Ai Editorial: Inherent complexities – biggest impediment in embracing retailing

First Published on 12^th June, 2017

Ai Editorial: Airlines need to deal with several intrinsic hurdles, be it for being averse to openness such as the API culture or legacy IT systems, to embrace retailing, writes Ai’s Ritesh Gupta

“The benchmark for digital retailing might be “Amazon”, but is it being astutely assessed from airlines’ perspective? If Amazon had to deal with intricacies of air travel, then it might not have taken off (as a retailer)! Not to say Amazon doesn’t have interesting twists on how to be a customer-centric retailer. But it isn’t as simple as that.” This observation from a senior IT airline industry executive sums up the quandary that airlines find themselves in. The gap between where airlines stand today and where a passenger demands them to be – as digital retailers, as customer-centric organization that can serve passengers the way they prefer – needs to be bridged.

But getting rid of complexities associated with selling of air travel is one transition that isn’t a smooth one.

It can’t be denied that travel isn’t purchased the way it was done before. Even as airlines are poised to make investment decisions, which can be excruciatingly slow in this sector, are they right in being cautious against going overboard with it?

“Even NDC hasn’t shaped up the way it was supposed to. Various iterations had to take into account those complexities. It isn’t a negative feedback, but at the end of the day, when expenditure is going to be incurred by various stakeholders, the idea of a standard needed to be uniform. Probably because of the complexities, there was too much flexibility in the initial versions of schema and implementations weren’t the same. Today even some of the basic NDC messages are being re-factored. Is the complexity rising at the moment or at least for next 2-3 years?” questioned the same executive.   

Complexities that are impeding transformation

How to figure out the core IT set up going forward? Are airlines opting to control their own merchandising, e-commerce and API technologies, using platforms that enable airline control, faster speed to market, and flexibility? Are they ready to move away from solutions that are hard-coded or community-model based, or tied to a particular PSS or channel? It seems PSS capabilities, which are essential to running any airline, are being separated from technology that can pave way for differentiation of travel offerings.

“Technology isn’t an issue, but full-service carriers have to deal with their current legacy IT set up. Yes, new airline-specific IT offerings, engines that are data-driven are emerging but old hasn’t become obsolete yet,” acknowledged a source. “So if we talk of “next round of negotiations or contracts”, then PSS probably isn’t going anywhere but a key point is discussion around PNR data and how to serve passengers throughout the travel journey.”

A point of contention with current PSSs tends to be components based on mainframes running the transaction processing facility operating system. The debate is about efficacy vs. cost, flexibility etc. It is interesting to assess how NDC and One Order initiatives are initiating change, and how architecture-related roadmap is being devised for the core functionalities that are being performed by the current crop of PSSs. Do expect from new IT specialists “solutions that extensively use data-driven workflows, cognitive analytics and even self-learning capabilities to enhance offer and order management,” stated a whitepaper from consulting firm travel in motion, distributed during Ai’s Ancillary Merchandising Conference in Spain recently.  

“The core PSS is not the place to analyse that data,” this is what an IT executive told me last year. 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.”

Another executive says, “If there is a full reliance on those legacy systems for back-office processes such as revenue accounting, revenue management, interline ticketing, and pricing, among many other functions, there will be limitations to the capabilities possible through digital transformation.”

So how systems that handle core functionalities related to running an airline evolve is one area that is worth watching out for. Is it right to say PSS will not be agile enough to evolve as fast as NDC? Are we going to see PSS as part of Offer and Order Management systems? If this is a possibility, then what sort of IT architecture would result in this?

What’s happening at this juncture is typical of innovation and technical evolution – blending the old with the new until the old becomes archaic. That’s how certain airlines are moving ahead with their airline distribution and merchandising technology - emerging platforms and messaging protocols are being bolted onto legacy airline systems. This paves way for capabilities such as personalisation, merchandising and dynamic offers.

Another area that airlines need to focus on is to make the most of data in real-time to create personalised offers as well as serve the passenger at any stage of the journey via any touchpoint they desire to choose.

This is important as in today’s “connected” era, where a traveller might restrict themselves to a 3^rd party ecosystem – say Tencent’s WeChat or Google or Facebook - for their travel-related requirements, selling shouldn’t be the core objective. For instance, a traveller is on Facebook - reads a review about a meal or seats, posts a query on the  business page of the same airline, interacts with a chatbot on Facebook Messenger etc. This means the journey-related experience is on a digital channel not owned by the airline. So the focus needs go beyond selling.

Here the complexity is: the airline industry is, by its competitive nature, very adverse to openness. “We are also, by our safety-conscious nature, very resistant to change,” said a source.

Beyond systems and processes, another area is personnel.

travel in motion also highlighted that a carrier’s business units tend to be organized according to the traditional airline model. Being “siloed” doesn’t help as ecommerce is alienated, and adopting a retail mindset is not just for the e-commerce people, rather for the whole organisation. As we highlighted in one of our recent articles, executives on the board need to come from retailing background to drive this change, otherwise it will not work.

Hear from experts at the upcoming Controlling Your Offer Symposium, featuring live demonstrations that take NDC, dynamic pricing, revenue management and merchandising to the next level.

For more click here

Follow Ai on Twitter: @Ai_Connects_Us