First Published on 29th June, 2018
Ai Editorial: Airlines can't focus only on IATA's NDC distribution standard or One Order to attain customer-centricity. In addition they need to break organizational silos, leverage data and set up CEM platforms and go for adaptive IT architecture as part of their journey to become digital organizations, writes Ai's Ritesh Gupta
Being ready to serve a passenger as per their intent is what today’s organizations are after.
Comparison between airlines’ offering and any product from a retailer, say a book or clothes, is unfair. Clearly, planning, buying and the consumption of a travel product is a prolonged journey. Even the day of travel when a traveller goes to the airport, the time it takes to board the flight, in-flight experience etc. is unique. Plus, a traveller has multiple avenues to get in touch with an airline. And the fact that airlines, especially full service carriers, have been using legacy IT set up and airline-specific systems and associated processes for decades, coming to grips with digitalization isn’t a straightforward task.
The stage has reached where the whole business model of running only logistics operations as an airline is also being questioned. Digitalization starts a radical change in organization culture. Eventually people and processes are put in place to embrace rapid learning cycles, empowering autonomous teams to innovate and validate at speed – be it for the product offered or the way customers are served in an omni-channel environment.
So how are airlines getting ready to embrace digitalization?
From personalization’s standpoint, Chris Eite, SITA’s VP Passenger Services says, “Certain carriers in the Asia Pacific region are undergoing a big transformation.” Referring to the example of Singapore Airlines, Eite said, “This (transformation) is starting to get reflected in terms of impacting the look and feel of the way an airlines treats me. It is a huge leap as it indicates that such organizations are starting to use the data they have lot more than what they have done in the past.”
The journey of personalization
A key component of how transformation results in customer-centricity is the combination of IT set up and data collection, processing and eventually offering insight via relevant dashboards for various disciplines (such as marketing, customer service etc.) to use for decision-making.
In their endeavor to come up with a passenger experience that considers context and real-time response, airlines need to count on computing power, data storage, and open-source frameworks. Eite acknowledged that airlines are looking beyond the legacy set up and gearing up for modern commerce and omni-channel service. Focus is on how data about customers is being garnered (CRM, loyalty, PSS etc.), it is being processed via a customer experience platform, say working in conjunction with CRM, to deliver a differentiated experience. “Some airlines are starting to focus on differentiation. This impacts the customer in a meaningful manner and in turn results in retention. (By acting on data), airlines are starting to move insights into operational systems. Biasing is starting to happen, for instance, in terms of seating on the aircraft,” said Eite. “Within a frequent flyer program, higher lifetime value is being identified and accordingly biasing some form of the product, driven by data analytics.”
As for going deeper into identifying and delivering a personalized offer/ service at every touchpoint, say at the airport, Eite mentioned that even if data dexterity is attained by being a digital organization, it doesn’t mean that systems managing key operational facets like departure control systems are going to change overnight. “These systems – reservation, DCS – the way they are handled is still sort of cumbersome.” Overall, the way flying tends to happen and the way airlines manage the journey – from check-in to boarding gates to in-flight, they have certain processes, the systems reflect that. “How IT can streamline all of this (processes that handle a passenger at the airport), supports all the data that is available and then how IT additionally paves way for treating a customer in a non-commoditized way would key going forward,” he said.
Eite acknowledged that if on one hand certain carriers in the region are making diligent efforts to gear up for today’s connected era, there are others that aren’t even gearing up to leverage their digital assets optimally. “If we talk of NDC, one key aspect is to be in control of the offer being pushed to the indirect channel. But airlines in APAC need to introspect and assess how they are doing the same via their own .com or app?” Eite mentioned there are carriers in the APAC region that “hardly seem to be knowing about their passengers, there is lack of personalization and are offering same offers not considering the type of traveller, their context, who is accompanying etc.”
Improving selling and servicing – not just about transformation
In order to be in control of the offer and serving the way passenger intend to be served, airlines not only have to transform themselves, but they also need support from technology providers as well as the industry processes such as One Order that are being planned.
Airlines are assessing opportunities about how to optimize their inventory and work out data-driven offers. In addition to air and non-air ancillaries, retailing platforms and B2B connectivity have positioned airlines to target the second wallet. The possibility of moving merchandising, pricing, scheduling and availability out of the PSS in order to create an offer that is under the control of the airline.
Eite mentioned that there are other issues that aren’t only necessarily about operations vs. commerce aspects of a PSS.
He shared that revenue management systems are not well equipped to cater to increasing number of ancillary options that airlines offer today. These systems fall short of delivering real-time dynamic pricing options without disrupting the booking flow. And the flow is an integral part of ancillary sales success.
“The industry is struggling with RM at this juncture (in terms of managing ancillaries). So if ancillaries are contributing 30-40% of the revenue generation, how RM as a discipline has responded to the same,” said Eite. “RM is starting to respond – improving upon the forecasting around total revenue per passenger and evaluating profitability per passenger with the product being unbundled.”
In terms of progress, the industry is counting on predictive analytics for ancillary pricing by taking into account traveller type, price point, timing etc.
It is interesting to assess how the entire industry is enabling airlines to dynamically create and price bundles of itineraries and ancillary services at a transactional level.
“Also, a lot of airlines have been going ahead with a “me too” approach with their ancillary selling. Each carrier needs to assess impact of ancillaries on profitability plus how systems such as revenue accounting get impacted, how the interline world works with ancillaries and unbundling,” said Eite.
Another area that highlights complexity is in the nature of contracts plus the lack of appetite for risk (to go ahead with relatively young technology companies) in this industry. One reason that airlines don’t come across as agile retailers is owing to the fact they are averse to going beyond one tech provider. For instance, airlines need to partner those Internet Booking Engine (IBE) companies which are investing in API’s that allow airlines or partnering software developers to build their own user interfaces or applications on top of their outdated IBE’s.
“Also, when you consider NDC and the concept of One Order, one of the complexities is to work around the interline world especially when the emphasis on direct selling,” said Eite.
One Order removes the current booking, ticketing and miscellaneous document records and combines the content of those into a single retail and customer focused order, according to IATA. But switching over to One Order will affect operations, including reservations, ticketing, customer servicing and revenue accounting areas. “In addition to interlining it is important to assess how One Order would streamline the concept of Super PNR (a record consisting of all the different bookings) and tie the whole travel experience around it,” said Eite. IATA has worked out three solution architecture for One Order environments and envisioned transition paths to move from the current PSS record-based environment. So the challenges would include switching from the current data model built around PNRs, ETKTs and EMDs to the new data model built around orders plus dealing with interline between airlines using current and new processes.
“In case of no changes there are hardly any issues, but if changes have to made into a trip itinerary (which contains bookings related to hotels, car rental, excursions etc.) owing to weather, technical issues at the airline level or even when the traveller changes plan, then One Order will streamline the process, but it would take time to happen,” said Eite.
Augmenting indirect distribution
Airlines need to find ways to support fragmented distribution.
As much as they can find brand agnostic travellers and high yielding travellers from indirect channels (via search engines or GDS companies), there is also need to ensure they refine their API connectivity. So be it for conversational commerce or the emerging blockchain technology, enabling technology for them to pursue would be APIs.
A couple of areas where airlines can improve:
Many pieces of puzzle need to come together
So for airlines to attain customer-centricity, it is imperative to not only transform themselves by breaking organizational silos, embracing customer experience management platforms and adaptive IT architecture. But equally important is how the entire industry evolves and complements proactive airlines in their quest to serve the passengers in the best possible manner.
Chris Eite, SITA’s VP Passenger Services is scheduled to speak at the upcoming Mega Event Asia-Pacific (Ancillary, Loyalty and Co-Brand Conferences) to be held in Bangkok, Thailand (28-30 August, 2018).
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