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

First published on 29^th 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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