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

First published on 3rd October, 2016

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

 

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

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

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

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

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

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

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

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

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

NDC

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

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

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

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

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

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

·          Amadeus Flexpricer uses the NDC XML AirShopping verb.

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

·          Amadeus Rich Content uses the NDC XML FileRetrieve verb

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

Catching up

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

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

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

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

 

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

Twitter hashtag: #MegaEvent16

Follow Ai on Twitter: @Ai_Connects_Us

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

First Published on 26th September, 2016

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

 

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

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

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

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

Defending the “mainframe”

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

Why is the mainframe the source of ire for many?

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

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

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

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

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

Senior management ignorance

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

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

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

Way forward

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

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

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

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

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

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

·          What are the reasons behind IT outages?

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

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

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

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

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

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

 

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

Twitter hashtag: #MegaEvent16

Follow Ai on Twitter: @Ai_Connects_Us

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

First published on 19th September, 2016

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

 

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

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

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

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

Decide your own journey

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

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

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

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

Issues for airlines

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

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

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

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

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

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

 

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

Twitter hashtag: #MegaEvent16

Follow Ai on Twitter: @Ai_Connects_Us

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

First published on 6th September, 2016

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

 

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

Old on its way out or just a passing phase?

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

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

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

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

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

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

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

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

Opportunity for new entrants

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

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

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

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

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

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

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

·          Control and time-to-market of their product

·          At a lower cost

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

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

 

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

Twitter hashtag: #MegaEvent16

Follow Ai on Twitter: @Ai_Connects_Us

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

First published on 31st August, 2016

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

 

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

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

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

Airplane seat vs. book – just not the same

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

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

API-driven

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

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

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

An example – Ryanair

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

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

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

Optimizing digital touchpoints

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

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

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

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

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

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

 

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

Twitter hashtag: #MegaEvent16

Follow Ai on Twitter: @Ai_Connects_Us

Ai Editorial: NDC adoption is about getting your priorities right

First published on 23rd August, 2016

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

 

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

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

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

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

Adoption

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

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

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

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

Keeping pace with expectations

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

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

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

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

Continuing to move

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

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

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

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

Follow us on Twitter - ‪@Ai_Connects_Us

Ai Editorial: Spotting the next frontier for ancillary revenue

First published on 8th August, 2016

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

 

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

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

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

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

Sorensen referred to 3 major drivers for ancillary revenue growth

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

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

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

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

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

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

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

Becoming smarter in terms of selling

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

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

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

The case of Spirit and Ryanair           

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

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

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

 

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

Follow Ai on Twitter: @Ai_Connects_Us

Event’s Twitter hashtag: #MegaAPAC

 

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

First published on 29th July, 2016

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

 

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

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

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

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

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

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

5 points to consider

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

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

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

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

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

From the transport companies themselves:

·          Local taxi companies are being aggregated into dozens of platforms

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

·          Coach companies are exploring new business models and operating models

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

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

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

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

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

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

 

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

Follow Ai on Twitter: @Ai_Connects_Us

Event’s Twitter hashtag: #MegaAPAC

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

First published on 22nd July, 2016

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

 

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

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

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

It’s getting bigger and bigger

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

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

Highlights:

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

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

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

Preparing for the future

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

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

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

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

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

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

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

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

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

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

 

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

Follow Ai on Twitter: @Ai_Connects_Us

Event’s Twitter hashtag: #MegaAPAC

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

First published on 21st July, 2016

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

 

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

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

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

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

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

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

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

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

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

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

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

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

·          Optimizing user experience via emerging payment options

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

Plan, invest, learn and learn more

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

Challenge status quo  

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

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

Collaborative approach

Airlines are not technology providers. They are service providers. 

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

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

Follow Ai on Twitter: @Ai_Connects_Us

Editorials

  • Ai Editorial: Friendly fraud – a battle that still isn’t easy for airlines to cope up with +

    First Published on 17th November, 2017 Ai Editorial: Airlines continue to struggle to avert the danger of friendly fraud. There are new developments, ones related to machine learning and biometric Read More
  • Ai Editorial: Assessing building blocks for becoming a platform-enabled retailer +

    First Published on 14th November, 2017 It is imperative for airlines to be in as many winning digitally connected ecosystems as possible, while protecting their value add. Either you will Read More
  • Ai Video: Is being process-centric really a hindrance to being a retailer? +

    First Published on 7th November, 2017   Operations and safety have always been high on the agenda of those running an airline. In this context, if airlines have rather been Read More
  • 1
  • 2
  • 3
  • 4
  • 5