Aviation Festival Asia always has the most exciting and relevant topics at the forefront of the agenda. 2022 will have new topics that are crucial to industry improvements and recovery with new business models being at the heart of the programme. We present to the aviation industry new changes in the market and translate them into actionable take-aways that drive innovation, experience and revenue.
Over two days Aviation Festival Asia will feature 150 speakers from airlines and airports sharing case- studies and what is needed for the next steps across the industry. This combined with travel technology companies sharing products, solutions and services both onstage and on the exhibition floor then whether you’re in passenger experience, retailing, IT, digital transformation, distribution, loyalty, marketing, operations, communications or innovation, there’s content tailored just for you.
The World Aviation Festival is the world’s most important aviation technology conference and exhibition. The event is for the leaders of the world’s airlines, airports and their most senior executives in charge of the latest tech and strategies that are driving the industry forward.
In 2022 we will be moving to the RAI in Amsterdam to bring our community of 5,000 global executives together once again to be inspired by 400 speakers over 2 incredible days.
In a panel discussion led by Sinead Finn, Founder, Affinity Ltd., Bryan Porter, Head of Commercial — EMEA, Accelya Group, Jason Coverston, Director, Office Domain, Navitaire, an Amadeus Company, Sophie Dekkers, CCO easyJet, Achim Tyler, Vice President of Global Sales, Infare Solutions, and Krassimir Tanev, Chief Commercial Officer, Blue Air each shared their views on changes in the marketplace since 2019 and the rapid adaptation required to stay ahead, particularly in revenue management systems.
“In the last 20 months or so, is it’s very much a switch towards away from looking at historical behaviour and historical data into much more forecasting and forward-looking; which is a challenge, because who knows whose crystal ball is right,” said Sophie Dekkers, CCO, easyJet. “But we are having to switch and use much many external data sources to help make sure the points that we’re looking at in terms of forecasting are correct… In terms of the revenue management system itself, it’s trained to price at certain points with certain low matter. We’re in a very different time now, with a much later booking window. We were at about 75% of our sales were coming in the last three months [before travel]. Recently that changed to around 63% now [booking] in the last three months for travel next three months. That’s still very near-term [bookings] versus what the system had learned over the last 25 years, built to look much further out.”
“How do you stimulate demand? Once they get to the website, the conversion is there because the prices are attractive at the moment.”
Customer behaviour has also shifted somewhat in terms of apprehension to book, although Dekkers said the airline had seen a marked improvement in conversions, returning to 2019 levels. “But it’s the demand traffic in the first place that isn’t coming in. Once they come in, they see the prices, and they’re converting. So, our conversion rates are the same as in 2019. But it’s the demand that’s still depressed. If we look at searches on Google for flights, generically, they’re still down about 40% of what they were from 2019. That demand is the challenge—how do you stimulate demand? Once they get to the website, the conversion is there because the prices are attractive at the moment.”
Krassimir Tanev, Chief Commercial Officer, Blue Air, explained that the company as a whole had reshaped its business model from a hybrid budget airline to a true low-cost airline, with a greater focus on ancillaries.
“We have deployed a robust commercial plan over the last 12 months, focused on three main pillars that underpin our developments. The first one was network development, or rather, network enhancements, adding more value to our customers by focusing first on primary airports. We have tried our best to expand our operations rapidly and flexibly into the gaps that full-service carriers have opened up. We’ve opened up new markets like London Heathrow, Amsterdam Schiphol, Milan, Linate, and Frankfurt, just to name a few. The second priority for us was the customer experience elevation. Here, we also made significant progress. We used this time to upgrade our products. We have added a new fleet with a state-of-the-art, cost-efficient 737 Max 8 aircraft. And on top of that, we have also enhanced our customer experience capabilities and customer notification platforms–we’ve added new chatbots. Our digital systems, we’ve improved overall. We focused on adding more value to the customer experience. And last but not least, we focused a lot on actually driving growth in ancillaries. We know that most carriers have reported weaker or softer yields throughout the pandemic. But one thing that we delivered very well was that we provided more opportunities to our customers. We increased our ancillary yields by more than 50% thanks to our new ancillary strategy, where we have unbundled our products further. We have created new product features and new product bundles for our customers. And we have deployed dynamic ancillary pricing, just to name a few of our actions. But more importantly, we have enhanced, or we have increased our exposure to the VFR (visiting friends and family) markets, which has proven to be much more resilient compared to other market segments.”
“We work very quickly with existing customers to start consuming new types of datasets”
Bryan Porter, Head of Commercial — EMEA, Accelya Group, shared some examples of how the company’s airline customers had adjusted RM when historical data proved less useful. “Norwegian started using Accelya’s airRM revenue management solution back at the end of 2019. So we implemented a solution that effectively used historical behaviour to predict future behaviour. We built in all the forecast models, and, of course, along comes COVID–none of that is effective anymore. [How we deal with that is] we work very quickly with existing customers to start consuming new types of datasets. This is taking in market insight data and competitive fare data and utilising that to optimise prices. We also started pulling in data from the look-to-book activity that we’ve seen on some of our customers’ websites and other data that allowed us to focus on price optimal optimisation on an intraday basis. So if there’s a sudden, unscheduled event or a sudden fluctuation, our customers were able to cater for that. We effectively moved midstream with Norwegian. At the same time, we had customers coming to us—Iberia being one of them—who had barely been using their traditional RM system and suddenly found that it wasn’t fit for purpose. So they started working with us, implementing some of the solutions similar to what I’ve just described for Norwegian.
“Another example is we have seen the rise of new low-cost carriers that have effectively started during the pandemic. They don’t have any huge debt burden, and the cost of entry into the market is lower than it’s ever been. So we’ve had airlines coming in, who have no historical data to optimise their prices effectively, and are looking for new tools that can suddenly get them into the market. It’s been an interesting time for us. We’ve managed to onboard 11 new customers during the pandemic—our team’s been very hard at work. We’ve effectively introduced 280 discrete additional value points to our product set. We focused on new data integration, better visualisation to allow revenue managers to identify trends and start making more active decisions, as well as to look at automation and intraday optimisation.”
“One of the things that we’re working on with some of our newer customers is total offer optimisation.”
Porter also discussed how the company’s acquisition of FareLogix has helped refine the pricing of both fares and ancillaries. “One of the things that we’re working on with some of our newer customers is total offer optimisation. Through our flex merchandising module, we’ve started revenue managing ancillaries. We can start using price optimisation across the ancillary products and start doing that with bundling as well. [We’re] working with a large European airline currently to effectively couple our airRM revenue management solution with our merchandising solution. We are introducing AI (artificial intelligence) and ML (machine learning) to enable ‘willingness to pay’ models. We’re not just looking for an entry bid price, but ultimately at what the customer is willing to pay and utilising that to optimise price.”
Achim Tyler, Vice President of Global Sales, Infare Solutions, said data supply to inform RM models has increased.
“We’re looking in the future, then looking into historical data. We don’t throw away any information we collect—it’s still available. If you want to go back to 10 years and further, if you want to look into the market, we still do that. But last year and this year was always about the future… We invented a product called Market Trends, which observed the scheduled flights versus the flown flights, how prices were changing how quickly they were changing, how [many flights were] cancelled. That was last year. This year… there’s not too much churn. We focused this year more on optimising costs for our customers in the way we source our data. We did a couple of projects regarding API access to data—NDC API projects… We have already about ten customers on NDC APIs. NDC is the most efficient way for airlines to access the information they have on their website, which is our quality aim… We also see shopping data and ancillary data as a newer trend, talking about dynamic pricing and continuous pricing. You can imagine it’s going to be much, much more data. We work together with airlines and RM vendors to make this most efficient for all of us. A lot of data needs to be collected and consumed. You have to run all the algorithms, on top of that, to get to the really good revenue results.”
“One of the things that we’ve found is that our crystal ball is not as good as the crystal balls that our customers have—and they each have a different one.
Jason Coverston, Director, Office Domain, Navitaire, an Amadeus Company, also mentioned the importance of working closely and collaboratively with airlines to collect the correct data and refine predictive models. “You’re just talking about how much data it takes to react,” he said. “One of the things that we’ve found is that our crystal ball is not as good as the crystal balls that our customers have—and they each have a different one. So we try and get out of the way of our customers. For example, [one of our] customers realised they
needed to react more quickly [to] data coming in from Infare. We have a team dedicated to helping customers operationalise the data they get. So, we came in, and we created a pipeline. They were able to implement exactly the logic and algorithms they wanted. We take a very non-structured approach to deliver value to the customer. When it came to the algorithm choosing fares and exactly how to write the logic around how to compete, that was completely up to the customer. But they needed a bit of help in operationalising that because it wasn’t part of their out of the box system. So, whether it’s [data sources like that], or maybe somebody’s got a new Google TensorFlow model that they need to get into the system. We don’t use our crystal ball to decide [for our customers what they need, such as] you need willingness to pay, you need probability, you need x, y, and z. Instead, we say, we’ve got some patterns that we’ve seen to be successful, and they’ll show you what other customers have done. But at the end of the day, you can invent entirely new steps in the process so that you can be agile as the world changes from month to month.”
By Marisa Garcia
Revenue Management and Pricing
RM, continuous pricing and Demand Forecasting Panel Discussion: Rebuilding and adapting forecasting models with different inputs and future strategies to ensure that we capture demand?
From its very inception, IATA’s New Distribution Capability (NDC) has evoked heated debate. Sometimes that debate is related to the purpose of the NDC technology but mostly it’s about who will pay.
Such fundamental challenges have hampered the standard from gaining significant traction before now and while adoption is progressing, many predict there are further hurdles ahead.
Traditional airlines in Europe, such as those in the Lufthansa Group and Air France-KLM, have largely embraced the NDC technology standard and talk about it in the same breath as their modern retailing future. Other carriers, meanwhile, have taken a step back and returned to traditional distribution methods.
It might be time to accept that NDC is not a magic wand transporting the air passenger transport industry into the e-commerce world of Amazon, but a stepping stone in that evolution.
By acknowledging that NDC is a means to an end, airlines, travel intermediaries and technology partners can more easily face up to the challenges of implementing NDC, some of which might be considered challenges to their overall future survival and growth.
An e-retailing mindset
A change in mindset from all players is critical to move towards modern retailing.
At a recent airline conference, one former airline executive said airlines risk losing share of wallet to non-travel retailers such as Amazon or Google, not only because of the traditional mindset but also because of the ongoing reliance on legacy technology.
Many advocate it is not just digital transformation that is required, but complete system transformation if carriers, and other players in the distribution ecosystem, are to meet the growing expectations of consumers.
Evolving standards
Going forward, IATA’s recently announced plan to move from the NDC certification index to an Airline Retailing Maturing (ARM) index might focus minds on the end objective rather than the technical barriers to getting there.
One further challenge to NDC achieving greater traction is the various versions of the standard that airlines have used to develop solutions. This might be resolved through the launch of a new version carriers can unite around.
With so many hurdles it’s hard for airlines and intermediaries to see the real value NDC might provide let alone achieve it. But there are small steps carriers can take to unlock the potential.
Unlocking the value of NDC
Small developments such as ensuring technical specifications and documentation are easily available to developers and automating contract signing are easy wins for airlines to implement.
Making it easy for aggregators to access and sell NDC content and even incentivising travel firms for selling could also help demonstrate the value in changing to newer ways of retailing.
Finally, and requiring more of a mindset shift, is the decision by airlines to outsource their IT function so they can focus on flying planes and the passenger experience instead of trying to make legacy systems fit for the digital world.
It’s not hard to see why it still might take a few years before NDC has more of a presence but it’s important to note that steps taken in its development and implementation will not be wasted. This is progress towards the potential rewards of airline retailing which, as McKinsey and IATA estimated in a 2019 report, could be worth up to US$40 billion in additional annual value.
By Viktor Nekrylov, Managing Partner, DRCT
Viktor Nekrylov is managing partner at DRCT, the trusted tech partner for airlines and travel sellers. Powered by AI, DRCT’s technology integrates with existing selling platforms to solve the pain points of dated, legacy distribution systems. http://www.drct.aero/
During the Aviation Festival, London, Guy Johnson, News Anchor, Journalist and Aviation Enthusiast, Bloomberg, David Neeleman, Founder JetBlue, Azul and Breeze Airways, and Robin Hayes, CEO, JetBlue Airways, discussed what it takes to grow in new market conditions and build a more sustainable industry.
Neeleman explained the opportunities which inspired him to found Breeze Airways and launch during these challenging times for airlines. “I just saw trends that were developing in the United States, where the smaller and medium-sized cities you had to go through a hub on most all of these cities if you want to go anywhere. But, at the same time, the cities were growing. And especially in the post-COVID era, a lot of people want to go live in cities like these. They don’t really want to live in the big cities anymore. They can telecommute. So a lot of these cities are vibrant and growing, but they just lack air service. That affects the quality of life. Just for people to go to Florida or get to the mid-Atlantic region and different places they want to go, we can see that traffic.”
“..there’s a great market out there if you can do things that can simulate traffic with low fares and convenience for people to travel.”
As Neeleman elaborated, “If you go to a market and say five people are flying this route every day, can we take it to 100 people every day. We’ve seen that. We’ve seen some markets go up 20 times what the X-day was because of traffic stimulation. So we’re looking at 400 routes today. You know, when Ryanair started saying, ‘we’re going to go from 40 million people to 60 million people to 100 million,’ I thought that’s insane. But obviously, Wizz does it now. So, you know, there’s a great market out there if you can do things that can simulate traffic with low fares and convenience for people to travel.”
Hayes agreed. “To me, it made perfect sense because, with all the consolidation that’s happening over the years, so many cities have lost direct service. It’s all being hubbed. So here’s a business model that is almost infinite in size that allows an airline like David’s new airline, Breeze, to take advantage of that. I think it’s terrific, and I think it’s going to be a great success.”
“We’re going to see the actual effect on the planet. As we go ahead the next five years, ten years and 15 years, we can make adjustments.”
Johnson also asked the CEOs about the ambitious sustainability commitment the airline industry had made for 2050, net-zero carbon emissions, and whether it was achievable. “I think so,” Neeleman replied. “I mean, you look at what’s happened in technology over the last 25 years, and you project that ahead for the next 28 years, I think there’s no doubt that we’ll figure out how to solve this problem. And then, as we go along the continuum, there are a lot of other examples of cutting down carbon production. We’re going to see the actual effect on the planet. As we go ahead the next five years, ten years and 15 years, we can make adjustments.”
Hayes noted that airlines must remain financially sustainable while meeting climate sustainability targets. “I think airlines are going to have to—in addition to solving the segment sustainability challenge—they’re going to have to figure out ways of making money doing it. But again, the industry has shown so much creativity over the years in doing that.” Hayes said JetBlue is looking for those opportunities through JetBlue Ventures. “For example, travel products—that’s going to do $100 million EBITDA next year. You know, it was pennies on the dollar just literally two or three years ago. Airlines will have to figure out other ways to drive margins and revenue because I’m not sure consumers will accept higher fares. Why? Because at the end of the day, it’s going to, it’s still going to be a very competitive industry. You’re going to have airlines like David’s Breeze starting up. You’re going to have low-cost carriers growing. You’re going to have JetBlue and airlines like JetBlue, right. All of us will still build a business model around low fares. So, to sit there as an airline and say, ‘I can get higher fares from this in future because there’ll be a willingness to pay,’ I don’t think we can make that assumption. Certainly, the challenge I set out for our team to accomplish this goal. I want to protect margins, and I don’t want to increase fares doing it. Now, some would look at that and say, ‘You can’t do all of that.’ But I think we have to think big and think outside the box to find how we can do all of those things at the same time.”
“For example, in the US, at the moment, is I think there’s a great opportunity for sustainable aviation.”
Hayes also said that these airline sustainability targets would need broader support than the airlines alone. “I think that the industry has to demonstrate a global commitment to this, right? Because governments get the upper hand when they can quite rightly point to a problem. We must take a leadership position now. Where I think governments can help is by providing an incentive. For example, in the US, at the moment, is I think there’s a great opportunity for sustainable aviation. Still, it needs some form of tax incentives that allow producers—allows people—to make investments. There’s lots of money out there. The banks and other financial institutions want to point at sustainable technologies. So the money’s there, but you’ve got to create an incentive structure that allows that pick-up in demand in the early days.”
“This industry has shown a remarkable ability to adapt; whether fuel prices are $50 or $100, airlines have figured out that they can make money.”
Hayes continued, “This industry has shown a remarkable ability to adapt; whether fuel prices are $50 or $100, airlines have figured out that they can make money. We are used to very big swings in energy costs…I mean, look at how much efficiency and how much cost airlines have taken out during COVID… We’ve already gone through a lot before, yet we could do more. I’m not saying it’s going to be easy. We will have to get very creative in driving other revenue streams. You know, at JetBlue, we’re talking about all these people flying on vacation. We’ve got a very little share of wallet beyond their flight. That should be relatively straightforward to convince people to spend more money with us. Now we’re able to drive support. You know, we’ve got a much higher revenue stream for the same capital base. That’s going to help fund some of these sustainability investments.
By Marisa Garcia
CEO
Keynote JetBlue and Breeze Fireside Chat: What will be the longer term effects of the last 2 years and how can we effectively respond to rebuild a more sustainable industry?
During a breakout chat conducted at Aviation Festival, London, Alison Taylor, Chief Customer Officer, American Airlines, shared some of the airline’s changes to its retailing strategy as it adapted to the COVID-19 pandemic.
One of the strategies has been offering customers menu options to book ancillaries and services on-demand on the day of travel, such as requesting wheelchair assistance, adding a lap child to the booking, getting a day pass for the airline lounge, or booking preferred seats.
“Even now, you can buy flagship dining—which was only ever for our first and business class—for that day for that airport. They’re opening at JFK, Miami, and soon they’ll be LA. We’ve tried to become more nimble at the options we offer for the customers and how we deliver those offers. Of course, NDC always helps us with that.”
“We want people to be able to purchase where they want to purchase”
Taylor said the airline had employed an “educational” approach to merchandising, informing customers on the options available to them more than pushing a sale or a particular sales channel. “We want people to be able to purchase where they want to purchase. It could be via GDS, or it can be direct. That’s not for us to worry about. We just want the customers to be able to purchase it, but it has enabled some things for us on the retailing side that we’ve never done before.”
Rich content options available through ATPCO and Routehappy have helped the airline get creative in presenting offers to different customers. “We had rich content that we could supply whether you’re a leisure agency, corporate agency, or corporate direct. For us, that freed up that content. We have a lot of leisure operators absorbing that into their systems, making sure that it’s enabled through ATPCO and NDC. That has helped us to deliver the content they needed. We dealt with some cruise lines as well. [The COVID pandemic has] broadened the audience that wants that [rich content]. They had to have a lot of information available to their customers on travel, health protocols, safety, wellness, and the leisure agencies needed that quickly. We could do that by working with Routehappy and ATPCO… We’ll continue that journey now, but it was very much at the forefront of the pandemic because the leisure operators needed to inform their team members and also the travellers.”
Taylor shared that the pandemic has also resulted in a marked shift in buying habits and preferred sales channels and increased the demand for customer support teams.
“One of the things that we needed to do for returning customers—who were younger—[was to simplify enrollment].They weren’t going to fill out a whole screen of forms.”
“It’s quite different depending on the country, of course. When you talk about American Airlines now, one of our major markets is the US, without a doubt. In the US, we have seen that many of our travellers are buying through agencies because they need that extra helping hand, and they want the servicing aspect of being able to travel. I’ve been seeing many operators here while I’m in the UK, and they have seen that shift as well. So I’m sure we’re not the only ones. But, at the same time, we have seen new customers, booking on AA dot com, and new customers becoming AAdvantage members. We had to change our AAdvantage Program very quickly. One of the things that we needed to do for returning customers—who were younger—[was to simplify enrollment]. They weren’t going to fill out a whole screen of forms. They just needed a one-click to join the AAdvantage Program and become members. We did that very quickly. It’s something we’ve been talking about but hadn’t done. We did it in a matter of weeks, which greatly helped the number of young millennial memberships for AAdvantage. Also, even our corporate brand card—we have MasterCard, Citi, Barclays, of course, very strong here in the UK. We even had to change how we talked about our partnerships onboard and on the ground, changing the scripts to appeal to a different audience when we send to different channels…[Another] shift for us was people needing more servicing. We have large servicing centres, and we added almost 3000 [staff] to reservations. Because those that did book direct, and all those agencies, just needed more servicing. The calls were much longer. The calls to our reservation teams are five times longer than normal because they’re asking about border closures, border openings, and of course, what you’d expect about [travel health] protocols.”
“…recognize our customers and understand what they may need without constantly asking them the same questions again”
Personalization continues to be a priority for American Airlines, Taylor shared. “Personalization has been on our roadmap for a while—this is really important for us so that we can recognize our customers and understand what they may need without constantly asking them the same questions again. It even means—eventually—we can serve up different surveys for them as well…We just want to be customer-centric in using our data. I’m going to give you an example. If we know that you never buy flowers on Valentine’s Day, why are we serving you up via AAdvantage, something to do with a florist, right? So [we want] to make sure that we’re relevant at every touchpoint. Maybe we also know that you don’t open emails at a certain time. We can be relevant with that in our communication or the offers we are providing you, whether on the ground or in the air. It also helps us to adapt our offers. We want to get to the stage where we know that if you’re in your seat, we can utilize our IFEC data and understand what you watch, so we serve that up to you more naturally. That’s down the track, but those are the things that we’re working through. We’re working through with AAdvantage Program on entertainment, understanding whether you enjoy lounges, as well. Data enables all of that. Our customer journey is very important to us. My title is Chief Customer Officer because we want to put the customer at the forefront, not just commercial or business deals, etc. This is important for us. We’re completely enhancing our AA dot com app to make sure that we’re at the forefront of that. What the app will eventually serve you up will be more personalized as a result.”
By Marisa Garcia
Distribution
Panel: How does American Airlines plan to offer enhanced travel retailing to help drive recovery?
Context is everything: decoding post-pandemic demand through new data points
Airlines need to sell the right product to the right customer at the right time and at the right price. Any additional information that can be utilized to make that happen provides much-needed context to those pricing decisions.
In traditional revenue management systems, observations can be made about demand leading up to a flight departure, the capacity of a flight or route per day, and the impact of holidays or regional and global events. However, the legacy science, systems, and processes that used to drive commercial decisions for airlines are unable to keep up with the new, volatile environment that the industry has found itself in.
Even before the pandemic, adaptability was key for airline strategy. Anything from extreme weather conditions to a marketing initiative from a competitor can impact demand and make forecasts redundant. Being able to apply context to pricing puts airlines in the best possible position to gain revenue uplift.
Adaptability was at the core of how Cirrus™ was designed and enabling airline analysts to understand and interpret context means they have the confidence to use our insights to make better commercial decisions.
How does Cirrus provide extra context to pricing decisions?
FLYR’s Cirrus technology maps every piece of commercial data or input to all others, even in the noisiest or most data-sparse environments. This includes bookings, schedules, competitors’ schedules, pricing or capability, ancillary transactions, and third-party demand signals.
By mapping and understanding this context within our airline customers’ networks, we can accurately forecast future performance and set appropriate pricing strategies, even for markets that have not been flown before, or which have seen dramatic disruption in their environment.
Key areas we provide context on are:
Forecast – Airline forecasting is more critical than ever. However, legacy systems are limited by data scarcity resulting from the use of a narrow scope of metrics heavily reliant on flight-vs-flight and market-vs-market information, none of which will quickly surface clear trends at the required level of granularity. Cirrus solves this challenge by giving airline executives and commercial teams a new superpower, Forecasting at the Speed of Change. By identifying similarities across markets, origins, destinations, flight durations, departure schedules, and competitive pressure, Cirrus’ Deep Learning algorithms can identify trends before they are visible in data-sparse subsets of the airline network. With the right insights readily available and continuously updated, airline teams can, in real-time, start to resolve complex questions that used to be answered with guesswork.
Geography – Cirrus tracks the length of each flight segment and which airports are operated into and out of. Similar airports are mapped via embeddings, for example, the South Florida markets or the LA 5, to better predict pricing. This analysis can be done with far greater insight and automation.
Seasonality – Cirrus models seasonality with any persistent shifts in demand reflected. So, in the post-pandemic world, we can assess what the new seasonality may look like, as we cannot rely on previous years’ data. Using legacy systems can work can take months, as airlines have access to this information but are unable to utilize it efficiently. Cirrus uses machine learning to absorb this data and turn it into a richer set of insights than is possible using legacy ruled-based systems.
Itinerary – Cirrus can forecast Willingness To Pay (WTP) for a given market and differentiate WTP between customers looking to fly non-stop, on convenient single connection routes, or on more complex journeys.
Speed and Granularity – In traditional revenue management systems, if system demand falls short of forecast, the airline might take more than a week to observe and then react through broad system-wide changes in parameters. Instead, every day Cirrus learns about demand on an individual flight level, observing bookings continuously, forecasting those changes daily, and amending prices accordingly.
Competitor capacity and activity – Cirrus utilizes real-time competitor pricing when making revenue optimal decisions and when displaying market trends. The platform also knows when an airline’s strategy is optimal compared to a competitor’s actions. Cirrus’s competitive strategy is complex and highly depends on context, for example, the type of competitor and how many competitors there are for a certain route. For example, if you are only up against one non-stop competitor on a route, the best action may be to not match on price. However, if there’s another competitor in the market, it might be suboptimal to ignore competitive pricing. Airlines can price closer depending on the competitive landscape, in a game-theory-style strategy.
How can analysts manage these context data points?
Cirrus brings analysts the ability to combine all these context points within a single interface. Previously, analysts would hold historical and current performance data in separate places, often managed through spreadsheets, and then use another program to influence decisions. In Cirrus, analysts have access to all the above context data points and can see forecasts, revenue, load factor, and competitor positioning to review how pricing compares.
However, Cirrus is not 100% self-driven. If an analyst prefers to implement a pricing strategy different from that of Cirrus, there are many familiar pricing influence options available to the user. For example, when looking at their own pricing relative to competitors, they can choose to meet a competitor’s pricing by only 20% or 50%, or adjust by a specified Dollar amount.
The data afforded through Cirrus is incredibly rich. Analysts have access to over 150 metrics within the user interface, and if they want to explore any specific metric, they can click on it and see a trend graph. The ability to overlay this amount of rich, granular details together is rare in legacy revenue management software.
How does context affect the baseline expectation and resulting revenue?
For every flight or market in an airline’s network, Cirrus generates a ‘baseline expectation’ for revenue and load factor. This baseline is a much more accurate alternative to year-over-year metrics or historical averages, which cannot be relied upon due to COVID-19. Once established, the baseline can objectively compare actual revenue and load factors as it builds over time.
We can characterize how similar or dissimilar airports, routes, departure times, and competitor presences are across the network in the form of a ‘vector’. Such vectors help produce market – and flight-specific – forecasts and strategies that perform even under the most volatile conditions.
FLYR runs true A/B tests to compare flights that remain underpricing control of a legacy revenue management solution to those managed by FLYR. Using this comparison, we can measure revenue and load factor uplift. Typically, we see a significant revenue lift of 5-7% amongst our customers.
For more information about FLYR and how we use advanced and intuitive technology to understand context and help airlines achieve their ultimate revenue potential, contact us today.
During the Aviation Festival in London, an expert panel of airlines and payment services providers discussed some of the challenges of retailing and payments during the COVID pandemic. They shared their views on payment strategies to encourage more people to fly while keeping up with the industry’s financial challenges.
The experts tackled how airlines can keep up with the power shift towards customers and offer more flexibility to give consumers that “Uber experience.” In the process, they provided an overview of the current marketplace opportunities and some predictions on trends that will take hold in payments over the coming years.
“Now we’re looking forward to shaping a new way of interacting with customers at different touchpoints”
Thomas Lindner, Senior Director IT Distribution, Payment and Order Management, Lufthansa, said of adapting to new technology trends: “With the time to reassess what change of behaviour the customer will see, and demand from us, and especially as an airline supported by state aid, we had to make up our mind so we’ll be able to repay those billions in loans. Therefore, we came up with more creative ways to offer services to the customer. On the overall industry side, we had issues in acquirers having risk-aversion to that exposure with the airlines. We had a multi-acquirer strategy to juggle that, but that, of course, was a shift in the styles as well. Now we’re looking forward to shaping a new way of interacting with customers at different touchpoints.”
Frank Gubba, Product Manager Loyalty and Payments, Icelandair, agreed with Lindner on the challenges of keeping up payments during COVID. “The problem was suddenly that refunds were higher than transactions. You went out also to have good discussions with our acquirers, looking into things and how can we bring this to a turn-around. We had a financial restructuring, then, in the latter part of 2019. And we were getting everything involved in negotiations with all the key stakeholders. What helped us was to look more strongly into the reporting to understand the new normal for airline travel. It helped to be upfront and very transparent with our partners. For us, the risk mitigation part moving forward is very critical—having various providers in place and the recalibration of our mix for forms of payments. Not be so much dependent on credit and debit cards. Looking ahead, for us, to ensure like a frictionless journey, being close to the customer.”
“I will tell you—buy now, pay later, or whatever name you want to give that flexibility option was nowhere on our radar two years ago.”
Keith Wallis, Senior Director Distribution and Payments, Air Canada, suggested that many solutions were already in the marketplace though airlines were slow to adapt. “I would say the pandemic just massively accelerated everything. As being in charge of payments in Canada, I will tell you—buy now, pay later, or whatever name you want to give that flexibility option was nowhere on our radar two years ago. And it is rapidly becoming the thing that our customers are very excited about. For something like travel, which is aspirational, inspirational, and typically has a larger than average cart size, I can’t believe that buy now, pay later options weren’t already in our industry. But some vendors approach us with solutions that I don’t believe had travel on their radar two years ago.” Wallis pointed out that consumers have built a habit of online purchasing during the pandemic and have new expectations of what merchants need to offer. “I think as an industry, we need to do better. If you didn’t have one of the three major cards, you weren’t doing business with us five years ago. I’m proud to say that’s not the case now, but our customers expect even more than that. Geographically, it’s different. By customer segment, it’s different. People want flexibility and choice in a frictionless experience. We need to do much better than we’ve done historically.”
Michiel Kossen, Partnerships and Business Development in Airline, Travel & Hospitality at Adyen, said the company had helped airlines manage those high refund balances caused by the lockdown. The company is focusing on flexibility as the market reopens. “We took the opportunity to start projects that have been on the shelf for a long time. We’re expecting that there will be differences in how customers are dealing with the situation. And [we’re trying to define] how, as an ally, we can be flexible—adding new payment methods in different markets.”
Chris Fendley, Executive Vice President, Enterprise Partnerships, Mastercard, suggested the pandemic has called attention to the importance of collaboration in finding new solutions which ensure greater flexibility on payments.
“As an industry, we’re now looking and seeing real change around how passengers are dealt with, how the different partners in the industry work together, transparency of data..the whole ecosystem and managing things like access to credit, which is key”
“As an industry, we’re now looking and seeing real change around how passengers are dealt with, how the different partners in the industry work together, transparency of data…the whole ecosystem and managing things like access to credit, which is key. Also, things like customer service, where you need customer chargebacks, we all learn how painful it was when the whole system got shut down. There are legacy payment systems that are not fit for purpose. They need to evolve, and the industry needs to work together. At MasterCard, we have some solutions, but it needs to be done collaboratively with everybody.” Fendley offered some examples. “We’ve been on a bit of an education campaign on virtual cards for B2B flows. In the last 12 months, we’ve found that the agencies are looking for protection around the payment flows. Traditional VSP cash doesn’t provide the same level of protection for them or the consumer at the end of the day. I’m fully supportive of multiple solutions…But however this evolves, you need to have protection on both sides of the fence.”
In terms of B2B transactions, Air Canada’s Wallis said, agencies’ preferences in different regions affected their ability to deal with the shutdown’s financial impact.
“In North America, my experience is those travel agencies are very keen to pass through the customer’s card and allow the airline to be the merchant. They’re not interested in the fees. They’re not interested in the liability. They just want to pass that through and let us do the work. In Europe, we find that agencies are much more interested in owning that customer experience. They will take the customer’s card and be the merchant of record, assuming the costs and liability to own all aspects of that customer relationship, including the payment. I think the pandemic highlighted that many agencies who didn’t do that were very much at the mercy of travel suppliers and whatever policies we had on refunds. They were struggling to get a refund from 10 or 20 different suppliers. Those who had decided to own that aspect of the relationship were completely in control of what they could do for their customers. So, sure there’s a cost. But it’s an interesting discussion now around what is the value you can generate as an agent by owning everything, including the payment aspect.”
“..half of the millennials and all of Gen Zed, that segment is very different. Cards are not nearly as important to them.”
Wallis also pointed out that the consumer preference for credit card payments is generational. That’s true even in North America, where credit cards are widely entrenched and encouraged by points earning schemes. He advised planning for the needs of the up-and-coming consumer.
“If you look at the data in time segments—so what has happened in the last 12 months—you can see the changes in consumer segments. The bottom half of the millennials and all of Gen Zed, that segment is very different. Cards are not nearly as important to them. They pay direct when they pay online. And buy now, pay later solutions are very strong in those segments. Those are the future buyers. That’s the segment we need. I don’t need to devise new solutions for people in my age bracket—we have to understand what’s coming and be prepared for it. So it’s really about finding out not what you need to do now, what you need to start now for what [is coming up over the next five] years.”
By Marisa Garcia
Payments
Panel: How can airlines keep up with the power shift towards customers, and offer more flexibility to give that Uber experience?
It’s been a short while now since World Aviation Festival, which as always, was a pleasure to speak at. And even though the news of Omicron has somewhat muddied the waters for the return to normal travel, I still feel invigorated and optimistic about the future of the industry.
As a recap, I want to share with you my five biggest takeaways from the event and what I’m excited about going into 2022 and beyond.
1.The growth of Account to Account payments
By far and away the biggest payment trend in recent times is just how quickly Account to Account payments are growing. Most of us in the industry knew it was coming, but at what speed and that it was nowhere near reaching its full potential pre-pandemic.
Accelerated Digitalisation is driving the Open Banking industry, forecasting growth to be a staggering 1079% in the UK alone between 2021-2024. This early growth in terms of users of this type of banking method is really positive to see and makes the future look very bright for Account to Account payments.
2. Build for tomorrow. Not today. I’ve noticed a shift in thinking. Companies have started to adapt their innovation and product strategies to have more shelf-life and value for the consumer over time. Instead of trying to put out the immediate fire, or get something out as soon as possible, there’s more of a shift towards reflecting. During these uncertain times when the industry has been rocked so heavily by the pandemic, we can at least be thankful that this slowdown has allowed for more meaningful, longer-term planning. Most merchants are now shifting their thinking towards the question “What does 2023/24 look like? How can I build for that consumer?”
3. Airlines are becoming more consumer-focused.
The modern customer, predominantly Gen Z or millennial, demands an effortless digital experience and more flexibility. During the pandemic, refunds became a huge bone of contention for them. It became clear that the flexibility that they expected wasn’t really there. Cash settlement speeds and the handling of refunds / chargebacks were ranked as the top two challenges faced by companies in 2020 during the height of COVID-19 and they’re actively looking for ways to alleviate these pain points to help win consumer loyalty.
4. Lower costs and faster settlements.
All of this adaptation needed by the Airline industry is leading to some good upsides in the long run. For example, those who are looking to implement faster cash settlements and improve transaction operations are not only just left with happier customers. Those who are offering Trustly’s unique collection method are skipping out on the middlemen, meaning a much lower cost of distribution.
5. Bank on the right proposition For the last five years, Trustly has been focusing on shaping a relevant Global Bank proposition with its distributing partners for the industry. Throughout this time we’ve built up a solid idea of what works, what doesn’t and what is missing. In my opinion, the way forward is through banks that provide automation, guarantees, real-time messaging, reconciliation and instant settlement, all delivered through proven industry specialist partnerships.
FLYR | Highlights of 2021 and What 2022 has in Store
While the past 18 months dealt unprecedented disruption to the aviation industry, 2021 also became the year during which airlines recognized their need for an accelerated digital agenda to maximize efficiency, plan with confidence, improve their agility, and create more alignment between different commercial teams.
At FLYR, our objective has always been to enable such agility and confidence for commercial decision-makers, spanning from analysts to commercial leaders that seek to align revenue management, capacity planning, and marketing teams.
For us, 2021 was a year of rapid growth as our vision rapidly aligned to that of airlines around the world, culminating with the demonstrations of our technology and its results at the World Aviation Festival in December.
Here’s to the Mavericks
Our origins sit with a small team that simply wondered what would become possible if cutting-edge Artificial Intelligence were applied to airline pricing and forecasting. Back then, we were a maverick group of technologists with grand ambitions. Now, our crew is on track to reach 300 strong in 2022 with a presence across the US, Europe, Middle East, and Asia.
These days, we are fortunate to also count among our crew many former airline operators and revenue management experts that recognized the need for change, becoming mavericks in their own right by driving positive change in an industry they’ve known for decades.
Some examples of such industry veterans are Rob Haun driving customer deployments, Jon Ham driving continuous performance improvement, Kyle Holden assuring customer adoption and confidence, Kartik Yellepeddi letting science lead the way, Dennis Michon aligning 15+ product teams, Niels Colémont enabling our ancillary optimization, and Matt, Dominic, Clayton, and Jan carrying the torch to airlines in need!
Interested to join our Maverick crew? Find the latest opportunities here.
Great Backers for Great Ambitions
Notable in 2021 was our $150M Series C capital raise led by Laurence Tosi’s WestCap, Jeffrey Katzenberg’s WndrCo, Silver Lake, Peter Thiel, JetBlue, and others. We were fortunate to welcome WestCap’s Will Cunningham to our board of directors, jointly focused on a deep partnership between WestCap and our teams.
The fundraise makes for one of the largest private investments in the area of revenue management, forecasting, and airline business intelligence. With it, we can place big, bold bets and reduce time to value for our airline partners.
Other examples of our growth ambition can be found in the rapid succession of acquisitions such as Faredirect to expand our ancillary offerings, xCheck to closely interconnect revenue management and marketing tools, and Bonanza to enable real-time, dynamic offer management.
Our Alliance with Air New Zealand
At this year’s World Aviation Festival in London, a contingency of FLYR crew members provided over 2000 attendees with live demonstrations of our product, user interface, implementation processes, analytics, and change management infrastructure.
The event was the perfect platform to announce our strategic alliance with Air New Zealand, which will see us working together to collaboratively develop advanced AI-based applications that utilize our Cirrus™ software platform. The alliance marked an expansion of the relationship between Air New Zealand and FLYR which began in 2020.
Looking ahead to 2022, the collaboration with Air New Zealand will see co-located teams out of Air New Zealand’s headquarters in Auckland, also forming the blueprint for similar alliances in the works with other FLYR customers. After all, we consider ourselves a partner first, and a vendor second.
The Revenue Operating SystemTM
Planning throughout their cautiously optimistic recovery, airlines are announcing new routes, migrating capacity at a rapid pace, launching new ancillary offerings, and reevaluating their distribution strategies.
In an environment exemplified by volatility, the need for a Revenue Operating SystemTM is more critical than ever, aligning all commercial teams and their decisions around the best pricing technologies and common ground truth. To that end, we are committed to deploying our own capital in helping airlines adopt our technology at a rapid pace and plan for a bright future without delay.
We thank our airline partners for their trust in us and for serving as our product’s brain trust, our investors to support our bold vision for the future, and most importantly, our FLYR crew for living and breathing the change we believe in.
During the closing keynote panel on Day One of the World Aviation Festival, London 2021, a panel of airlines and experts in distribution updated attendees on their progress with NDC programs and answered questions on how the COVID crisis has affected the pace of new programs to improve distribution and merchandising. There was almost unanimous agreement that the crisis had helped accelerate these programs.
The expert panel consisted of Mike Croucher Group CTO The ATCORE Group; Steve Domin, CEO and Co-founder Duffel; Bas Hooft’t, Distribution Director Merchandising, Air France/KLM; Tina Larson, Director Online Travel Agencies and Distribution Hawaiian Airlines; Antii Tolvalnen, Vice President Revenue Management and Pricing, Finnair; and Sebastien Touraine, Head, Dynamic Offers, IATA.
“Back in 2020—the beginning of the crisis—we asked as part of the distribution Advisory Council..what we should be doing..”
As IATA’s Sebastien Touraine explained, “Back in 2020—the beginning of the crisis—we asked as part of the distribution Advisory Council..what we should be doing. They said, please don’t stop NDC. And actually, some of the airlines have been using this crisis to reflect and to use some new capabilities—continuous pricing has been a key investment for some.”
Tina Larson, Director Online Travel Agencies and Distribution Hawaiian Airlines, shared: “Prior to COVID, we just started getting traction on new merchandising initiatives, NDC, and marketing projects. Then COVID struck. I remember the day that our flights went to 13% of our original size, thinking COVID would kill every single one of these projects. But I have to credit our leadership team because they came to us and said, ‘Don’t stop. You guys need to keep moving. Because when we come out of this, we need to be more agile, more nimble, and we’re going to have to fiercely compete in the whatever the new normal is.’ Since then, we have invested heavily in data. Our data was an absolute mess before. We had disparate sources—my data and your data mentality. We worked together as a commercial team to build out this commercial data domain, and from there, we talked about what we wanted to do with this. That led to our revenue management team upgrading our revenue management system, expanding our merchandising capabilities…we took advantage of the downtime to double down on the plumbing. Restructuring is going to be so important when we’re back fiercely competing.”
Antii Tolvalnen, Vice President Revenue Management and Pricing, Finnair, suggested that the momentum to improve distribution will be ongoing, and COVID crisis or not, as part of the airline’s core objective—to reach the end customer and meet their needs.
“What’s behind the transformation that we are doing?”
“What’s behind the transformation that we are doing? It is not a digital transformation or a distribution transformation. It’s a transformation of the business model from B2B to B2C. We must keep in mind that we try to serve our customers. That is the main target. Then, of course, all those customers will not find our content on our direct channels. They’d rather use an agent or an OTA, a Meta channel, or something like that. Then it’s essential for ourselves as a sales channel. Again, we must think about how our products find the customer. I think this will be something that will add value to the whole value chain, but maybe some weights in the value chain will change in future. That might be a painful transformation to get [through], but I think we just have to make sure that everyone understands that we are just talking about the customer in the end.”
Bas Hooft’t, Distribution Director Merchandising, Air France/KLM, suggested, “GDS is morphing towards the aggregator models…we need them to get our reach out there. We’ve never said this is not about the interaction or moving everything direct. We need travel agencies. We are a global company. We are connecting a lot of passengers around the world. We can’t be everywhere, and there’s a role for aggregation in the marketplace. But that model is changing. We announced our Amadeus contracts, and this week we’ll announce another one.” Air France/KLM announced a new NDC Distribution agreement with Travelport. “We are also leaving space for new aggregators.”
Steve Domin, CEO and Co-founder Duffel, said they have also seen a lot of activity on NDC during this downturn. In terms of the company’s role in the new distribution landscape, Domin said: “At the end of the day, the work that we do as intermediaries, or aggregators, in the broadest sense of the term, is understanding the needs of the airlines and the products in a way that it an agent can do individually. I think we’re spending a lot of time and resources on the technology side to make that product available in the best possible way for the travel agent. Since the GDS have done that for a long time, we are trying to do it on new rails.”
“Every airline in the future—as the service tends to get more sophisticated—I expect will have different requirements of what they expect to personalize that offer.”
Domin believes there are opportunities to bundle over types of content. “Products like insurance are very popular. That’s an enormous opportunity for the airlines to push insurance through the NDC channel.” On the complexities of integrations, he said, “I think I kind of look at the problems in two ways. One is the complexity for us understanding the product that the airlines are pushing, then breaking it down to the travel agents in the way that they can display it, [but still] in the way that the airlines envision it. The other side is how can we get the data to the airlines that they need to create these dynamic offers. Every airline in the future—as the service tends to get more sophisticated—I expect will have different requirements of what they expect to personalize that offer.”
In the end, though, airline distribution is always about getting very complex information to be digestible by consumers logically, in a way that is easy to process, shop, compare, and book. That consumer demand for simplicity and ease of shopping is the key differentiating factor, in terms of competitiveness, regardless of the distribution channel. The critical engine of progress in airline distribution is a never-ending quest to simplify flight search.
As Mike Croucher Group CTO The ATCORE Group put it, “We’re nine years into NDC, and it’s coming to fruition, and people integrate in that way…When NDC was first there, they played off on the GDS and put their channels in place. And now they’re doing deals with the GDS to distribute NDC through it. The initial NDC proposition was to avoid aggregators, and now we’re seeing aggregators aggregate NDC content because it’s complex again, and they’re taking the complexity out. So I think there’s always going to be platforms to take the complexity out of distribution.”
By Marisa Garcia
Retail
Closing Keynote Panel: Delivering on the promise of Retailing, Dynamic Offers, NDC and the future of One Order?
The aviation industry was among those most impacted by COVID-19. While the industry is still reeling under the pandemic’s aftereffects, we can also begin to spot accelerated technological innovations that would have otherwise taken years.
Technology is evolving at lightning pace, making it a great time to embrace it, emerging as a future-ready, intelligent airline. Airlines can tap technologies like Artificial Intelligence (AI), Machine Learning (ML), big data, assistive technologies, mixed reality, NLP, cloud computing to derive the following benefits:
achieve operational excellence through real-time actionable insights
overcome interdepartmental silos
develop interoperability and collaboration
captivate many other smart decision drivers
Sounds great, but the obvious next question is about the ‘how.’ How do you leverage tech? Let’s find out.
How can airlines use technology to succeed in the post-COVID world?
Here are some tech-enabled steps that can add value:
From the curb to the gate in 30mn, with an almost touchless experience at the airport.
Augment ancillary sales yields by using intelligent merchandising platforms.
Create an ideal baggage handling experience by leveraging digital bag tags and advanced technologies.
Optimize turnaround processes by using computer vision and machine learning (ML) models.
Reduce the impact of disruption by identifying the early stages of disruption and optimizing a recovery plan.
Decrease maintenance and engineering efforts through predictive and prescriptive analytics to avoid unplanned maintenance and overhead expenses.
Automate back-office jobs by leveraging Robotic Process Automation (RPA).
Such an intelligent airline can be a perfect blend of smarter people, optimized processes, and state-of-art technology. This article will explain how airlines can sculpt the future of air travel by focusing on a seamless customer experience and intelligent operations.
Seamless airline customer experience.
Customer experience is the new battlefield where airlines can use the latest technologies as their most potent weapons. They are now discovering how AI and ML can improve customer experience and meet modern customer demands by focusing on personalization.
With rapidly evolving mobile technologies and ease of connectivity, new-age travelers have developed a habit of exploring, connecting, and buying on the go. The attention span of today’s buyers is also quite limited, implying that the current way of non-personalized engagement will not work. Airlines need to rethink how they can sell according to the evolved market conditions and traveler expectations. Fortunately, AI-enabled technologies have the power to make this happen. As has already been proven in the retail industry, contextualization, and personalization—two related AI technologies— have made consumer engagements much more successful.
In AI-based personalization, the system learns the user’s likes, dislikes, and preferences to create personas and customer segmentation.
AI-based contextualization means that the system considers the current situation and circumstances with general world knowledge, which often affects the decision for or against a specific option.
Airlines can use AI to develop an intelligent merchandising capability that combines personalization and contextualization in real-time. This helps determine the most relevant offerings that meet customers’ travel needs. It also maximizes the conversion rate and gives a one-click buying experience to the customers.
At the same time, digitally mature airlines have begun adopting IATA standards such as New Distribution Capability (NDC) and one order to modernize their product retailing and create a transparent buying experience. NDC gives airlines the capability to easily sell ancillary and rich content directly to aggregators like OTA and GDS through a set of standard XML APIs.
Apart from NDC’s capabilities, AI models can also help airlines build an intelligent and advanced retailing system to offer more value to the customer. NDC enables airlines to sell flights and ancillaries in a retail way. AI-based technologies allow airlines to add a personalized and contextual wrapper to achieve a higher look-to-book ratio, allowing airlines to transition from non-personal selling to retail-driven personalized selling.
Inlaying agility in airline operations
Airline operations are complex and have many challenges like inter-departmental silos, manual processes, and low collaborations. These challenges then lead to operational inefficiencies. Innovative technologies can help by creating an intelligent airline ecosystem and inlaying agility into operations. Let’s examine three such areas.
Enabling data-driven insights and collaboration
Airlines can build a collaborative ecosystem of integrated operations with a well-informed and connected workforce. Empowered digital employees increase productivity, break internal silos, and produce cross-functional insights. AI/ML data used in real-time for predictive analysis and operational recommendations ensure increased efficiency. All airline processes – crew management, passenger management, turnaround operations, baggage management – can be made more efficient and reliable using data and AI/ML-driven technologies.
For example, an airline can leverage computer vision and machine learning technologies to enable reliable turnaround management. The flight turnaround process is crucial for every airline. It should be optimized to reduce delays, save costs and satisfy customers with on-time flights. The turnaround of aircraft comprises all tasks that occur from arrival to departure. These activities include boarding and disembarking passengers, cabin cleaning and catering, aircraft maintenance and refueling, loading and unloading cargo, security checks, etc. Various stakeholders (boarding staff, BMA staff, security, ramp agent, OCC, controller) collaborate to ensure an on-time flight. However, this objective often fails because they often lack a common source of information and are not connected at all times. Now, imagine, what if they could be?
Airlines can leverage computer vision and AI/ML to build a model that associates each task with an object visually identified from the camera stream at the airport. The following table depicts the tasks:
This model can connect all the dots, simultaneously evaluating the performance of the turnaround activities, alerting stakeholders if a process has not yet started or is likely to be delayed.
The use of AI/ML has created many such use cases, which has significantly improved the efficiency and predictability of the airline’s operations.
Digital M&E functions
Any airline’s engineering function offers a vast scope for digitization, potentially saving costs and increasing productivity and safety. One such area is the digitization of maintenance records. Airlines must maintain detailed aircraft usage and maintenance records, including any changes made to the aircraft’s configurations and components. Any failure to comply or not manage records properly can directly impact the aircraft’s resale value and increase the time of returning the leased aircraft to the lessor. Enter RPA!
Robotic Process Automation (RPA) can be used to identify missing paperwork, data entries, and inaccuracies. The maintenance process can be streamlined by digital maintenance records, increasing visibility, and access (anywhere). This data can then be shared with internal audit teams and third-party MROs to plan scheduled maintenance. Airlines can also use AI/ML on these data insights for proactive and predictive analysis to reduce unscheduled maintenance overheads.
Another use case involves using smart glasses for aircraft inspections and recording feedback through audio recording and pictures from smart glass. This can significantly accelerate the overall process by not only making it error-free but also hassle-free.
Minimize disruption impact
IROPS (IRregular OPerations) is a situation in which a flight doesn’t operate as scheduled. The cause may be bad weather or technical faults or crew shortage or delayed connecting flights or anything else, leading to flight delays and cancelations. Often, the effect of the disruption is enormous as it affects passenger experience, crew duty times, along with a loss of revenue and reputation.
Airlines, as per the preferences and availabilities, adopts various recovery methods simultaneously to overcome these impacts, such as:
Delaying subsequent flights by a few minutes, keeping in mind the minimum connection times and crew duty limits.
Re-allocating passengers by moving passengers to other available flights.
Swapping resources when aircraft or crew members are unavailable for the next flight – other available aircraft or crew at the same airport replace the original ones.
Utilizing any reserved resources that are generally kept on standby.
Upgrading and downgrading an aircraft.
Dead-heading and ferrying aircrafts: The airline crew is transported to a disrupted airport as a passenger, and a empty plane is hauled to attend to an unscheduled flight.
So far, many airlines have struggled with two challenges:
a) Evaluating the exact impact of disruptions
b) Choosing the appropriate recovery method that can reduce the overall commercial and reputation impact.
While the methodologies to predict potential IROPs situations and plan better are quite limited, AI/ML technologies have opened a new dimension. With real-time data insights, AI/ML-based predictive models can help airlines identify the early stages of disruption and measure their impact over the short and long term. These inputs can also optimize schedule recovery (including aircraft, crew, slots), connections (including passengers). This enables a passenger-centric recovery approach that reduces the overall commercial and reputational impact of disruptions.
Clubbing the IROPs methodology with a customer personalization engine can elevate the quality of service. IROPs-impacted customers can receive some specific services based on their history and consumer preferences, potentially converting an otherwise stressful experience to a much better one.
Conclusion
The advent of innovative technologies opens new avenues for airlines in the field of passenger service and digital operations. It is time to board the seamless, intelligent airline driving innovation through disruptions. Are you ready to take off on the future of aviation? Nagarro’s digital and aviation expertise can help you reach new highs. Reach out to them at explore.tnl@nagarro.com to discuss more!
International airlines have, by necessity, some of the most complex payment ecosystems of modern merchants, and an equally diverse (and thus demanding) customer base to match. The COVID-19 pandemic led to unprecedented levels of stress being placed on systems which, in many cases, were already outdated to begin with, highlighting the need for innovation and automation throughout the payments process.
CellPointDigital CEO Kristian Gjerding, explores the myriad challenges faced by airlines in the wake of the pandemic – both within and outside of the payments space – and how merchants in all verticals can leverage these learnings to make payments easier for their customers.
An industry understandably concerned with security
Fundamentally, the airline sector is justifiably risk averse when it comes to every aspect of its business. External threats to security, technology malfunctions and simple human error can, in the worst-case scenario, lead to loss of life, leading most airlines to favour tried and tested systems in place of new initiatives. Furthermore from a commercial perspective, airlines on the whole have high overheads, and operate at such low margins, that making any changes to their existing systems could significantly damage – or improve – their bottom line.
The high-risk nature of change leads to a reluctance to embrace new technologies, which is perfectly epitomised by the flagship model, the Boeing 737, which, despite taking its first flight over 50 years ago, is still widely used throughout the industry today, even though there are far more efficient models available on the market. This culture of risk aversion extends to airlines’ payment ecosystems, with many carriers preferring to persevere with traditional and cumbersome payment solutions, or sub-optimal partnerships with a single PSP, rather than embracing the benefits of new, emergent platforms and solutions.
A complex payment eco-system in a complex market
By definition, international airlines serve customers from all over the world, operating in multiple different currencies and jurisdictions. This leads to many nuanced challenges in allowing customers to pay how they want; different cultures prefer different methods, with some regions preferring digital options over physical cash, for example. Currency barriers can also create friction during the shopping and payment experience, leading to failed conversions. Additionally, consumers have many different profiles, from business travelers to families on long-haul leisure breaks, each with their own unique payment needs.
As a result, airlines need to offer a wide variety of payment methods around the world, managing a high volume of cross border transactions and offering multiple different currencies to match their consumers’ needs. The complexity, however, isn’t just on the customer’s side. Managing a payments ecosystem that can successfully meet the needs of an international customer base means building relationships with several different acquirers and PSPs in every territory the airline serves, giving them multiple options to mitigate risk and optimise their costs and acceptance rates.
Given the cumbersome process of establishing and integrating new acquirers, payment method providers or PSPs, airlines often encounter difficulties in rolling out the right payment eco-system they need for their network, or scaling platforms to support a new destination. This leads to friction for customers looking to buy, change or refund their tickets.
COVID-19; a catalyst for digital adoption & automation
These challenges for airlines and their consumers were brought to bear during the COVID-19 pandemic, which placed unprecedented stress on airlines’ traditional payment systems. As consumers on a global scale tried to refund tickets in the event of mass flight cancellations, airlines had to be on hand with alternative options to keep capital in house, largely by offering rescheduled dates and issuing vouchers wherever possible. At a time when refund requests hit their peak, the need for and benefits of automated solutions to offer and issue refund vouchers as an alternative became self-evident.
Mass ticket cancellations also led to a near overwhelming amount of chargeback requests which, again, many airlines didn’t have the technology in place to manage efficiently. Carriers that didn’t have the capability to automate the management of unjustified disputes had to either incur sizable costs to increase their back-end resources to handle the volume, or simply write revenue off altogether, leading to significant negative financial impact in both scenarios.
Society’s wider shift towards digital and contactless payment methods was also accelerated during the pandemic, with customers increasingly demanding socially distanced, COVID-secure payment methods, and airlines who readily embraced this change saw the benefits. One example of this is Cellpoint Digital client, Southwest Airlines, which incorporated Apple Pay into its payment mix in late 2019. The platform has since become their most popular alternative payment method in the wake of the pandemic and continues to grow month-on-month.
What the pandemic highlighted overall was the rigidity and lack of automation of most airlines’ current payment solutions, and the need for more agile payment orchestration solutions to better serve their customers and optimise their payment ecosystems on a global scale.
A new dawn for the airline sector?
For an industry that was already averse to risk, and faced challenges in innovation and technological development, COVID has spearheaded digital adoption and exposed the need for more efficient payment systems. The changes brought about by the pandemic will be felt for years to come, and airlines will need to adapt to survive. Like airlines, the merchants who embrace the widespread shift to new technologies such as payment orchestration, and invest in allowing their customers to pay how they want, will see the greatest benefits in the digital-native future.
Historically, the relationship between airlines and travel agencies was one in which the airlines truly had all the power. The travel industry at that time included a highly fragmented set of agencies for distribution and each one of those agencies had their own segment of the market. During this time, the airlines, the travel brands themselves, had most of that control.
Today OTAs have grown into global entities with massive reach and the ability to scale infinitely to capture as many customers as possible. This upended the control of the value chain to where the brands, the airlines, no longer had the same standing that they did before. The disruption this caused in the travel industry persists today.
OTAs have been able to commoditize the airline, creating no differentiation in their products, or in the airline’s brands. Airlines struggle to bring offers in front of customers at all the various touchpoints, whereas OTAs can present offers at every touchpoint, including powerful comparison-shopping tools. OTAs have intercepted airlines’ customers and captured an outsized percentage of travel demand.
The opportunity to “Undisrupt”
When COVID-19 hit, non-essential travel came to a halt and the travel industry was severely affected. As a result, OTAs reduced their spending in paid media and on innovation, creating an opportunity for airlines to close the gap and move a higher percentage of sales to their direct channel.
Direct sales are not only more cost-effective, but they also build brand loyalty between the passenger and airline and provide more leverage to the airline in the market overall. When passengers purchase flights through OTAs, airlines become a commodity to the customer.
“Airlines have recognized for years the importance of driving online direct sales to reduce dependency on Online Travel Agencies for market share and own the relationship with the customer. This increases loyalty and lifetime value of their passengers,” said Seth Cassel, Co-Founder, and President of EveryMundo. “COVID-19 has been damaging for airlines, but it has also been a wake-up call: airlines must do more to own their customer relationships directly, and they require technology from partners such as EveryMundo to accelerate this effort. We are seeing energized motivated airlines use our fare marketing software like never before.”
We believe now is the time for airlines to take advantage of this unique opportunity by prioritizing customer acquisition and direct sales to drive customer lifetime value. It is time for airlines to “undisrupt” the industry and take the power back from OTAs. A key factor in capturing travel demand is improving the customer experience, including user engagement technology, enhanced visualization in offers, calls to action, and more that supersedes that of OTAs. By utilizing technology airlines can increase website traffic, improve booking conversion rate, enhance online user experience, reduce their dependance on OTAs, and drive brand engagement on and off the airline’s website.
According to the latest Global Passenger Survey (GPS) published by the International Air Transport Association, passengers welcome the efficiencies of biometric identification at control checkpoints.
The survey results of 13,579 participants from 186 countries show that passengers want to spend less time queuing and would want to use biometric identification if it expedites travel processes.
“Passengers have spoken and want technology to work harder, so they spend less time ‘being processed’ or standing in queues. And they are willing to use biometric data if it delivers this result,” said Nick Careen, IATA’s Senior Vice President for Operations, Safety and Security. “Before traffic ramps-up, we have a window of opportunity to ensure a smooth return to travel post-pandemic and deliver long-term efficiency improvements for passengers, airlines, airports and governments.”
Biometric Identification
The notion of using biometrics as a form of identification has had a significant lift in acceptance.
73% of passengers are willing to share their biometric data to improve airport processes (up from 46% in 2019).
88% will share immigration information (including health questionnaires) before departure to expedite processing.
51% would be willing to share their biometric data with partners, including hotels, car rental companies, if it helps to facilitate their onward journey.
Part of that increase may be attributable to the successful technology roll-out thus far.
36% have experienced using biometric data when travelling.
86% of those who have used biometric data to travel were satisfied with the experience.
The top three touchpoints where passengers welcome the ease of biometric identity are:
51% Entry Immigration
47% Exit Immigration
34% Security check
These coincide somewhat with the current low touchpoints in passenger satisfaction during the journey. Border control immigration is the lowest rated satisfaction touchpoint (62%). Security satisfaction rates were slightly higher at 71%, topping transfers (68% satisfied) and baggage collection (69% satisfied).
However, passengers still care about the security of their biometric data.
56% of those surveyed indicated some level of concern about data breaches.
52% of passengers want clarity on who their data is being shared with
51% want to know how their biometric data is used/processed
Less time spent at the airport
Passengers still want to cut short the time they spend at the airport, the survey reveals.
69% said that when they are travelling only with carry-on luggage, they would like to get through the airport process in under 30 minutes
73% said that they would like to get through the process in under 45 minutes when they travel with carry-on and check-in baggage.
85% of passengers want to spend less than 45 mins on processes at the airport if they are travelling with only hand luggage.
90% of passengers want to spend less than one hour on processes at the airport when travelling with a checked bag.
Passengers may still welcome time spent enjoying the airport’s facilities and concessions, but they would rather cut through the stress-inducing parts of the journey and get to the pleasurable ones.
Overall, queues are unpopular, which should surprise no one who has ever stood in a queue.
55% of passengers identified queuing at boarding as a top area for improvement.
41% of passengers identified queuing at security screening as a top priority for improvement.
38% of passengers identified queuing time at border control/immigration as a top area for improvement.
54% want to see queuing cut down at boarding time, and 29% expressed dissatisfaction with queueing in the jet bridge.
With the lifting of travel restrictions around the globe, as airlines ramp up to reopening, this is a particular area of concern. The new travel requirements may exacerbate queuing.
“With additional document checks for COVID-19, processing time at airports is taking longer,” IATA explains. “Pre-COVID-19, the average passengers spent 1.5 hours in travel processes (check-in, security, border control, customs, and baggage claim). Current data indicates that airport processing times have ballooned to 3 hours during peak time, with travel volumes at only about 30% of pre-COVID-19 levels. The greatest increases are at check-in and border control (emigration and immigration) where travel health credentials are being checked mainly as paper documents.”
Solutions to congestion
IATA touts two mature programs underway, working with industry stakeholders to give travellers the expedited air travel experience they crave. These can also avoid airport crowding, as passengers return to flying under new COVID-19 related travel protocols, cutting queues and reducing the risk of airport congestion brought about by new document check requirements.
IATA Travel Pass app can handle the complex mix of travel health credentials that governments require. It gives passengers a safe and secure way to check the requirements for their journey. They can get test results, scan their vaccine certificates, verify that these meet the destination and transit requirements, and share the information effortlessly with health officials and airlines before departure and when using e-gates.
The One ID initiative will help the airline industry advance so passengers can move from curb to gate using a single biometric travel token such as a face, fingerprint or iris scan. It will require government acceptance of digital biometric credentials, a process that is still ongoing.
As IATA’s Careen points out: “We cannot just revert to how things were in 2019 and expect our customers to be satisfied. Pre-pandemic, we were preparing to take self-service to the next level with One ID. The crisis makes its twin promises of efficiency and cost-savings even more urgent. And we absolutely need technologies like IATA Travel Pass to re-enable self-service, or the recovery will be overwhelmed by paper document checks. The GPS results are yet another proof point that change is needed.”
The financial impact of the COVID-19 pandemic has been huge for the travel industry. Finding a new way to work with its acquirers is going to be critical as we look to recovery.
The travel sector and the payments industry have never had a simple working relationship. There are several examples of travel industry failures, such as the collapse of Thomas Cook and Monarch Airlines, that have concluded with the travel operator and their payments partner accusing the other of being the source of the failure. This happens when the acquirer withholds funds to cover the cost of the chargebacks it will be liable to repay customers if the operator goes out of business. Taking this precaution is of course understandable, but it is the view of the travel business that this withholding of cashflow at a critical time creates enormous pressure for them and in fact is final straw that triggers the very collapse that the acquirer is seeking to protect itself against.
And of course, the pandemic has brought that strain in the relationship into even sharper focus. Global travel and tourism lost almost $4.5 trillion in 2020. For context, while worldwide gross domestic product contracted 3.7 percent, travel’s contribution to the global economy reduced by 49.1 percent.
And it hasn’t only been only financial challenges that the travel sector has suffered since the outbreak of COVID-19; there have been operational issues to face as well, as they were forced to process many millions of reservation cancellations. To make matters worse, some acquirers reacted to the adverse market conditions by either exiting the sector altogether, or resetting the terms of business with their travel clients. This has put even more pressure on the relationship between the two parties in a situation where the travel business has options because fewer payments partners that will work with them.
The heart of the issue: future delivery payments are high risk
Much of the friction that can occur between the travel sector and acquirers stems from the fact that travel is considered a high risk vertical by the payments industry, and this was true well before the pandemic. This is true of all sectors where long periods of time occur between the consumer’s payment and the date that they receive the goods or services. In the travel industry this period is typically 60-90 days.
If the goods or services are not delivered for any reason, be it cancellation, unforeseen circumstances such as COVID-19, or the business ceasing to trade, it is the acquirer who is liable for repaying the customer. When the high transaction values typically seen in travel are factored into the equation, acquirers can find themselves exposed to tens of millions of pounds worth of risk for a single travel business. Many simply do not have the appetite for that level of risk.
A new solution: safeguarding addresses the issues created by holdbacks
As we have already discussed, risk is usually managed by the acquirer through withholding cash as collateral. But there are several drawbacks that makes this a sub-optimal solution for the travel sector. The drain on liquidity is an obvious one, but in addition it is often unpredictable how much acquirers will withhold to offset the fluctuating risk, and that makes decision-making and forecasting extremely difficult. Withheld funds also cannot be shown on a company’s balance sheet.
So it will come as no surprise that travel sector is trying to find a new way of working with acquirers as they strategize recovery and growth beyond the pandemic. And progressive payments companies including Paysafe are also looking for new solutions to work more harmoniously with the sector, specifically replacing cash collateral with a trust-based mechanism called safeguarding.
With safeguarding, the travel business still lodges a cash reserve with a third party. But instead of being repaid in large sums often at the acquirer’s discretion, the funds are released steadily on a planned basis either when or shortly before travel takes place.
This new way of working addresses both the liquidity and transparency issues the travel industry has consistently voiced its concerns about. Funds held in trust can also remain on the company’s balance sheet.
Working towards a better future
Cash collateral was the go-to solution for managing acquirers’ risk exposure in the travel sector for years. But this system is no longer fit for purpose. Safeguarding will soon become the most common mitigation process for travel merchants and acquirers. It will enable airlines and the rest of the travel industry to avoid tying up critical funds that would be better spent on running and expanding great businesses, as well as attracting investment through making balance sheets healthier.
Using Machine Learning based AI technology to drive tangible commercial results for airlines, hotels and other travel companies.
Revenue potential. Tangible, explainable results. Commercial viability. It’s the holy trinity for any sales and marketing team, but not always easily quantified when assessing new technology. Travel companies assessing how to use AI to cross-sell and upsell to their customers want to know what return they can expect.
As travel automation experts, we continuously explore new ways to help travel companies achieve their commercial goals. AI and machine learning (ML) technology embedded in direct channels can boost efficiencies in loyalty programmes and prevent churn without losing profits. But how can AI technology help airlines cross-sell to their online and digital sales visitors?
Always relevant
The psychology of selling has been used for generations in the person-to-person sales process – both face-to-face and over the phone. The advent of digital selling removed an element of the ‘personal’, with many websites producing a static shopping experience, ignoring who the user is as an individual. The scientific approach of finding “a way to market to [customers’] current needs and wants” is, put simply, lacking in many online shopping environments.
Digital companies know the value of human interaction and connections in the sales process, but often struggle to translate that value into actions online. Using Artificial Intelligence, an airline website can transform itself into being always relevant – to each and every user.
Consider your user journey
Rarely do your customers wake up in the morning, think ‘I’d like to fly from Paris to New York next week’ and book after the first search they make. Like any purchase decision, there’s a customer journey when someone decides to travel. At varying speeds, a potential customer will cycle through different stages of intent: Looker, Planner, Booker and, finally, Customer. These stages represent opportunities for an airline to communicate with the user. Consider what messages you would like to present at stages of your specific selling journey, as a customer is planning, booking, pre-flight, in-flight, in-destination, and post-flight. Maybe not everything should be sold directly in the funnel.
Machine Learning powered AI learns from thousands of data points, identifying in real-time the stage each of your online visitors are at. Using AI to cross-sell products and services can transform your website, driving real-time merchandising in a seamless way.
For an airline direct channel: AI tools can predict the users who are open to adding hotels, transfers or rental cars, and present these options at the salient moments in the customer journey, increasing the likelihood of purchase. The right time, the right format, the right offer. These may be different for each and every person and different each time they travel.
Technology in action: a use case for airlines
The challenge many companies face with new technologies is understanding how it can benefit the bottom line.
While still seeking to broaden revenue some have declared airline retailing a failure, others have bolted on third parties or rafts of options for the unwary consumer. Yet what is the best way to “sell” these items without distracting the user who wants to make a simple seat-only booking?
The short answer is that tailored ML driven AI can help personalise merchandising and the online digital shopping experience on an airline direct channel.
Philosophy: Once airline decision makers see that it is possible to infer immediate desires and actions for each client in real-time it opens up an entirely new way of thinking. Maybe the current need of a client can be responded to more accurately by understanding what they want right now than trying to understand what they wanted last time they travelled.
Relevance: Our technology assesses each online user on an individual basis, using thousands of data points to paint a picture of their desired travel experience. Simultaneously, the AI calls upon product profiles to select the most relevant hotel or other holiday element, displaying it in changeable areas of your website and digital sales platform to users it identifies as being open to the possibility of add-on purchases.
Realising Commercial Priorities: You’ve decided to use AI to cross-sell on your airline’s website. Commercial product steering is possible to help you reach targeted KPIs. Are there specific hotels or ancillary products you would like to prioritise during a certain travel window? Do you have offers that you only want to display to families or repeat customers? Or are their airports you wish to prioritise?
Guiding rules: AI is capable of modelling and explaining your entire audience. Eligibility rules for offers and products to be displayed can be set to accelerate learning – taking advantage of the existing knowledge of experts in commercial teams. These can be brought to life at scale as the AI learns in real-time what works. This can then work to deliver productive and profitable actions to the entire audience.
Self-learning: Customers expect personalised content and relevant information. By showing different recommendations in different placements at different stages of the user journey, the algorithms continuously learn what offers and products appeal to specific customer profiles. They use these learning cycles to refine what is presented, testing a new product, message or placement, to maximise uptake. This real-time evolution encourages a fast testing and experimentation environment, letting analysts tweak business rules and priorities to maximise return and drive revenues.
Using data to predict customer behaviour has led online giants like Amazon to dominate the global marketplace. For travel, the uptake of technology has been slower than in other retail sectors – even as the former British Airways CEO recently discussed – despite research suggesting “travel brands find they’re more successful at upselling when they show only a few offers that match customers’ likely interests.”
The process of selling is dependent on relationships. Relationships involve listening as well as talking. Your customers need to trust what you sell and how you sell it. By using AI to cross-sell online – showing relevant products and services to the right user at the right time – you can grow your sales in a targeted way.
This all starts with real-time measurement of intent. Learning how to value this takes time, effort and experience. We can help you develop the approaches required to prove out your incremental revenue, to explain your results and to ensure that your individualisation initiatives are commercially viable.
If this is a relevant subject for you and your business, we would be happy to welcome you at our booth D32 for a chat and exchange of thoughts. We are keen to learn from your experiences and challenges. Let’s discuss what it takes to drive conversion, approaching individuals versus segments, improving ancillary sales and reducing churn – leading to happier customers and loyal friends of your brand.
The aviation industry is hugely important for people and the economy. At the same time, it bears a high level of responsibility for our environment. Airlines are currently undergoing a huge transformation toward sustainability. As a tech company and airline IT provider, Lufthansa Systems is committed to identifying our own environmental footprint and improving that of its more than 350 customers worldwide to actively shaping the green shift in aviation. In this interview, Olivier Krueger, CEO & Chairman of the Board of Lufthansa Systems, discusses how digital solutions can drive green innovation and help achieve international climate goals.
The world is demanding a new and more sustainable approach to the travel industry. What role do new technologies and digitalization play in tackling the challenges of climate change?
OK: Innovative technologies are an essential tool on our journey to a sustainable future for aviation. We want to trigger solutions that optimize operational processes along the entire travel chain and reduce carbon footprint. The key is to combine data sources, gather insights on environmental impacts and develop intelligent software. While powerful IT solutions already support climate-sensitive planning and decision-making, we are only at the beginning of what we can accomplish. To drive innovative approaches forward, we are working across divisions to combine in-depth industry knowledge with forward-looking technological expertise.
Can you give us a specific example of how smart solutions support a more sustainable industry?
OK: There are several ways to improve the air travel industry’s environmental footprint. Flight routing, for example, has a direct and substantial effect on fuel consumption and carbon emissions, with smart planning and calculations that allow us to minimize these effects. Our flight planning software Lido Flight 4D calculates the most efficient flight route, taking into account all current, flight-relevant data. This enables airlines to reduce flight times and costs and save up to five percent of the fuel required compared to other solutions in the market, generating annual savings of around 270,000 tons of carbon emissions for a network carrier. Another example is network design and planning. Our NetLine/HubDesigner uses the available fleet and demand patterns to create a network optimized for low carbon emissions by adding penalties for such emissions and enhancing fleets with partner flights and intermodal traffic alternatives.
Another way to adopt more sustainable approaches is to digitize the aircraft. With our electronic charting solutions, we are helping airlines to achieve a paperless flight deck. This has reduced our printing volume by 75% in the last three years, which corresponds to savings of around 100 tons of paper over this period. However, a paperless aircraft consists of more than just the flight deck. Our ongoing efforts to increase connectivity in the cabin led us to develop a wireless in-flight entertainment platform. This helps airlines to digitalize seat pockets by transforming content into a digital service delivered directly to passengers’ devices.
While there are many more examples I could mention, let me highlight another facet that I am particularly proud of. We are part of the Lufthansa Group’s CleanTech Hub, which accelerates the implementation of clean technologies within the Group’s airlines and fosters collaboration with external pioneers.
Can you tell us more about the CleanTech Hub?
OK: Climate protection is a challenge for all of us, and we can only make a difference by working together. The CleanTech Hub is a virtual center of excellence, a platform that connects the Lufthansa Group’s airlines and subsidiaries as well as start-ups and research institutes. It is an inspiring space for collaboration that facilitates, motivates and stimulates clean technology and sustainability initiatives by providing access to resources, augmenting initiatives and accelerating the time to market. At the end of the day, the goal is to drive green technologies that reduce carbon emissions, non-carbon, noise and waste emissions of Lufthansa Group flight operations while at the same time changing behaviors, scaling up, and future-proofing our industry. The CleanTech Hub consists of five focus areas and I am proud to be the sponsor of the ‘Digital Solutions and Procedures’ focus area. We work cross-functionally to bring IT capabilities and knowledge leaders together.
What role does data play in driving forward this green transformation?
Data is the only way forward. Collaboration between regulators, airports and airlines should be at the top of the agenda, because mutual exchange and transparency offer an excellent opportunity to access a vast source of data. But the work does not stop there. The industry needs to go one step further by making good use of this data. Adopting machine learning and AI-powered automation tools helps to create a more efficient decision-making process. Our IT experts support airlines on this journey together with our start-up zeroG, which is dedicated to unlocking the intrinsic power of data to improve the world of aviation.
Given the current global circumstances, airlines now benefit more than ever from automated optimization solutions that result in significant cost savings, increased operational stability and reduced environmental impact. To give one example, preventing contrails can significantly reduce aviation’s impact on global warming and climate change. Based on new weather data and specific rule sets, we are working closely with our partners to develop an optimizer that can avoid ice super saturated regions and in doing so prevent the generation of contrails.
Anyone who would like to learn more about the role of data in achieving sustainability targets might be interested in joining me in the panel discussion about “How do we achieve ambitious industry sustainability targets and what role can (sharing) our data start-ups play in this?” on Wednesday, December 1 at 3:35 PM at the World Aviation Festival in London.
Before we close, do you have a piece of advice that you would like to share with industry colleagues concerning the sustainability agenda?
In 2019, we experienced an aviation infrastructure pushed to its limits, both at airports and in the air. Then the COVID-19 pandemic swept the globe and triggered an immense crisis in the aviation industry, causing travel restrictions and volatile demand. The huge transformation currently underway in the airline industry represents our best chance to address climate change. It is imperative that we move toward a greener future for aviation, and the discussion about how to get there is finally picking up speed. The current transformation process should incentivize us to rethink our industry and take inspiration from these promising developments. Our way forward is simple: together, we must act responsibly today for a sustainable tomorrow, and I invite all of our colleagues to join us on this journey to shape a more sustainable future.
It is incredible to see how much things have transformed for the airline industry! To understand just how radical this transformation is, let’s turn the clock back by a few years. The airline’s legacy distribution ecosystem involved publishing standard fares and showcasing generic products and services. It was a complicated fare filing process with multiple reference records like PNRs, E-tickets, and EMDs adding to the complexity. Given this reality, one can imagine the excitement in 2005, when IATA introduced a modern framework – New Distribution Capability (NDC). The NDC framework helped ease the operational processes and transferred the control back to the airlines to showcase their products and services across distribution channels.
Fast forward 16 years to 2021: The industry spent millions on building the backbone of the NDC ecosystem – the new-age offer management and order management systems. But the framework has failed to deliver on its promises.
The fault does not lie in the solution’s maturity but in its integration, which is still not seamless. Imagine the plight of airlines who know that the fix exists but are helpless as the overall ecosystem hinders them from progressing quickly and utilizing NDC’s true potential.
The asynchronous ballet of offer and order management
The airline ecosystem is complex and has taken decades to reach its current state. Systems have been layered, modified to dance together on the same rhythm. But the introduction of offer and order management systems changed the dynamic, resulting in siloes of independent systems.
For instance, a change in the itinerary would lead to OSIN (OrderSalesInformationNotif) messages from the order management system, but this must also be relayed to the existing accounting and notification systems.
Another most probable scenario is about offer creation. It requires interaction across multiple systems like, CRM (with customer 360 views), customer preferences, and dynamic pricer before the offer management system can bundle a personalized offer. The list of such scenarios is endless, and the fact that technology outdates itself even before it can be implemented, does not help matters. As also evident in the case of NDC – the contemporary XML schema for NDC is no longer the first-choice framework to curate new applications, becoming another hurdle in setting up seamless communication across the NDC ecosystem.
A dance with NDC middleware
As an airline, you would not want to go ahead and create custom integrations for each system. Instead of solving the problem, this approach will only aggravate it by creating clustered silos. The need is to have a middleware that can choreograph the NDC ecosystem and bring back the missing rhythm. Further, the NDC middleware will transfer the control back to airlines to offer the right products to travelers.
By creating a common layer between internal and external platforms, a middleware can simplify things immensely for airlines. Be it mobile or web-based interactions, interline or codeshare interactions, PSS-CRM-Revenue management system interactions, etc., a middleware can induce agility and operational effectiveness in the airline ecosystem by bringing in replicability, thereby reducing duplication and saving the other APIs from constant changes. In short, a middleware with below capabilities can bring back the missing rhythm and help airlines realize the true value from NDC:
NDC schema transformation: While the NDC systems have been developed on the XML schema, the modern B2C applications use the current schema such as JSON. The XML schema is required be transformed as per the application to fit into the existing ecosystem of applications.
Integrating legacy and offer & order management systems:The complex airline ecosystem comprises many different systems – PSS, CRM, accounting, flight operations, etc. To ensure a seamless performance, it is essential to integrate and align all of them.
Data streaming and processing:Before passing data on to the other systems, it must be processed across different systems. For example:
When an OSIN message would share only the new itinerary, leaving the old systems to figure out the changes
When a flight time change information must be communicated to the passenger
When in the case of information processing, it is imperative to pass the right information at the right time to the travel agents.
The count for such messages can be endless. The right answer is a middleware, which can stream and process the data to relay any changes to the airline ecosystem.
Trigger processes across the traveler journey through wrapper services:NDC systems are not yet mature enough to handle things like order confirmation emails, initiating itinerary changes or order receipts generations. Middleware can take care of routines through wrapper services to support the new ecosystem and ensure a perfect ballet performance.
Middleware in action: Choreographing offer creation
Creating a personalized offering is one of the building blocks of the NDC initiative. It requires multiple airline systems to come together across different stages. A middleware can sync all systems together, creating the right offer by ensuring a seamless flow of events across the different platforms, as depicted below.
In a nutshell
The offer creation use case clearly shows that we have a fix to make NDC investments worthwhile. Airlines need to onboard the middleware to choreograph the NDC ecosystem so that it can live up to its expectations and deliver what it always promised.
Do you have the NDC middleware advantage or are still pondering over your NDC investments? It’s still not late! Make your systems dance to your tune and create the differentiation you always wanted.
The pandemic challenged leisure travelers and travel brands in a way few events have done before. It was during this time that travel anxiety surged and revenue plummeted, highlighting the
need for flexibility and assurance on both sides. Travelers are prioritizing the ability to change their minds or their plans; in fact, 43% of Hopper users ranked flexibility, or the ability to change plans without penalty, as the most important factor when booking a trip. But airlines and travel companies? They are searching for a solution that increases margins, decreases risk and drives conversion. Developed in 2018, Hopper’s fintech suite of products are doing just that. From disruption protection services to products that generate revenue before the customer even books, financial technology has the potential to drive substantial gains across the industry.
The Role of Fintech in Travel
Traditionally, revenue streams in travel consist of accommodations, airfare, tours, cruises and cars, and efforts to add new monetization models through added fees and services have often seen push back from customers. An alternative approach is to create a brand new sector of the travel industry – a fintech sector, that is AI-driven and dynamically priced. Fintech ancillaries and prediction technology allow travel brands to monetize the exact flexible options that customers are looking for.
Hopper is leading the way in bringing this technology to market. First deployed in the Hopper app, the company’s fintech products include Price Freeze, which allows customers to freeze prices for up to 14 days, to Change for Any Reason, which gives customers the ability to instantly change the date, time, and even airline of the flight for any reason up to 24 hours prior to departure. As a result of the pandemic, travelers are more keenly aware of the risks that come with booking travel, and solutions to this stress are increasingly valuable. According to Hopper, almost 60% of customers purchase at least one fintech product when making a booking and on average travelers are willing to spend 15% more upfront on their tickets for flexible options. And travelers can’t get enough, as 79% of fintech users will repeat their purchase. The product market fit is clear – this fintech increased Hopper’s revenue 100% year-over-year despite the pandemic, and today 50% of the company’s revenue comes from these fintech products alone.
Driving Travel’s Recovery
Hopper is not a standalone use case – fintech margins have significant potential for the entire travel industry. If all travel distribution channels (airlines, hotel, banks, GDS, OTA, Metas, etc.) offered fintech products based on dynamic pricing, it could increase the total consumer spend for the sector by billions. According to some estimates, this could be as high as $200 billion annually. And while travel brands look to increase bookings as travel resurges, some brands are also looking to get a piece of this new pie.
The key to fintech success in the travel industry is speed, relying on the cloud for scalability over the next year will help companies start to see their share of this new revenue stream. This is what led Hopper to announce Hopper Cloud, the company’s B2B initiative that enables any travel company to easily scale fintech with pre-built integrations. Further, Hopper takes on all the financial risk so companies never need to worry about cash flow impacts of market disruptions or negotiating reinsurance to keep the balance sheet. But that’s not all – in addition to the fintech products, Hopper Cloud also allows customers to seamlessly tap into the world’s largest multi-sourced travel marketplace. In just a few clicks, travel companies can stand up a world-class travel agency, or can elevate and expand an existing travel company by seamlessly adding new categories.
Meeting New Traveler Expectations
Consumer behavior has changed and the added stress around purchasing airfare in the past year shines light on the need for in-depth and tailored fintech offerings. Furthermore, flexible payment options, like buy-now-pay-later that have become common in the retail industry, have set higher expectations for the level of control customers want while purchasing all goods and services online. As such, fintech should be considered a must-have for travel brands that want to remain competitive in the modern market.
As the industry rebounds after a detrimental year, new emerging technologies will define the modern travel experience that customers now expect. If brands are able to serve these needs while also creating opportunities for incremental spend, there is the potential of industry growth worth billions of dollars. Fintech is uniquely positioned to both redefine the traveler’s journey and significantly aid in the industry’s recovery, just when brands need it most.
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This model can connect all the dots, simultaneously evaluating the performance of the turnaround activities, alerting stakeholders if a process has not yet started or is likely to be delayed.
In a nutshell
