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).

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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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Ai Editorial: Is any player good enough to offer a door-to-door journey?

First published on 22nd June, 2016

Ai Editorial on ground transportation: Ireland-based Kevin O’Shaughnessy, founder of Indigo.gt explains how the industry can improve the customer experience in this arena

 

Is reaching a destination, and then proceeding to a hotel or moving around in a city a smooth experience yet?

Before we delve deeper, there are many facets from which this aspect of a journey can be looked upon.

One could be sheer utility angle – just boarding a bus or taking a cab to reach my hotel. Of course, car hailing apps are there to avail, but what if going online isn’t possible. Yes, if you happen to be in an airport like New Delhi, just don’t assume you can go online that easily even if it’s free. Moving on one can also enjoy the peculiar ways one can travel – trams, bikes, train, vaporetto, gondolas, carts, cruise etc.

I will give you an example. I have been planning a trip to Switzerland. I chose Zurich, Lucerne, Lauterbrunnen, Montreux and Geneva as my places to visit. Yes, I could check options to reach hotel in each of the places via hotel website or via booking.com (post booking email/ in-app content link). But several of my questions remained unanswered unless I chose to research online. For instance, is there any option to take a cruise from Zurich to Lucerne? Not really, but one can enjoy cruise from Lake Zurich or Lake Lucerne. Directions and mode of transport can be checked via Google Maps, but there are times when I struggled with it. Google Maps came closest to sharing options – for instance, Hotel Astoria in Lucerne to Lauterbrunnen, one could find out the exact routing, time and stops for rail, car etc.

But I wasn’t completely satisfied with the experience. What if Gmail could analyze my emails – my dates of travel, air ticketing and hotel bookings – to send me a link for moving around! I would readily give access to any sort of permission Google might seek, and would rather present with me options.

Game changer

Ireland-based Kevin O’Shaughnessy, founder of Indigo.gt, a search and reservation platform for airport-to-city transfers, says if every journey for business or leisure was considered a door-to-door journey from a planning as well as a booking perspective, rather than just directing users to the flight segment, we could show users a complete itinerary and allow them to book the entire thing in one step.

Kevin says overnight, this would change the dynamics of airline web bookings, online travel agencies and meta-search companies.

“This specifically means that instead of thinking of ground transport as an afterthought, it becomes a peer in a shared itinerary with flight content. The core technology to deliver this is here today: how long before the taxi app proposes to “take me home”, and streamline the flight booking as part of the process?”

Airlines are uniquely positioned in the market to profit from delivering a better user experience that comes from the transport utility, stated Kevin.  

Opportunity for airlines

For the majority of air passengers, transport to/ from the airport — whether in car rental, chauffeur drive, metro or their own car — is a utility class of product: it is a functional part of the journey.

“If this is true, then the only real room for improvement are the external elements, such as the pickup experience. With the advances in ground transport technology and choice of providers, there is no reason airlines cannot take a lead in the passenger experience, turning a utility product into a positive experience. In doing so, airlines can also capitalize on the revenue opportunities, too,” said Kevin.

It needs to be highlighted that in the last 3 years, the data roaming charges in Europe have gone from extortionate to virtually free (part-driven by regulation), and many early adopters the world over have made the switch to tariffs which allow data on their handsets. Frequent travelers typically have the “roaming” switch set to “on” and there’s a good crossover between this behavior and use of taxi apps in a foreign destination. “The next major shift in transport innovation could well be driven by more widespread trends in passenger behavior when it comes to that roaming setting. If everybody could use data anywhere tomorrow, and since local taxi apps are commonplace, the biggest winners in the space — from a travel industry perspective — will be those apps. Airlines have therefore a very short runway indeed to capture — and profit from — this latent behavior common to the majority of their passengers,” explained Kevin.  

Current gaps

As a traveller, Kevin says he attempts to optimize time and cost, but different passengers have different priorities. As for gaps, he points out:

-       Not all the answers are in the online maps: not all the detail is there: not every mode of transport is shown, traffic information is patchy so timing will be off, cost is usually not there.

-       There’s an onus on the passenger to “learn the destination”. I think airlines do go a certain distance to promote new routes and to give basic routing information to the city area.

-       These different elements in the hands of passengers creates a type of “Travel Math” where they need to calculate the landing time, estimate the waiting time for their chosen transport, calculate the transit time. Then, they can finally propose a meeting at a certain time.

-       At the airport, not all services are treated equally. The pick-up for different car services are relegated to car parks, different levels or more convenient exits. The same holds true for coaches: different commercial deals mean that some will be more convenient for passengers than others.

-       Sometimes regulation or industry-wide tech adoption means that booking rail on mobile still means that passengers still need to pick up paper tickets, or that local transit tickets are only available to locals. This is slowly changing.

Here one must add that typically, airports profit well from ground transport companies: levies are applied to operating taxis and car services, rail is charged at a premium, bus stands are expensive and pick-up points for shuttles are all billed liberally. Since the revenue is already captured, at least to a certain extent, there’s less of an incentive to “go digital” and, only with a handful of exceptions, airport “ground transport” pages are limited to names of operating companies and basic destination information only. This is improving, very slowly, but airports are falling short of what they can do to improve the passenger journey.

Making it easy

Kevin says every market has its own habits.

“While taxi/ car services are popular across the US — this is not the case in large US metro areas or in Europe. In some markets, rail trips to/ from the airport are as high as 65%. Where high speed rail links exist, the typical take-up rate is about 35% of all passengers to/ from an airport,” said Kevin.  

The problem, however, isn’t the product, according to him.

“Ultimately, ground transport — whether taxi or train — is a “local transport” product, which has been built for local residents over the last 50-100 years. This is perhaps why we must think of “transport” and “travel” as not being the same thing,” said Kevin. “Local transport, as a product, is not built for air passengers. Communicating options clearly and openly is key,” he says.  

Referring to Europe, Kevin says rail and air behave differently in terms of information systems.

“We see plenty of innovation in train operating companies, but, to date, no credible source which brings all rail content together in a meaningful way for consumers,” he says.

When we “learn” a destination, we capture local knowledge in the right way for us. This is known as “embedded information” and the process of capturing and using this in online systems is difficult. To date, the travel industry hasn’t had a “common language” to apply to the intricate networks of and routes — whether to use them in a useful way for passengers or to monetize them somehow. “There’s no simple way of capturing the basics and communicating them simply. To date, only Google Maps has come close to this, maybe Rome2Rio, but both are missing the ability to transact,” says Kevin. “In some cases, this is hampered by local regulation or alliances. Only with some exceptions in the UK, rail is still mostly paper-ticket based. The trendy mobile apps you use still send you off to a machine to collect a paper ticket: basically reducing the mobile component to “search with a transaction” rather than issuing a fully-electronic ticket. In some cases, large rail operators in Europe intentionally restrict access to inventory, or lay on additional fees, in an effort to maintain consumer exclusivity.”

“Today, a door-to-door journey needs either time and effort on the part of the passenger to line up all the elements or, alternatively, some seriously smart technology, which we still haven’t seen yet,” Kevin.

He asserts that all ground transportation should be as easy to use as a taxi hailing app, and to achieve this, it means that all the inventory, pricing, commercials, payment technology, legal acceptance of terms and conditions by passengers needs to be visible and instantly available (meaning less than a second) for booking.

“This can be brokered through standards, but none has emerged yet. Business and Leisure travel could be transformed completely if the local transport component became an integral part of travel planning,” explained Kevin.

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Ai Editorial: Prioritising data and IT infrastructure for retailing

First published, 7th June 2016

Ai Editorial: How are airlines gearing up for retailing? The industry is gradually making moves in a way that IT is being linked to business value. Ai’s Ritesh Gupta identifies 3 core data and IT-related issues

 

Being a part of an industry that is often labelled as a “laggard” when it comes to being customer-centric is no fun. Full service airlines are often singled out for their archaic IT infrastructure, and it’s time they find ways to get rid of sluggishness on their part. 

“If you look at other industries you can see that airlines are far behind in terms of retailing their products,” pointed out a source, referring to proficiency of some retail players in pre-empting questions like “When will a specific customer next make a purchase?” or “How best can we communicate to them to make it happen?”

 “Airlines simply don’t have that information available,” added the source. As things stand today, airlines’ offerings aren’t personalised and importantly, the booking flow isn’t aligned to the way customers think. Also, once a flight booking is confirmed, post that there is no cross-sell longevity. And carriers try to sell everything at once.

This is where organizations like Ryanair are counting on digital transformation, looking at data and IT in a novel way.

Here we explore what modern retail infrastructure should look like in the era of omni-channel retailing:

·          Flexibility - Platforms need to become more flexible, think of being retail-oriented rather than being “airline website” oriented, as Dara Brady, Ryanair’s head of digital experience, asserted during Ai’s Ancillary Merchandising Conference in Barcelona (held in April this year).

Delving deeper into this, Paul Byrne, Senior Vice President of Development at OpenJaw Technologies, says, “It implies focusing on all the major retailing principles required for a true omni-channel retailing. Websites are just one part of the overall jigsaw. A rich customer experience requires rich, curated content, targeted / tailored products, adequate pricing models and a seamless experience across all channels.”

“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 require a lot of development/ programming to facilitate every change,” says Byrne. He says to create and manage rich omni-channel customer experience, airlines require 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. Structured and well defined APIs form a key requirement for collaboration and innovations.”    

·          Dealing with existing IT set up – IT strategy and business strategy are being seen as inseparable, especially with digital transformation coming to the fore. IT is being linked to business value.

This inevitably makes one think – how can airlines gear up for transformation?

One can’t discount airlines’ existing infrastructure that is already in place. Re-developing these old systems would cost a lot of money. There are already specialists that offer modern PSS systems, some already fully NDC compliant as they say.  “But if you are running one of the old legacy PSS systems it’s indeed the right way to make sure that you gain the desired customer-centricity by implementing the necessary systems around or on top of your current IT landscape. There are already cloud-based solutions available that provide you with an offer- and order management including detailed rules engines. In the back they’ll connect to your internal IT (e.g. legacy PSS system, CRM, pricing engine, etc.) to get input for the offers they generate. This is also the way how the IT landscape would look like in an NDC world,” shared PROLOGIS’ Matthias Hansen.  

IT needs to showcase its proficiency and power change. The digitization trends are social, mobile, cloud, big data and the Internet of Things.

In a recent blog post, referring to hybrid infrastructure, Hewlett Packard Enterprise highlighted that big data can also be used to improve the existing infrastructure. The role of big data in itself is to pave way for simplicity irrespective of the situation. “… and hybrid infrastructure is nothing if not complex, particularly when it's built atop virtual servers, storage, and networking architectures, and then populated with numerous mobile, sync/sharing, and data productivity apps.” The same post did acknowledge that optimizing hybrid infrastructure is an intricate part of transforming legacy infrastructure into a modern, abstract data environment. Yet the entire ecosystem “must be funneled through an intuitive albeit comprehensive user interface that allows knowledge workers to define their own data and infrastructure requirements (within limits, of course).”

·          Being data-driven - To keep up with the pace of personalization 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.

Airlines need to focus on how business functions create and use data in the context of day-to-day operations.  For instance, how can e-commerce work on a use case for site traffic and conversion optimization? It could be about understanding my intent from the source I land up on an airline website or say I search on Google and then open an airline mobile app. “A lean experimentation approach would be beneficial initially. Firstly do enough homework to identify some of the low hanging fruits (short-term goals). Digital marketing and operation teams are key contributors at this stage. Identify and outline what you want to know from the data and to do what? Now identify the data sources needed to answer your queries and start aggregating / massaging the data sets,” said Byrne. “The point is that you might not initially require the Big Data storage and technologies. Try out small first and then hire a specialised vendor/ partner, when you are ready to go big. It’s a specialised area with high costs associated to it. A strong collaboration is needed between strategy, marketing, operations, analytics and IT teams for this to be successful.”

As for personalisation, there are still challenges that organization face when it comes to data: How to integrate different technologies involved in this industry’s value chain, so that they all work together for the same purpose. “It’s easy for one of the links (technologies) of the chain to fail. Although it is a challenge even for our direct channels, indirect channels are the biggest challenge for data collection, customer recognition and the effective use of the information,” shared Maria Cardenal, head of product development at Vueling Airlines, in a recent interview with us. She also referred to the high cost of implementing personalization, and customer acceptance i. e how much you can personalize before annoying customers.

Hear from experts about how to go about prioritising data and IT infrastructure for retailing at the upcoming 3rd Mega Event Asia-Pacific, scheduled to take place in Kuala Lumpur (23-24 August, 2016)

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Ai Editorial: NDC and retailing is about harmonizing IT and ecommerce

 

First Published on 25th May 2016

Ai Editorial: Is PSS really an enigma? Rather than writing off PSS, airlines need to work around their IT set up by fostering harmony between IT and other departments, including e-commerce, writes Ai’s Ritesh Gupta

 

Over the past year, I have spoken to several industry executives including ones from full service carriers about their IT infrastructure and the possible areas of improvement as far as their distribution and data-driven merchandising is concerned.

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

Discussions did invariably touch upon IATA’s NDC standard, which is not mandatory for any airline to focus on, and also the role of PSS.

NDC as a development is interesting as it talks about control over content and offers, and at the same time being customer-centric, too, matching passengers’ intent with right content and offers. As much as control over indirect distribution, including work on apt API strategy that let XML messages in and out of a web service, is paramount, we shouldn’t forget airlines are looking at strengthening their own digital assets, too. If you are in digital domain, you are finding ways to be data-driven, and you need your IT infrastructure to complement it on order to excel in the arena of customer experience and personalisation.  

Here we discuss few issues around PSS and legacy messaging, and how to bring about a positive change towards better control over offers:

PSS isn’t an enigma: One of the core issues where discussions tend to focus on is the current status of the PSS.

When I spoke to an airline IT specialist about the talk around the limitations of legacy infrastructure especially PSS, he pointed out that the mainframe has been written off too many times. “I see the “anti-mainframer” campaigners fixated on removing the “legacy” system without understanding what it does and how it works,” he said. He added, “Many have failed to replace it. Amadeus do not publicise the fact, but they still have a TPF4.1 system behind the scenes some 15 years after purchasing the British Airways and Qantas Mainframe staff and systems. We have the world’s most reliable mainframe real-time systems with massive throughput of tens of thousands of messages per second with fast recovery (z/TPF IPLs in less than 45 seconds) yet there is no GUI with z/TPF or ALCS.”  

“Green on black” works, he asserted. “But Generation Z does not like Green on Black.”

“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.”

Where do IT and e-commerce agree? There is a difference in opinion when one talks to various departments.

As for IATA’s vision, it asserts NDC technical standard provides the opportunity to implement a modular environment where valuable assets are leveraged, out-of-date assets are renovated and new assets can be added easily. In effect, this modular architecture will allow airlines to respond rapidly to changes in their business environment; this is a must for retail organizations. IATA has been working on plans to modernize the multiple and rigid booking, ticketing, delivery and accounting methods with a single, flexible order management process.

An IT professional with over 3 decades of experience says, “The problem I often see is that people who have never used a core PSS system, have never come from the traditional (Swissair and British Airways) Airline Apprentice background of the 1980s where they would work their way up from being a Reservations Agent to an Airport Agent, to a Ticketing Officer to Revenue Management are now making the decisions. Those new people, many from non-airline backgrounds, simply do not understand what the core PSS does. They see a “legacy” system and think it must be replaced.  This approach will fail.” He adds, “The driver is getting to know the top passengers much better than at present. The data is there. The core PSS is not the place to analyse data, but it can be the place to place the offers and incentives to the passenger face to face.”

And this is what an ecommerce executive told me: “Legacy PSS systems should be actually redeveloped almost from scratch if it brings any major improvement, and this is something which isn’t going to happen in a very near future.” 

So digging further the core functionalities of airline IT systems and data management can be improved in following manner:

FSCs have been looking at separate engines and modules such as availability and pricing, customer database, merchandising, NDC interfaces etc. outside of PSS as legacy systems are not effective enough to be used for sharpening their retailing strategy. Effectively it means that in the near future PSS may only used for routine operation such us PNR creation. In order to craft a 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. Structured and well defined APIs form a key requirement for collaboration and innovations.    

A PSS specialist agrees and refers to the way availability is handled now. But the same adds, “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.”

An e-commerce specialist, too, says currently there is a problem of data integration from different systems based on completely different philosophy and aggregation methods. “I would find legacy PSS systems as a major obstacle in getting quick and well aggregated customer view as it requires complicated interfacing which may impact data accuracy and reliability. I would rather focus on real time PSS data reliable interfacing to the 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.”  

As for data about passengers coming from the indirect channel, airlines struggle with knowledge about the passenger from 3rd party channels, where they know almost nothing while it is usually lion’s share of the business. So in the future airlines need to get the most out of search and booking message flow that NDC will deliver.

From EDIFACT onto XML: As things stand today, the usage of NDC -XML by airlines and GDSs varies in its shape and form, resulting in a mix of EDIFACT and XML connectivity. It is not correct to suggest that an airline should be all NDC or all EDIFACT. ​EDIFACT will continue to exist for some time, even in carriers that adopt NDC enthusiastically. For example, it would be perfectly acceptable for an airline to offer NDC to partners but to retain current EDIFACT connectivity for interlining. At present interlining NDC-to-NDC business requirements and schemas is work in progress that complexity will take some additional time to address. NDC provides some short-term benefit from personalised shopping and ancillary distribution that EDIFACT can’t keep pace with, even if EDIFACT is needed for later parts of the process.

Way forward

Where the PSS specialists get annoyed is when they have to deal with people who have not even bothered to research the current capabilities of the PSS. “They have not even bothered to go on a Basic Reservations, Inventory, Ticketing and DCS courses. They just see a “legacy” mainframe and want to get rid of it,” summed an IT specialist.

The way forward is probably to start building the things needed on the outside of the old/ existing logics, then to “bridge it” in the back office (e.g. Revenue Accounting processes) to make sure the new functionality works in parallel with the old. Then, whenever nobody is using the old stuff, it can finally be removed.

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Ai Editorial: Triumphing in the game of ancillary products and personalisation

First Published on 17th May 2016

Ai Editorial: Selling ancillaries is about identifying a need in a particular moment. The key here is to do it right. Because awkward personalisation can be worse than not personalising at all, says Vueling Airlines’ Maria Cardenal. She spoke to Ai’s Ritesh Gupta about getting it right.

 

Offering an ancillary product isn’t just about revenue maximization. If you can provide relevance and personalised service and service recovery at all touch points, then you have reached personalisation nirvana.

“Picture a transfer offer you receive while on your in-bound flight, the airline knows the actual hotel you need to go to and they are providing a free limo upgrade because your flight last week was delayed,” this is what an executive told me as he referred to the sort of travel experience he expects today.  

These are exciting times indeed. And there are executives, who are striving hard to excel in this arena.

I really enjoyed my interaction with Maria Cardenal, head of product development at Vueling Airlines.

Barcelona, Spain-based Maria finds the continuous challenge of seeking the next big thing or the next step in improving the product as the most exciting part of her role.

“It’s a very rewarding feeling to create new services for our passengers or innovate in business models. I am also fortunate because I have the chance to meet diverse and really interesting people from a lot of different business areas. What is less satisfactory are the limitations that we face to offer all these new services or products across our sales channels. That’s not an easy task. But we have been successful in selling part of them in a bundled way through our branded fares,” said Maria.

Delivering what I am seeking

What to offer each individual customer, when, and through which channel is the new merchandising paradigm. What this means is that unique and personalised offers for individual customers based on their attributes.

Nowadays, most airlines offer a great deal of ancillary products, even the ones that have been slow in introducing them. And more are to come, of course. What is not so common is to offer them in a personalised way, says Maria.

“Selling ancillaries is about identifying a need in a particular moment,” says Maria.

It’s heartening to hear this. It clearly shows the intent and the desire to make progress.

Of course, this would only be possible when travel marketers capture all interactions as well as shopping and buying behaviour across all channels – airlines can commence building a unique contact strategy for each visitor, traveller or customer. Also, the use of predictive analytics to drive offers in practical terms means you stop asking the question “What products do I need to sell” and start asking “When will a specific customer next make a purchase?” and “How best can we communicate to them to make it happen?”.

But amidst all this one shouldn’t forget the significance of doing it right.

“Because awkward personalisation can be worse than not personalising at all,” says Maria. She adds, ”Here is where big data comes into play.”

Using data effectively for personalisation

According to Maria, there are four fundamental aspects for using data effectively for personalisation:

1.     You need to collect enough data with enough quality.

2.     You need to have the ability to draw the right inferences. Customer intelligence.

3.     You need the right tools to transform the data into personalised messages or experiences.

4.     You must do it at the right time and in real time.

Maria said all the above is possible with today’s technology, but, as airlines, we are facing three big challenges that make it difficult to offer what we would like to, which are:

1- The mix of technologies: or how to integrate different technologies involved in this industry’s value chain, so that they all work together for the same purpose.  It’s easy for one of the links (technologies) of the chain to fail. Although it is a challenge even for our direct channels, indirect channels are the biggest challenge for data collection, customer recognition and the effective use of the information.

2- The cost-benefit balance: or the high cost of implementing personalisation.

There is evidence that personalisation is profitable because it drives conversion up, but there is also evidence that it only works when you get it right and only on a highly segmented audience. As a consequence, you have to be careful with the cost, both economic –high investment is needed- and also opportunity cost. Hopefully, personalisation tools and CRM technologies will be inexpensive in the near future.

3- Customer acceptance: or how much you can personalise before annoying customers or travel agencies.

Once you have the data and the right interpretation of that data aligned with the business strategy, as well as the technology to be able to use it effectively, then you need to use it in the right moment and with the right message so it will not be received as intrusive or wrong by the customer.

“Therefore, technology is not enough, you need to build your customer’s trust.  The relationship with your customers is a quid-pro-quo relationship. Travellers are willing to provide more personal information if it means a better customer experience for them. If you make proper use of their personal information and the message you send is relevant to them, then it will not annoy them, but will develop trust,” said Maria.

She also added, “We have to be humble, we are at the beginning just looking into the horizon of what we might be able to do in the future.”

Selling ancillary products in a better way

Maria would like to see an improvement in easiness, convenience, relevance and self-sufficiency when it comes to ancillary products.

“From a technology perspective, to achieve this we will need as much information as possible from our customer. For that reason, we need to work in a collaborative way with our partners and the rest of the stakeholders involved in the travel experience, sharing more information across platforms,” she said.

Overall, airlines are in a “very good position” to offer a personalised experience for travellers, integrating the best deals and all of the customer intelligence that all the stakeholders involved in the travel experience could share, to achieve a common goal: a win-win relationship which results in an enhanced travel experience, more repeat customers and, consequentially, more business.

“In a very near future I would like to see Social CRM playing a bigger role than it does today. Along with this, new advanced ways of customer recognition, geo-localization and real time communication will enable us to deliver contextualized and relevant product offerings to our passengers,” concluded Maria.

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