Ai Editorial: Fragmented distribution - must for airlines to sustain their existence

First Published on 5th June, 2018

Ai Editorial: Airlines need to find ways to support fragmented distribution, rather than continuously drifting and ending up with a precarious situation where one player in Google ends up controlling the whole travel value chain, says Bobby Healy, CarTrawler’s CTO.

 

Airlines need to assess how emerging forces such as conversational commerce enable them to break the threat of monopoly. An opportunity in this context is API connectivity.

“When you consider Facebook Messenger or Tencent’s WeChat, these are strong ecosystems in which Google doesn’t have a monopoly (in conversational commerce). Airlines should work with players that will sell their product via a conversational interface. It is a far more fragmented ecosystem and not controlled by one player. Airlines need to stick to fragmented distribution, as is the case now, but they need to be guarded against the future,” said Healy, who added that the concept of Alibaba’s Fliggy storefront or Tencent’s WeChat mini-programs are much better and are quite different from transactional platforms of today. 

Other than conversational commerce, Healy also referred to blockchain technology. “These could be small opportunities as of now, but over a period of time any new distribution platform that airlines find is not controlled by one player they should pursue it. And enabling technology for them to pursue would be APIs,” he said.

Healy added, “If you look at what Google is planning, then there would be no more flights booked on the airline-owned websites. The role would be restricted only for operational notifications and logistics-related conversations with passengers. Google are close to having that vision. Airlines could end up paying more than $50 per booking in 10 years’ time if they keep on going in the direction as they are moving now.”  Healy further said, “A way to mitigate the same is to provide relevant travel products – hotels, car rental, insurance, activities etc. In fact, Ryanair has shown the way, open to offering flight comparisons featuring other airlines.”

The logic behind working out a marketplace like one that by Ryanair would be to retain the customers on their platform even if they sell them some other flights. In a way a platform that connects end users to other systems that provide them important services. The value of the brand will largely come from technology that enables seamless, frictionless, user-centric transaction. 

Considering the way digital economy works, it is being asserted that airlines that will focus only on core business will not be able to survive outside of niche markets. Core business has become commodity and yields no profit.

The role of airlines from being a supplier to a platform operator needs to be contemplated.

NDC – playing into the hands of Google and meta-searchers? 

Referring to IATA’s XML distribution standard, Healy mentioned that NDC certainly helps, but doesn’t make integration any easier. It does improve the capabilities of an airline to distribute their products better.

“For me, the biggest winner from NDC would be companies like Google or Skyscanner. Because eventually it is going to help these players come up with a better proposition for the consumer. It (NDC) doesn’t help them technically (so many versions of NDC XML APIs) but for Google, Skyscanner and KAYAK it is not difficult to implement airlines’ APIs that is bread and butter for them. So NDC doesn’t reduce their effort (as of now) in a way that they really care about. But, overall, NDC plays into hands of the meta-search. Because in the end, rather than showing just price comparison, they end up showing product attributes as well. Only price comparison is a barrier to a meta-search being valuable to travellers,” said Healy.

Healy mentioned that airlines still need to look-out for new trends, such as API connectivity paving way for sharing of relevant information or bookings within the interface consumers are operating in. “Conversational commerce is going to drive a lot of changes. The younger demographic is going to use it and that is going to be powered by intermediaries – Google, Amazon, Skyscanner etc. And they will initially build themselves because they have APIs to their content. Over time airlines would need to refine their APIs to support conversational commerce. An API like NDC is nearly everything that you need in conversational interface – may be additional functionalities could be cancellation that are needed at an API level,” said Healy.

Chatbots are still in the initial stages, and haven’t solved painpoints in a big way. On voice activation software in the travel industry, Healy mentioned that it is currently capable of answering simple questions like the status of a particular flight. “In a decade or so, we will see the rise of micro-transactions carried out in a conversational style completed through a voice operated interface.” So airlines need to prepare for such developments.

Expect a lot of changes in the next decade. It is being projected that mobile apps would be slowly replaced with chatbots that enable constant human-like conversation with passengers. Every customer journey will be different. The more data you will have and the more systems you will have in your digital ecosystem, the better proposition you will have for your customers. The value of the brand will largely come from technology that enables seamless, frictionless, user-centric transaction. Airlines need to gear up for the same.

 

Hear from experts and assess the journey of airlines at the upcoming Mega Event Asia-Pacific (Ancillary, Loyalty and Co-Brand Conferences) to be held in Bangkok, Thailand (28-30 August, 2018).

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