The travel insurance industry is undergoing a significant shift, driven by the evolving needs of modern travellers. From flight delays and lost baggage to unpredictable weather and medical emergencies, disruptions have long been a challenge. However, advancements in digital technology and innovative insurance solutions are making travel insurance more accessible, efficient, and customer-focused – minimising frustrations and shifting focus back to the joy of travel.
Parametric insurance: A game-changer for travellers
Today’s travelers demand convenience and reliability, especially during unexpected disruptions. Parametric insurance has revolutionised the claims process by offering fast payouts without requiring customers to file claims or provide proof of loss.
This type of insurance is triggered automatically when a pre-defined event occurs—such as a delayed flight, lost luggage, or adverse weather—verified by real-time data from trusted sources. For example, if a traveller’s flight is delayed by more than two hours, a parametric policy might automatically issue a $100 payout. The traveller doesn’t need to submit forms or proof; the payment is processed quickly and sent to their bank account or mobile wallet.
Global insurers like Chubb are leading the way by partnering with flight and baggage tracking companies to provide automatic claim payments. In some cases, travellers receive compensation before even leaving the airport. This not only reduces stress but builds trust and loyalty in a competitive market.
Transforming the claims experience
Parametric travel insurance offers flexible coverage for common disruptions. Travellers can receive compensation for delays in various forms, such as airline miles, lounge access, direct payments, or e-vouchers. Airlines and online travel agencies (OTAs) can customise the duration of delays that trigger payments, layering multiple payment options for added flexibility.
Similarly, real-time baggage tracking and quick payouts for delayed luggage have streamlined the resolution process. These advancements minimise passenger frustration and allow airlines to focus on delivering exceptional service.
Chubb’s new Travel Pro suite exemplifies this shift toward digital-first solutions. Alex Blake, Chubb’s Global Head of Travel Insurance, highlighted the company’s commitment to innovation: “By harnessing data and technology, we are simplifying the travel insurance experience and providing travellers with the reassurance that they are supported every step of the way. With Travel Pro, we aim to make travel more enjoyable and worry-free.”
Benefits for airlines and travellers
For airlines, adopting digital insurance solutions creates new revenue opportunities while enhancing customer loyalty. Quick payouts and real-time assistance elevate the travel experience, positioning airlines as leaders in innovation and customer-centric solutions.
Integrating travel insurance into booking systems via APIs has streamlined access and added value during the customer journey. This seamless integration allows passengers to access customized protection during the booking process, enhancing their overall travel experience.
These modern solutions also reduce operational strain on airlines and travel agencies by addressing common pain points. Meanwhile, travelers enjoy greater convenience, speed, and reliability, ensuring their journeys remain smooth and stress-free.
Redefining the travel ecosystem
Advancements in travel insurance are setting a new standard for innovation across the aviation and travel industry. By leveraging digital technology and customer-centric solutions, the industry is tackling key challenges while creating a more seamless travel experience.
These innovations are becoming an integral part of the travel ecosystem, ensuring disruptions are met with swift solutions. Airlines, travel agencies, and insurers alike stand to benefit, fostering a future where passengers can travel with confidence. This transformation ensures that travel remains a source of joy and inspiration for millions worldwide.
For more information, visit Chubb’s travel insurance website.
When John McCarthy coined the term ‘artificial intelligence’ (AI) in 1956, few could have imagined how transformative it would become. Over the past decade, AI’s progress has accelerated dramatically, fueled by the explosion of data, advanced algorithms, and powerful computing. From healthcare to banking, AI is redefining industries. Aviation, too, stands to benefit enormously, yet the adoption of AI for turnaround management and operational optimisation remains surprisingly limited.
Introduction: The paradox of AI in aviation
Airlines and airports operate in one of the most complex environments in the world, where minutes matter and efficiency directly impact profitability and passenger satisfaction. AI can revolutionise this space by:
Enabling and enhancing real-time visibility across operations
Predicting and preventing delays
Optimising stand management
Improving asset and resource utilisation
Supporting predictive maintenance
Reducing downtime and operational costs
Improving collaboration among multiple stakeholders
These capabilities directly address aviation’s biggest challenges: rising fuel costs, growing passenger expectations, regulatory pressures, infrastructure constraints, and the need for faster, safer, and more cost-efficient operations.
The numbers speak for themselves. According to Straits Research (2024), the global AI in aviation market is projected to reach US$32.5 billion by 2033, growing at a staggering CAGR of 46.97%. Yet, despite the clear opportunity, many airlines and airports remain hesitant.
So, what’s holding them back?
Barriers to AI adoption in aviation
1. High implementation costs
AI requires significant upfront investment in infrastructure, software, and skilled personnel. While studies suggest that AI can lower maintenance costs and enhance fuel efficiency, the initial outlay remains daunting—particularly for regional airports and smaller carriers. For example, one European low-cost airline reported saving about 7 kg of fuel per flight through AI-powered fuel planning, with additional reductions achieved via optimised climb speeds and taxi operations.
Possible solutions:
Start with pilot projects underpinned with base models and measurable KPIs
Flexibility in options between cloud, hybrid and on-premises systems.
Explore flexible models like “AI-as-a-Service” or pay-per-use.
See AI adoption as an enabler for real return on investment and cost savings, not as pure cost.
2. Integration with legacy systems
Aviation still relies on decades-old legacy platforms that were never designed for AI. Integrating modern tools often requires costly upgrades, customisation, and phased rollouts. In addition, the aviation industry revolves around siloed systems that cannot communicate with each other.
Possible solutions:
Deploy APIs to connect AI with existing systems and break down silos.
Consider AI as tool to leverage and enhance existing systems, and not just “another additional system”
Use “layered” AI applications that gradually integrate.
Leverage digital twins to replicate operations in real time, allowing AI to work alongside legacy systems without full replacement.
3. Accountability and transparency
The “black box” nature of AI creates trust issues. In an industry where safety is non-negotiable, regulators and operators demand explainable, auditable AI.
Possible solutions:
Adopt explainable AI models that provide traceable reasoning.
Establish clear accountability protocols and audit trails.
Maintain human oversight for safety-critical decisions.
Treat AI as a highly efficient colleague that drastically aids decision making (but does not necessarily make the decision for you)
4. Data infrastructure and security
AI thrives on data—passenger records, aircraft telemetry, weather updates, and more. But managing, securing, and harmonising such vast datasets is a formidable task. Regulations like GDPR add further complexity.
Possible solutions:
Use unified dashboards to consolidate fragmented data sources.
Implement strong encryption, intrusion detection, and compliance frameworks (GDPR, ISO 27001).
Build secure data-sharing ecosystems between airports, airlines, and ground handlers.
5. Workforce readiness and trust
AI adoption is as cultural as it is technological. The shortage of aviation-focused AI talent slows progress, while frontline staff and managers may hesitate to trust AI recommendations.
Possible solutions:
Run change management programs with workshops, training, and continuous on-site support.
Clearly communicate the benefits of AI to operational teams and actively demonstrate the value
Position AI as an enabler, not a replacement, of human expertise.
Use consultancy companies to create reference and base models to review performance before and during AI enhanced operations
Actively seek user feedback and address concerns
6. Risks of bias and errors
AI models can inherit bias from incomplete or poor-quality data. In aviation, even small errors can have outsized consequences, creating resistance to adoption.
Possible solutions:
Keep humans in the loop for mission-critical decisions.
Continuously audit and retrain AI models.
Ensure robust data cleaning and validation processes.
7. Regulatory complexity
Aviation is one of the most heavily regulated industries. Introducing AI into predictive maintenance, flight planning, or turnaround management requires rigorous validation and approval from authorities like the FAA and EASA. This process is long and resource intensive.
Possible solutions:
Map regulatory requirements early in AI development.
Build compliance into AI models from the start.
Collaborate with regulators to define safe, transparent adoption pathways.
Why the time to act is now
Despite these barriers, delaying AI adoption comes at a cost. Early adopters such as Flydubai, Ethiopian Airlines, and Fraport are already reaping benefits including:
Improved on-time performance through predictive scheduling
Reduced unplanned downtime via intelligent maintenance forecasting
Enhanced safety monitoring and regulatory compliance
Streamlined resource allocation and turnaround optimisation
Superior passenger experiences through smoother operations
Increased non-aeronautical revenue through AI-driven retail optimisation
Better drive sustainability initiatives
Conclusion: The strategic imperative
The aviation industry stands at a crossroads. AI is no longer a futuristic concept—it’s a proven operational enhancer available today. Organisations that address the cost, integration, and trust barriers systematically will unlock significant efficiencies, cost savings, and safety improvements.
The competitive landscape is shifting rapidly. Airlines, airports, and ground handlers that embrace AI now will establish new benchmarks for safety, efficiency, and passenger satisfaction. Those that delay risk falling behind in an increasingly AI-driven industry.
AI adoption is not merely a technology investment—it is a strategic imperative for the future of aviation.
The real question is not “Should aviation adopt AI?” but rather:
“How quickly can it adapt to remain competitive in an AI-driven future?”
We at ZestIoT are leveraging AI to drastically enhance Aircraft Turnaround and Resource Management as well as improving the passenger journey. Come and speak to us to learn more.
Picture this: you step into the airport and the journey starts in conversation. No fumbling with apps, no juggling boarding passes, no tapping your way through a kiosk. The environment is listening—ready to respond to your voice.
“Check me in.” The check-in kiosk wakes up, greets you by name, and prints your bag tag.
“Add a bag.” The bag-drop belt whirs to life, scales your suitcase, and flashes a green light—done.
As you walk toward security, a voice alert in your earbuds says, “Your gate has changed to B12. Estimated walk time: 6 minutes.” No searching through the departures board. No pulling out your phone.
Later, when a delay hits, you don’t stop walking—you just say, “Rebook me on the next flight with a window seat.” A list of options appears on the nearest display. You glance, confirm with a quick, “That one,” and your new boarding pass is instantly pushed to your watch.
Throughout the journey, your voice is the key. Boarding gates respond. Lounge doors unlock. Meal orders are taken and confirmed while you’re still walking down the concourse. Even disruption recovery becomes as simple as a passing comment—“Find me the fastest connection to Denver”—with results appearing around you in real time.
This is the future of air travel, and it’s closer than most realize.
The airport infrastructure hasn’t been removed—it’s just invisible now. With artificial intelligence (AI)-driven voice technology, airlines are replacing friction with fluid, personalised journeys that build loyalty and actually listen to you. NLX, the enterprise conversational AI company enabling airlines to build scalable, natural, multimodal solutions, is making that possible. NLX has equipped global brands with conversational solutions that seamlessly connect voice, chat, and digital interactions with enterprise systems. NLX’s patented Voice+ technology is transforming voice into a dynamic interface for completing complex tasks end-to-end using two channels simultaneously.
For airlines, that means making every passenger journey conversational—from booking to baggage to unexpected disruptions—delivering the kind of seamless, next-gen experience travellers increasingly expect, and competitors will be forced to match.
The industry landscape: Stuck in the past
Booking a flight in 2025 still feels like 2005. Click through endless menus, wait on hold for an hour, pray you picked the right option in a phone tree. Meanwhile, customer service complaints in the US were up 322% since before the pandemic, according to the US DOT, with the majority concerning refunds and flight problems (such as cancellations, delays, or other deviations from airlines’ schedules).
Airlines have dabbled in AI, but what’s out there today is surface-level: bots that spit out FAQs or send flight updates, then hand you right back to the same call centre bottlenecks. And voice? Still trapped in rigid IVR systems that frustrate more than they help.
Passengers talk naturally to Alexa or Siri every day, but they can’t just say “rebook me” or “add a bag” to their airline. AI and voice haven’t been connected—until now.
The passenger lens: Expectations are already ahead
Travellers don’t want to wait. A 2024 IATA study found that 71% of travellers say they want self-service tools and prefer online or app-based booking, with 53% favouring the airline’s digital platforms. And speed isn’t optional—80% of American consumers say speed is one of the most important elements of a positive customer experience; fast resolution is what makes them stay loyal. The gap is obvious: airlines cancel hundreds of thousands of flights a year, call centres melt down, and passengers are left stranded in queues instead of conversations.
And when disruption hits, voice is the only channel people trust: 84% of travellers say personalised service in those moments decides whether they’ll book with you again. Until recently, voice couldn’t scale. Now it can. United Airlines has been one of the first U.S. carriers to launch AI-driven and voice-enabled technologies. Thanks to platforms like NLX, airlines are now able to deploy capabilities even further—bringing real, conversational voice AI into aviation today. What once looked next-gen is here, and it’s only just getting started.
The opportunity: Conversational AI at scale
Airlines don’t need another chatbot; they need a way to turn disruption into loyalty. Travellers expect to be heard and be able to rebook, redeem vouchers, or secure a hotel in seconds, not hours. The technology to make that possible isn’t futuristic—it’s here.
NLX is delivering it. Since 2018, NLX has replaced outdated IVRs and rigid scripts with intelligent, multimodal conversations that scale. At the core is Voice+, a patented technology that transforms websites, mobile apps, and IoT devices into fully voice-navigable, end-to-end experiences. Passengers can book flights, add bags, change seats, or rebook cancelled connections—seamlessly, using their voice.
Unlike legacy tools, Voice+ doesn’t just deflect calls; it drives resolution and revenue. Multimodal design syncs voice with screens, surfacing upgrades or bundled offers at exactly the right moment. For airlines, that means fewer bottlenecks, lower costs, and higher loyalty. For passengers, it means control, speed, and trust that you’re being heard.
Conversational AI isn’t about replacing humans—it’s about elevating the experience and making interactions with computers more accessible. With NLX, next-gen voice is no longer next-gen. It’s here, it works, and it’s ready to scale.
United Airlines: Proof in practice
United Airlines has already put this vision into practice with NLX. By embedding conversational AI into its ecosystem, United enables passengers to rebook flights and track bags—all without waiting for an agent. During disruptions, this reduced call centre strain and improved satisfaction by providing immediate, natural-language solutions.
Over a six-month period, United saw:
31% of cancellation-related calls became fully automated.
64% of wheelchair-access requests resolved without an agent.
CSAT scores of 82% for cancellations and 90% for accessibility—well above the 76% industry average.
United even won the 2024 Opus Research Conversational AI Award for enabling travelers to add wheelchair or service animal requests in minutes, without staff intervention.
NLX and its Voice+ solution isn’t about distant-future speculation—it’s about giving airlines a competitive edge today. Travel may never be frictionless, but with voice-first journeys, it can feel effortless. For airlines, embracing voice-first transformation turns support from a cost centre into a service differentiator—and loyalty driver—where your customers truly feel heard.
Car rental has traditionally been treated as a secondary ancillary product for airlines. Yet in an environment where every percentage point of revenue matters, it offers untapped potential. Airlines that integrate car rental seamlessly and connect it to their loyalty strategy can not only grow revenues but also strengthen customer engagement and partner relationships.
Scandinavian Airlines (SAS) provides a clear example. Today, SAS is among the best-performing airlines for car rental, the result of combining its own drive for growth with a new partnership model.
Car rental as an enabler of loyalty and commercial strategy
When SAS reviewed its ancillary revenues, the leadership team faced a decision: follow the aggregator route that many airlines take, or preserve direct rental partnerships and look for a model that could unlock more value.
The choice was deliberate. Direct partnerships allowed SAS to design bespoke campaigns, integrate EuroBonus loyalty mechanics, and protect relationships with key car rental partners in Scandinavia. What was missing was the speed, transparency and technical flexibility to execute at scale.
A new approach: Speed, data and partnership
Working with Meili, SAS launched a new platform within 12 weeks, with fewer than 13 hours of SAS internal development time. Campaigns that once took a month can now be live in days.
Equally important, both sides recognised that success depended on ambition. SAS brought a determination to push for continuous improvement, while Meili provided the expertise and market knowledge to guide the roadmap. SAS describes this as a “team effort,” where ideas are not just requested from the airline, but proactively put on the table by their technology partner, Meili.
Data has also shifted the conversation. Shared dashboards now give SAS and its car rental partners a clear view of performance. This visibility has allowed SAS to treat car rental as a proving ground for new loyalty approaches, using insights from car rental to shape its broader ancillary strategy.
Results so far
Car rental revenue has nearly doubled compared with their previous soluti
Campaign lead times have been reduced from weeks to days, enabling faster testing and stronger momentum
Car rental has become SAS’s benchmark for ancillary performance, setting the standard for how other products are evaluated
SAS now uses car rental as a testbed for loyalty mechanics, trialling EuroBonus campaigns here first before rolling them out across other ancillary products
Car rental partners report greater satisfaction, reflected in new agreements and joint marketing
Lessons for other airlines
SAS’s experience highlights four lessons for peers across the industry:
Loyalty mechanics matter more than discounts. Travellers respond more strongly to progression and status benefits than to price cuts.
Speed builds momentum. Faster campaign cycles energise internal teams and partners alike.
Direct partnerships unlock differentiation. Keeping car rental partners close enables bespoke offers and deeper loyalty integration.
Partnerships succeed when both sides bring ambition. Airline drive, combined with Meili’s specialist expertise, creates momentum and lasting results.
Looking ahead
SAS now aims to make car rental even more visible in the journey and use it as a platform for loyalty innovation, from expanding redemption options to engaging non-EuroBonus customers. The focus is on long-term retention, ensuring car rental becomes not just a revenue driver but a loyalty engine.
Partnership in action
The SAS story demonstrates how ambition and expertise come together to transform ancillary performance. By combining SAS’s determination to grow with Meili’s specialist technology and market insight, the partnership has delivered a benchmark for airline-led car rental, and a model for others to follow.
As SAS and Meili prepare to share their story on stage at the World Aviation Festival, the message is clear: active airline leadership, combined with the right partner, can redefine what is possible in ancillary growth.
Edgar, Dunn & Company, strategy consultancy specialised in payments with dedicated expertise in travel and airline payments, shares its perspectives on airline payments.
In the past, payments operated like plumbing — hidden in the background and only noticed when they failed. For many merchants including airlines, they were viewed purely as a cost. Today, payments are becoming an integral part of the storefront, attracting customers, influencing their experience, and driving sales. In other words, payments are not just an expense, but also a key revenue driver to create new customer journeys.
On the cost side, payment in the airline industry has been an overlooked cost driver. Yet, it represents approximately 2.2% of airlines’ revenues – amounting to $22 B globally as evidenced by a study led by Edgar, Dunn & Company for IATA.
On the revenue side, payment has been even more overlooked. Some airlines do not even maximise their market reach via local payment methods or instalment payments, or suffer from low conversions due to below-par payment processes.
With a dedicated Travel Payment practice since 2002 as part of its global payments consulting services, Edgar, Dunn & Company (EDC) has over two decades of experience working with travel-related actors, and more specifically with airlines ranging from global carriers to regional airlines as well as with airline industry stakeholders such as IATA or UATP. Based upon these consulting engagements in all regions across the globe, we have identified seven payment issues affecting the airline industry. The seven issues – shown in the table below – are key pain points or emerging needs that need to be addressed by airlines.
These seven payment issues have been organised around four themes:
A. Payment acceptance
B. Payment issuing
C. Managing (“internal organisation”)
D. Processing (“technology & processes”) payments.
This classification is particularly relevant because payments impact multiple business units within airlines. This ranges from digital / e-commerce, distribution, IT, marketing to finance and revenue accounting. While organisational structures vary across airlines, clearly defining ownership of payment responsibilities is crucial.
The identified payment issues do not exist in isolation. They emerge from a complex and continuously evolving payments landscape. Four key drivers of change shape this landscape, each introducing new opportunities (or threats!) that airlines must navigate:
These drivers create a dynamic environment where payments strategy and operations must constantly adapt. While not exhaustive and varying by countries and regions, the examples mentioned above represent key patterns observed across the industry.
The interplay between these external drivers of change and internal airline operations helps explain why payment issues persist despite efforts to address them. Understanding this context is crucial. It demonstrates that payment issues often stem from structural market changes rather than operational inefficiencies alone.
While these payment issues are common across the industry, EDC recognises that solutions must be tailored to each airline’s specific context. Factors such as airline size, payment operations maturity, market competitiveness, strategic priorities (growth vs. profitability), and home market conditions all influence the optimal approach.
EDC’s Travel Payment practice will share its perspectives on each of these seven payment issues and their potential solutions in a series of articles, leveraging its independent position and end-to-end understanding of the airline payment ecosystem across regions. Unlike generic industry reports, this series is based on real-world consulting engagements, offering actionable insights tailored to the specific challenges faced by airlines.
Each article in this series will follow a structured approach: first examining the payment issue in detail, then illustrating it through real-world examples from EDC’s experience. And we will explore potential solutions.
Through this exercise, EDC’s Travel Payments practice aims to raise awareness on common payment issues in the airline industry while demonstrating the strategic importance of airline payment strategies and operations.
As an airline, are you actively monitoring and managing your payment costs? And are you investing in payments to enhance customer experience, unlock new revenue streams, and gain a competitive edge? We hope this series of articles will help airlines move payments from the boiler room in the basement to the shop window.
We value industry dialogue and shared learning. If you have insights or perspectives to contribute, feel free to reach out to us at travelpayments@edgardunn.com and connect directly with us: Louis Wapler, Pascal Burg and Greg Toussaint. We would be happy to arrange a discussion and exchange ideas.
Stay informed with the latest insights on travel payments – subscribe to our newsletter here.
Edgar, Dunn & Company is a global strategy consulting firm specialising in payments and financial services. Since 1978, we have partnered with clients across the globe and developed an unrivalled depth in specialist expertise, with specific expertise in airline and travel payments. We offer a truly independent voice and our vision is to be the most trusted global payments consultancy. Today, we serve clients in over 45 countries through our global office network in North America, Europe, Middle East and Asia Pacific.We help organisations (e.g., airlines, hotels, travel agents, car rental operators and payment providers) navigate the complex payments and fintech ecosystem, identify opportunities to accelerate profitable revenue growth, and drive their competitive advantage.
Dear reader, you can probably guess how much, as a consultant in the travel industry, I am made to travel. Now, add to it a wife determined to discover all corners of the world, and you’ll understand why my body has got more used to an airplane seat than my own bed for sleeping.
This is all to say, I am a frequent traveller, coming with all the usual perks. I know to avoid having any luggage, my laptop bag fits neatly on top of my carry-on, and I have my perfect suite of gadgets for before, during and after the flight, which I have now perfected over the years (yes, that can be detailed in a future blog post).
We all know the airline industry is currently undergoing a massive transformation, leaving the legacy world of EDIFACT distribution and moving into a more customer-centric, Offer & Order world. And I cannot wait to see the Order part of said transition… take flight (forgive the pun).
Better servicing capabilities
The first reason I’m cautiously optimistic, is the new capabilities associated to the Order itself. Imagine landing after a delayed flight, fully aware that you’re too late for your next boarding, and immediately getting notifications containing rebooking options without even needing to go wait in a queue for an agent to handle this. This level of proactive, personalised service simply wasn’t possible in the old EDIFACT world, but it’s becoming the new standard as technology evolves. Also, airlines can now access a more complete view of each customer’s preferences and travel history, which means these rebooked services can be tailored to my preferences (how about offering me a window seat and wifi, as a way of apology for the stress caused).
Better door-to-door experience
A second major benefit is the potential for a true door-to-door travel experience. With richer data and integrated systems, airlines and their partners can coordinate everything from airport transfers to hotel check-ins, making the journey smoother and more seamless. No more juggling separate reservations or wondering if your ride will show up-soon, a single itinerary could cover my entire trip, with real-time updates and support every step of the way. For frequent travelers like myself, this shift promises to turn travel days from a logistical headache into a genuinely enjoyable experience, with a single place to manage all steps of the journey. And, going back to the servicing capabilities: should any delay happen in any step of the travel, that single place should be able to offer options to accommodate them.
Better tracking, leading to better advertising
I have spoken about delays a fair bit in the previous sections, but the fact is, I’m an “early arriver” at the airport. In fact, very often, I end up with at least an hour to wait within the airport, before my flight starts to board. With the new Order capabilities, the airlines will be informed at every step of my journey, including wait times. This should allow for personalised (based on historical data) advertisement, such as special shops and restaurant offers, lounge suggestions, etc… I look forward to receiving an advertisement for a lounge that also guarantees there is still room in said lounge. Like it or not, advertisements are everywhere, and on a personal level, I would rather have them tailored to me, rather than receiving a 5% discount on diapers that I will of course ignore.
The Geeky side
The idea of this transition allowing for a lot more features in an IoT (Internet of Things) concept is extremely interesting. Picture this: after passing the security gate, I receive the indication of where the lounge is, how full it is, and possibly a discount. Plus, while walking towards it, as I pass next to shops and restaurants, I’m getting information about what they offer. All these systems are interacting, sending information from one to another, and working together to offer a more streamlined and possibly personalised journey for the traveller. Oh, and if it can remind me that my wife’s journey is next week and that this duty-free store sells jewellery, all the better. Although one could wonder where to put the privacy boundaries…
The Dark Side
And that’s where this all leads: where is the line? Is it okay that airlines are now getting more efficient at tracking us, using our historical data, and interconnecting information to push better advertisements our way? I do not plan to get into the ethics of things in this blog post – rather, I share my own views. I don’t mind all this if it ends up enhancing my overall experience. But, as with a lot of these systems, I still recognise that there is a strong need for transparency for the traveller as to what data is used, processed, stored… And the possibility, should the traveller wish it, to turn it off.
Airlines, I hope you are reading this. And I hope, as a traveller, that you will implement these features soon, making my future trips a better experience. We live in a world that has gotten used to being online 24/7, and it is high time that you make full use of it.
Speaking at the World Aviation Festival this year, Cover Genius, SVP of Travel, Ticketing and Mobility, Peter Smith, claimed that, “One thing is clear, Gen Z will be a key demographic for the travel industry over the next 10 years.” During his presentation, he highlighted the importance of catering to this particular demographic, how they come with a new set of expectations that are redefining the industry, and how travel brands are responding.
His thoughts about catering to this growing demographic of travelers are below.
High Expectations, Responsibly
Gen Z is known for their high expectations when it comes to customer service and product quality. It’s a generation that has grown up with social media and content specifically tailored to their interests. As such, they expect the same experience when dealing with brands online. When these expectations are not met, it’s easier than ever to find an alternative choice that can cater to their needs in a seamless way. According to research, 57% of Gen Z in the US are less loyal to brands now than they were pre-pandemic. This should serve as a wake-up call for travel companies to step up their game and deliver on offering more tailored offerings that add value to their overall travel experience.
Anxiety and Risk-Awareness
Gen Z is also touted as the most anxious generation, with more than 60% of Gen Zers diagnosed with anxiety or depression. This anxiety is fueled by social media, the pandemic and environmental issues, among other concerns. Travel companies can help alleviate this anxiety and help Gen Z shield themselves of risk by providing tailored tools for peace of mind. For example, travel protection to safeguard their purchase, flexible booking options, and personalized travel plans.
Hyper-Personalization: The Key to Loyalty
Gen Z grew up with smartphones, apps, and content tailored specifically to them. As such, they expect the same level of personalization from the companies they choose to entrust with their travel. Hyper-personalization is key to driving loyalty, and it’s not just about offering bespoke options. It’s about providing unique experiences informed by data. Travel companies can use data to create personalized travel plans, unique experiences, and accessible destinations that cater to the specific needs of Gen Z travelers. With that data, they can also recommend ancillary offerings that are tailored to those specific needs. For example, an older traveler with their family will have very different needs for a two-week holiday than a Gen Z solo traveler extending their business trip to work remotely for a month.
Flexibility Over Luxury
Gen Z values flexibility over luxury. They want flexible travel planning, unique experiences, and accessible destinations. According to Skift research, 75% of Gen Z took two or more trips in the past year. As this significant segment of consumers ramps up the amount they spend on travel and the number of trips they book each year, travel companies need to respond with specific, personalized options.
For Gen Z, personalisation is about flexibility. They don’t want a one-size-fits-all policy that will cover them for everything – they want unbundled options that fit their every purchase and lifestyle choice. This flexibility is key to driving loyalty and repeat bookings.
Bleisure Travel: Work from Anywhere
In addition to personal travel, Bleisure travel has grown in popularity in recent years, especially among younger generations. Hilton’s 2024 Trends Report found that more than one-third of Gen Z and millennial business travelers globally plan to extend a business trip this year to enjoy leisure time before or after their work obligations. This is another example of the need for flexibility. These travelers have a different set of needs than purely leisure travelers which requires brands to find new personalized options for them. The customized approach, with unbundled options they can choose from can help travel brands set themselves apart from competitors.
Sustainability
Gen Z is eco-conscious and values sustainability. Intermodality, or traveling via multiple modes of transport to be more eco-conscious, has been gaining traction in recent years. Travel companies can offer intermodal agreements that allow passengers to book connecting itineraries across different modes of transport, providing a seamless experience and reducing the carbon footprint of travel. Different protection options for those travelers could be offered through a single provider, seamlessly through their purchase journey.
Conclusion
In conclusion, Gen Z’s expectations are redefining the travel industry. They want flexibility, personalization, and sustainability. Travel companies need to work with partners to help them adapt to these demands by providing bespoke options, unique experiences, and accessible destinations through technology, like insurtech. By embedding protection and providing tools, seamlessly, for peace of mind, travel companies can drive loyalty and revenue. The future of travel in today’s unpredictable world is all about flexibility and personalization.
Metaverse is a new and emerging technology platform that is creating waves with its unparalleled offerings in many industries. But is it worth a dive for the airline industry? Let’s discover!
Metaverse is a shared digital space that can be accessed by users from different locations worldwide, where they can interact with each other and digital objects.
The metaverse goes beyond traditional two-dimensional online experiences, offering a three-dimensional and interactive space where people can conduct various activities. However, it also manifests itself in 2D spaces where it allows engagement through mobile and web-based experiences.
Key characteristics that define the metaverse are:
Immersive: Lets people really experience it by being in it. With its 3D experience, users can be inside digital space, accessing and experiencing objects rather than just observing from outside.
Interactive: Enables users to actively connect and interact with other users or objects to enhance and influence their experience of engaging. For example, people can pick up objects or exchange items, shake hands, and do much more.
Shared Experience: What it essentially means is that it breaks distance barriers by bringing people together. Users can be at the farthest location yet connect with their families, peers, coworkers, and business stakeholders from their own location through an immersive experience.
Digital Elements: Digital assets, digital humans or avatars, digital currency, NFTs (Non-Fungible tokens), and a digital marketplace – metaverse is all driven and defined by the digital components.
With these characteristics, the metaverse clearly has massive potential to make an impact on the airline industry. Implementing a metaverse in airlines can bring marvelous and exceptional results, harping the advent of next-generation technological transformation that transcends the limitations of traditional online spaces.
Metaverse use cases in the airline industry
New revenue streams and differentiation through gamification: Metaverse opens new possibilities and exploration of avenues never experienced before.
For instance, it provides a unique platform for the airlines to position their offerings – products, and services that appeal to their customers like any other marketplace. However, the difference it brings to a traditional marketplace is worth considering.
By enabling passengers or public users to create their avatars and virtually experience the airline journey through gamification (by becoming crew, pilots, etc.) and share those experiences on social media, airlines can harness the much in-vogue influencer market.
Metaverse can further be used to enable users to earn rewards and points for participating in virtual activities, goals & challenges, and purchases through gamification. This could include virtual flight experiences, virtual shopping, and other virtual activities. Hence, this futuristic tech can be used to extend the reach of airline offerings even for those who are not flying by adding loyalty points through these gamified activities and letting people avail those benefits later when they fly.
Enhanced Maintenance and Supervision: Regular aircraft maintenance is a crucial activity that ensures the airworthiness of the aircraft by means of continuous inspection, defect identification, rectification, and replacement. However, there are several challenges that hinder the maintenance process, such as:
Shortage of skilled resources
Need for faster turnaround time
Glitches from a lack of monitoring
The metaverse holds the potential to not just cater to the above challenges but also provide convenience, enhanced scope, and precision findings. Let’s look at some of the ways by which metaverse can radically change the traditional maintenance procedures:
Maintenance engineers can access the aircraft virtually, inspect its parts, identify glitches, learn to repair things, and proactively prepare for unplanned instances using metaverse.
Metaverse facilitates real-time and remote collaboration and helps maintenance engineers fix issues quickly by seeking support from their peers who are physically at some other location.
Stimulating training programs: Training and onboarding a new workforce is a massive and demanding task, given the complexities of various aviation systems. Metaverse can revolutionize training which is predominantly simulation-based, online and offline.
Let’s look at how metaverse helps the airline industry in training:
Interactive training for future pilots by fabrication of real-world scenarios through immersive and engaging 3D metaverse flight simulators. This enables them to gain practical experience in a controlled and safe environment. Pilots can enhance their situational awareness by gathering information from sensors, weather information, and navigation systems.
Airlines can mimic real-world interactions and challenges to better prepare themselves in case of disrupted operations by recreating the complete airline experience in the virtual aviation world, consisting of various personas such as flight attendants, pilots, maintenance engineers, customer service representatives, and passengers.
Upscaling the level of training by enabling real-time collaborations of trainees with instructors and amongst themselves to gain knowledge with virtual scenarios, workshops, and classrooms.
Reimagining passenger experience: Despite their utmost enthusiasm to educate passengers about handling emergency situations, the airline crew often struggles even to seek the people’s attention. By harnessing the metaverse in this case, passengers can get into the immersive experience to learn how to prepare for extreme situations such as opening an emergency exit door, using oxygen masks, or using a safety jacket.
Further, passengers could be given a virtual tour of the aircraft, giving them the opportunity to experience upgraded classes or giving anxious passengers a glimpse of the entire check-in and boarding process from the ease of their homes.
Why should airlines traverse the metaverse journey?
The metaverse landscape is rapidly evolving, and many industries, such as media, gaming, healthcare, retail, beauty, and telecom, are already reaping their benefits. Metaverse has the potential to revolutionize how people interact, collaborate, work, learn, and entertain themselves. It can enable new forms of communication, commerce, gaming, and learning techniques and is certainly amongst the next digital playground through which airlines will be able to:
Evolve their capabilities
Expand their brand presence
Reach customers in a more immersive way
Bring in a futuristic approach to resolve operational challenges and have a faster turnaround.
The digital transformation curve is now taking a mega leap where ‘the experience of things’ is at the forefront of almost every industry, including aviation. And by leveraging the potential of virtual reality, augmented reality, and other immersive technologies that form the core of the metaverse, airlines can play the ‘experience game’ like never before.
By leveraging the potential of virtual reality, augmented reality, and other immersive technologies that form the core of metaverse; airlines can play the ‘experience game’ like never before.
We have often heard the term ‘customer experience.’ However, as we look to the future, new buzzwords will emerge from the metaverse spring, encompassing various facets of airline activities, such as ‘Operational Experience,’ ‘Planning Experience,’ ‘In-flight Experience,’ ‘Booking Experience,’ ‘Baggage Experience,’ and ‘Check-in Experience.’
In this new world of experiences, metaverse as a futuristic technology will play a key role in empowering consumers to experience the look and feel of products and services and helping them in their buying decisions while also helping airlines enhance their brand and customer loyalty towards it.
Conclusion
The metaverse is boundless when it comes to imagination and creativity. With its ability to seamlessly bridge the realms of the digital world and reality, the scope of the metaverse remains infinite. By carefully evaluating the opportunities, the airline industry can use the metaverse to simulate various scenarios and craft use cases to help businesses prepare better, plan and adapt to the future, and keep ahead of the competition.
We, at Nagarro recently joined hands with RipeConcepts to redefine futuristic tech, including metaverse, for our clients. Our airline experts can help you identify use cases of the virtual space, determine the type of experience required, and support you in developing the experience. For any suggestions and to know more, contact us at explore.tnl@nagarro.com.
When it comes to diversity, equity, and inclusion (DEI), Venari Partners believe in practising what they preach. As a champion of diverse values and experiences, Venari Partners are passionate about sharing their vision with their network and helping clients to meet targets on diversity. This can encompass many different areas – for example, gender, race, and class, among others.
Boards are just as crucial as the C-suite for organisations to thrive. Organisations with active DEI programmes in place increasingly want the board to reflect their commitment to diversity – and for change to come from the top down, with the CEO placement being a board mandate. There has been some progress globally in recent years – women now make up 10.4% of Fortune 500 CEOs, with the figure falling to 5.8% in Fortune’s Global 500 list – though we are still far from seeing gender equality at the highest echelons of the corporate ladder.
Over the past few years, we have seen increasing focus on, and demand for, gender diversity in the aviation industry. However, this is typically concentrated on areas such as operations – as well as, of course, the C-suite. The dearth of gender diversity at board level does not receive as much attention as we believe it should. A company’s board is essential for directing the organisation’s work culture, direction, and priorities. If women are present as NEDs, the likelihood of having female representation at C-level also increases – and we see this trickle-down effect as being an essential area for the aviation industry to address.
Venari Partners’ yearly update
The company picked up where their previous study left off, examining 411 NEDs of 40 airlines across the following regions*:
Australia/Pacific (APAC)
Europe
Middle East
North America
South America
*Of the 411 board members studied this year, 312 were men and 99 were women. The average number of board members across the airlines was just over 10. Data accurate as of 31 December 2023.
Last year, the company reported that females were outnumbered by a ratio of almost one to four across the boards of carriers surveyed in 2022. Has anything changed since then – and what does the future look like?
The results
Venari Partners’ findings for 2023 show a slight increase on last year’s figure. They have found that women comprised 24% of all board members – an increase of two percentage points on the results of last year’s whitepaper.
Gender split by region
The statistics differed from one carrier to another – and, most notably, across regions. This year, once again…
Southeast Asia has been forging ahead with its digital IDs rollout in the last few years. Xavier Declerck, Business Executive – Government and Identity, Entrust, shares how identity verification is key to accelerating enrollment by building citizen trust and tackling growing fraud.
As the gateway to digital governance, implementing national IDs has been a top priority for Southeast Asian governments in the last couple of years.
As of 2022, eight of 10 ASEAN members have implemented or are planning to implement digital ID programmes, according to Southeast Asian think-tank Fulcrum.
However, in order to implement a successful national ID programme, it is not sufficient to have the right technology, but also having a digital infrastructure that has the maturity to be both secure and interoperable across different agencies and applications, says Xavier Declerck, Business Executive – Government and Identity with Entrust, global tech leader for identity, payments, and data security solutions.
In 2023 alone, several news reports alluded to Southeast Asia’s vulnerability to fraud. A global study found that victims in Singapore lost the most money on average to scams, with identity theft being the most common scam.
The impact of identity fraud disproportionately impacts the most vulnerable populations, as this study showed.
Meanwhile, Malaysia’s data breach cases hit a record high. In Thailand, a hacker demanded a ransom from the government by threatening to leak the personal data of 55 million citizens.
Xavier shares how – given the increase in such crimes – having a robust identity verification solution alongside other key factors can help governments accelerate the rollout and impact of their national digital ID programmes.
‘Best way to tackle fraud is to detect it’
“Many times, it’s too late to act until identity fraud is detected, and then you have rampant fraud everywhere… And not all governments might be aware of existing frauds happening as well,” says Xavier.
Xavier used India’s digital ID programme, Aadhar – also the world’s largest biometric identification programme – as an example to illustrate his point.
“Sometimes, you only discover the true volume of fraud upon implementation. While worries about Aadhaar grabbed headlines, its execution revealed pre-existing frauds that had gone undetected,” he explains.
Identity verification and authentication can help secure digital IDs by protecting against fraud and identity theft, highlights Xavier.
Verification is a one-time affair that confirms a person’s identity and validity of the information provided, while authentication is a continuous process of matching the person’s credentials with the claimed identity – to confirm that people are who they claim to be.
National ID programmes were not initially created to secure against digital frauds, Xavier adds, and many countries still do not have the tools to protect their programmes as they are at an early stage of their digital ID journey.
Additionally, the progress of digital ID development is not catching up with increasingly sophisticated frauds.
“Not all countries are victims of the same fraud,” he adds. Both developed and developing countries in Asia are susceptible to identity theft crimes, ranging from welfare frauds to loan frauds.
As citizens are relying on secure and reliable digital channels to access public services, this affects their trust and engagement with governments, explains Xavier.
Digital ID should be convenient and standardised
Securing digital IDs should not be at the expense of convenience, says Xavier. Rather, digital IDs should allow citizens to interact seamlessly across government and private sector agencies.
A key obstacle that governments face is that agencies frequently adopt different technologies, ways of doing things, and measuring success. The lack of standardisation slows down digital ID rollout and make citizens less likely to use their digital IDs to access services, as some agencies may not be onboarded yet.
“At the moment, the organisations at the forefront of digital IDs are passports standardised by the International Civil Aviation Organisation (ICAO) and driving licenses by International Organisation for Standardisation,” he says.
The ICAO’s influential role in standardising ePassports was critical in driving the adoption of machine-readable passports across 145 countries, reported the International Airport Review previously.
As for governments, he says: “[With] national digital IDs, they are more difficult for governments to implement given multiple stakeholders across different sectors and the lack of standardisation.
“We see that the governments which really rise to the challenge are those which have implemented strong regulations and policies on digitalisation.”
Inclusivity and partnerships to drive the future of digital IDs
Moving forward, Xavier highlights the need for governments to be inclusive, meaning to ensure access to government services regardless of citizen’s digital access.
Secondly, governments are increasingly shifting towards a partnership model for complex IT systems such as national digital IDs, instead of developing and managing these themselves.
“Governments need to partner with companies with a proven track record to adapt to future frauds. They need to build scalable solutions to handle large transaction volumes, and continuously improve their platforms with emerging trends in both identity verification and digital identity. This is really the future of government services.”
Entrust previously partnered with the governments of United Kingdom, Canada, Uruguay and others in rolling out a variety of digital ID programmes.
Which technologies are changing the way airlines operate?
Join us to follow a flight’s journey from preparations on the ramp, to managing the aircraft in the air and finally handling baggage post-flight using new technologies and up to the minute data.
Turning around an airplane between flights involves more than restocking drinks and a quick refuel. A typical turnaround involves more than 75 different people and entities. Minimizing the time this takes is crucial to not only keep customers happy but to improve cost efficiency and reduce emissions.
So, how can airlines improve turnaround times? There are three phases of innovation to be considered:
Manual Optimization. For example, Delta Airlines tweaked the angle at which aircraft are pushed away from the gate. A shift from 90 degrees to 45 degrees saved the company a minute or two each time, which all adds up.
Smart Visibility. This phase uses technology to monitor ongoing processes and enhance planning. Travel-tech startup Assaia employs a synergy of AI and computer vision. Its solution can, as one example, assist in efficient de-icing processes by integrating data from the gates, the de-icing pad, and other essential inputs. Assaia’s tech suite claims over 12% turnaround time improvements.
Integrating AI. The future could include an automated ecosystem where every piece of data is acted upon in real-time. The “Deep Turnaround” system at Amsterdam Schiphol Airport tracks over 70 steps in the aircraft turnaround process to predict its duration and estimate when a plane is ready to push back from the gate.
Flight planning currently involves airline dispatchers collaborating closely with pilots to ensure safe and efficient routing, but two key challenges mean that more integrated technology solutions may be needed to enhance the precision and adaptability of the process.
More severe weather considerations. Three-quarters of all flight delays are caused by weather conditions, but emerging technologies can predict and plan ahead for adverse weather. JetBlue estimates an annual reduction in operational costs of close to $4 million USD from using Tomorrow.io’s advanced weather forecasting tech.
More air traffic. Next-generation AI platforms use traffic information based on scheduled and active flights to formulate flight paths that dodge congested zones. Alaska Airlines has partnered with Airspace Inteligence, whose Flyways AI platform suggests optimal routes. As a result, the airline saved 480,000 gallons of fuel in 6 months and between Jan – Sep 2022, the AI contributed to an average time saving of 2.7 minutes per flight.
Post-flight, passengers head to thebaggage belt to claim their luggage, but for a minority of unfortunate travelers the bags they’re waiting for don’t appear and are either returned later, damaged or never seen again. The mishandled baggage rate escalated from under 0.5% of all passenger bags pre-pandemic to nearly 0.8% in 2022.
Problems often occur when handling systems do not have enough time or manpower to transfer bags between flights, so amidst an airport labor shortage, how can this gap be bridged?
Key to this process are baggage management solutions that integrate with various airline systems, from flight information to booking and departure control, sharing real-time updates across all relevant teams. Advanced software systems also aim to balance tail-to-tail transfers, considering resource availability and workload. At Singapore Changi airport, the fully automated Early Baggage Storage (EBS) system features automated cranes that manage luggage storage and retrieval across a 13 km subterranean network, connecting three terminals. The shift to full automation has allowed the airport to free up to eight workers per shift to do more productive work.
This is an overview of a new report from OAG: The Future of Innovative Airline Operations. Download the report now.
In today’s fast-paced markets, you must continually transform business to stay ahead. Waiting to see what competitors will do—or simply moving forward as usual—will mean falling further and further behind.
No matter the industry, it’s more important than ever to find new ways to capture category leadership positions. Modern retail transformation is the airline
industry’s next frontier—the way to sustainable growth. But creating a new model that’s technologydriven, data-centric, and customerfriendly is no easy task. It requires a technology and travel partner to help chart, navigate, and guide the retail journey—and new processes that come with it. Bringing the airline retail vision to life requires a reset across the industry—a careful readjustment of people, organizations, processes, technology, standards, and data management. That’s because we can’t build new things using old ways. The shift to retailing with offers and orders will require modernized capabilities and skill sets, and close collaboration across stakeholders.
You may be unsure of where or how to start the journey to modern retailing—overwhelmed by requirements across departments, internal processes,
and legacy or entrenched technology.
But there’s no need to “eat the whole elephant” all at once. Instead, focus on the process step by step—methodically and incrementally identifying,
implementing, and integrating new ways of working as required to achieve specific retailing goals. While it may be difficult to adopt this mindset, taking these small steps to modernization makes it easier to identify and achieve early “big wins,” and maintain the momentum required for future retailing endeavors.
Download our playbook to help you define strategic objectives, set quick wins, and overcome common hurdles as you navigate the transition across IATA´s five “Airline Retailing” transformation programs.
It doesn’t matter if we are talking NDC or not the biggest hassle seems to be changes. Not only is it costly it is complex. You would think with automated coding and automated tools to change that this would be no big deal but, in every discussion, we keep coming back to servicing as the biggest challenge for both corporate and leisure travel. In the debate we hear “Change has not been implemented for NDC bookings”, “Our main reason for not implementing NDC is the challenge with servicing”, “Servicing remains the biggest challenge to our automation flow”, “Customers do not understand what they are paying for”. Isn’t it time that we start thinking about how we can modernize this process?
Changes are a corporate pain point
At the latest GBTA conference a corporate stated that they deliberately book as many one-way trips as possible as they struggle with the change process. Not only do they think they are overpaying for the service of change it has become an impediment to innovation. It is easier to book one-ways and gives them much more flexibility. Question is if airlines ever expected this to be the case? Very similar to virtual interlining that airlines never really saw coming.
Changes are a pain point for leisure travel too
And it is not only corporates that struggle with changes. On various online travel forums one of the most important questions is “Why do I have to pay a penalty not to fly”, “Why do I lose my flights from New York to London if I don’t fly from San Diego to New York?” “Why do I have to pay $3000 just to change one flight on my itinerary”. The ugly truth is that passengers do not understand the complexity and it also resonates less and less that I just forfeit a trip I want to cancel.
Changes are a pain point for airlines
For airlines servicing, exchanges, and refunds are constantly brought up as customer pain points. After the pandemic, tons of vouchers were added to the complexity as airlines had little or no experience dealing with other forms of payments than the traditional. Suddenly, they had to deal with longer validity, miles expiration and transfer of value. Customers had to deal with vouchers and expiration dates and constantly changing their plans and worrying whether conditions remained the same or whether the airline was still in business. It became very evident that the underlying airline processes and associated technology are very outdated.
Some of the problems related to changes and refunds are quite mind-boggling in 2024 such as:
Why exchange unused tickets and EMDs?
Why are there still technical restrictions on the number of exchanges?
Is the cost for both the service and the auditing of exchanges justifiable?
In this article we want to address some thoughts on modernization and what could be ways to change.
Is part of the answer marketplaces?
Both Flybondi and Royal Air Maroc have introduced marketplace concepts where the passenger can resell tickets. This type of reseller functionality has many benefits, it gives revenue management more visibility and control and an opportunity to resell. From a sustainability angle it makes better sense as we want to fill up the plane rather than having no-shows. In addition, there are many opportunities to turn these concepts into products or loyalty benefits.
Or is the answer to rethink the process itself?
Should change become a product like any other product and be unrelated to the fare itself? Rather than having a complex calculation based on availability and fares shouldn’t the change product be more dynamic? Typically, today change conditions state that “change fee is $$$ and any fare differential”, no wonder the customer is confused.
Or would changes in payment be a way forward?
Another thought is if other payment concepts could simplify servicing? We are seeing an increase of new payment and retailing practices being trialled both in travel as other industries and believe that payment will be one of the drivers that will change the legacy eco-system and support inter-operability for multi-modal travel. The common characteristics, however, will be the need to be flexible to changes after the initial order/reservation has been made.
An example of a retail practice being trialled is ‘pay on delivery’. In the Netherlands a global payment provider and a local supermarket chain have introduced this concept. Simply explained you purchase a product or service, the payment platform collects the money and when the product or service has been delivered the seller, releases the funds from a holding account.
Another possible solution could be ‘Pay When You Fly’ (‘PWYF’), it doesn’t solve all the problems, only some of them, and other technology like blockchain or travel wallets are needed. But the more choice and control the airlines offer to customers, trust and loyalty grows, for example by offering PWYF.
It should be noted that PWYF is not new. It has been around for more than 20 years and is used by several airlines typically for corporate travellers. But the question is can it scale?
Which ones of these problems would go away or are radically changed if we were to apply PWYF and how can it facilitate a transition to Offer/Order?
We do not have to remove tickets and EMDs in our transition to Offer/Order, but PWYF can eliminate some of the pain points in the ongoing process to move to Orders. PWYF would eliminate the exchanges of unused tickets and EMDs. It would simplify IROPS (Irregular Operations) when the airline is not delivering a service ordered. It also saves on handling time of complaints, and it is easier to automate compensation business rules. In addition, we would significantly reduce cost of auditing.
Finally, PWYF would work as an extra incentive for travel retailers (airlines, OTAs, TMCs) to ensure that the promises to their customer are delivered; this will further build trust and loyalty.
Will WEB3 come to the rescue?
WEB3/blockchain technology (like the decentralized Camino Network, the blockchain for the global travel industry) is uniquely suited to support this transformation without even needing payment platforms. By using smart contracts – programs that run on a blockchain and execute agreements without intermediaries – you can program any kind of payment rules and payment flows. This means the settlement can be entirely automated based on some external trigger and both parties involved in the contract have the security that the payment will only happen if certain conditions (coded into the smart contract) are met. Pay when you Fly could easily be implemented via smart contracts that provide escrow and could be triggered to initiate the payment when the flight departed.
Pablo Castillo, CTO of Chain4Travel, the company tasked by the Camino Network Foundation to build the Camino Network: “Pay when you Fly is a great example how using modern technology we can reimagine the payment and booking processes to make it more flexible and adapted to the customer needs by eliminating the complexity of transactions, especially refunds, and create a seamless experience for both airlines and customers. With Camino Network, travel companies can finally leverage web3 technologies to drive digital innovation on a secure, agnostic and scalable operating system for travel.”
Reality check, what’s the impact of implementing Pay when you Fly?
By Paul van Alfen, Travel Payments Strategist at Up in the Air: “a ‘can of worms’ comes to mind when looking into the impact on the current ecosystem of switching from ‘pay at booking’ (or at ticketing a couple of days later) to ‘pay at departure’, at scale. Stakeholders from across the business will see massive changes and an overhaul of systems, processes, and policies, with Finance (cashflow), Revenue Management (forecasting) and Revenue Accounting (reconciliation, reporting, auditing) the most affected. It’s probably fair to say that a new generation of systems will be required, combined with a customer centric mindset and a different (non-pre-payment based) financing model, to make PWYF work at a large scale and across the direct and indirect channels for both corporate and leisure customers.
The main difference with Buy Now Pay Later (‘BNPL’), when it comes to impact, is that BNPL does not affect the timing of payment to the Airline, it’s the full amount at the time of booking and therefore ‘business as usual’.
In summary
We predict that considerable change appears to be inevitable at some point in time to allow flexibility in ordering, changing/servicing, payments, and settlement. Change is driven by the customer and new entrants in the travel ecosystem. Pay when you Fly is only a small part of that change but could lead the way towards much needed simplification.
Aviation start-up ZeroAvia have announced that it has completed its Series C funding round at a total of $116m, including a $40 million backing from the UK Infrastructure Bank.
The fundraising round also received investments from co-leads Airbus, Barclays Sustainable Impact Capital and Saudi Arabia’s NEOM Investment Fund with the round set to accelerate the company’s journey to clean propulsion technology, hydrogen-electric engine production and zero-emission flights.
The company hopes that the funding will help to support the UK’s status as a market leader in research and development in both aviation and hydrogen as well as ZeroAvia’s growth plans within the UK.
Val Miftakhov, Founder & CEO, ZeroAvia said:
“This backing by such a pre-eminent investor as the UK Infrastructure Bank will help us deliver the first commercial zero-emission flights, and help the UK realise substantial export potential.”
Aviation contributes the equivalent of more than 38 million tonnes of CO2 from international and domestic journeys starting and ending in the UK. Around a quarter of UK carbon emissions are predicted to come from aviation in 2050. This funding in an emission-free and clean energy aircraft could provide support to the Government’s target of decarbonising aviation by 2050.
The company believes that a sustainable hydrogen ecosystem will be crucial for net zero and is an area in which the UK Infrastructure Bank is keen to act as a market leader.
Ian Brown, Head of Banking & Investments at the UK Infrastructure Bank, said:
“Aviation and hydrogen are sectors that need significant private investment to get to net zero. By providing confidence to investors, our equity has helped to crowd in the private investment needed for the continued development of this cutting-edge technology and should help stimulate the development and deployment of hydrogen technology across other hard to decarbonise sectors.”
The unique nature of the International Civil Aviation Organization’s (ICAO) Digital Travel Credential (DTC) presents an exceptional opportunity to build a next-generation system for passport issuance and inspection, setting a new standard for the traveler experience. Entrust fully supports the vision set out by the ICAO for technological advances from the current eMRTD standard for ePassports to a future state that will see only virtual eMRTDs. But the journey to paperless passports will take many years.
There have been several policy and technical papers released – and, despite the gaps in technical specifications, we’ve seen many seamless travel pilots already. However, much of the policy work at the ICAO level to enable the passport-issuer created DTC remains in-progress or has yet to begin. Governments and industry should begin to contribute to policy discussions now to support future technology decisions.
DTC Standards
VC = Virtual Component PC = Physical Component
There remains significant work to do on communications protocols between the DTC and inspection systems. Most of the Type 2 and 3 specifications are yet to be developed.
DTC Pilots
Pearson Airport, Toronto
The Canada Border Services Agency worked with Entrust and Face4 Systems Inc. on smartphone-based enrollment including DTC derivation for a touchless arrivals process for returning Canadian citizens. The goal was to test passing identity information and traveler declarations to the CBSA back-end for processing, essentially replicating kiosk-based traveler processing, but via a self-service touchless process.
UK / EU
Eurostar is working with iProov and Entrust on smartphone-based enrollment including DTC derivation for a touchless train journey check-in and border processing for passengers departing the UK from St. Pancras International. The DTC can be reused for subsequent journeys. Hundreds of transactions demonstrated improved traveler throughput without compromising security. Eurostar is deploying the service as an operational system before rolling out to stations in the EU.
Netherlands / Canada
This pilot is a collaboration between the Ministry of the Interior, the Royal Netherlands Marechaussee (KMar), the National Service for Identity Data (RvIG), Schiphol Airport, KLM Royal Dutch Airlines, and IDEMIA. Funding is provided by the European Commission. Canada’s engagement is limited to facilitating temporary procedural changes to waive the presentation of a physical passport prior to boarding. The project scope is for Netherlands and Canadian citizens departing Canada for the Netherlands.
DTC Use Cases
ICAO identifies the following potential DTC use cases:
Enable seamless travel
Using the packet of verifiable traveler data as the enabler of touchless travel experiences.
Improve the Advance Travel Authorization process
Authentication of data submitted to Electronic Travel Authorization and similar schemes, and elimination of data errors.
Streamline border management
Pushing the border out before travel starts by enabling the passenger to send data in advance, allowing authorities to make early watchlist checks.
Emergency Travel Document (ETD)
Type 3 DTCs could be issued by authorities to citizens whose passport had been lost or stolen during travel, saving significant costs and inconvenience for traveler and government alike.
What can document issuers do now?
Document issuers could follow the path being paved by the Netherlands Ministry of the Interior by getting involved in seamless travel pilots. Historically, document issuers have had little influence over how their documents are utilized. A pilot of this sort would require forging close relationships with immigration authorities and airlines. A pilot under the control of a document issuer would perhaps be easier to implement. The two obvious use cases within the control of a document issuer are streamlining border management and the issuance of emergency travel documents.
The rate of adoption of innovations in the passport world has some very understandable friction. Most passports are valid for 10 years, and ICAO’s policy to be backward compatible with previous technology whenever possible may make changes appear slower in implementation. But for the people directly involved, whether from industry or government, there is a growing excitement for the changes the DTC will bring to the world of travel.
It began, like many discussions in our family, during a joint family dinner. One of my sons, then still a teenager, politically very active and vocal (maybe not for the right side, in his father’s opinion!) announced to all of us that he will never fly again – because of global warming and the contribution aviation makes to it. As an experienced father of three I immediately decided not to enter into a discussion, simply because his siblings would take side with him against their parents, so instead I proposed to look at the facts.
The facts are of course that civil aviation does indeed contribute to global warming – what doesn’t? McKinsey, among numerous others, has recently published an article about decarbonizing aviation that provides an excellent introduction to the subject.[1] It is summarized that pre-pandemic about 2.5% of the total global CO2 emissions were caused by aviation. Therefore, I think it is fair to state that our industry is not the main problem, although we all are fully aware that every ton of CO2 counts and that the predicted growth of air traffic will further increase the need to act. It is also necessary to mention that recent research work sees that non-CO2 effects should not be underestimated in this context,[2] but this research work is still in a nascent stage.
As a result of the increasing need to take action, the aviation industry has committed to become net-zero by 2050. Numerous activities need to contribute to achieving this target, such as more efficient fleets on numerous levels, from better operations and individual flight planning to common airspace control, sustainable aviation fuels (SAF) and carbon offsetting. McKinsey estimates that a fuel efficiency improvement of 39% has been achieved between 2005 and 2019, and McKinsey’s work further quantifies each of the aforementioned activities in relation to a projected global 2030 view.
All that said, in my view two facts need to be highlighted:
net-zero aviation cannot be achieved immediately, especially as a lot of the described activities take time to be implemented, such as fleet renewals or moving to a Single European Sky (we don’t even have a single European power plug yet, by the way!)
it will lead to higher ticket prices for the passengers.
Still, we can already act now, mainly by offsetting CO2 emissions and further pushing for SAF. Many airlines have taken action and offer CO2 neutral flights. In some cases, CO2 neutral flights are offered by airlines as a special fare family or product bundle. For instance, the Lufthansa Group offers “green fares” for all intra-European flights, with the fare uplift covering 20% CO2 reduction through the usage of SAF and 80% of CO2 reduction by offsetting. This offer is currently not available for intercontinental flights, although this is most likely just a matter of time, either for LHG or others. Indeed, many other airlines also offer CO2 neutrality as an optional ancillary product available to purchase, very often based purely on CO2 offsetting.
Both ways of reducing CO2 (SAF and offsetting) can be integrated and embedded into distribution processes with relative ease. Third-party service providers such as Berlin-based start-up Sqake offer highly sophisticated and automated tools to exactly calculate the amount of CO2 emitted by travel on a specific route and cabin class, as well as executing the CO2 neutrality through SAF, climate projects on behalf of the airlines or a mixture of both. Assuming that airlines will not revenue manage the price of CO2 neutrality, a cost-based price can be provided to the traveller. And even if the airline is not able to provide such seamless methods as special fare brands or ancillary services, travellers can still compensate emissions by offsetting these through stand-alone methods such as those provided by companies or foundations like Switzerland-based myclimate.org.
In essence, reaching CO2 neutrality when flying is already possible today, either through a service, provided by the airline or by offsetting through independent providers (although not all CO2 offsetting projects are equal and attention should be paid to where contributions really go!). But reaching CO2 neutrality comes at a cost, and in the end travellers will have to cover them, either directly or indirectly. And this point is where I see the paradox. While 56% of travellers worry about climate change, less than 3% of them currently travel CO2-neutral.[3] Or in other words, most travellers recognise the problem and the mechanisms to achieve individual travel that is CO2-neutral are available, but very few really “walk the walk.” Therefore, blaming (or even financially punishing) airlines for CO2 emissions is not very helpful as long as travellers are not willing to cover the additional efforts of the airlines in the form of higher ticket prices.
It was again during one of our family dinners where spoke about our travel plans for 2024. After taking trains and ferries for the last couple of vacations, all family members are back to flying – although this is not necessarily a contradiction to the dinner conversation mentioned at the beginning of this blog. It is about flying in a responsible way by also compensating for our leisure travel. Travellers can already help our industry to accelerate the journey to achieving CO2 neutrality and (if they travel on business) also help their companies reach their ESG targets. More and more companies have committed to reaching ESG targets and CO2 reduction down to CO2 neutrality is a key pillar. Thus, we see growing demand for CO2 neutral flight products and airlines need to find ways to offer and to deliver them. NDC could also act here as an enabler, if all parts of the distribution chain agree to support this.
Of course, CO2 offset does not equal CO2 prevention, but every little helps, and it is a big step forward. Travel in Motion has compensated all of our air travel for many years, and when we entered into our strategic partnership with Oystin Advisory our wish that they also start compensating was immediately accepted. We now strive to become a CO2-neutral company, and soon hope to be able to offset all emissions from heating the home office, hotel stays and public transport to the cups of coffee we drink and meals we take.
In partnership with World Aviation Festival in Lisbon, sponsors Plan3 conducted a roundtable discussion focused on airline passenger IROPS. From legacy to low cost carriers, 18 airlines signed up to discuss the current landscape of disruption management in the context of a post-pandemic industry in recovery.
As a follow-up piece for our friends in aviation, here is a snapshot of airline passenger disruption management that includes industry metrics, airline feedback from the roundtable, and insights from Plan3 – a leading passenger disruption management solution.
Topics covered in this report include:
Airline Passenger Expectations in 2023
How the pandemic influenced consumer
How new consumer behaviour has exposed a trend in airline
Stats around generational
How Effective are Current Passenger IROP Solutions?
What does a typical passenger IROPS experience look like?
Metrics that reveal the efficacy of current IROPS
The common barriers to smooth disruption
The Challenge of Solving Passenger IROPS Through Automation
At what point does disruption change the value of the trip for the
During the pandemic, when air passenger traffic was at an all-time low, a few smart airlines demonstrated record-breaking sales by earning even more than 50% of their revenue from their ancillary products and services. Indeed, ancillary sales revenue is no longer seen as an airline’s secondary option. Instead, it has now taken a front seat in the airline business model.
In this context, we need to note that the traditional way of retailing does not cater to today’s tech-savvy customer who is information-rich but time-poor. In the current era of disruptive technological changes and a highly commoditized travel world, airlines have a cut-throat competition where products and services that may be cutting edge today can become outdated soon.
Adopting the advanced retailing concept in the airline industry is going to be one of the biggest transformations in the industry.
Customer loyalty is not what it used to be. With increased transparency on comparative prices and easier access to booking tools, travelers are increasingly loyal to those that provide the best prices and experiences. These fluctuating trends and rising consumer expectations make it challenging for airlines to keep up with the changing times.
The USP in this competition is the outstanding customer experience that revolves around a customer-centric approach. This allows an airline to deliver a positive and personalized experience at every stage of its customer journey. They can interact with customers based on their needs, adopt a fact-based approach to decisions using customer data as a primary source of insight, and embrace new channels to build a customer-focused culture, creating value across the way.
Many forward-thinking airlines have already embarked on adopting smart merchandising strategies to deliver a tailored, personalized, and seamless experience to individual travelers.
Smart merchandising strategies driven by an AI-based retail rule engine
In this blog, we will attempt to explore various best practices, frameworks, strategies, and techniques for an airline to deploy a successful merchandising strategy. This strategy will deliver exceptional customer experiences along with higher conversion rates.
The mantra behind successful merchandising revolves around five key areas, and they are:
Identify the right personas for your travelers
Contextualize your offer in real-time
Deploying the best packaging techniques
Target the right time and stage of the journey
Deliver a seamless digital experience
1. Define the right persona for your travelers
An airline caters to millions of passengers in a year. Every customer has unique needs and has a different perception of products and service values. If you understand those differences and are flexible in how you offer the services they need, you can gain a competitive advantage.Customer segmentation is a strategy to divide customers into various groups or personas having similar characteristics, wants, and needs.
Traditionally, airlines used to segment customers based on the booking class, which today holds limited relevance and doesn’t reflect complex passenger behavior. To overcome this challenge, airlines can leverage technologies like artificial intelligence and machine learning to develop self-learning models which analyze the below-listed factors and self-calibrate to optimize the personas.
Geographical: Country, state, climate, food habits, etc.
Demographic: Age, gender, marital status, family size, nationality, ethnicity
Behavioral: Spending pattern, price sensitivity, need for flexibility, loyalty index, CLI
At the same time, each persona defined by the airline must be:
Measurable: In terms of volume, purchasing power, and other characteristics, an airline can predict as well as target the revenue and profit a segment can make.
Accessible: The persona is easily accessible so that the airline can approach them.
Differentiable: Each persona must be unique and reacts differently to the market mix.
Actionable: Airlines be able to provide value to the segment.
A good segmentation strategy should have a persona for each passenger category and reveal underserved segments. For example, an airline receives most of its bookings from guest users, and the airline does not possess any historical data individually for these customers. But, by using engaging factors like demographical and geographical, airlines can achieve segmentation. In a recent survey conducted with an airline, it was discovered that young travelers between the age of 18-35 going from Oslo to Switzerland during winter had shown an affinity towards XL baggage for carrying their skiing kits. So, using such insights, airlines can target customers with similar personas to elevate sales.
2. Contextualize your offer in real-time
Now that we know each traveler’s persona has specific needs, the second step is to set the right context so that the customer understands the value that a recommended ancillary is going to deliver. For example, a business executive taking an early morning flight from an airport that experiences a high passenger load around the time of departure can open an opportunity to sell fast-track ancillary.
Contextualizing helps the traveler understand the benefits of the offer then and there.
Airlines can tap into such opportunities by leveraging an intelligent merchandising engine. These build a knowledge graph for each persona to understand their affinities towards ancillaries. They then evaluate it with real-time contexts like load factors, routes, flight duration, and peak hours through a robust scoring algorithm for ancillary recommendation across various stages of the travel lifecycle. Doing so significantly improves the likelihood of making a purchase hence, delivering a higher conversion rate.
3. Deploy the best packaging techniques
Airlines use various offer creation and packaging techniques like bundled ancillaries, unbundled ancillaries, and hybrid bundling (branded fares) to personalize an offer. Each of these techniques plays a role when targeted to the right customer. Branded fares or bundled ancillaries deliver a simple approach to building an all-inclusive fare, reducing the complexity of choice and making comparison and purchase decisions easier for passengers. But at the same time, with evolving customer expectations, it is a huge challenge for an airline to decide which ancillary items to bundle and which items to offer separately.
The best-fit package results in value to the customer and higher per-passenger revenue for the airline.
Deploying an intelligent merchandising engine that can generate multidimensional insights on ancillary sales performance across all channels and travel lifecycles can help revenue managers optimize their packaging techniques or even take a step ahead to tailor the bundles in real-time for a customer.
4. Target the right time and stage of the journey
Airlines can maximize their ancillary sales by encouraging customers at various stages of their travel lifecycle, beginning from the inspiration that starts the planning in the first place, all the way through the booking process, to pre-and post-trip engagement. Each stage offers a unique upsell or cross-sell opportunity that a traveler may consider.
The most important thing that airlines need to keep in mind here is to offer the customer the right product at the right time.
Not everything can be sold during the booking; travelers develop their needs as they proceed. Airlines can use their data to understand customers’ specific needs to determine the behavioral factors, purchasing patterns, and affinity factors for each persona.
The choice of the product can be determined by the customer persona and contextualization. In contrast, the stage of the journey should be targeted, considering when it will be needed the most. On the other hand, the choice of the channel can be determined by the accessibility factors, and the price should prove to be a good value to the customer – it should neither be too high nor too less.
For instance, a family of four going for a week-long summer vacation would be interested in booking a hotel room at the time of flight booking. A few days before departure, when they start packing, they might opt for extra luggage and finally may need a taxi on the day of departure. Whereas a backpacker who is a price-sensitive traveler may look for a cozy hostel room at the time of booking and may be interested in some good adventure deals as per destination.
5. Deliver a seamless digital experience
Delivering a one-click buying experience that enables customers to make informed purchases can be a differentiator among competitors. Along with the perfect offer, an airline should focus on the user experience they deliver to the customer.
The user experience should be fast, easy, and intuitive so that a customer can easily navigate to buy and manage their purchases.
An average user experience can easily make customers disinterested, even if they see a good offer. On the other hand, a good user experience delivers high-quality content and information about a product, which in turn converts lookers into bookers.
Airlines need to understand the challenges associated with different distribution channels, primarily indirect and direct.
Indirect channels
From a customer perspective, shopping through an indirect channel provides a disjointed user experience where they are not presented with personalized offers and don’t have access to the products they could purchase from an airline. From the airline’s perspective, they have to manage multiple EMDs for the ancillary purchase per ticket while distributing via a GDS channel.
Direct channels
To overcome these challenges, digitally matured airlines have adopted IATA standards such as New Distribution Capability (NDC) and ONE Order to modernize their product retailing and create a transparent shopping experience. NDC allows airlines to easily sell ancillary along with rich content directly to aggregators like OTA and GDS via a set of standard XML APIs (which was not possible earlier) and get away with the challenges of EMD issuance for ancillary purchases.
The capabilities of NDC clubbed with AI models can help airlines build a smart & advanced retailing system that offers customers a better product and more value. NDC enables airlines to sell flights and ancillaries the retail way, and AI-based technologies enable the airlines to add a personalized and contextual wrapper, so you are selling the right thing and have a higher look-to-book ratio. This enables the airline to transition from non-personal selling to retail-driven personalized selling.
Conclusion
The power of digital airline retailing is no more a secret. Revenue managers have identified its real potential and are leveraging it to target more sales. As we enter the digital revolution, the right set of techniques along with technologies like AI/ ML and big data could be the first step towards deploying successful merchandising strategies towards building a great customer experience and path to profitability.
As someone who made the leap from customer-facing passenger servicing into the complex world of airline Passenger Service System (PSS) IT at the turn of the century, I vividly remember my initiation into this intricate realm. Back then, a six-month comprehensive training program welcomed me, covering every facet of the PSS – from the business dynamics to the IT intricacies. It was a structured journey that armed me with the necessary knowledge and skills to thrive in the airline domain.
Fast forward to today, and the aviation industry faces a new challenge post-COVID-19. While business is picking up, there’s a pressing need to re-employ for talents that moved on. The catch? The industry has evolved, demanding a deep understanding of cutting-edge technology, cloud solutions, and compliance with ever-evolving regulations. All this must seamlessly integrate with existing IT infrastructures and the talents within the organisation during a transitional phase.
The job market, not just in aviation but across industries, often demands the impossible: “10 years of domain knowledge and experience” for newcomers. In the airline sector, where technological advancements are the norm, finding talents who understand the intricacies of this industry can be a daunting task. After all, if they don’t know what’s already in place, how can they ask the right questions to drive innovation?
So, how can we bridge this knowledge gap effectively and fast track the process of introducing new technical talents to the airline domain? Drawing from my own experiences in onboarding newcomers and engaging in conversations with industry peers, I’ve put together a roadmap for success:
Comprehensive Orientation Program:
Personal Touch: Begin their journey with a warm welcome and a comprehensive orientation program. This should offer an immersive overview of the airline industry, the company’s culture, and the intricate components and processes within the corporation.
Mentorship and Shadowing:
Learning by Doing: Pair newcomers with seasoned employees who can act as mentors. Shadowing these experienced hands offers invaluable insights into day-to-day operations and allows newcomers to learn not just theoretically but by example.
Online Learning Modules:
Self-Paced Learning: Leverage online courses or modules created by industry experts. Cover essential airline industry topics, including jargon and terminology and use these also to upskill talents in the organisation when changes are on the horizon. Allow them to think about what impact the evolution has on their area within the organisation.
Continuous Evaluation and Feedback:
Personal Growth: Implement regular assessments to track progress. Provide constructive feedback and additional training as needed, fostering personal growth and development.
Cultural Immersion:
Harmonious Interactions: Given the industry’s diversity, incorporate cultural sensitivity training to promote understanding and harmonious interactions among employees and passengers. Share personal experiences of working with diverse teams.
Emergency Response Drills:
Safety First: Given the industry’s critical nature, emergency response drills are essential. Train newcomers on how to handle various emergency scenarios like outages or security threats, underscoring the importance of safety.
Cross-Training Opportunities:
Versatility: Encourage cross-training among employees. This enables newcomers to gain a broader understanding of the airline industry, making them versatile and ready to adapt to different roles if necessary.
Customised Training Plans:
Tailored Development: Recognise individual strengths and weaknesses. Tailor training plans to individual needs, nurturing personalised development journeys.
Regulatory Compliance:
Safety and Quality: Ensure all training programs adhere to industry regulations and safety standards, emphasising the industry’s commitment to safety and quality.
In a rapidly evolving industry, training newcomers swiftly is a formidable challenge. However, by adopting a comprehensive training program encompassing orientation, mentorship, online learning, and continuous evaluation, airlines and IT vendors can equip new talents with the skills and knowledge needed to excel. This benefits not only the newcomers but the entire industry, ensuring growth and success.
By sharing my own experiences and insights, I hope to inspire a more efficient and personalised approach to onboarding in the airline domain, where personal growth and industry knowledge go hand in hand.
Since iconic American Airlines CEO Robert Crandall spearheaded yield management in the 1970s, Revenue Management (RM) has been on an innovative trajectory that includes embracing dynamic and continuous pricing models and Artificial Intelligence (AI). As this transformation progresses, RM is entering a golden age of new possibilities characterized by a new category of demand – travel mode.
Travel Mode
Travel mode is the shift in travelers’ mindsets and spending behavior in the time leading up to a flight departure. While the transition into travel mode can begin at different times, it typically peaks immediately before take-off, when day-to-day distractions are replaced with travel-related imperatives, airport-related stress, and welcome anticipation. During this period, customers’ typical Willingness-to-Pay (WTP) patterns increase.
Two key factors underpin the transformation of WTP in travel mode, economic and behavioral.
Economic: The limited options of the air travel environment and the stage of the customer journey lead to lower elasticity of demand. Essentially, consumers in travel mode are less sensitive to price changes, even when prices may be higher.
Behavioral: Studies indicate that consumers put money aside for leisure travel and are more flexible in how they spend it. This trend is described by the second wallet concept created by Atmosphere Research Group.
Atmosphere’s research shows that “more than four in five travelers […] establish budgets that cover their leisure trips’ transportation, lodging, ground transportation, and meals”. This second source of funds – hence the “second wallet”- allows consumers to self-indulge through travel, “It’s this second wallet that often funds travelers’ ancillary product purchases such as fast-track security, seat or room upgrades […]”.
Many RM front-runners are using real-time auctions of seat upgrades to take advantage of the change in WTP during travel mode. In so doing, they are unlocking three game-changing benefits:
Captured Incremental Revenue
Committed Revenue – The Backstop
Unconstrained Demand Data
Let’s take a closer look at these practices.
Captured Incremental Revenue
During travel mode, premium seats and other products are usually restricted for customers to buy. Until now, airlines could only tap into elevated demand during travel mode through airport operations, but gate agents are not an ideal retailing channel. They are focused more on matters such as ensuring an on-time departure and policy enforcement. Also, gate agents aren’t retailers – they don’t have the same skills as other airport staff like those working in Duty Free. This is where digital real-time auctions come into the picture. They turn that demand into revenue on behalf of the airline.
Real-time upgrade auctions use a mobile application to engage customers on-the-go in gamification (bidding) to tap into WTP during travel mode. They drive incremental, non-dilutive revenue upward until minutes before departure and capture it without undercutting higher fares or purchases.
The amount of captured revenue depends on several factors, including customer profile and product availability. Generally speaking, real-time upgrade auctions can easily generate more than $10,000 in unconstrained ancillary revenue per long-haul flight.
Committed Revenue – The Backstop
Every department in the airline wants incremental Captured Revenue. On the other hand, Committed Revenue is a unique tool for the RM team and one that they can incorporate into their existing RM practices.
Bidding, by its nature, is a commitment to purchase a product should the inventory be available. It’s demand/revenue that is waiting at the gate if the airline wants – or needs – to pick it up. As such, Committed Revenue is a Backstop that gives RM the confidence to take more calculated risks, earlier. For example, make bolder pricing decisions and engage in product experimentation, channel differentiation, and innovative promotions.
In total, the bidding Backstop has been shown to deliver a ~1% boost to RASK – without dilution.
Unconstrained Demand Data
For airline RM, the benefits of real-time upgrade auctions extend beyond Captured and Committed Revenue. Such auctions can also help optimize total pricing and revenue generation strategy by capturing unconstrained demand data.
Let’s face it. Airlines are more constrained than other industries. For example, like hotels, capacity is fixed – it is not usually possible to increase the number of seats on a plane. So, accurate demand forecasting and high-quality demand data are vital to understanding when and how to adjust prices and inventory allocations. To do this, RM must have an accurate picture of the overall demand potential.
With real-time upgrade auctions, WTP is measured outside of booking controls, technical limitations, and inventory constraints. This data helps create an idealized view of the demand curve. It is RM’s Holy Grail.
Unconstrained demand data can be used across the RM discipline, from dynamic pricing and promotional strategies to scenario planning.
By combining Captured and Committed Revenue, RM obtains a previously inaccessible and well-segmented source of unconstrained demand data. This enhances RM’s optimization modeling to increase revenue overall. Add in the incremental revenue benefit to the bottom line while delighting customers – real-time upgrade auctions, such as those provided by SeatBoost, airlines have a win/win.
