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

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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

 

Ai Editorial: 5 issues that can propel ground transportation as an ancillary offering

First published on 29th July, 2016

Ai Editorial: If stakeholders, including airlines, manage to inspire and uplift the customer experience, they can end up monetizing the overall door-to-door journey, writes Ai’s Ritesh Gupta

 

How can ground transportation become an integral part of the booking flow? Can it lend a new dimension rather than just coming across as a utility offering?

As we highlighted in one of our recent articles, airlines are uniquely positioned to profit from delivering a better user experience that comes from the transport utility. But for this to happen, the magic of content, availability etc. needs to reflect in the way, say the recommendation engine understands my intent (which sort of transportation option suits me), my travel (business or leisure) etc. 

So let’s say I am booking a trip to Venice. I am travelling with my family for a holiday. If I intend to travel from Milan to Venice via train, and then to my hotel via Venice water bus or Vaporetto, can I visualise the journey via a 30-second video and book it on airline.com? Of course, there are options such as Gondola ride, too, when we talk of Venice, but that’s where the challenge lies. The main hurdle seems to be going beyond mere car rental to look at various transportation needs, as travellers share itinerary information with airlines.  

Consider for a moment that most — if not all — journeys start and end well outside the airport. Only one component of this — the flight — is easily found, planned and bookable online. Then it seems that the logistics for the rest of the journey ultimately falls to the passenger to resolve. Whether it’s for a wedding or a business trip, the “travel math” that comes from trying to piece together the details of every journey — no matter who faces them — ultimately drives the user to either a friend for help, a travel agent or long hours with a search engine.

So if stakeholders, including airlines, manage to inspire and uplift the customer experience, they can end up monetizing the overall door-to-door journey.

As for the size of the ground transport as a travel e-commerce category, Ireland-based Kevin O’Shaughnessy, founder of Indigo.gt, a search and reservation platform for airport-to-city transfers, says“From our own data, primary research and other publicly-available measures from government agencies, the total estimated spend in ground transport from airport to final destination is $24 billion in Europe, approximately $80 billion worldwide. This is the total spend, whether or not it is captured in mobile, pre-booking or airline-direct transactions. Our figures include regulated taxi, metro, express rail as well as shuttle and limo services." 

5 points to consider

For airlines to make the most of ancillary revenue generation opportunity, O’Shaughnessy recommends following points:

·          Structured approach: Until very recently, all activity in the airport transport e-commerce focused on white-label shuttle and executive services with some big winners and losers along the way. Today, there’s more choice than ever to airlines in the pre-book and on-demand market, says O’Shaughnessy. “The question for airlines is simply whether they wish to capture this revenue as part of their service offering. With ground as a long-standing topic on the desk of many ancillary revenue managers, the question is no longer “why” or “when”, rather “how” they can be part of it,” pointed out O’Shaughnessy. From passengers’ perspective, this need isn’t new — everybody who lands at an airport will leave, one way or another. While some will connect to another flight, most will need to think about their onward journey — an inevitable necessity. This can be part of the “arrival” story on mobile, or part of the “planning” story as an integral part of the booking engine, just to mention a few. “Airlines should target their ground transport projects in a structured way — while there’s technology and coverage to provide for a simple “transport switch” today, airlines who build transport into their offering in a step-by-step approach will capture more revenue, with less risk, faster.”

·          Working with B2B specialists: The blend of air ticket plus car rental is proven, and various stakeholders have reaped benefits by optimizing the traveller’s journey. How can airlines target other ground transport options? O’Shaughnessy says, “Some airlines tell us that air + car is still “small but growing”, but that the value of the commission per-transaction is quite high. Every passenger has a different transport preference, so why gamble on a low-conversion opportunity? All travel retailers need to make a conscious choice between low-volume/ high-commission-value and high-volume/ lower-commission-value. (In some markets, rail trips to/ from the airport are used by as many as 65% of passengers. Where high speed rail links exist, the typical take-up rate is about 35% of all passengers to/from an airport). “Airlines can get up and running quickly with other types of ground transport types by working with ground transport aggregators,” asserted O’Shaughnessy.

·          Keep an eye on API revolution: When we talk of content and inventory related to ground transportation, how is the industry gearing up for innovation? Transport is in the middle of an “API revolution” and soon it will be easier than ever for any small team to offer complex rail, flight and taxi content, developing exciting new channels and experiences for travel content on a limited budget. Like all other travel innovation, the key is customer acquisition, conversion, service and loyalty,” explained O’Shaughnessy.

He added that on a global level, a couple of developments stand out - content aggregation (individual transporters from around the world operating under their own brand and sold through Indigo.gt, Cartrawler or Mozio) and growth of multi-market transport apps operated under a third-party brand such as Uber and Blacklane.

From the transport companies themselves:

·          Local taxi companies are being aggregated into dozens of platforms

·          Rail is slowly opening up to strategic distribution, sometimes blocked by regulation

·          Coach companies are exploring new business models and operating models

·          Shuttle, executive and van companies remain the most diverse in the business, but new models are being explored by their operators

“The key innovation in ground is technical connectivity: making reservation systems accessible by other partners. Often payments technology stands in the way of an efficient relationship, but this is slowly changing. This has been quite proactive, and largely driven by the ground transport aggregators,” he said.

“In the next three years, it will be easier than ever to access transport content directly from the rail, coach or taxi company directly, however the “back-office” complexity will remain. The good news is that the better platforms for ground transport today provide a certain degree of future-proofing which reduces technical and commercial complexity for their airline partners,” says O’Shaughnessy.

·          Payment technology: According to O’Shaughnessy, the key to future ancillary growth in airlines is in payment technology. He says airlines need to think about an “open wallet” approach. Store the cardholder details (carefully — using a third party or in-house solution) and allow the passenger to dip in and out of other commercial opportunity in pre-departure communication, mobile, check-in and even on-board.

“There are other ways of handling payments other than the typical “Twenty Questions checkout” process where cardholder details must be entered every single time, opening the door to the risk of fraud again,” said  O’Shaughnessy. “Tokenization technology means that airlines can trigger the request for cardholder data once, then share this at the right time with car hire, in-flight entertainment, hotel and other ancillary providers, all with the users consent and secure, controlled transfer of payment details. This is just one example, and other techniques exist. This more relaxed approach, coupled with a broader-reaching mobile platform, allows more products to be marketed in the always-open airline store front.”It’s important to remember that both Lyft and Uber operate in this “store front” manner. While it appears that they are the merchant of record, in reality, the driver is contractually the merchant; the app is simply facilitating the transaction. The innovation is that Stripe and Braintree are also essentially allowing the driver to be the card processor too. No “Twenty Questions” when you get into your taxi. By behaving more like Uber/ Lyft, an airline can capture more revenue from its mobile storefront on more occasions during the journey for relatively low investment.

·          Acting smartly – think of the day of travel and mobile: Of course, the day of travel can trigger certain initiatives from a flyer, including transactions. “In pure operations terms, nobody knows better than airlines where the user is. Few relationships are as trusting as this. There’s no reason a passenger can’t send a tailored push notification to a user’s app on arrival, or suggest a scheduled pick-up while the passenger is waiting at the airport on departure,” said O’Shaughnessy. For instance, Dublin-based MTT have captured some of these day-of-travel elements wonderfully for Easyjet from an experience perspective. “What airlines are missing out on — especially in terms of revenue — is what 60%+ of every landing passenger will do on arrival: use a ground transport product. The airline mobile app’s true revenue opportunity is calling, and there’s no reason why today, that one-button-booking experience can’t be delivered directly by the airline app, without having to pass through the app of a third party.”

 

Kevin O’Shaughnessy, founder of Indigo, is scheduled to speak at the upcoming Loyalty& Ancillary Revenue Conferences - 3rd Mega Event Asia-Pacific, slated to take place in Kuala Lumpur (23-24 August, 2016).

Follow Ai on Twitter: @Ai_Connects_Us

Event’s Twitter hashtag: #MegaAPAC

Ai Editorial: As ancillary revenue soars, time to become more judicious

First published on 22nd July, 2016

Ai Editorial: United’s total ancillary revenue almost touched $6.2 billion in 2015. But as stakes get higher, airlines need to prepare better. Ai’s Ritesh Gupta assesses 5 areas.

 

Can an ancillary product be linked with loyalty? How to avoid the “clever” idea of opportunity cost pricing, say for a seat in the aircraft or lounge access?  How can bundling and unbundling be linked with comfort and convenience?

Airlines are contemplating and probing issues around customer-centricity when it comes to ancillary revenue generation.

As IdeaWorksCompany and CarTrawler released 2015 Top 10 Ancillary Revenue Rankings, it was emphasised that ancillary benefits shouldn’t eclipse the core principles of customer experience that airlines have built their brands on. The opportunity is to deliver a personalised offering that complements their brand promise.

It’s getting bigger and bigger

In the era of data-driven merchandising and personalisation, stakes are much higher now.

According to IdeaWorksCompany’s latest ancillary revenue review of top-performing airlines, the top ten tally soared to nearly $26 billion in 2015.

Highlights:

·          Top performer per passenger is Spirit. Even though the carrier’s systemwide total revenue per passenger was a very modest $119, the $52 earned from ancillary revenue represents a crucial 43.4% of Spirit’s total revenue per passenger. As per the revenue profile of Spirit, checked bags contributed 18%, online and call centre fee 14%, assigned seating 4%, sale of FFP points 3% and all other ancillary 4%.

The study asserts that a la carte methods have gained acceptance over the years, a trend exemplified by the fact that Spirit has risen from 5.5 million passengers in 2008 to nearly 18 million last year. For a carrier like Spirit, high passenger volumes and load factors enable them to sell more ancillary products and services, which in turn allow to reduce the base fare even further. In this category of ancillary revenue as a % of total revenue, Spirit was followed by Allegiant (37.6%) and Wizz Air (36.4%).

·          Total ancillary revenue – United led this category with $6.2 billion, followed by American ($4.71 billion), Delta ($3.78 billion), Air France KLM ($2.16 billion) and Southwest ($2.11 billion). In all, there are 10 airlines over $1billion in the total ancillary revenue per year category. For their part, United has over the years grown their ancillary revenue per passenger by growing bag fees, developing their Economy Plus product, and stretching the revenue boundaries of the MileagePlus frequent flier program. Ancillary revenue per passenger in case of United has risen from $22 or so in 2008 to $44.16 in 2015.

Preparing for the future

Indeed ancillary revenue generation is an integral part of the business today, but airlines can’t afford to annoy the customer, and they also need to improve business processes.

1.     Personalisation: The concept of ancillary products is common, but selling them in a personalised way is not. As Maria Cardenal, head of product development at Vueling Airlines asserted in a recent interview, selling ancillaries is about identifying a need in a particular moment. And doing it right. Because awkward personalisation can be worse than not personalising at all. Here is where big data comes into play. “So there is a need to use data effectively for personalization - collect enough data with enough quality, have the ability to draw the right inferences or customer intelligence, work out right tools to transform the data into personalised messages or experiences and must do it at the right time and in real time,” Cardenal pointed out. And while doing so, airlines need to counter the high cost of implementing personalization and assess customer acceptance level for personalisation.

2.     Distribution: Airlines, OTAs and GDS companies are working on advanced merchandising capabilities including enhanced product information delivery via images, video etc. GDS companies have come up with graphically-rich workflow to support ancillary and branded fares sales. As IdeaWorksCompany’s president Jay Sorensen highlighted during our Ancillary Merchandising Conference in Barcelona in April, linking a la carte methods to GDS is the next revenue frontier. Quite often it is pointed out that ancillary or bundled products are not readily available when shopping through most travel agencies or corporate booking tools, but as Sabre recently told us, the team has made ancillary and branded fare content available through all points of sale that it develops.

3.     Being flexible: In order to be flexible and astute with airline merchandising, there is a lot of scope for improvement as of today. If being flexible with the crafting of a new offering – say a new fare, a new ancillary product – can result in increased average order value or even augment the customer experience, then it would be a welcome change for any airline. But how much time does it take to do so? The technology is making rapid strides, and it is being highlighted that it shouldn’t take more than a day to 3 weeks (depending upon the fulfilment aspect of the new offering) to implement the same. Of course, testing is a vital component, but that shouldn’t restrain from trying out. The work that is done at the back-end to introduce a new offering should be done in a way that there is no amendment required in existing digital assets such as PC website.

4.     Making it simple: Spirit asserts that the team allows customers to see all available options and their respective prices prior to purchasing a ticket, and this full transparency illustrates that total price, including options selected, is lower than other airlines on average. In fact, the airline ran a brand campaign in 2014 and 2015 to create awareness about how unbundled pricing model works.

Vueling’s Cardenal says the industry can look at improvement in easiness, convenience, relevance and self-sufficiency when it comes to selling ancillaries.

Also, airlines need to ensure page flow configuration on their sites results in control – the sort of products that one intends to sell, at what stage during the booking flow and also for the routes and a set of customers chosen. “Everything can’t be sold to the same set of customers the same way,” Justin Steele, Senior Director of Innovation, Switchfly.

5.     Demonstrating value: One thing that I find annoying, from a traveller’s perspective, is the “clever” idea of opportunity cost pricing.  Why should I pay an extra $10 for an economy class aisle seat just because the flight is not full today, knowing that a week ago a same seat on a fully booked flight did not demand any extra price? How can such opportunity cost pricing be justified?

Cardenal says the fundamental idea behind charging for a particular seat is not the opportunity cost, but the benefit of choosing where to sit and removing the uncertainty of where you will finally sit.

“Vueling passengers will have a seat assigned for free if they choose so or will be able to choose it themselves if either they pay for Optima fare or pay for Basic fare and then the seat they prefer. Either in an unbundled way or in a bundled way, there is value behind the possibility to choose.  It’s the same simple principle for which you have different prices depending where you want to sit at the theatre or the Opera or a football match. You will have to pay extra if you want to sit in a privileged zone,” she said.

 

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

Ai Editorial: It’s just not about selling the way “Amazon” does, travel needs its niche

First published on 21st July, 2016

Ai Editorial: Delivering “Amazon-like” travel experience is an apt benchmark. But as much as we can learn from the top-notch retail commerce platforms, we shouldn’t forget shopping for travel and say a retail item could be different, too, writes Ai’s Ritesh Gupta

 

What’s the benchmark for optimizing a traveller's shopping experience? 

Quite often clues are taken from the retail sector, which I believe also tends to exert unnecessary pressure on executives from airlines.

Yes, there could be plenty to learn. So it could be running a personalised platform rather than a website that features customer profiles, depicting brand story in a forceful manner and delivering a distinctive experience, customized offers based on personal preferences etc.

But shopping for travel and say a retail item could be different, too.  When I search for a book on Amazon, and “how to travel from Zurich to a village in Interlaken?” on a travel e-commerce platform, the requirement could be drastically different. While for a book, I might read 2-3 lines of reviews, price, availability etc. (yes, Amazon might be well anticipate what I intend to read), in case of a trip, I would look for different transportation options and then respective classes in each, things to do, weather, etc. As the number of variables increase, the display of content becomes a challenge, too. Definitely not an easy task for any airline, even though airlines might be knowing where I might travel next!

So any technology-related (or even distribution, loyalty, retailing-related etc.) decision isn’t easy as too much is happening around us. Airlines are contemplating several areas:

·          How artificial intelligence (or AI) can pave way for meaningful interactions? Say - personal travel assistant and tips for trips

·          Moving away from disconnected things to Internet of Things (IoT)

·          Earnings points and miles when a loyal traveller isn’t travelling

·          Effective cross-sell and up-sell at the right time and in the right channel

·          Drifting away from websites to platforms as one embraces digital transformation

·          Layering behavioral data on top of transactional information for real-time complete view of a traveller.

·          Crafting luring offers based on contextual marketing, location etc.

·          Optimizing user experience via emerging payment options

·          Making the most of latest merchandising and retailing technology and overcoming limitations of legacy infrastructure

Plan, invest, learn and learn more

Airlines need to be meticulous about the way they go about planning for the future. Earlier this year JetBlue chose to set up JetBlue Technology Ventures, a wholly owned subsidiary. The plan is to invest in, incubate and partner with early stage start-ups. The advisory team includes CIO, and Executive Vice President – Commercial and Planning, along with other executives from the senior management. As much as a proper vision and an enterprise approach to aligning teams and identifying gaps are required, the organization needs to streamline testing of new concepts on an ongoing basis. Big organizations like Expedia, priceline etc. have proved it – iterations, testing etc. needs to go on and on. This week as I learnt about the introduction of a new artificial intelligence chatbot by Gurgaon, India-based travel search specialist ixigo, it emerged that it  took 12 months for the team to come up with their AI chatbot. The offering would continue to evolve, learning from real interactions with users since the team uses artificial intelligence and deep-learning. So the point I was referring to about retail vs. travel – moving from A to B loaded with information that serves the purpose of the trip – travel companies are responding. ixigo is confident, starting with “80% accuracy”, something that has been built upon from over 30 million data points across destinations, points of interest, routes, things to do etc.

Challenge status quo  

May be its time airlines looked beyond existing options for IT and distribution. “Airlines are still to a large extent looking for industry specific vendors and solutions, and – in many cases – still looking for a silver bullet to give them a 10- years leap forward. In my opinion, this is truly strange; when realizing that retailing has out-paced aviation, why don’t airlines look to major retailers for learning and to vendors/ systems in the retailing space, even without any airline special requirements?” questioned a source about the current approach.  The source further added, “I don’t understand why we are looking for one standard – XML – why not allow any standard? Won’t we have the same problem as we have with EDIFACT today (although EDIFACT serves its purpose well in many environments), what will happen in years to come when we claim that XML is holding us back and we have a better messaging format? In that case use converters so if you want to speak XML and I want to speak JSON, why don’t we just translate?” As it turns out, Google currently supports structured itinerary definitions in email confirmations using two standards: an industry format Called Micro Formats, and their own custom format called JSON-LD.

Talking of selling, indeed if we were to see something new and different like e.g. airlines selling ancillaries on other airlines then I think NDC as a standard would become interesting and tangible. Matching content to offer is a major issue even today. Also, beyond a point don’t blame the so-called legacy structure, why should everything be sold in the same way. Sell as “well” as you can in the channels where you can sell and measure those sales. British Airways is introducing a host of servicing options and an additional payment option via NDC. Agents booking BA flights through NDC enabled systems are being equipped to pre-book additional luggage, advise the airline of catering requests for pre-order etc.

Collaborative approach

Airlines are not technology providers. They are service providers. 

So in order to carve a niche, a strong collaboration is needed between strategy, marketing, operations, analytics and IT teams before any major initiative is taken. Your technology should integrate seamlessly across channels and touchpoints, while effectively scaling to meet your evolving needs. This is often easier said than done due to legacy systems and data silos. The digital transformation should not be linked to a certain department anymore.

As for keeping pace with the pace of personalisation and omni-channel retailing, airlines will have to implement a system that can link all the data that is being gathered together to enable intelligent offer management capabilities based on the identification of customers and their preferences. And things are moving. For instance, a carrier in Europe is working on a customer-centric platform. They have chosen a supplier that provides a modern CRM platform framework that enables the integration of all relevant operational systems. Besides the PSS it’s possible to integrate an external identity and access management system as well as social media, real time arrival and departure information and many more. Based on all these sources of data it’s possible to develop applications that can use and combine such data to serve the customers in the best way.

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Ai Editorial: Airlines need to be wary of proprietary APIs

First published on 15th July, 2016

Ai Editorial: Proprietary APIs tend to create “one-off” implementations that make repeatability more complex and therefore more expensive, writes Ai’s Ritesh Gupta

 

Airlines are increasingly opting to control their own merchandising, e-commerce and API technologies.

The focus is on using platforms that enable airline control, faster speed to market, and flexibility – and drifting away from solutions that are hard coded or community-model based, or tied to a particular PSS or channel.

As carriers gear up for personalisation, yield-managed offers, it is clear that they need to sharpen their respective APIs (application programming interfaces). Amidst all the talk around a single, standardized set of XML messages that can feed all channels, how are airlines and GDS companies going about the same? It seems we haven’t yet settled for standardization i. e. relying on XML APIs or set of codes so that structured data can simplify processing and new application development.  

Proprietary APIs – airlines need to be wary of them

NDC-XML is a messaging standard, and not a model or a system. Whether an airline is using XML or any other messaging standard, they will get feedback on their offer when someone purchases it.  But proprietary APIs are not always scalable for widespread adoption.

I recently interacted with the Chinese platform Alitrip's team and it emerged that they have signed direct connect agreements with domestic carriers in China. But these aren’t NDC XML APIs.

“Proprietary APIs tend to create “one-off” implementations that make repeatability more complex and therefore more expensive,” said Jim Davidson, CEO, Farelogix.   

He added, “Proprietary APIs are where we started, and generally it makes scaling more complex and expensive, hence the necessity for standardization. Even standardized APIs are subject to implementation interpretation which we are already seeing with the NDC APIs.”

So how complex it is to change APIs and switch over to NDC XML one?

“It is a process for anyone who has developed to a certain API, as they must reprogram to the new API. Certainly some change, and updating will always be required as new functions and services are added to the API. 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,” explained Davidson.

APIs and travel distribution

API’s are all over the place, and companies like Google have thousands. The concept of API utilization in travel distribution is about content delivery and the concept often referred to as the single point of truth. In terms of content delivery, an API generally has the capacity to deliver more interactive content than traditional (i.e., older) types of connectivity. Car, hotel, and even airline APIs have been around for years. “However, they tended to be a bit fragmented in their structure – meaning no two were really alike – so scaling was both challenging and expensive. For the concept of a single point of truth, an API can function as that one place anyone can go to for consistent and reliable (and accurate) content,” said Davidson.

NDC – still a long way to go

So when we compare the way carriers like American Airlines, British Airways, Qatar Airways etc. with say ones in China, it seems there is disparity in adoption of NDC-XML coding. Proactive airlines have shown that it is possible to deliver richer, more personalized offers across multiple channels, and also possible for aggregators to more cost-effectively scale their integration efforts. As Davidson shared with us earlier this year, this is a major accomplishment and bi-lateral win for the industry.  We are seeing that play out in a number of forms – whether it is OTA’s such as Priceline consuming airline direct connects; GDS such as Sabre consuming American Airlines API etc. NDC-XML provides a strong first level of standardization where XML is used, and avoids many inefficiencies that different versions of XML can create. Based on this foundation, the industry will naturally and in practice further standardize how NDC-XML is applied in order to facilitate the widest adoption. This will involve a process of trial and error.

It is pointed out that GDSs have integrated airline content using proprietary airline API interfaces for several years. But GDS specialists are working their way, and even point out that IATA NDC standards are still new and emerging, and the airlines and airline IT providers are still assessing the role that NDC will play in the distribution of fares and content. “While 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. According to a recent IATA NDC survey, 86 carriers are planning to adopt the NDC standard in some capacity, while 93 are either undecided or not planning to adopt the NDC standard,” shared a source.

For their part, Sabre is closely engaged with IATA and ATPCO on the NDC initiative at both an executive level as well as a working group level.

“(Sabre) will be part of the group of industry constituents driving the evolution in this area,” Kathy Morgan, Director of Transportation Product Solutions, Sabre Travel Network told me in an interview.

In an interview with Ai earlier this year, Gianni Pisanello, Strategic Marketing Director, Airline Distribution, Amadeus did acknowledge the limitation of proprietary APIs and mentioned that NDC-XML will help increase scalability through a level of standardization. The industry will need to further standardize the data elements and the booking flows to benefit from full economies of scale. In order to deliver the economies of scale that everyone seeks and needs, the industry will need to continue to work closely together to find a balance between that flexibility and effective standardization as NDC-XML gets deployed.

Focus on centralized and standardized API

 “When it comes to a distribution approach to an airline’s selling channels, the delivery methodology would be quite clear, i.e., a centralized and standardized API that would be consumed by all channels – web site, kiosk, GDSs, mobile, etc. The technology behind the API is generally related to the functions one wants to deliver through the API. In the airline world its things like flight search, flight price, PNR create, ticketing, etc. It’s nothing really magical, but rather just a highly efficient way to communicate with the outside world,” Davidson said.

Looking at the bigger picture, Farelogix recommends that airlines not only need to work out standardized set of XML messages that can feed all channels, but also need to plan web and mobile front-end that can dynamically add or alter any fare, bundle or ancillary, and facilitate all offer types and corresponding functionality for shopping, booking, fulfilment etc.

 

Ai is set to host Complimentary MasterClass with Farelogix - NDC in Action: Best Practices in Airline Merchandising & Digital Commerce in Kuala Lumpur (on 22nd August).

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Ai Editorial: Sabre’s way of dealing with inconsistency in air travel distribution

First published on 11th July, 2016

Ai Editorial: Sabre is counting on its scale for innovation as the group continues to power apps, sites, reservation systems etc., writes Ai’s Ritesh Gupta

 

The way airlines sell is evolving, and this is ruffling the status quo.

Clearly airlines are re-looking at their IT infrastructure as well as association with intermediaries in order to gain desired control over what they sell. How viable is a direct connect agreement? What sort of investment would NDC require? Cutting down on GDS distribution cost or even doing away with it? These and many more issues are being dealt with.

Be it for consistency in selling across direct and indirect channels, or understanding a traveller’s intent, context, loyalty or even cost control, airlines are seeking change. Carriers are now focusing on a new messaging standard NDC, doing away with inflexible platforms that require a lot of development / programming to facilitate every change, looking at attaining cost-benefit balance while going for personalisation etc.

Sabre – banking on scale for innovation

Since airlines work with technology vendors and distribution specialists, a big question then is: how are B2B travel conglomerates responding to the evolving needs?

For one, Sabre is ready to bring on change with its software, data, mobile and distribution solutions. The group asserts that its scale enables the team to innovate across the entire travel lifecycle. Sabre processes more than 1.1 trillion system messages every year.

We interacted with Kathy Morgan, Director of Transportation Product Solutions, Sabre Travel Network about how the group is playing their part today:

·          Collaborating for emerging distribution technology capabilities: A prime example of this is NDC connectivity to the Sabre GDS, as American Airlines worked on GDS integration to Sabre using the  NDC-style API late last year. We are already seeing that usage of NDC -XML by airlines and GDSs will vary in its shape and form, resulting in a mix of EDIFACT and XML connectivity. “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,” said Morgan. 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.” Morgan pointed out that going forward, the biggest challenge 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.

·          Consistency in distribution: Morgan asserts that 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 provided by entities such as ATPCO, IATA, and OpenTravel”. So for Sabre, the biggest development in indirect distribution that exemplifies how the GDS is enabling airlines to differentiate their offerings is the evolution of Sabre Red workspace travel agency platform, to include enhanced merchandising capabilities for suppliers.

“(The new flexible content sourcing platform) enables airlines to distribute their products in new and different ways, ensuring the indirect channel has access to the full breadth of content an airline wants to distribute and differentiate,” says Morgan. The offering features advanced merchandising capabilities including enhanced product information delivery via images, video etc. “It would enable airlines, hotels and other travel providers to leverage the Sabre travel marketplace for an omni-channel marketing strategy.” Morgan added that the graphically-rich workflow supports ancillary and branded fares sales (and enhanced hotel capabilities).

·          Unique value: Sabre states there are several ways in which the group delivers unique value to airlines. “Through our APIs and Sabre-developed points of sale, we extend the reach of the airline to customers not easily accessible to them in their direct channel – such as managed corporate travellers and buyers outside of their home market,” says Morgan. “(Also, 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.” As distribution specialists, they state that GDS remains the most efficient, neutral and cost-effective distribution channel to reach travel agencies, not just for seats, but also effective retailing.
 

·          Availability of ancillary or bundled products: It is pointed out that ancillary or bundled products are not readily available when shopping through most travel agencies or corporate booking tools – creating an unnecessary discrepancy and lost opportunity for both the airline. Morgan said the bundling and unbundling of products and services drives complexity in the air shopping and booking process. “At Sabre we’ve made ancillary and branded fare content available through all points of sale that we develop, from the Sabre Red Workspace agency booking platform to GetThere, our corporate online booking tool. Currently, 72 percent of bookable air content in Sabre offers an ancillary and/or branded fare, a significantly larger number than other GDSs. This more advanced level of merchandising capability is also built into our APIs, which are used by developers to build or update a customized booking applications for their websites or to use Sabre content within another application,” explained Morgan.

Morgan also mentioned that air ancillaries and branded fares are relatively early in their lifecycle and take time for adoption to grow. However, the industry is witnessing progress in this area. “Using March y-o-y comparisons as an example, growth of ancillary sales in the direct channel was 87.9 percent while growth in the indirect channel was almost twice that at 174.5 percent,” shared Morgan.  

·          Industry standards: Morgan said Sabre is a strong advocate for industry technology standards as the group believes they are the backbone of travel commerce and enable the broad and rapid deployment of products and services in the most efficient and cost effective manner. “We are also a major contributor to industry technology standards through participation and collaboration with industry bodies such as IATA, ATPCO, ARC and OpenTravel,” said Morgan. “Having said this, not all airlines choose to participate in and utilize the same standards. Sabre also needs 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.”

NDC Certification

Morgan says NDC Certification is a formality – it is not required for Sabre to develop and deploy NDC-based solutions. “Sabre was the first GDS to launch American Airlines’ premium and paid seats capabilities (Preferred and Main Cabin Extra Seats) based on the NDC standard, making these ancillaries available to travel agents earlier this year,” emphasized Morgan.

“Additionally, from an airline IT perspective, our Dynamic Retailer solution will be available to all distribution channels via the NDC XML standard. This 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 traveller,” added the executive.

Sabre is in the process of certifying both their GDS and IT solutions using NDC standards.

 

Hear from experts about the latest trends in air travel distribution at the upcoming 3rd Mega Event Asia-Pacific, to be held in Kuala Lumpur, Malaysia (23 Aug - 24 Aug 2016).

Follow Ai on Twitter: @Ai_Connects_Us

Ai Editorial: Reshaping IT for future, LCCs are just better prepared for it

First published on 29th June, 2016

Ai Editorial: Modern infrastructure is challenging and airlines struggle with systems that can support their retailing needs. LCCs are ready as long as they stick to their innate strengths, writes Ai’s Ritesh Gupta

 

Airlines’ approach towards retailing and their IT infrastructure has been under scrutiny for a while now.

In today’s era where digital transformation is paving for personalisation and enabling passengers to be in better control of their journey, it’s imperative to assess how full service carriers (FSCs) and low cost carriers (LCCs) are positioned to move on.

So how does the overall IT infrastructure at FSCs and LCCs for supporting core operations differs?

It doesn’t differ that much, says Ann Cederhall, an experienced business consultant.

LCCs (not all) are typically hosted on PSS with “less bells and whistles” (e.g. Navitaire, Radixx) just because they typically started out as website only distribution and with limited need for traditional distribution, said Cederhall. FSCs are typically hosted on the large PSS or own host with all the distribution complexity like interlining, code-shares, travel agency distribution etc. As it gets more complex, bigger is the need for a larger IT structure. “But remember that there are very few PSS to choose from as an airline customer and with the Amadeus acquisition of Navitaire it will be interesting to see what happens in this space in future, also interesting to watch are IBS and Travelsky,” said Cederhall.

Here we explore what’s required to make optimized IT and retail-oriented decisions:

·          Being savvy with IT

It is pointed out that FSCs tend to struggle with changing their IT set up for distribution and personalisation.

Modern infrastructure is challenging and airlines struggle with either buying or building systems that can support their retailing needs. The biggest problem is that there really are not that many players to choose from so perhaps look how to leverage other technology? “(May be its time to question) if there is a need for a merchandising engine, wouldn’t just any powerful rules engines sitting in e-commerce suffice? Or maybe a combination of a shopping engine and ecommerce. To find best of breed is challenging and is time consuming. I actually see a need for more advisors in the industry helping airlines to assess in different areas what is best for them and how to move forward,” shared a source. 

As for LCCs, they are driven by change and innovation which makes it a lot easier for them, it is in their DNA, asserted Cederhall.

She added, “But I have seen that it becomes challenging for LCCs when they decide to work with models used by FSCs, e.g. interlining, working with O&D based revenue management, travel agency traditional distribution. For example, if the airline is ticket-less can they stay ticket-less with agents? Yes some airlines are doing that but some use BSP ticketing for the GDS. And if you do this you have two models that you have to maintain in the airline.”

Cederhall points out that if airlines want to avoid being a commodity product they either need to demand that their PSS technology is customer focused or start using tech outside the PSS to do this kind of work.

In order to drive personalisation, it might be the case that airlines move toward a true super PNR environment/ strong relationship database. If it is not possible to drive change in the PSS enable systems on top. Should the super PNR environment drive personalisation and loyalty?

Considering that there is constant influx of new technologies that is changing the way businesses operate, how are LCCs reacting swiftly to the possibility of being customer-centric? Why the turnaround time of LCCs new IT projects is lesser? For instance, Ryanair has just launched myRyanair platform as part of its digital transformation program.

Reflecting on the same, Cederhall says again it is in LCCs’ DNA, cost effectiveness is key. And the LCCs have been the drivers of innovation and new revenue models.

“LCCs, in my experience, are usually much more open to new technology as they typically do not put all their eggs in one basket,” she said. Also when you work in an environment where you are told to constantly question how we can do it better and faster it comes natural to these airlines. But the trick is to stay like that. “Typically when these airlines are moving into what characterizes FSCs they sometimes struggle. They can also get caught in the PMO death spiral with more employees from consultancy companies than your own “formalizing the strategy” etc.  Technology wise I fine Scoot particularly interesting as they are doing some interesting stuff different to traditional distribution. But you also see FSCs being innovative, Air New Zealand is one that I find interesting, also KLM embracing social media.”

·          Being retail-oriented

Ryanair have talked about looking at selling other airlines on the platform and that is truly retail thinking, looking at flights and airlines like a commodity. 

Of course, it’s a strategic decision.

But in general airlines are just taking baby steps when it comes to proper retail, just think of all the co-branding opportunities, of the personalisation opportunities. Retailing opportunities are endless, and we don’t see enough experimenting and testing.  “Some airline websites out there are just so sad, I see endless opportunities with what you can do with the whole customer experience. But it does mean that the airline has to rethink its business in many areas and acquire new knowledge. Perhaps we are at the time when retailing will drive organizational change of the airlines?” pointed out a source.  

Cederhall said that independent of the industry, there are a set of features needed by anybody who wants to be successful in (online) retailing. By recognizing these requirements and putting focus on adding the functionality needed to meet the additional needs, it should be possible to keep existing “core functions” from a PSS and online booking engine (IBE) and to enhance the customer experience without purchasing a complete, new e-commerce suite.

Cederhall cited few examples of core functional needs/ market demand that need to be considered:

     I.        Any online retailing site needs a content management system (CMS).

    II.        Core “shopping cart & check-out” functionality is something that everybody needs, the same for connectors to payment providers etc.

  III.        A more or less generic integration platform (or architecture allowing integration of any service) is a definitive must for any investment in retail/ ecommerce platform as of today. Airlines are generally already selling hotels and car rental – often through 3rd parties such as Expedia or Booking.com.  Integration of any such 3rd party, be it Lonely Planet guidebooks or Über taxis, it must be possible to sell just about anything including T-shirts and model aircraft, either from internal inventory (e.g. T-shirts with colours and sizes kept in own inventory, such as SAP ERP system) or any external inventory.

   IV.        Analytics - customers are getting spoiled nowadays, and Amazon, Google et al have taught customers to expect a personal touch. Hence, the capability to drive personalisation is increasingly important and might well differentiate you from your harshest competitor. Even without analytics it is possible to do some basic level of personalisation.

    V.        Data. One of the core problems for many airlines is that they actually don’t have their data available. Surprisingly, still after a couple of years with a lot of hype around “Big Data”, airlines typically trust their PSS vendor to keep all their structured sales data (aka PNRs), which are also purged a couple of days after last itinerary segment is past date (even though solutions exist to build a data warehouse and also to keep some level of data in loyalty/ reward systems).

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