ritesh Gupta

 

When IATA launched the NDC initiative in October 2012, the trade association identified a five-year timeline toward mass implementation.

The first NDC standard was adopted in September last year, and Version PADIS 16.2. is scheduled for this month. IATA’s Yanik Hoyles, Director of NDC program, says as of now there are 52 NDC capable/ certified companies and 24 airlines have deployed some or all elements of the NDC Standard, while 86 airlines have shared that they intend to adopt the standard.

Considering that NDC is an investment decision, hasn’t the adoption been slow?

“I’m excited that people wish it could move along faster - it means there is a market demand that is not being fulfilled through the existing model,” says Hoyles.

Decide your own journey

The objective of NDC is to make changes within distribution and sales on one hand, and payment and BSP on the other. So there are schemas for shopping and, order management, and the end result is creation of Offer ID and Order ID, featuring order creation, ticketing, issuance, payment authorization and BSP reporting. So how has the industry gone about schemas for shopping and, order management?

“NDC is about enhancing retailing capabilities of airlines (distribution and sales) but this does not systematically imply changes for payments and the role of the BSP. This decision remains with each individual airline. To date, the very large majority of airlines have developed the capability to use the schemas for both Shopping and Order management,” shared Hoyles.

So considering that different airlines have different objectives/ expectations from NDC, does it mean some are only working on schemas for shopping and, some are working on schemas for both shopping and order management? “Yes, each airline makes its own decisions in terms of whether to adopt all or part of the NDC standard,” answered Hoyles.  

The common agreement among airlines is in the enablement of controlling the offer – back to the single source of truth concept. That seems universal among airlines moving in the NDC direction. Beyond that the industry can expect more splintering. Some airlines will want to go end-to-end; others may say they only want to be in control of the offer and really don’t need to perform the execution. Or, the execution on the offer becomes more of a tactical/ economical decision rather that a strategy decision.

Issues for airlines

1.     Distribution of content via API XML connectivity: Hoyles points out that the problem today is that airlines that already have API XML connectivity have it in a proprietary way. “The consequence is that implementations with new partners take time and are costly as they are all unique. Because NDC is a standard it will make such connections more cost effective and faster to deploy,” explained Hoyles. “If the partners involved (airlines or agents) see value in the presence of an intermediary, the standard can cater for that – and this is where aggregators come into play. They can be incumbents (GDSs) but also new players who are encouraged to offer their services because the connectivity is fulfilled via an Internet based standard which makes the market place much more open to competition.”

2.     Separating the core PSS capabilities: As much as it is important for carriers to plan, deploy, manage and upgrade APIs for all stakeholders to capitalize upon, airlines’ internal systems also should be in a position to pave way for API-based distribution. A senior IT executive working with a carrier in the Middle East mentioned that rather than writing off PSS, airlines need to work around their IT set up by fostering harmony between IT and other departments. “Getting rid of the “Mainframe” is not the answer. Working with the mainframe, using the immense processing power, high reliability, throughput and recovery, to let the mainframe do what it does best is the way forward,” said the executive. Offload as much data as possible.  But keep the mainframe for its phenomenal message processing capability.” An e-commerce executive suggested that FSCs need to focus on real time PSS data reliable interfacing to an external contemporary system where the proper data aggregation could be maintained. This would result in a mirror of PSS database outside of PSS, which could be used for generation of the accurate offer for individual passengers. “We are seeing airlines increasingly opt to control their own merchandising, e-commerce and API technologies, using platforms that enable airline control, faster speed to market, and flexibility – and move away from solutions that are hard coded or community-model based, or tied to a particular PSS or channel,” shared a specialist based in the U. S. Of course, who is delivering these new-age modules, is an interesting race, but as of now it seems “out of the box” solution is being favoured.  

3.     Managing “version control”: The first official industry standard was launched 12 months ago. Further versions of the schemas are 16.1 and 16.2 while previous versions (1.1.1 and similar) are candidate releases. The evolution of the standard is captured within the different versions, with each new version incorporating improved functions reflecting the feedback from pilots and users. The best way to understand the evolution of the standard is to consult the Implementation guide V3, shared Hoyles.  

Airlines have different objectives and there are different versions of schema varying from 1.1.1, 1.1.2, 1.1.3, 15.2 and then 16.1 and 16.2.

As Jim Davidson, CEO, Farelogix explained: Messages may change and improve with new versions thanks to the addition of new elements (e.g., sending video images) or enhancements to existing elements (e.g., split PNR improvement). “Airlines will adopt new versions based on whether or not the newer versions address a required business need or if they simply want to update their version usage. In today’s world of deploying an NDC API between airline and intermediaries there will be evolving versions of the schema that will impact the specific XML messaging, in that messages themselves will change over time – new ones added, existing ones modified, etc.,” shared Davidson.  

So if an airline has deployed NDC schema version 15.2 and a newer version becomes available (15.4), then the airline would need to work with all their intermediaries that deployed version 15.2 in making the upgrade to 15.4. 

 

Where is NDC headed in the next 12 months? Hear from senior industry executives at the upcoming 7th Mega Event Worldwide 2016, The Event for Loyalty, Ancillary & Merchandising & Co-Brands, to be held in Toronto, Canada. (25 -26 October, 2016).

Twitter hashtag: #MegaEvent16

Follow Ai on Twitter: @Ai_Connects_Us

Ai Editorial: Is disruption happening with IATA’s NDC standard?

First published on 6th September, 2016

NDC, as a standard, has challenged the whole airline IT and distribution set up. Existing entities are trying to sustain their supremacy, and start-ups are trying to sneak in, writes Ai’s Ritesh Gupta

 

NDC has been around for 3 years or so, and to what extent this standard has disturbed the status-quo isn’t an easy topic, though signs of evolution have emerged - GDS integration to NDC-style API, a carrier’s business rewards program tying into its XML API, big OTAs counting on direct connect deals etc. The likes of travel B2B conglomerates Sabre, Travelport and Amadeus assert they are gearing up for modernisation of retailing, plus the likes of Farelogix, Datalex, OpenJaw, JR Technologies etc. are moving swiftly and exuding confidence, too. And then there are other relatively smaller IT specialists that are trying to plug in gaps in the arena of differentiation via delivery of content, IT connectivity, distribution etc.  Of course, NDC is posing questions - are airlines going to manage Order IDs on their PSS? How to maintain a record of every offer? How to support integration with revenue accounting systems and tracking payments? Many more of such queries are being contemplated as the change is upon us. 

Old on its way out or just a passing phase?

There are new IT, B2B and B2C players that are emerging.

But can they challenge the transaction processing model of B2B conglomerates, deeply entrenched in this industry with their distribution and IT competencies?

GDSs say there is a favourable cycle emanating from their current business model, driven by synergistic businesses and thrust on investment in R&D that will keep them afloat. “Just see the number of carriers and agencies, multi-year content agreements, shopping, booking, and fulfilment functionality as well as our assets in terms of data centre and local managers in over 190 countries,” asserted a senior GDS executive, who underlined that this binds the interest of airlines and agencies. Network is difficult to replicate, and when we talk of technology, these conglomerates are trying to improve as quickly as they can.

But at the moment there are gaps in their offering. “What’s the point of putting rich, personalized content in a robust API if it will end up being sold using selling system that strips the offer down to a commoditized “everyone looks the same” display?” questioned Farelogix CEO Jim Davidson in a recent interview.

Another industry source mentioned, “GDS have done a poor job in upgrading their reservation system so that the airline product is no longer seen just as a fare, i.e. as a commodity. That’s one of the reasons why LH (Lufthansa) went ahead with their DCC initiative: get the GDS to do a better job in marketing airline product and services to the agency channel. And that makes sense. Airlines spend millions in their product in order to deliver superior experience to passengers, these must be reflected on the screens of the agents when they have a choice between two products of two airlines at equal fares.”

For their part, Amadeus is looking at a sophisticated merchandising system, enhanced airline content at the point of sale and integration of their systems into their PSS.

In a recent interview with us, Sabre did refer to featuring advanced merchandising capabilities including enhanced product information on their new platform. “Suppliers can count on improved consistency across channels – whether it’s branded fares and ancillaries or personalised offers and integration of rich, visual and descriptive content, we can support it utilising a wide array of technology standards,” said Kathy Morgan, Director of Transportation Product Solutions, Sabre Travel Network. Referring to Sabre’s competencies, Morgan also mentioned that by using insights around the business processes and workflow of users in this channel, “we can drive up sales of their premium products to increase revenues”. She also added, “Evolution in technology standards is nothing new, nor is the use of XML technology standards in the air distribution business. But I would say that usage is on the rise. Sabre has been utilizing a variety of technology standards, including a mix of XML and EDIFACT standards, for a long time and we’ve actually developed our platform to have the flexibility to manage the new ways that new technologies are allowing content to be sourced and distributed.” Among other developments, Morgan also mentioned that from airline IT perspective, Sabre’s offering will be available to all distribution channels via the NDC XML standard. “Our solution enables airlines to join customer data (such as trip history and tier status) with their fare and ancillary catalog to generate flight, branded fare, and ancillary bundles and discounts that are both relevant and personalized to the individual traveler.”

The question then is where are the likes of Amadeus, Travelport and Sabre trailing? So if we are already witnessing “Out of the PSS” route in the NDC world, it would be interesting to see where these organizations are headed. Are we bracing up for strategic alliances in the near future?

Opportunity for new entrants

I spoke to a couple of start-ups and evaluated what they are trying to capitalize on. Interestingly, GDS is still in the picture in one venture, and in the other it isn’t.  

B2B: Going forward, one of the biggest challenges will be ensuring interoperability between the various industry standards during this evolution period – to ensure consistency in access to products and services across airlines and channels. India-based Airlines Technology is looking at being an aggregator and as well as offering an “adapter” for airlines to start offering NDC services without amending their respective PSS systems. The company has achieved IATA NDC Level-3 capable certification with implementation of 15 IATA’s NDC schemas and also completed a pilot with British Airways. “Our adapter for OTAs will showcase both NDC offers with rich content along with normal reservation details from existing GDS/ PSS on one single page. OTA can offer best customised offers and shopping options along with rich content from NDC enabled airlines along with non-NDC airlines. OTA will not lose on business from NDC enabled airlines ancillary offer sales or normal GDS options,” shared Paras Kumar, co-founder, Airlines Technology.

B2C: Berlin, Germany-based flyiin is building an online marketplace exclusively dedicated to air travel. According to Stéphane Pingaud, Co-founder, CEO, flyiin, travellers would be able to search and shop flights and any ancillary services directly with a multitude of airlines, while airlines would be able to distribute and sell their entirety of their product offering, with the same level of control as through their online direct channels. “We are developing our own, API-based search and booking technology, rather than using a GDS. Thanks to this new and superior technology, we are creating a completely new and digital experience for booking air travel online and gathering and sharing with airlines data currently not available through OTA and GDS” he said.

He further added, “The key asset of our API-based search and booking technology is the capability of accommodating any NDC-based API from our partner airlines, regardless of the version of NDC they use, and their specific “interpretation” of that version. For instance, it can send shopping request messages to multiple airlines, using the latest version of NDC (16.1) as inputs, translate these messages in the version supported by the airline, and doing the opposite process for the shopping response messages from the airlines,” explained Pingaud.

The team intends to certify their NDC Gateway with IATA within the next few weeks.

“Our understanding is that the application to get certified is quite straight-forward, as soon as you’re able to demonstrate a live deployment. In our case, the live deployment means showing how the “search and booking engine” behind our online marketplace - which we referred to internally as ‘NDC Gateway’ - sends shopping requests messages to multiple airlines, and how it processes the responses returned by these airlines,” explained Pingaud. “We also understand the certification comes at a cost, since companies need to pay a one-time application fee, and then yearly renewal fees, to become and remain NDC-certified. The good news for us that IATA applies reduced prices for start-ups, a move which confirms the faith that the industry has in companies like ours to drive innovation in airline sales and distribution.”

Pingaud stated that airlines would “see in this new, “semi-direct”, consumer-focusing, digital channel” the opportunity to finally achieve what they’ve long wanted to achieve through third party channels:

·          Control and time-to-market of their product

·          At a lower cost

·          While keeping the ownership of the customer, as with their direct channels

The emergence of start-ups is always exciting, and when the status-quo is seemingly or even verge of being challenged, it means processes and infrastructure would get refined to change for the better.

 

So is such disruption deep-rooted or will GDS/ IT conglomerates find their way out? Hear from senior industry executives at the upcoming 7th Mega Event Worldwide 2016, The Event for Loyalty, Ancillary & Merchandising & Co-Brands, to be held in Toronto, Canada. (25 -26 October, 2016).

Twitter hashtag: #MegaEvent16

Follow Ai on Twitter: @Ai_Connects_Us

Ai Editorial: Banking on a robust API offering for retailing and servicing

First published on 31st August, 2016

Ai Editorial: An efficient API strategy paves way for pervasive adoption of applications, enabling an airline to greatly expand its presence across related applications, writes Ai’s Ritesh Gupta

 

Travel vs. retail is one topic that continues to rule whenever we talk of a transaction in the omni-channel shopping environment.

I recently wrote about the significance of the travel sector finding its own niche, rather than just focusing on delivering “Amazon-like” experience. I felt airlines need to understand the implications of IoT, artificial intelligence etc. on one side, and in conjunction evaluate how their existing IT, data and analytics infrastructure can make the most of gamut of new technological advancements.

There are ample indications that airlines and IT specialists are collectively working on digital transformation, acknowledging the importance of digital business processes and enterprise models and aligning them with the digital ecosystem. And as Datalex points out, to compete in a digital marketplace, the industry must adopt the technology principles and methods of digital natives = API First.

Airplane seat vs. book – just not the same

Before we understand the significance of APIs, comparison with the retail sector needs to be equated in a balanced manner.

Last week at MegaAPAC in Kuala Lumpur, Christian Baillet, Regional Director, Airline IT Sales, Amadeus IT Group, gave an example: You buy an air ticket and a book on the same day, both transactions done via digital channels. Be it for a transaction (distribution) or fulfilment, channels and touchpoints vary vastly. The number of direct and indirect channels an airline can have are much more than Amazon, pointed out Baillet. Also, there is a huge difference in the delivery and consumption of these buys. The book is likely to be delivered at your doorstep, and you track delivery status after your order. In case of travel, even if I dream of door-to-door transportation i.e. being picked up from my original place to where I am staying at the destination, there can be many touchpoints where my experience can go awry. And Baillet made another pertinent point: personalisation isn't about recognising customers all the time (or being creepy), rather it’s about relevant offers.

API-driven

“All systems – whether digital or legacy - must work and run on APIs,” stated Malachi Faughnan, Chief Information Officer, Datalex. Referring to the likes of Google, Uber, and Alibaba, he highlighted that with technology at their core, these organizations are in a position to serve their offerings with outstanding accuracy, maximising their operations while engaging directly with and owning their consumers. “They have leveraged technology to unify their end-to-end operations,” said Faughnan.

A competent API platform lets interoperate with other enterprise solutions regardless of technology or platform. It facilitates an enterprise model that opens technology to connect people, organizations, and resources in an interactive ecosystem. Airlines can reap several benefits, be it for serving customers during their various stages of their journey as well as working out tool sets for configurability and integration to partner merchants. As Datalex states, application developers thrive on API developer tool sets to craft a superior digital retail experience and deliver real-time business insights for real-time retail decisions.

Airlines can reflect upon several aspects as they see where they stand: is there infrastructure cut out for unified pricing, offer and order management? What makes the experience immediate - connected and intelligent?

An example – Ryanair

In April this year, at one of our conferences in Barcelona, Dara Brady, Ryanair’s head of digital experience, spoke about how the carrier is gearing up to deliver “an Amazon Travel Experience”. Brady said Ryanair’s goal is to be the platform of choice for all travel needs, not just flights. Brady mentioned that the carrier “dominates in 20%” of the whole journey, which is just not about flights. The plan is to target a bigger chunk of the total spend (accommodation, transportation/ parking and in-destination spend) by becoming a travel platform that specialises in lowest fare flights. And about a couple of weeks later in May, Ryanair announced its myRyanair platform, letting users to select their travel preferences by creating a personal profile, securely store payment and passport details, and aiding them in trip planning and buying, and managing it, too. myRyanair is built to handle the details of 106 million people, and handling even a bigger pool won’t be an issue. A couple of facets that stood out with Ryanair’s approach - platforms need to become more flexible, and there is a need to move towards creating a single view via staged approach to data.

So how can an efficient API strategy play a vital role in overall digital transformation?

“Essentially, it provides for pervasive adoption of applications. An efficient API strategy enables an airline to greatly expand its presence across related applications. Developer communities open up significant distribution potential for those airlines with an efficient API strategy,” says Farelogix CEO Jim Davidson.

Optimizing digital touchpoints

Today e-commerce companies are working on APIs using data intelligence, for instance, making recommendations to users on their platforms.

So how should the travel industry go about counting on APIs for offering an optimized experience across various digital touchpoints?

This is about having instant access to content and information, says Davidson.

He further explained: Recommendations are generally based on historical or real-time interactive information. Airlines are now wanting to interact with their customers and prospective customers through a variety of touch points and timeframes. “APIs enable efficient connectivity to these various touch points and value aggregators can utilize these airline APIs to enhance their value creation to their customers. I believe we will see much more airline related content finding its way into a variety of applications, especially social networking apps, like never before. Key words or conversation topics will invoke airline related offers, etc.,” explained Davidson.

So airlines need to dig and explore how they can craft experiences around booking and travelling. Digitalization is about being relevant to the customer throughout the journey.

As Kevin O’Shaughnessy, CEO and co-founder, Indigo.gt, says, “Be your own API”.

 

Explore where your organization stands today and how to excel in this arena at the upcoming 7th Mega Event Worldwide 2016, The Event for Loyalty, Ancillary & Merchandising & Co-Brands, to be held in Toronto, Canada. (25 -26 October, 2016).

Twitter hashtag: #MegaEvent16

Follow Ai on Twitter: @Ai_Connects_Us

Ai Editorial: NDC adoption is about getting your priorities right

First published on 23rd August, 2016

Ai Editorial: NDC-XML will need time and resources to be invested before it is widespread, efficient and effective, writes Ai’s Ritesh Gupta

 

Digital commerce is breaking away from the shackles of a legacy enterprise IT set up, as airlines attempt to control their own merchandising, e-commerce and API offering.

Rather than sticking to hard coded or community-model based architecture, the plan is to support a digital ecosystem where one can work with various stakeholders, including indirect distribution, and be in control of content and offers throughout. This in essence also has been the focus of IATA’s XML standard, NDC, i.e. modernize the way air products are retailed to travel agents, corporations and travelers.

Airlines need to be part of this evolutionary phase, as much as a GDS or travel search engines needs to prepare for it. But this hasn’t been the case, when we hear what some of the active players have to share. For instance, an executive from a meta-search engine told me: “The speed of airline adoption has proven challenging and we would have preferred to see faster adoption and bigger commitment up front. The initiative is a few years old and just now we are getting to a tipping point where a lot of players are starting to use the system – if there was a wider industry commitment from the beginning, it would have allowed us all to invest more resource and thus moving the NDC adoption with the right speed.”

On the positive side, there have been striking developments such as American Airlines and Farelogix working on their GDS integration to Sabre using the airlines’ NDC-style API late last year or British Airways deciding to introduce servicing options such as pre-booking of additional luggage, catering request/ meal orders etc. via the NDC standard. But has the industry been slow with adoption of this standard?

Adoption

IATA’s Yana Hoyles, director of NDC program, speaking during ‘NDC in Action Workshop’ (held as part of Ai’s #MegaAPAC Merchandising and Digital Commerce Workshop in KL) highlighted that out of 179 airlines surveyed this year to measure the adoption level of NDC across the industry, 86 plan to adopt NDC, 23 don’t intend to adopt and 70 don’t know. In comparison, 73 had planned to adopt last year. Importantly, 24 already are live with the standard (NDC APIs “Open to all”, direct connect - travel agents, connection to aggregators, and focus on business travel).

Referring to several airlines, Hoyles mentioned that InselAir is moving from being a travel provider to an experience provider, counting on full NDC value proposition and attaining complete control of products and presentation; there is a natural fit in case of Gol Linhas Aereas Inteligentes as the airline is eyeing “lowest possible cost” avenue and also working with aggregators for distribution of content; Flybe is looking at connecting with corporate customers via an API plus consistency in presentation of products across all channels etc.

Commenting on value for airlines, Hoyles spoke about offer management areas such as merchandising the entire product portfolio and expanding to a gamut of sales channels, dynamic pricing and making personalized offers, whereas under order management one can simplify interlining and revenue accounting in addition to being in control of payment. Other than travel agencies, corporate travelers can hope for better policy enforcement, cost control, quality reporting etc.

Countering  IATA’s stance, an industry source recently told Ai: “Some carriers are further down the path with their assessments and piloting solutions utilizing NDC standards for offer creation and order management, the majority of the almost 400 commercial airlines in the world are not!”

Keeping pace with expectations

The level of expectation is fairly high for some comparing where we stand today, especially after what NDC promises to do.

“If we were to see something new and different like e.g. airlines selling ancillaries on other airlines or interlining based on NDC then I think it would become interesting and tangible,” mentioned a source.

Another senior industry executive also cautioned that before labeling NDC as a slow development, it also needs to be understood that some carriers still expect their PSS to deliver all as it historically did.

“Airlines require core platforms that are highly flexible. Airlines are still using very inflexible platforms. These are either based on shared community models or platforms that requires a lot of development / programming to facilitate every change,” Paul Byrne, SVP of Development, OpenJaw Technologies told me recently. “To create and manage rich omni-channel customer experience, airlines requires platforms that provides extensive business model control (rules based) plus strong product and channel management capabilities. These platforms must have a modular open architecture that fosters a partner eco-system for collaborations.”

Continuing to move

Broadly speaking the industry, including airlines, GDSs, IT specialists etc. have accepted that the usage of NDC -XML by airlines and GDSs will vary in its shape and form, resulting in a mix of EDIFACT and XML connectivity. As Farelogix CEO Jim Davidson says this is the nature of innovation and technical evolution – mixing the old with the new until the old becomes obsolete. “This is precisely what we are seeing in the advancement of airline distribution and merchandising technology, where newer platforms and messaging protocols are being “wrapped around” or bolted onto legacy airline systems. This enables new capabilities, such as personalization, merchandising and dynamic offers to become the new normal in an industry where yes, some of the core systems are decades old. In terms of an API strategy, yes, I believe that the future lies with airline-controlled technology that is PSS, channel and device agnostic. This will enable faster innovation by both the airline and aggregators/travel sellers, and is ultimately a win for the traveler that benefits from a more dynamic, personalized, convenient experience. This is the vision of IATA’s NDC as well as a number of companies, including Farelogix, that are delivering technologies that make this possible.”

Airlines are being advised to separate the core PSS capabilities, as they work on strong merchandising infrastructure and astute API strategy.

Talking of APIs, carriers need to avoid working on proprietary ones. As Davidson says, even standardized APIs are subject to implementation interpretation, which we are already seeing with the NDC APIs. Standardization allows for developers to get familiar and comfortable with certain APIs, even when they change a bit from time to time. This all adds to greater adoption and utilization, which is a good thing, he says.

NDC-XML is not a constraint in improving merchandising capabilities, and it intends to actually facilitate them. NDC-XML will need time and resources to be invested before it is widespread, efficient and effective. In the short term, airlines can already benefit from merchandising capabilities through the existing infrastructure. NDC-XML allows for a lot of flexibility, and this is one of its strengths.

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Ai Editorial: Spotting the next frontier for ancillary revenue

First published on 8th August, 2016

From bag fees becoming an integral part of economy fare to GDSs fully enabling the sale of optional extras to monetizing customer profile information, there are several avenues that can uplift ancillary revenue in the years to come, writes Ai’s Ritesh Gupta

 

Ancillary revenue generation is now a big game. Stakes are soaring higher. One needs to be swift, and make the most of traffic that’s coming their way.

A benchmark for ancillary revenue success, other than customer experience, is monetization.  United’s total ancillary revenue almost touched $6.2 billion in 2015. In case of Spirit, $52 earned from ancillary revenue represented a crucial 43.4% of Spirit’s total revenue per passenger.

One school of thought - travel isn’t a frequent buy, so when a traveller comes to a supplier, why not optimize the experience via relevant product offerings. Yes, the approach, staff training, infrastructure and fulfilment needs to be in line. Airlines today just can’t think in terms of air and non-air ancillaries. The industry is moving towards data-driven merchandising, and personalisation on an individual basis. Airlines are trying to curtail the learning curve, as quite often our industry looks upon the likes of Amazon to excel in retailing. The game is now about making the most of every interaction with the customer, predicting their next move, understanding the intent in real-time, and ensuring the number of clicks are reduced (certainly not 10-12 for a user to finish a transaction for an air ticket, seat, insurance etc.).  

We interacted with IdeaWorksCompany’s president Jay Sorensen about the latest trends in ancillary revenue:

Sorensen referred to 3 major drivers for ancillary revenue growth

·          First, there is plenty of opportunity left for airlines all over the world. Certainly the LCCs have covered almost every a la carte possibility.  But every other type of carrier from “regionals” to global network airlines have much work to do.  For example, bag fees will be almost universally charged for economy - currently they are not. 

·          Second, movement is occurring among the GDSs to fully enable the sale of optional extras.  Bookings by travel agencies and OTAs represent 40+ percent of the market that is largely untapped for ancillary revenue. (GDSs will continue to move away from their green screen presentation - which is really atrocious in today's world of user friendly interfaces - to a selling environment which mimics the display found at airline websites.  NDC will enable the transfer of price formulation from the GDS to the individual airlines.  We are far from that reality and even farther from airlines maximizing the opportunity).

·          Third, airlines are becoming better retailers. They are assessing their booking paths, cutting the unnecessary stuff, experimenting with pricing and positioning, and developing new products. 

Going forward what would be the next frontier as far as maximizing ancillary revenue is concerned? Would it be being data driven so that data such as flight and customer profile information can be used to dynamically offer customers the most compelling ancillary bundle to match needs?

Sorensen says monetizing customer profile information is “years away”. 

“NDC can be a conduit to link profiles to customized offers,” he says. 

“But airlines could largely be doing this now on their own websites, but are not.  The next immediate frontier is the revenue management - or today’s “cooler” phrase seems to be dynamic pricing - of optional extras.  This is especially true of the potential for managing the price points associated with branded fares.  The price distinctions of ‎20, ‎30, or ‎40 for the “good, better, best” method of branded fares can contribute millions in fresh revenue.  The revenue magic is determining the best price points – that’s always the case with effective retailing,” said Sorensen.

Becoming smarter in terms of selling

While carriers in the U. S. are much more well-versed, their counterparts, say in a market like China, are finding their way. When pursuing an ancillary strategy, airlines must not lose sight of the basic premise - the proposition has to provide value (monetary or otherwise) to the customer in order to be compelling. “Dynamic bundles are an effective way of providing such value. With bundles, airlines can use data such as flight and customer profile information to dynamically offer customers the most compelling air ancillary bundle to match their needs. For example, a frequent business traveller might be attracted to a bundle that includes seat upgrade, lounge access and Wi-Fi,” shared a source, based in China. “Fare Families, which involve retailing a flight plus a set of benefits for a transparent price, are also an effective way of communicating value. It may be a while before the Chinese carriers and their customers can fully reap the rewards from fare families.”

Sorensen says the “best” airlines understand they should not overwhelm the consumer with choices. 

He refers to analogy: Imagine going to a restaurant and ordering a meal. “I will have the breaded chicken”.  And then the waiter responds, “Do you want that breaded in flour, panko, or bread crumbs?  And regarding the seasoning, do you wish sea salt, regular salt, tarragon, rosemary, or paprika?” Some choices are simply better left to the chef and for the menu to describe the dish offered. That’s the same concept behind branded fares.  Consumers can choose from a menu of “good, better, or best” for their trip itinerary.  And, of course, being human, we are often lured to the safer middle choice.  And savvy airlines can price that product accordingly to deliver better revenue.  So for best retailing practice, my vote goes for branded fares, summed up Sorensen.

The case of Spirit and Ryanair           

$52 earned from ancillary revenue represents a crucial 43.4% of Spirit’s total revenue per passenger. What can the industry learn from Spirit’s way of handing ancillary revenue?

Sorensen says Spirit charges for everything and always remind the consumer they benefit from the lowest base fares. 

“It’s so very true.  In the absence of Spirit (or Ryanair in Europe) the global network airlines would immediately enjoy a big yield boost.  Consumers need these airlines to tamp down the overall fare level.  Spirit and Ryanair have an extreme natural advantage, almost all of their sales activity occurs within the completely controllable environment of their online store.  Ryanair has backed away from its reputation for ruthless efficiency and aggressive tactics.  They did this to attract business travellers,” shared Sorensen. He continued, “I think Spirit’s new CEO is showing signs of adopting the same image.  I give both carriers high marks for being very transparent about the process.  The trouble is, some consumers seem to sleep through the booking process and are surprised when they encounter a fee at the airport.  But - and this is important - the fee at the airport must be reasonable, and this is where many airlines stumble.  Being a few kilos over the limit should not generate a ‎200 overweight fee.  I think this is a generational factor which becomes far less frequent for younger travellers.  I will also add, when an airline charges for soft drinks and coffee, their overall food sales will increase.  Likewise, when an airline charges for large carry on bags, the revenue from hold baggage jumps.”

 

Gain an insight into latest trends at the upcoming Loyalty & Ancillary Revenue Conferences - 3rd Mega Event Asia-Pacific, scheduled to take place in Kuala Lumpur (23-24 August, 2016).

Follow Ai on Twitter: @Ai_Connects_Us

Event’s Twitter hashtag: #MegaAPAC

 

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