With the current landscape increasingly focused on digitization, AODB solutions sit at the backbone of modern airport operations, playing a pivotal role in the transformation of the aviation landscape. As the single source of truth, these solutions harness the power of real-time data and seamlessly integrate the complex array of airport systems and processes.
Making AODB solutions future-proof
The dynamic needs and ambitions of digitally-driven airports represent a difficult challenge for existing AODB solutions and their static software architecture: accessibility becomes increasingly important and providing stakeholders with access to AODB solutions from anywhere will ultimately become the status quo of modern airport operations, crucial for streamlining the operational workflows. Additionally, scalability is of utmost importance as the operational demands dynamically fluctuate throughout the year: AODB solutions should be able to scale both up and down based on changes in the volume of traffic. Therefore, highly accessible and easily scalable solutions are highly sought after, providing real-time data integration on a collaborative platform with particular focus on predictive capabilities, intuitive user experience and flexible integration with an unlimited number of airport systems.
An important operational concern of any airport is the ability to maintain uninterrupted operations at all times. Airports strive to minimise scheduled downtimes and the digital transformation process should increasingly enable continuous operations, upgrades, and maintenance without causing disruptions to the vital functions of the aviation ecosystem. Given the pivotal role an AODB plays in the operational management, the ability to ensure zero downtime and seamlessly provide software upgrades to AODB solutions without any impact to stakeholders and live operations is not simply a convenience – it becomes a necessity of utmost significance.
Complexity – no longer sufficient
As the operational brain of any airport, AODB solutions have become increasingly complex but the new era of digital transformation in airports deems this complexity no longer sufficient: the large volume of real-time data that can be harnessed for a variety of purposes means that standard AODB solutions which are operated separately and only used by a small group of stakeholders fail to maximise the potential of these data powerhouses.
Due to its highly strategic role within airport operations, AODBs tend to be last in line to undergo significant transformation and implement innovative changes. In reality, the innovative transformation within these solutions should sit at the centre of digitisation and should provide stakeholders with access to a highly accessible solution, providing a comprehensive suite of features designed to streamline and enhance every facet of airport operations. Some key features that quickly become an absolute necessity in AODB solutions include:
Real-Time Data Integration – flexible data engines should enable AODB solutions to seamlessly integrate live data from various airport systems, providing users with real-time processing of all operational data. The sharing of operational information with a wide variety of stakeholders promotes informed decision-making and cross-functional collaboration between all parties involved in the management of airport Additionally, any such solution should allow extensibility of its data model to include both new types of systems and data that appeared recently or will appear in the future.
Collaborative Platform: collaboration is key in streamlining airport operations and AODB solutions should become a platform which fosters this among all airport stakeholders, including airlines, ground handlers, airport staff, authorities and any other relevant Important capabilities such as A-CDM tools along with the implementation of collaboratively-agreed rolling plans as part of the AOP module make AODBs a centralised hub for communication, enabling synchronised operations in real-time and facilitating swift responses to unexpected operational changes or scenarios. Importantly, existing licensing models based on usage or number of users have rapidly become outdated and modern solutions must enable stakeholders to access the solution with the appropriate level of permissions based on their role in managing airport operations.
Predictive Analytics: as the single source of truth, AODBs have access to a very large volume of operational data and while reporting historical data is a key functionality, predictive analytical capabilities are becoming a key element in the process of transforming digital operations and increasingly critical for any AODB solution. Predictive capabilities should leverage the power of data analytics in order to provide predictive insights into potential disruptions and operational By proactively identifying issues, airport staff can take preventive measures, minimising disruptions and enhancing operational efficiency.
User Experience: In the realm of complex and efficiently managed airport operations, the success of AODB solutions often hinges on their ability to simplify complexity. Given the large volume of operational data that needs to be managed, providing stakeholders with a pleasant user experience is paramount: it enables them to fully focus on the critical decision-making for operational
The Cornerstone of Digitisation
As the aviation industry propels into the digital age and airports focus on the digitization of their operations, AODB solutions should become the technological cornerstone of this digital transformation process and empowers airports to not only meet but exceed their expectations in this new era of agile, data-driven, and passenger-centric airport operations. They should harness the power of real-time data with a suite of innovative yet fully comprehensive features that allows airports to streamline their operational workflows whilst providing all stakeholders with the insights required to adapt swiftly to dynamic operational scenarios.
In an industry where efficiency, collaboration, and passenger satisfaction reign supreme, AirportLabs’ SkyCore AODB emerges as a beacon of innovation and is a proven solution in some of the largest and most complex operations in the world, as well as in airports of a smaller scale.
Pay us a visit on September 26th – 28th at the World Aviation Festival in Lisbon, where you can schedule a demo of SkyCore AODB, take part in our our keynote presentation about the future of airport operations and engage with us during the panel discussion, where industry leaders will share insights on the role of emerging tech innovation in shaping the aviation industry.
Can low-cost-carriers squeeze more flights into their already packed schedules? Computer says yes.
Flight schedules are probably airlines’ most critical factor towards commercial success and for decades flight scheduling analysts have been tasked with the critical but challenging role of making sure they are profitable.
Arranging flight schedules is probably the most critical factor for determining if an airline thrives or flounders.
Increasing aircraft utilization is the number one strategic goal of all the low-cost carrier CEOs with which we have spoken.
Why? The airline industry is highly capital intensive and operates on razor thin profit margins. This is especially true for low-cost carriers (LCCs), for which the margin per available seat kilometer is only around 0.8 Euro cents, compared to 2.6 Euro cents full-service carriers; approximately 70% less.
Abrupt changes in the broader operating environment can quickly make such economics untenable.
This reality came into stark relief during the COVID-19 pandemic of 2020 and 2021, during which 63 airlines failed or restructured, including LCCs such as Norway’s Norwegian Air, the UK’s Flybe and South Africa’s Mango Airlines.
Maximizing airplane utilization by increasing the number of sectors (a flight leg between two points) an aircraft can serve over a given period is achieved through optimizing the flight schedule.
Not only does maximizing aircraft utilization drive top- line uplift, but it also yields improvements in bottom- line performance.
Aircraft operating costs: Boeing has calculated how airlines can reduce aircraft related operating costs by increasing airplane utilization. A 5% reduction in aircraft related operating costs is achievable by increasing aircraft utilization by 20% when the average flight distance is 500 miles (800 kilometers) or less, which is a typical flight length for low-cost regional and domestic carriers.
Cabin crew costs: Improving aircraft utilization can directly increase daily flight hours per crew member, and improvements in crew productivity can lead to significant improvements in operating costs. Prior to the pandemic, Lufthansa modelled a 0.20 Euro cents improvement on CASK for its Eurowings subsidiary between 2019-2022 by taking various steps to improve crew productivity, of which one lever was flight schedule optimization.
Artificial Intelligence. It is hard to dispute that the future lies with AI, but are airlines doing everything they can to stay ahead of the curve? AI has existed for a while but has only hit the mainstream in the last few years. The most common use cases are routine task automation, customer service improvement, and rule-based tasks such as revenue optimization. All of these use Machine learning and AI to study the previous actions of humans and apply them automatically to future decisions. What happens when you allow the AI to transform from a decision-support system into a decision-making system? Let’s dive into how Generative AI is changing the airline industry.
What is so special about generative AI?
Artificial Intelligence and Machine Learning refer to any model that can create a result based on supplied data. When moving into the world of Generative AI, we reach models that can create something entirely new after understanding the provided data. The most known instance of generative AI today is ChatGPT. The way it works is that when given two words, the AI can predict the next most probable word. Such a model is driven by a Goal supplied to it by the user. Now imagine taking that same thought process, but instead of text, we apply it to market data.
When provided with rich data that every airline has, Generative AI can understand an airline’s market down to the most granular level and then make market move decisions, taking into account the actions and reactions of all market participants: The airline, The buyers, and the competitors.
Truly understanding demand using AI
Demand is the bread and butter of any revenue management department. If we can forecast and understand demand accurately, we can price correctly and capture the most revenue.
Analysts spend hours upon hours dissecting data to predict how demand will change. The most significant limitation of humans is that we can consider at most 3-5 factors when deciding. When it comes to demand, the amount of factors that need to be considered is in the tens. By feeding the same data airlines use today into a generative AI engine that can digest internal and external data such as weather, stock prices, entertainment shows, and other things that impact demand, airlines can genuinely understand and react to live demand. Instead of five factors per decision, the AI will consider ten or twenty and do it faster and more accurately. A generative AI engine can create tens of thousands of demand curves and discover the most probable one and its demand elasticity.
Dealing with the competition
Competition is one of the most significant impacts on any revenue management decision. The actions of our competitors affect decision-making directly, and the key to success is to understand and foresee what my competition will do. Once again, the knowledge of historical competitor actions can inform us of their future decisions, but what about other factors?
Competitors adapt their pricing strategies, and relying on historical data is not enough anymore. When applying a Generative AI engine to competitive analysis, a brand new dimension of simulating competitor reactions comes into play. Imagine if you could decide on a tentative price, see how your competition reacts, and determine if it was the right decision. Imagine doing that ten thousand times for every single pricing decision, all in milliseconds. This isn’t a dream. It’s done today in e-commerce.
Generative AI engines also learn from live data, so every single pricing decision gives it another data point as to the pricing strategies of their competitors, allowing the forecasting of competitive behaviours to become much simpler and more accurate.
Putting it all together, from decision support to decision making
The possibilities with Generative AI engines are immense, but how can you harness them to your goals? The greater the degrees of freedom given, the greater the result such an engine can produce. An AI engine that accurately forecasts demand, optimizes prices to the fare base level, controls inventory allocation across RBDs, and publishes automatically creates a significant revenue uplift. Such an engine is agnostic to the airline type because it learns the singular market for each airline. A legacy airline and an ultra-low-cost airline are just different markets for the AI to learn. A Generative AI engine is a decision-making machine that can empower airlines to capture hidden and lost revenue by transforming the entire pricing approach.
The power of generative AI
Now, Imagine taking everything above and giving it a voice. By applying existing LLM technologies, You can talk to the Generative Pricing and Inventory Engine. Ask why it made a particular decision, and discuss the best way to increase the load factor by 10% in a certain O/D. Ask it to make you a report about competition performance over the last week, every Monday at 8 am, and send it to your email. Generative AI can empower airlines across all departments, giving a voice to the airline’s private data for the first time.
AI is the future, and the future is already here. With shifting market shares and revenue generation, the first-to-market advantage of airlines willing to embrace generative AI and empower their departments with its possibilities will be evident in the coming years. Fetcherr is leading the charge and bringing the future to airlines today, with Azul and Virgin Atlantic already in production.
Interested in learning more? Join the airlines embracing the future and contact us at info@fetcherr.io. Don’t forget to mark your calendar for September 27th, when we will host a workshop showcasing our system in production and present a case study with one of our customers.
Within the airline IT and commercial departments, everyone is talking about the Order Transformation, or the airline’s digital transformation in more general terms. Ignoring this completely will put an airline into a position of vulnerability in the next few years – vulnerable to the competition which has moved forward, and vulnerable to your PSS (Passenger Service System) provider which might dictate your pace of change.
There are several elements to consider in the case for change – future state architecture, functional benefits, how to transition and many other aspects. However, none of the elements are quite as daunting as trying to build the business case.
Luckily, airlines do not need to start from scratch. Some work has been done over the years which can be used as a reference or starting point. These are mainly the McKinsey study from 2019 and the more recent business case created by IATA (International Air Transport Association) with the Modern Airline Retailing Consortium specifically for the Order Transformation. Of course, many airlines will have their own experience with similar business cases due to investments in NDC (New Distribution Capability), enhanced eCommerce and similar digitally transformative projects.
There are several factors to consider when working through the business case for the Offer and Order Transformation.
The starting point and approximate target state: without knowing this, or at least having an idea of what the target state may be, it will be difficult to identify costs and benefits. And, while we may not know with which solution providers we may be working, or which new ancillaries or better services we may be able to offer in three, five or ten years, having an idea of the direction is essential.
What the revenue drivers are likely to be: this will often be linked more to the offer transition than the order component, however several airlines have already found that they cannot realise their offer vision without solving the “order” challenge as well. Moving to dynamic pricing may be possible with enhancing the offer and not the order, however will you be able to exploit all the benefits? Or do you calculate factors such as a potential increase of conversion of sales due to the better offers or improved customer servicing you can enable through order? There are many potential revenue drivers, however many of these are often based on various prerequisites – some of these not being technical but rather contractual.
The cost savings: this element ranges from potential distribution cost savings to process enhancements which simplify the business to, potentially, having the ability to remove certain solution components altogether. Often, the challenge on the cost saving element in such a large transformation programme is that the business case is made for a three or five-year period. However, with the offer and order transformation, many of the benefits will only be achieved towards the latter part of the transformation, thus only having a positive contribution once the transformation is complete. Thus, we recommend creating a post transformation calculation as well, which should help show if the cost of the transformation will render financial benefits during or only after the project, and which savings (and revenue) can be expected after completion. The removal of software and solutions is an important one. There are considerable opportunities to modernise the system landscape and interfaces well beyond just the offer and order management solution, as the processes are undergoing considerable change. Thus, a solid sketch of the future potential solution and business processes will certainly help understand which solutions are needed in the future and where savings can be achieved.
The less obvious and substantiable factors: can factors such as customer satisfaction be converted into revenue? There are studies which clearly state that customer satisfaction and conversion are linked. Or that personalisation and increased conversion go together. However, conversion, the effects of customer service and satisfaction and similar are much more difficult to put into numbers which are not based purely on statistics. Furthermore, there are many other factors which could influence this. For example, if we enhance customer service capability considerably and NPS (Net Promoter Score) shows that we have great customer satisfaction, however we then have considerable delays due to airport congestion, customer satisfaction may well sink.
The investment: of course this could (and some may argue, should) be part of the cost aspect. I have separated this to differentiate between cost savings in operations, servicing, processes, and sales from the actual capex spend. The main investment factors will be in new solution components (or re-engineering existing ones) and into the workforce needed for the project. The investment into people and processes should not be underestimated at this stage. Moving to offer and order without considerably reviewing and rethinking business process and data flows will end up in the rebuilding of legacy. However, with the redesign towards a retail environment, we must also invest into a retail mindset, and an organisation which is structured and trained to understand, live and breathe airline retailing.
While the above categories (cost, revenue, etc.,) are obviously part of any business case, Travel in Motion has seen some of these ignored or forgotten. In some cases, we have seen airlines and vendors challenged to define and decide which elements should be considered for each, and for example, if the soft factors such as improved customer service should be considered or not. These choices will be individual to each airline, and may either be ignored (after careful consideration), included, or used to sway a decision.
Pulling the business case together will not be an easy task. It cannot be done in isolation. The business case must be part of a concept phase where the future target state is discussed, where the architectural concepts are outlined, where the business is involved in helping identify process improvements and current challenges to be overcome and numerous other aspects. Thus, to create a solid business case, there must already be investment into time and resources, and potentially external support from companies such as Travel in Motion or many of our other industry colleagues and competitors. There will be workshops to share knowledge and align concepts between departments, and some airlines have even held workshops with vendors to understand their views on the change. Not a single vendor in the airline commercial space is ignoring this change and each has their own ideas and plans for the transition, which makes them great sources of ideas.
Do not expect the business case to be completed in a week. It is complex and multi-faceted. Do not assign one person in your organisation to try to master this – it is an unfair expectation, as this is extraordinarily complex and requires many parts of the organisation. Do not ignore the true costs, and use a realistic view of the potential revenues. While we would never criticise what companies like Bain and McKinsey did in their studies, we would say that those are ideal and very generic cases.
After all those “do not’s”, here is what we think you should do: plan a process of several months for the concept design of your offer to order transformation, involving various departments in the airline with clear expectations of what offer and order should deliver. Do not shy away from external help, be that from IATA to get an industry perspective, vendors to understand their paths to the future or industry experts like us to give a broader perspective and potentially an “outside in” view.
In an era marked by dynamic shifts in the aviation industry, ancillaries have emerged as a pivotal driver of airlines’ financial success. The trajectory is undeniable, with global ancillary revenues surging from $42.6 billion in 2013 to $102 billion in 2022, even amidst the pandemic disruptions. Capturing 15% of total airline revenue, these numbers underscore the strategic significance of ancillaries for bolstering airlines’ economic resilience and growth.1
Currently, one of the fastest growing ancillary solutions in the airline industry is seat blocking. According to a poll from Amex Trendex, 61% of people would be willing to pay extra to ensure the seat beside them remains empty.2 It’s a desire that airlines can tap into to not only redefine the economy passenger experience but also boost their revenue potential.
Here are some key takeaways you need to know about seat blocking and why airlines should be including it in their ancillary strategy today.
Today’s passengers want more flexible perks
Seat blocking meets the demand of economy passengers who crave a bit more elbow room but are reluctant to splurge on a Business or premium cabin upgrade. It offers an affordable middle ground—the chance to enjoy an extra seat’s worth of space—or even an entire row—without breaking the bank. Coupled with seat upgrades and other offerings, seat blocking helps create a well-rounded catalogue of perks, with a variety of price points to choose from.
Airlines need to differentiate themselves
In an industry categorized by fierce competition and tight profit margins, building brand loyalty is a key focus. Ancillary solutions are increasingly being used not only as a flight feature, but as a key differentiator. By offering seat blocking and other ways to elevate travel, airlines can expand the ways in which customers are able to get more enjoyment out of their travel journey and in turn foster future loyalty.
Consumer travel motivations and airline operations are evolving
Airlines are constantly adapting to changes in consumer behaviour and operational efficiencies. For instance, low-Cost Carriers have demonstrated that unbundling services from the base fare leads to increased revenue streams, which has encouraged larger airlines to follow suit. At the same time, passengers, no longer singularly motivated by price, are seeking more comfort in their travel experience. Ancillary services like seat blocking cater to these shifts in operations and consumer mindsets by allowing passengers to pay to tailor their experiences while giving airlines a new profit line.
Since 2009, Plusgrade has enabled airlines to monetize empty seats through seat blocking amongst other solutions. Check out Seat Blocker and other ancillary revenue opportunities by visiting the Plusgrade booth at this year’s World Aviation Festival or plusgrade.com.
In an era where environmental consciousness is paramount, industries worldwide are stepping up to address climate change. For the aviation sector, this mission is particularly daunting due to its substantial carbon emissions. Embarking on a responsible journey toward sustainability demands the creation of high-integrity climate action budgets. Discover how this sector can lead the charge in combating climate change through a carefully orchestrated five-step approach.
Step 1: Anchoring to scientific benchmarks
Aviation’s profound environmental influence cannot be overlooked. As aviation enterprises embark on the journey of creating climate action budgets, it’s crucial to tether their strategies to well-defined scientific benchmarks.These benchmarks, sculpted by experts like the Intergovernmental Panel on Climate Change (IPCC), establish the financial implications of emissions reduction. Such alignment with authoritative guidance assures aviation entities contribute responsibly.
Step 2: Cultivating peer group insights
Peering into the strategies of peer groups unveils a treasure trove of strategic wisdom. Airlines and airports, seeking to refine their compensation budgets for carbon removal, can tap into platforms like Patch. These platforms provide a window into how peers are investing in carbon removal solutions, offering a real-time snapshot of industry trends. By aligning their budgets with these insights, aviation stakeholders not only stay current but also drive the industry’s collective momentum towards a more sustainable future.
Step 3: Navigating financial terrain
While peer comparisons are informative, it’s vital for aviation companies to chart their financial voyage. This involves delving into their profits, emissions, and the fraction of profits earmarked for climate initiatives. The journey isn’t just about feasibility—it’s about a sustainable commitment. This step anchors budgets to fiscal realities while fostering lasting climate impact. By aligning financial strategies with ecological aspirations, aviation entities establish a foundation for enduring and impactful climate actions.
Step 4: Framing with Precision
The aviation industry’s course must be carefully calibrated. The climate targets they choose steer the budget’s trajectory. Whether it’s adopting science-driven goals, striving for net-zero emissions, or dedicating a percentage of spend to climate endeavours, the strategy defines the budget’s essence. Through this lens, aviation stakeholders set their aspirations within a clear framework. By aligning their budget decisions with their chosen climate ambitions, aviation entities solidify their commitment and guide their resources toward meaningful environmental transformation.
Step 5: Navigating with strategy and caution
For an industry as pivotal as aviation, a portfolio strategy is essential. Airlines and airports should contemplate backing multiple carbon removal projects to optimise impact while guarding against risk. Guided by predetermined guardrails, like minimum pricing thresholds and standards of permanence, they harmonise choices with principles, ensuring the chosen projects resonate with their mission.
Taking flight now: Aviation’s path to sustainability
Given its substantial impact on the planet’s health, the aviation sector bears a profound responsibility to address the climate crisis. With the potential to be a driving force for change, the sector’s commitment to crafting high-integrity climate action budgets carries the weight of leadership by example. By embracing their duty to environmental preservation and actively championing carbon removal solutions, the aviation sector not only advocates for a greener future but also contributes to the scaling of emerging carbon removal technologies crucial for achieving IPCC targets. In doing so, the sector plays a pivotal role in mitigating some of the most devastating consequences of climate change and setting a course towards a more sustainable world.
If you’re eager to delve deeper into this topic and unlock comprehensive insights, the full guide is available to download now. Discover practical steps that will empower the aviation sector to drive meaningful change and contribute to a sustainable future.
Airlines and airports want to simplify and automate processes as much as possible to deliver superior passenger experiences by improving operational performance, as well as have smarter usage of data to maximise existing cost structures and generate new and more valuable revenue streams. All that together will lead to higher customer satisfaction and retention, that will generate more income and maximise usage of precious existing staff and infrastructure.
Why biometrics are gaining ground
Travellers are increasingly demanding a seamless journey experience, enabled by contactless and easy-to-use technologies, which put their safety and data privacy at the forefront. Airlines and airports are determined to simplify and automate processes as much as possible to be able to build sustainable and long-term growth.
Biometrics are unique personal identifiers, which can be used to verify, identify and automate bureaucratic processes. Therefore, facial recognition provides greater security and efficiency in an airport environment where passengers are normally required to show government-issued photo identification and boarding pass. This applies all the way from check-in to boarding – and can be extended to the ultimate destination and afterwards.
How are biometrics transforming the ecosystem?
The IATA (International Air Transport Association) Annual Review 2023 mentions that the “Digital identification IATA’s One ID will allow passengers to streamline their journey with advance information sharing and a contactless process at the airport based on biometric recognition”. In turn, “airlines can offer a seamless experience across different channels and touchpoints”.
Travellers can move from the check-in to the gate using a single biometric travel token, that can provide their information direct to governments without airports and airlines acting as intermediaries.
There are tangible benefits of the technology for stakeholders in the airport ecosystem. Boarding an aircraft using biometrics through a seamless journey increases efficiency, and Vision-Box observed that biometric technology is capable of boarding 480 people in 20 minutes – about half the normal boarding time.
Putting the focus on the passenger
The key elements of seamless travel experiences are the passengers themselves and their motivation is to have a smooth and stress-free experience – the airport can be an incredibly stressful environment. Integrating external services and leveraging biometric tokens enable the personalisation of each journey, enhancing security, convenience, and overall travel efficiency. Embracing these advancements in technology helps opening the path to a future where travel becomes an effortless and memorable experience for every passenger.
A critical aspect of achieving this seamless experience lies in personalisation. Each traveller’s journey can be tailored to meet their specific needs and preferences. The use of a single biometric token plays a significant role in digitising the entire experience, enabling more efficient, seamless, and personalised processes.
Getting the most out of the journey
A traveller-centric focus is the first prerequisite to get the most out of an investment in biometric technologies. Reducing both stress and friction, by simplifying the steps that passengers require to get through the airport, should be the primary goal.
The speed and accuracy of data capture and recognition are also critical to effective biometric operations. Using a system with real-time recognition help to keep the transaction time at each touchpoint to a minimum. Both hardware and software infrastructures also need to be easy for airport/airline staff to use and integrate with their existing systems.
Going further, a biometric layer that integrates smoothly with existing infrastructures at the airport contribute to the return on investment by aviation stakeholders, and a reduction in the total cost of ownership. At Vision-Box, we are strongly committed to helping airlines and airports to get into the digital travel world and create seamless travel experiences, so they can grow and scale their own businesses organically. In this light, using biometric technologies to deliver seamless travel journey is the future-proof solution that will highly leverage competitive advantage.
Article by Alessandro Minucci, Chief Product Officer at Vision-Box
As a legacy-ready ecosystem, Vision-Box’s Seamless Journey Platform enables the airport to shift towards contactless travel, permitting a controlled upgrade path from non-automated and non-biometric boarding pass-based workflows, towards a full automated biometric-enabled journey.
Among the numerous technical challenges facing the aviation industry, two stand out as both critical and urgent: the adoption of NDC and the application of AI technology. At the nexus of these we find particularly promising use cases for AI, enabling aviation businesses to adapt to, design and create new NDC capabilities faster and more efficiently. While AI will help organisations lower overhead costs and generate operational efficiency, NDC adoption harnessing new intelligent retailing and offering generation capabilities holds the promise of increased revenue generation and lower distribution costs. The perfect pairing.
One of the first and widely touted uses of AI technology continues to be a low effort – high reward opportunity to lower overhead costs: chatbots. Training an AI chatbot on vetted marketing and sales material creates a reliable lead nurturing tool. Adding a layer of operational and booking data onto that generates a customer service tool that can assist with new bookings, changes to existing bookings, loyalty program management and call handling during IROPS. Chatbots can also be trained to deal with rote employee enquiries that usually land in the HR inbox and drain precious resources that could be applied elsewhere.
While not as headline-grabbing, a more advanced, high effort application carries the potential of even more savings and operational efficiency: AI-powered translation of airline-specific NDC schemas into a standardized version. An otherwise resource-intensive task, this standardization initiative will ease the integration with OTAs and facilitate the adoption of IATA’s NDC framework across the travel industry.
How would it work? Large Language Models (LLM) such as the GPT series, PaLM, LLaMa and Claude are trained on billions of text files, code and data points. With this, a LLM can be tasked to create a blueprint structure based on the industry standard NDC format. Then, with advanced prompt engineering, this LLM can convert an airline’s unique JSON structure into the supported schema, at far greater speed and scale than would have traditionally been accomplished.
A key strength of NDC is the improved ability to personalize and enhance offers, with dynamic pricing and greater inclusion of ancillary products and services such as accommodation, car rentals and attractions all included. Rich content can also be integrated into these offers, giving providers better control over product marketing. However, the collection, parsing and mapping of data needed to produce these personalized offers requires significant upfront investment in, among other things, new tech stacks, changes to workflows, and specialist staff such as business analysts, developers and NDC experts. These are some of the obstacles on the road that hinder progress for airlines on their journey to expose NDC content to the market. AI can offer a way past them and towards the finish line.
How would this work? Once the NDC framework is in place, AI can be layered on top to analyze a multitude of datasets and feed customized offers back into the NDC. AI can connect to internal and external datasets, creating a large sample of previously disconnected datapoints to identify patterns, relationships and correlations. Information like market trends, historical pricing and client preferences can thus all be used to generate personalized and highly dynamic pricing to maximize revenue.
While AI and NDC may seem like an obvious and indeed essential next step in aviation technology, many organisations find themselves at a loss when it comes to leveraging these technologies. The truth is, despite a goal of NDC to drive standardization, while adoption is still in its infancy there remain significant obstacles to both the producers and consumers of NDC APIs due to a lack of standardization and practical experience in this space – coupled with the ongoing shortage of IT talent – makes this a formidable challenge for airlines and the wider aviation sector.
Now, more than ever before, finding a reliable and experienced IT partner who can lead or augment existing in-house teams can make all the difference between successful adoption and pricey failure or delay. We recommend an approach that pairs in-house education with external service contracting. Ensure your team reads up on these technologies, have them attend webinars and in-person events where possible – and don’t dismiss social media channels such as YouTube or Reddit for staying up to date with rapidly developing AI capabilities. At the same time, reach out to software development agencies and start conversations with vendors. You want to find someone who has AI expertise as well as industry-specific knowledge, all while fitting your project requirements. A good partner will also help you make the business case to stakeholders to garner buy-in for budgets and leadership commitment.
Curious about AI use cases in aviation? Contact DataArt at aviation@dataart.com to learn more and to discuss your NDC project. And mark your calendar for September 26 at the World Aviation Festival in Lisbon, and be a part of our panel discussion on ‘Modern Airline Retailing in an Era of ChatGPT, Emerging FinTech, and Flexibility in the Next Normal – What Does It All Mean for the Ongoing Retailing Revolution? ‘
Since the creation of NDC, airlines have been offering access to their API for free without enforcing many restrictions. The main reason is that it encourages the adoption and usage of the API by travel agencies and other third-party developers, which can help to increase the distribution of the airline’s content and services. However, with volumes growing in the NDC world, a new issue arises; “look-to-book”. In the late 90s and early 2000s, look to book was already a challenge, with availability queries increasing considerably as airlines started to offer direct access to availability to the GDS. This was somewhat managed over time, but now has come back in full force.
1. About look-to-book
The look-to-book ratio is a comparison between the search requests (AirShopping) versus the actual bookings. The term is an industry-specific version of the more general “conversion rate”. While airlines earn money with bookings, shopping requests cost money. Indeed, high look-to-book ratios impact both performance and costs of airlines, as they require significant resources to process large volumes of search requests.
There are two aspects which an airline must consider – security and cost. In terms of security, OWASP, a group of leading security experts, identify “unrestricted API usage” as a security risk that can “lead to DoS due to resource starvation, but it can also lead to operational costs increase” From a cost perspective, the airlines will be paying both availability calls as well as the shopping engine consumption, which is often limited to levels which were agreed pre-NDC. This does not allow for the high look to book seen today, which can easily reach 10,000:1.
2. AirlineProfile: the mitigation step
AirlineProfile, an IATA NDC Standard message, is a way for airlines to indicate their supported itineraries to agencies. By supporting this, agencies can avoid sending shopping requests to the airline for routes it doesn’t sell. While this does reduce the number of shopping requests, it still has a lot of limitations. It does not account for seasonal routes (all supported routes throughout the year need to be included), it requires the agency to implement it, and it still does not reduce the number of queries for routes that are sold by the airline. Thus, while the airline profile is helpful, it will not solve the airline look to book issues.
3. Taking action
There are several actions available for airlines when it comes to look-to-book:
Absorb the costs: Most airlines, today, pay for those shopping costs. While this is viable short-term, when it comes to very large shopping volumes, it may result in exponentially growing costs.
Block/Throttle: By applying limits/quotas, and applying blocking or throttling in the shopping requests, it is possible to mitigate the costs. This comes with the risk of losing some sales and is not an optimal solution.
Put a price on it: By asking the API users (aggregators, agencies) to pay for their excess usage, airlines can shift induced costs to the agencies. To put it in more crude terms, excessive shopping queries must be blocked, or someone will pay for them. The fact is, by implementing a pricing model for their NDC API, airlines can incentivize travel agencies and other third party developers to use the API more responsibly and efficiently. This can help to reduce the costs associated with high look to-book ratios while also improving the performance of the airline’s systems.
4. Looking outside
Airlines have become API Providers, and by entering this realm, it would be wise to look at the existing giants. Google, Microsoft, and plenty of other companies have been providing APIs for a long time now, having to deal with high volumes of search queries as well. All of those APIs have two things: usage limitations, and pricing models for users who need higher lookto-book ratios. Some common pricing models include:
Pay-as-you-go: This model charges users based on the number of API calls they make. It is a flexible model that allows users to pay for only what they use. An example of a pay-as-you-go API pricing model is Apigee by Google Cloud.
Subscription-based: This model charges users a fixed fee for a certain period, during which they can make an unlimited number of API calls. This model provides more predictable revenue for the airline. An example of subscription-based pricing is Azure API Management by Microsoft.
Transaction-based: Stripe, a payment processing platform, offers a transaction-based pricing model where users are charged a percentage of the value of each transaction processed through their API.
Ultimately, it’s up to each airline to determine the best model for their NDC API based on their specific needs and goals, as well as their partners.
Working towards a Gold Standard of Airline NDC API Onboarding
Current status
Airlines have been onboarding agencies, aggregators, and other partners for a couple of years now. With NDC presented as the holy grail of standardization, one would expect this technical onboarding process to be pretty… standard. However, when looking at the state of the industry today, we could not be further from the truth.
Let’s look at what it means for an agency to get connected to an NDC airline today. We will focus on the technical aspect of it, but of course, commercials are a key factor in the go-live process as well.
The long path to go-live
A critical step to going into production is for implementers to pass the airline certification process. However, this is only the third piece of the equation. First, implementers need to familiarise themselves with the API through documentation, before using the sandbox environment where they build the connections. As we will see, each step on this journey can be quite tedious.
1. Documentation
The airline’s NDC API documentation exhibits significant disparities and limitations resulting in many challenges for implementers.
Firstly, the documentation showcases a wide range of formats employed by different airlines, each varying in detail and structure. While most airlines offer implementation guides, they differ in presentation and format. They are available in either PDF format or accessible through searchable Wikis on their websites. In more comprehensive instances, airlines go the extra mile by sharing Postman or SoapUI projects that include ready-to-run scenarios, facilitating implementers in jumpstarting their implementations with tangible, functional examples.
When examining the actual content, certain deficiencies come to light. While default scenarios are consistently addressed, there is a noticeable lack of information from the majority of airlines regarding API limits and error cases, let alone providing guidelines or mechanisms for testing them. As a result, implementers are frequently left to speculate or manually test these error cases without sufficient guidance.
Overall, the first thing the implementers will see of your API is documentation. Making sure it is easily readable and well-structured is key to being able to quickly kickstart any implementation.
2. Sandbox
After understanding the API documentation, agencies usually gain access to a sandbox environment, or a test environment provided by the airline. The sandbox environment allows agencies to experiment, simulate transactions, and test their integration without affecting live systems or incurring any financial implications.
Obtaining sandbox access can sometimes be a multi-step process involving registration, approval, and acquiring necessary credentials such as API keys. The complexity arises from configuring the integration to work seamlessly with the sandbox environment, ensuring the correct handling of requests and responses, and addressing any technical challenges encountered during testing.
This brings us back to the first issue, with a lot of documentation skipping the whole “authentication/security” part of the API. Airlines should explain the required steps for authentication, including obtaining API keys or tokens, with clear examples.
The additional problem with some sandbox environments is how much they can differ from the actual production environment. Some sandboxes are lagging behind the production environment, while others are used for experimental features. Both cases result in instability and divergences between documentation and actual implementation.
3. Certification
Once agencies have successfully tested their integration in the sandbox environment, they need to undergo a certification process. Certification involves demonstrating compliance with the airline’s technical and business requirements. This process ensures that the agency’s integration meets the necessary standards and is ready for production usage.
Certification processes vary a lot among airlines, requiring agencies to fulfil specific criteria, such as passing specific test scenarios, properly displaying the airline offering, and proving their technical capabilities. Agencies may need to provide test logs, validate the accuracy of offer display, handle many scenarios, and sometimes even demonstrate error handling capabilities. The complexity lies in meeting the airline’s expectations, ensuring that the integration is robust, scalable, and able to handle real-world scenarios effectively, while properly reflecting the airline’s values.
While some airlines are very upfront with the validation methodology (going as far as putting the full list of scenarios on their onboarding platform), others do not yet provide such a structure. Therefore, implementers end up seeing more and more test cases, without a clear view of the end of the implementation. This results in, undoubtedly, the most frustrating part of the process for the agencies, sometimes with many months of back-and-forth on the testing scenarios.
Is there a solution?
This article was a bit bleak, so let me reign it back a little. While it is unavoidable to have differences between various companies, there can be light at the end of your NDC tunnel.
There is undeniably a willingness in the industry to simplify. As a key example, IATA has been trying to help airlines bring a kind of “standard methodology” for many years. One approach that IATA took was the “At Scale” certification, which required a “good enough” onboarding methodology. This certification is now discarded, but its contents are part of the IATA ARM (Airline Retailing Maturity) index. However, while it is a good base, it is not yet “strict” enough to enforce similar methods for all.
The state of the airline industry, when it comes to onboarding processes, is very reminiscent of the early days of web APIs. Each airline is trying its spin on the onboarding formula, with some more successful than others. Luckily, airlines are now learning from each other and discussing this topic at various forums. Those discussions will drive the way to a more aligned, and hopefully better, onboarding method for all.
One question remains, though. Should we let the industry slowly define those better processes through trial and error, or should IATA drive this shift by enforcing strict guidelines for a proper onboarding standard?
From interactions with many airlines and agencies in the past, we feel strongly that there is a need for clearer definitions. If these are not standardised at an industry level, we should at least work together to define the best practices to follow.
The relationship between airlines and ancillaries is a delicate balancing act. The necessity for optimising profit-per-booking must be achieved without inconveniencing passengers in the checkout or irritating them with pestering post-booking marketing. Each new ancillary therefore has to overcome a lot of cynicism and multiple hurdles before it reaches the point where it warrants a serious review.
Could it be that international connectivity has now reached that milestone?
The category has had its fair share of failures: from complicated international-calling-cards to click-and-collect SIM cards. The tantalising prospect of customers’ need to keep mobile devices connected during their stay has remained unmet due to cumbersome delivery methods and inconsistent solutions. However, with the long overdue digitisation of SIM and the resultant move from a physical SIM card to a digital eSIM that is all changing, and changing fast.
This could mean that a major new category in ancillaries, with the potential to match revenues in car hire is ready for take-off in 2023.
Ancillary revenue – recovery & growth
A recent report by Ideaworks and Cartrawler projects airline ancillary revenue will increase to $102.8 billion worldwide in 2022, compared to $65.8 billion in 2021 and the $109.5 billion record of 2019. Coming out of the pandemic, ancillaries’ recovery has outstripped the pace of total airline revenue, and the volume of passenger return. The value per passenger now sits at a touch under $30, up over $8 on its pre-pandemic level.
Airlines’ fundamental business will always be selling seats but customers now expect to have convenient, pertinent services made available in a one-stop-shop and increasingly airlines’ financial well-being depends on them providing those services in the most profitable way possible. With supply-side pressure on margin in existing ancillaries, it’s therefore essential that airlines have a long-term vision for ancillary management and a pipeline of new opportunities to feed into it.
International connectivity – the need & market size
Everyone will have their own experience of where international connectivity can go wrong. The road trip of a lifetime that turns into the journey from hell when your teenagers are separated from social media and YouTube; the all-important business trip that fails as the essential presentation doesn’t download in time on coffee-store WiFi; the panic as the booking details or health documents held in the cloud are suddenly inaccessible as your device drops off grid. But when international connectivity goes right, the enhancements to your trip are massive: sharing your experiences online in real-time, planning and booking dining and experiences as you need them, and an endless stream of entertainment literally at your fingertips.
The market that serves this is currently a mix of paid-for international roaming with your home carrier (sometimes packaged up in a day-rate but often on a rack-rate that can run up sizeable bills) and purchase of a local pre-paid SIM card on arrival. It is worth an estimated $20 billion each year and is set to grow rapidly over the next 3-5 years.
– Increased category penetration
Around half of international travellers choose to turn off data-roaming on their devices; relying on WiFi or managing without their phone for the duration of their stay.
o Customer Need
Penetration has been increasing each year in line with a need for always-on connectivity and dissatisfaction with WiFi security, log-in protocols and stability
o Awareness
More convenient access to connectivity plans through eSIM have seen penetration growth accelerate in the last 12 months and will see the rate of acceleration increase further over the next 1 to 2 years.
– An ever-upwards trend on data
The amount of data consumed by mobile users doubles every eighteen months as streaming and photo quality increases and 5G brings data-hungry rich content mainstream, creating a need for larger and larger packages.
The key players in the market currently are the mobile network operators/carriers who generate a profit on their customers’ roaming activity and the retailers like Sim Local who have positioned themselves in airports and travel hubs to serve passengers as they land in destination. As the digital revolution takes hold the most likely beneficiaries will be those who can provide the right product at the right moment in a customers’ journey and can be trusted to deliver.
What is eSIM and how prevalent is it?
An eSIM (embedded Subscriber Identity Module) is basically a SIM card that is built in to a mobile device’s chip-set that can connect you to any operator offering eSIM services. The eSIM works the same way as a traditional SIM card, but you don’t need to acquire and insert a physical product. The eSIM is pre-installed in the device, and you can activate it by installing an “eSIM profile” from any network. The move from a SIM card that needs to be sold in a bricks-and-mortar retail environment to a digital product that can be bought and delivered over the air is a market disruption that mirrors the switch from CDs and tapes to Spotify and Tidal.
SIM cards are still the most prevalent method for getting connected, but almost all smartphone releases from Apple, Samsung and Google for the last four years have had dual capability. The game-changer for the market came in September 2022 when Apple announced that in the US the iPhone 14 would be the first major device to remove the SIM card slot and become eSIM only. Experience says that where Apple lead others will follow, and so it is likely that most devices in most markets will be eSIM only from the next release cycle.
How will this fit in with an airline’s booking flow
As with all ancillaries the watch-words are ‘relevance’ and ‘simplicity’ when it comes to placing eSIM in front of passengers.
Possible Touch Points for Customers
Customer Choices
eSim allows travellers to save money and be in control of their spending.
What are the models and choices
Congratulations! You’ve decided eSIM is going to benefit your customers and your bottom line, but what now? You’ve got some choices on who to partner with, and some options on what level of integration you can stomach.
Working directly with Mobile Network Operators Mobile Network Operators are territory-specific: they buy the spectrum from government, run the infrastructure and in theory should always provide the best value. However, there are almost 2,000 worldwide with no consistent tech interface and so if this is your route you’ll have to get ready for quite a mess of integrations and an industry for keeping on top of commercial negotiations and product amendments.
Working with Roaming Providers
A spate of new companies have sprung up on the back of eSIM technology, purchasing data wholesale and packaging it up into Roaming bundles for travellers. Roaming suppliers can provide a convenient one-stop shop with impressive country coverage but access to 4G and 5G quality connections is inconsistent, the pricing is typically high for customers (particularly at higher data allowances) and potential commissions are often low.
Working with a Marketplace
The well-trodden path through similar territory has led to aggregators or marketplace platforms providing a single point of integration for airlines and access to a full range of suppliers in car hire and stays. The model of CarTrawler and HostelWorld is also in place in eSIM, with the supply management bringing together roaming providers and Mobile Network Operators from across the world in one service with commissions benefiting from the scale of the organisation.
Summary
Airlines need new ancillaries and the revenue streams that go with them, but they need to exercise caution in selecting categories that satisfy a real customer need, represent a good long-term revenue stream, and can be implemented without impeding booking time or irritating customers. Connectivity has always ticked the first two boxes, but with the arrival of eSIM it’s just got over its final barrier and is ready for take-off.
The world’s leading travel marketplace for eSIMs, Sim Local has been selling SIM cards to travelers for over 10 years, through its global airport retail, affiliate and vending network. Partnering with local telecom operators their technology provides travel companies with multiple partnership and integration options to bring eSIM connectivity to their customers as an ancillary.
Untapped potentials of AI in the Airline Industry?
Inspired by a follow-up on my customer insights blog last December and an AI assignment for my Executive MBA studies, I wanted to share some learnings from that work. The aim was to look for an AI use case that can be implemented for an airline venturing onto the new distribution transformation path – something that many airlines are just starting to consider. There is a wealth of data to be tapped into, but what exactly might some of the possibilities be for using this data in a meaningful way? What does the new world allow an airline to do that it didn’t before? Will it deliver as promised, and how can this be measured?
While there is much talk about how AI can revolutionise pricing and revenue management, are there other potential uses of the data that can now give insights that an airline didn’t have before?
Much has been said about the ability to make more targeted offers and thereby increasing revenue per customer and flight, might there be other untapped golden nuggets to be derived from the offer data?
The airline industry is highly competitive, where customer satisfaction and operational efficiency are crucial to success. As airlines have access to vast amounts of data, it is no surprise that many are turning to artificial intelligence to help them gain a competitive advantage.
One of the most significant benefits of AI for the airline industry is its potential to improve customer experiences. Especially when looking at finding patterns and opportunities that might be undetected today, AI has the potential to process a huge amount of data with an efficiency that only a few solutions already do. Including more and different data sources than what is traditionally done can provide customer insights from a different angle. By analysing customer data, airlines can tailor their offers and services to meet their customers’ needs and preferences better.
A look at some use cases
Traditionally, airlines have pushed out the availability (or made it available in a “pull” fashion) and the prices, and only got to know about the customers when they purchased a flight. However, there is considerable knowledge about how customers behave before they buy – knowledge which airlines to date have never had access to. But my interest was piqued when thinking about what offers customers didn’t buy, since this says as much about their needs as what they finally purchased. Having a complete picture of who did not buy what can lead to new insight into what appeals to whom – in a different way than previously possible.
For example, AI can provide personalised recommendations for flights, hotels, and other travel-related services. AI can analyse a customer’s past purchases, preferences, and other data to deliver tailored recommendations more likely to meet their needs.
AI can also provide real-time information and support to customers during their journey. Chatbots, for example, can provide instant customer support, answering their questions and providing guidance throughout their journey. This can help to reduce customer frustration and improve their overall experience.
Airlines can increase operational efficiency by optimising their processes and reducing costs by using AI. For example, to optimise flight schedules, crew assignments, and other operational tasks.
AI can also improve maintenance operations, reducing downtime and increasing aircraft availability. By analysing data from sensors and other sources, AI can predict maintenance issues before they occur, allowing airlines to address them before they cause disruptions proactively.
Finally, AI can help airlines to boost their revenue by optimising pricing and increasing ancillary sales. AI can analyse customer data and market trends to predict demand and optimise pricing accordingly.
AI can also be used to increase ancillary sales by providing tailored recommendations for ancillary services, such as seat upgrades, baggage allowances, and lounge access. By tailoring these offers to each customer’s preferences and needs, airlines can increase their likelihood of purchasing.
The challenges
While the potential benefits of AI in the airline industry are significant, several challenges come with its implementation. These include the cost of implementation, the complexity of the technology, and the need for skilled personnel to manage and operate the systems.
To overcome these challenges, airlines need to take a phased approach to AI implementation, starting with small proof-of-concept projects to demonstrate the potential value of the technology.
Another challenge is data privacy and compliance. Airlines need to ensure that their use of AI complies with all relevant data privacy regulations and that customer data is adequately secured. This requires a strong governance framework and robust security measures to protect sensitive data.
Airlines need to ensure they have the right personnel to manage and operate AI systems. This requires a mix of technical skills, such as data engineering and data science, and soft skills, such as communication and stakeholder management. Airlines should invest in training and development programs to build these skills in-house and ensure their personnel are up-to-date with the latest AI technologies and best practices.
Potential – but only by doing it right
In conclusion, AI has enormous potential in the airline industry, providing airlines with tools to increase revenue, improve efficiency, and provide customers with personalised offers that cater to their needs. However, implementing AI solutions has challenges, and airlines must be aware of them and take steps to mitigate them. It’s essential to have a dedicated team with the necessary skills and expertise to manage the project and communicate the process and results effectively. With AI, the airline industry can move towards a more sustainable customer-centric business model, identifying new opportunities that emerge from the direct distribution model.
AI has the potential to transform the airline industry, and airlines that embrace it will have a competitive advantage over those that don’t. While the airline industry is still in its infancy in using AI, it’s clear that it is a technology that will play a significant role in shaping the airline industry’s future. It’s exciting to see what the future holds, and we can’t wait to see how AI will continue to transform the airline industry.
Letsfly Co-founder – 3 Key Elements For Airlines & Retailers To Improve Distribution Strategies
The travel & airline industry always undergoes a rapidly changing commercial landscape. Understanding how to navigate it is a key component of success.
One of the biggest challenges airlines face is the shifting dynamics between carriers and their distribution partners. Could this be a sign of fragmentation for airline distribution? If so, then could there be signs of reaggregation emerging on the horizon?
GDS to NDC and Direct API
GDS has historically dominated the distribution market, and airlines must seek flexible and cost-effective distribution solutions and other alternatives. As a result, Next Generation Distribution Solutions (NDC, Direct API) surged in popularity as they offered more agile adoption methods.
However, there are still critical aspects that require special attention, and airlines and retailers must first know how to analyze them, before defining their approach. And that begins by looking beyond the traditional solutions, and preparing for success by knowing how to effectively adopt a New Distribution Solution.
How to prepare for success with a New Distribution Solution
Kelvin Fu, Co-founder of Letsfly (a provider of high-quality content so airlines and travel organizations lower distribution costs and reach new markets), believes that the New Distribution Solution model presents both challenges and opportunities. Which is why he states that it’s important for airlines and retailers to first understand three key aspects to prioritize their efforts.
The 3 critical elements airlines and retailers must prioritize
How to cover more markets at lower costs for airlines
How to support the sales of diversified products more flexibly, such as ancillaries and bundles
How to ensure a satisfactory ticket purchase and post-sales service experience for travelers under the New Distribution Solution
To achieve success, companies need to focus on important areas such as expanding market coverage while reducing costs, supporting the sales of diversified products like ancillaries and bundles, ensuring a seamless customer experience throughout the ticket purchasing process and post-sales services, and assessing technical performance and effectiveness.
According to Kelvin Fu, Co-founder, Letsfly:
“It’s crucial to have a distributor with extensive and quick market coverage, who can establish direct API connections, and handles the entire case, this especially means post-service. Only in this way will distribution strategies be optimized in the New Distribution Solution model”
How to solve the 3 critical key elements:
Ensure your distributor has extensive and quick market coverage.
Reduce third-party process, build direct API connection with distributors.
Partner with a distributor that provides end-to-end solutions to your case.
By focusing on these key aspects and collaborating with distribution partners – airlines and retailers can be in a position to adapt in this rapidly changing landscape. Through this, they optimize their distribution strategies and provide a better overall experience for their customers.
“It is essential to pay attention to issues such as market coverage, product diversification, customer experience, and technical performance to succeed in a rapidly changing market. By doing so, airlines and retailers can benefit from greater efficiency, cost savings, and customer satisfaction.” – Kelvin Fu, Co-founder, Letsfly.
New Distribution Solutions have been around for some time, but airlines always need to adapt to changing consumer preferences and seek to diversify their product offerings. As a result, more airlines have been adopting lightweight and flexible distribution methods, moving away from the traditional GDS model. While this trend was initially led by low-cost carriers looking to save costs, it has evolved into a more fragmented market.
Flexible, Adaptable, and Tailored Solutions
To tackle this issue, Letsfly offers tailored solutions that are more flexible and adaptable. The goal is to offer airlines and retailers a distribution solution that helps expand market coverage while keeping costs low, support the sales of diversified products, ensure satisfactory customer experiences, and improve technical performance.
“New innovations will continue to emerge and disrupt the industry, as more companies are open to adopt these solutions. Those who understand how to navigate this landscape successfully can expect to achieve greater efficiency, cost savings, and customer satisfaction.” – Kelvin Fu, Co-founder, Letsfly.
Collaboration and Customer-Centric Strategies
As with any industry, the travel, aviation and hospitality sector will always continue to evolve, and collaboration with distribution partners is key to success in this ever-changing industry. Airlines and retailers must be open to embrace new technologies and collaborate closely with their distribution partners to achieve success.
Many new companies are emerging to innovate and potentially replace the traditional GDS’s position, and become the new dominant solution. So it is important for airlines and retailers to work together with their distribution partners.
This will help to foster long-lasting relationships with customers in order to remain competitive in an industry that is constantly changing.
In the end, success in the travel industry is all about the customer. By investing in strategies that are customer-centric and tailored to their needs, airlines and retailers can build long-lasting relationships that will keep customers coming back for more.
It won’t be an easy road, but those willing to embrace change, experiment with new approaches, and collaborate with their distribution partners will be the ones that thrive in it.
Letsfly is an innovative company focused on providing high-quality content to travel organizations while helping airlines lower their distribution costs, reach new markets and maximize profit. Its mission is to improve travel distribution with cutting-edge technology and provide long lasting value to its customers. The company was founded in 2014, with headquarters in Beijing (China) and offices in Hong Kong, Sydney, Singapore, and Dublin.
Takeoff with AI: Five Reasons the Airline Industry Should Embrace AI
Technology is revolutionizing the way that businesses interact with customers, streamlining operations and uncovering new opportunities for growth. Artificial Intelligence (AI) is playing an increasingly important role in the airline industry, allowing businesses to take advantage of a range of benefits that enable them to stay competitive and profitable. By leveraging the power of AI, businesses can gain a competitive edge in the airline industry and identify new opportunities for success.
The use of AI in the airline industry has seen an impressive increase in value, from $152.4 million in 2018 to an expected $2,222.5 million by 2025. This upward trend is likely to continue as the industry evolves and businesses seek to remain competitive and profitable.
Here are the top five reasons to use AI in the airline industry:
1. Optimized Operations
Airline companies can optimize network planning, adjust flight schedules, and manage aircraft capacity to maximize efficiency and reduce costs using AI. This can help airlines to better manage fuel consumption and emissions. AI can also be used to automate routine tasks and processes, allowing airlines to focus on more important tasks.
2. Improved Customer Service
AI can provide personalized service to customers, such as recommending travel itineraries and providing real-time information about flight status and delays. AI chatbots can also be used to answer customer queries and resolve issues quickly and efficiently. This can help improve the overall customer experience and increase customer satisfaction.
3. Revenue Optimization
Gathering detailed insights on customer demand is an essential prerequisite to optimize the revenues and margins of the overall network of any airline. As such, solutions that harness the power of AI are a clear competitive advantage for airlines – under the right conditions, they can bring highly accurate forecast capabilities that can be leveraged to make better informed decisions, and ultimately have direct impact on the bottom line both from a revenue and cost perspective.
4. Cost Savings
By leveraging AI-driven automation, airlines can reduce operational costs and increase operational efficiency, leading to a substantial increase in profitability and market competitiveness.
For instance, airlines can automate their inventory management, pricing, and revenue management processes to optimize their operations and reduce the risk of overbooking, which has a high cost per offloaded passenger, not to mention a very poor customer experience. AI algorithms can analyze historical data and current market trends to make real-time pricing decisions, thus reducing manual labor and human errors. This can also lead to increased sales and revenue uplift.
In addition, AI-powered predictive maintenance can help airlines identify potential aircraft malfunctions before they occur, leading to fewer flight cancellations and maintenance costs. AI can also streamline operations, such as baggage handling and check-in, leading to a reduction in staff and labor costs.
By embracing AI, airlines can unlock significant cost savings and gain a competitive edge in the market, making it a worthwhile investment for any airline looking to stay ahead in the industry.
5. Increased Scalability
AI can help airlines scale up their operations quickly and efficiently. This technology can be used to automate customer service inquiries and other processes, streamlining workflow and allowing airlines to focus on more important tasks. Additionally, AI can be used to provide predictive analytics and insights that can help airlines identify potential opportunities and make decisions more quickly and accurately. With the help of AI, airlines can stay ahead of the competition and be up-to-date with the latest trends.
AI has the potential to revolutionize the airline industry. By automating routine tasks, making better decisions, improving customer experience, and optimizing maintenance, AI can help airline companies become more efficient, cost-effective, and competitive.
Smart airline retailing: The new merchandising and revenue frontier
During the pandemic, when air passenger traffic was at an all-time low, a few smart airlines demonstrated record-breaking sales by earning even more than 50% of their revenue from their ancillary products and services. Indeed, ancillary sales revenue is no longer seen as an airline’s secondary option. Instead, it has now taken a front seat in the airline business model.
In this context, we need to note that the traditional way of retailing does not cater to today’s tech-savvy customer who is information-rich but time-poor. In the current era of disruptive technological changes and a highly commoditized travel world, airlines have a cut-throat competition where products and services that may be cutting edge today can become outdated soon.
Adopting the advanced retailing concept in the airline industry is going to be one of the biggest transformations in the industry.
Customer loyalty is not what it used to be. With increased transparency on comparative prices and easier access to booking tools, travelers are increasingly loyal to those that provide the best prices and experiences. These fluctuating trends and rising consumer expectations make it challenging for airlines to keep up with the changing times.
The USP in this competition is the outstanding customer experience that revolves around a customer-centric approach. This allows an airline to deliver a positive and personalized experience at every stage of its customer journey. They can interact with customers based on their needs, adopt a fact-based approach to decisions using customer data as a primary source of insight, and embrace new channels to build a customer-focused culture, creating value across the way.
Many forward-thinking airlines have already embarked on adopting smart merchandising strategies to deliver a tailored, personalized, and seamless experience to individual travelers.
Smart merchandising strategies driven by an AI-based retail rule engine
In this blog, we will attempt to explore various best practices, frameworks, strategies, and techniques for an airline to deploy a successful merchandising strategy. This strategy will deliver exceptional customer experiences along with higher conversion rates.
The mantra behind successful merchandising revolves around five key areas, and they are:
Identify the right personas for your travelers
Contextualize your offer in real-time
Deploying the best packaging techniques
Target the right time and stage of the journey
Deliver a seamless digital experience
1. Define the right persona for your travelers
An airline caters to millions of passengers in a year. Every customer has unique needs and has a different perception of products and service values. If you understand those differences and are flexible in how you offer the services they need, you can gain a competitive advantage.
Customer segmentation is a strategy to divide customers into various groups or personas having similar characteristics, wants, and needs.
Traditionally, airlines used to segment customers based on the booking class, which today holds limited relevance and doesn’t reflect complex passenger behavior. To overcome this challenge, airlines can leverage technologies like artificial intelligence and machine learning to develop self-learning models which analyze the below-listed factors and self-calibrate to optimize the personas.
Geographical: Country, state, climate, food habits, etc.
Demographic: Age, gender, marital status, family size, nationality, ethnicity
Behavioral: Spending pattern, price sensitivity, need for flexibility, loyalty index, CLI
At the same time, each persona defined by the airline must be:
Measurable: In terms of volume, purchasing power, and other characteristics, an airline can predict as well as target the revenue and profit a segment can make.
Accessible: The persona is easily accessible so that the airline can approach them.
Differentiable: Each persona must be unique and reacts differently to the market mix.
Actionable: Airlines be able to provide value to the segment.
A good segmentation strategy should have a persona for each passenger category and reveal underserved segments. For example, an airline receives most of its bookings from guest users, and the airline does not possess any historical data individually for these customers. But, by using engaging factors like demographical and geographical, airlines can achieve segmentation. In a recent survey conducted with an airline, it was discovered that young travelers between the age of 18-35 going from Oslo to Switzerland during winter had shown an affinity towards XL baggage for carrying their skiing kits. So, using such insights, airlines can target customers with similar personas to elevate sales.
2. Contextualize your offer in real-time
Now that we know each traveler’s persona has specific needs, the second step is to set the right context so that the customer understands the value that a recommended ancillary is going to deliver. For example, a business executive taking an early morning flight from an airport that experiences a high passenger load around the time of departure can open an opportunity to sell fast-track ancillary.
Contextualizing helps the traveler understand the benefits of the offer then and there.
Airlines can tap into such opportunities by leveraging an intelligent merchandising engine. These build a knowledge graph for each persona to understand their affinities towards ancillaries. They then evaluate it with real-time contexts like load factors, routes, flight duration, and peak hours through a robust scoring algorithm for ancillary recommendation across various stages of the travel lifecycle. Doing so significantly improves the likelihood of making a purchase hence, delivering a higher conversion rate.
3. Deploy the best packaging techniques
Airlines use various offer creation and packaging techniques like bundled ancillaries, unbundled ancillaries, and hybrid bundling (branded fares) to personalize an offer. Each of these techniques plays a role when targeted to the right customer. Branded fares or bundled ancillaries deliver a simple approach to building an all-inclusive fare, reducing the complexity of choice and making comparison and purchase decisions easier for passengers. But at the same time, with evolving customer expectations, it is a huge challenge for an airline to decide which ancillary items to bundle and which items to offer separately.
The best-fit package results in value to the customer and higher per-passenger revenue for the airline.
Deploying an intelligent merchandising engine that can generate multidimensional insights on ancillary sales performance across all channels and travel lifecycles can help revenue managers optimize their packaging techniques or even take a step ahead to tailor the bundles in real-time for a customer.
4. Target the right time and stage of the journey
Airlines can maximize their ancillary sales by encouraging customers at various stages of their travel lifecycle, beginning from the inspiration that starts the planning in the first place, all the way through the booking process, to pre-and post-trip engagement. Each stage offers a unique upsell or cross-sell opportunity that a traveler may consider.
The most important thing that airlines need to keep in mind here is to offer the customer the right product at the right time.
Not everything can be sold during the booking; travelers develop their needs as they proceed. Airlines can use their data to understand customers’ specific needs to determine the behavioral factors, purchasing patterns, and affinity factors for each persona.
The choice of the product can be determined by the customer persona and contextualization. In contrast, the stage of the journey should be targeted, considering when it will be needed the most. On the other hand, the choice of the channel can be determined by the accessibility factors, and the price should prove to be a good value to the customer – it should neither be too high nor too less.
For instance, a family of four going for a week-long summer vacation would be interested in booking a hotel room at the time of flight booking. A few days before departure, when they start packing, they might opt for extra luggage and finally may need a taxi on the day of departure. Whereas a backpacker who is a price-sensitive traveler may look for a cozy hostel room at the time of booking and may be interested in some good adventure deals as per destination.
5. Deliver a seamless digital experience
Delivering a one-click buying experience that enables customers to make informed purchases can be a differentiator among competitors. Along with the perfect offer, an airline should focus on the user experience they deliver to the customer.
The user experience should be fast, easy, and intuitive so that a customer can easily navigate to buy and manage their purchases.
An average user experience can easily make customers disinterested, even if they see a good offer. On the other hand, a good user experience delivers high-quality content and information about a product, which in turn converts lookers into bookers.
Airlines need to understand the challenges associated with different distribution channels, primarily indirect and direct.
Indirect channels
From a customer perspective, shopping through an indirect channel provides a disjointed user experience where they are not presented with personalized offers and don’t have access to the products they could purchase from an airline. From the airline’s perspective, they have to manage multiple EMDs for the ancillary purchase per ticket while distributing via a GDS channel.
Direct channels
To overcome these challenges, digitally matured airlines have adopted IATA standards such as New Distribution Capability (NDC) and ONE Order to modernize their product retailing and create a transparent shopping experience. NDC allows airlines to easily sell ancillary along with rich content directly to aggregators like OTA and GDS via a set of standard XML APIs (which was not possible earlier) and get away with the challenges of EMD issuance for ancillary purchases.
The capabilities of NDC clubbed with AI models can help airlines build a smart & advanced retailing system that offers customers a better product and more value. NDC enables airlines to sell flights and ancillaries the retail way, and AI-based technologies enable the airlines to add a personalized and contextual wrapper, so you are selling the right thing and have a higher look-to-book ratio. This enables the airline to transition from non-personal selling to retail-driven personalized selling.
Conclusion
The power of digital airline retailing is no more a secret. Revenue managers have identified its real potential and are leveraging it to target more sales. As we enter the digital revolution, the right set of techniques along with technologies like AI/ ML and big data could be the first step towards deploying successful merchandising strategies towards building a great customer experience and path to profitability.
The flight to stability: learning from the financial markets to inspire robust technology in the airline industry
The financial markets have seen remarkable growth and success in recent years, driven largely by the adoption of advanced technology infrastructure and automation. In the world of high-frequency trading, speed and efficiency are essential, and the transition from manual to electronic trading systems has been crucial in meeting these demands.
By enabling faster and more efficient trading, electronic systems have increased liquidity, tightened bid-ask spreads, and lowered trading costs, all of which have helped to drive growth and profitability in the capital markets. The benefits of automation and advanced technology infrastructure extend beyond just the financial markets, with other industries, such as the airline industry, beginning to explore their potential.
However, the airline industry is still grappling with outdated systems that are not equipped to handle the volume of data and volatility inherent in the industry. Recent events, such as the COVID-19 pandemic, the Southwest Airlines computer outage and Lufthansa IT failure, have exposed the industry’s limitations. Thus the capabilities of the financial markets’ systems provide a valuable example for the airline industry to follow.
The financial markets have developed robust technology infrastructure, utilizing state of the art technology available at every period, including advanced machine learning algorithms and AI, which enable high-frequency trading and automated trading. These systems can process vast amounts of data with hundreds of millions of actions per second and operate on millisecond timescales, all without crashing. By implementing cross-industry technologies like ML algorithms and AI, airlines, even though lagging decades behind financial markets, can modernize their infrastructure and move towards more efficient and stable systems, enabling them to make smarter decisions based on real-time data and predictive analytics.
The potential benefits are significant. By leveraging third-party vendors, airlines can streamline and optimize their operational processes, resulting in cost savings of up to 10-20%. Furthermore, according to a recent ‘Precedence Research’ report, the implementation of AI in the airline industry is projected to grow at a CAGR of 35.38% from 2022 to 2030, offering a significant growth opportunity for airlines to enhance their operations and improve the passenger experience.
The benefits of implementing new technology and infrastructure upgrades extend beyond operational efficiency and increased profitability. By modernizing their systems, airlines can also enhance the passenger experience. For instance, airlines can leverage data analytics to personalize the travel experience for each passenger, offering customized services and recommendations based on their preferences. Additionally, AI-powered chatbots and virtual assistants can help passengers navigate the booking and check-in process, reducing wait times and improving overall satisfaction.
While the airline industry faces several challenges in modernizing its technology and infrastructure, cloud-based systems that offer remote control and easy onboarding, along with third-party vendors, can provide a flexible and scalable solution for airlines to optimize their operations while reducing operational risk.
According to a report by Allied Market Research, the aviation analytics market was valued at $2.78 billion in 2020 and is projected to reach $8.21 billion in 2030, registering a CAGR of 11.72%.
In conclusion, the aviation industry can modernize their technology and infrastructure with cross-industry technologies like ML algorithms and AI, as well as by collaborating with third-party tech enablers. This can enhance operational efficiency, reduce delays, improve the passenger experience, and increase profitability. By adopting these innovative strategies, airlines can make smarter decisions based on real-time data, leading to higher revenue and stability. This will give them a competitive edge in the industry and enable them to stay ahead of the curve.
Article by Dr. Uri Yerushalmi, Co-Founder and Chief AI at Fetcherr, Former CEO and Head of AI for a major algo trading firm. Three decades of experience in software development and AI.
Accelerate your airline’s transition to retailing with offers and orders
As the industry looks to modernize its retailing and back-end capabilities, only a handful of progressive airlines have begun the transition to distributing their dynamically created offers using NDC. Even fewer airlines have started looking at ONE Order to simplify the fulfilment of customer-centric retailing.
While industry discussions and initiatives have been ongoing for around a decade, why is the journey to retailing with offers and orders taking the industry so long? And with the expected benefits of increased airline revenues, improved traveler experiences, and greater cost and process efficiencies, how can we throttle up the pace?
Accelerate your airline´s transition to retailing with offers and orders by adopting a three-phased approach that addresses six critical areas for transformation success.
Once a year, when I’m not busy helping airlines figure out their latest integration challenges around NDC or their IBE, I like to go scuba diving and snorkelling. If you’ve never been, I really recommend you give this a try – the underwater world will blow your mind. While scuba diving is allegedly an “adventure” sport, what I like to do most is just lay still in the water and watch the fish go by. It’s fascinating to watch the interactions between the fish, and soon you come to realise that a reef is a real community. The place is usually teeming with little fish going about their business – which usually involves avoiding being eaten by the big fish! However, the little fish also help to keep the reef clean, and some of them even clean the big fish of parasites contributing to a healthy ecosystem. All the fish have to get along, so it’s not simply a case of the big fish eating the little fish (luckily for them!).
One day I got to thinking about the plethora of airlines we have in the world, and all the various systems they choose to use for their various services. In total, there are more than 5000 airlines in the world and about 25 providers of what we would typically call “PSS” services. Here, just like in the underwater world, we also often have big fish and little fish happily living alongside each other. Smaller airlines have very different needs to a larger airline, but often use some of the same reservation system providers – small and big fish in the same big pond. Usually these are the bigger system providers, although there are also some pretty big airlines that use smaller, more niche providers. So, what motivates an airline to be a small fish in a big pond, or a big fish in a little pond? Let’s start with the small airlines, who essentially have two choices: one of the smaller, more niche providers or one of the big two providers of “classic” PSS services. While in earlier times the choice of vendor may be influenced by the airline’s chosen business model (LCC vs. FSC), there is less of a clear demarcation here these days. Most airlines operate a hybrid model with aspects of both an LCC and FSC, and as such need flexibility. The smaller providers tend to be more focussed on the retail aspects of distribution with extensive ancillary product and bundling capabilities in their base product offering. This matches well with the needs of the airlines, who also have to be nimble enough to react to changing market situations with great flexibility. New products can be defined on the fly, while cloud-native applications allow safe, rapid deployment of new features.
The obvious choice for a larger airline would of course be one of the larger PSS vendors. These may not be as flexible in terms of speed to market or modern airline retailing capabilities, as they tend to still rely on legacy artefacts such as PNRs, e-tickets and EMDs for booking, fulfilment, and settlement. However, they do make it work through add-on components and, if your airline has been in business for a few decades, this probably makes perfect sense. While this is not “wrong” per se, it does imply some upstream and downstream complexity within distribution and the afore mentioned processes. Complexity in IT systems typically equates to cost, and as such smaller providers may be able to offer more attractive pricing. On the other hand, the larger providers have the benefit of economies of scale and are often perceived as “a safe pair of hands” (the old adage “nobody ever got fired for buying IBM” springs to mind).
However, the industry is moving in a different, more modern direction with NDC, ONE Order and the transition to offers and orders, pushing the vendors to evolve. Some have embraced this change and are moving forward where they can, while others have been rather hesitant; big fish are not always the most nimble. There are also some airlines that are realising that modern airline retailing is the way forward and are also pushing where they can. But this is change that is of more an evolutionary nature, and as such will take time to show tangible benefits. Together though, airlines and vendors large and small must drive this change forwards and continue to innovate and evolve. Smaller providers have this in their own hands and need to invest in their products and show innovation in driving this transformation forward. The larger vendors have traditionally built-up capabilities based on the needs of their community of users. Here, the onus is on the airlines to communicate their expectations towards their providers in terms of industry change and ensure that the industry as a whole keeps moving in the right direction.
Considering all of the above, it really seems that, just like the coral reef, there is a real community within airlines and vendors, and the fish all need each other to get along, survive and indeed thrive. Without the smaller airlines and providers, the innovation needed to drive lean operations and enable airlines to grow would be missing. Without the bigger airlines, the economies of scale would not work and (at least in the case of some larger airlines) the thought leadership to drive the industry towards modernisation would be lacking.
Working for more than two decades in the industry, jointly my colleagues from Travel in Motion and Oystin Advisory have worked with airlines of all sizes and business models and discovered that the biggest challenge is not necessarily choosing the right PSS vendor – at least not initially. It is about understanding and formalizing the airline’s business needs and challenges based on the overall strategy. Part of executing this strategy is then to choose the right set of products for an airline to suit their own unique needs and enable to them to survive, thrive and drive their business to the next level. Based on this, and unlike the fish in the sea, you have the choice of ponds you want to swim on. Either, as a small fish in a big pond or as a big fish in a small pond. Or, you can even make your own pond.
The idea of dynamic pricing – optimizing prices based on demand and propensity to buy – is not a new concept. For centuries, businesses have implemented this strategy to adjust prices for products and services based on customer demand. Revenue leaders have adopted this across many industries, including hospitality, tourism, entertainment, retail, energy, public transportation, and commercial airlines with the goal to maximize sales volumes and product or service value by stimulating pricing urgency and market demand.
While the retail and entertainment industries have excelled in innovating their dynamic pricing models and technology, the airline industry has been left behind with legacy methodologies that are no longer able to keep up with today’s volatile market and ever-changing landscape. With market demand fluctuating, historical reports and sequential modeling used today can only tell a fraction of the story. And without the proper context, airlines are stuck in the past, lagging behind other industries and far from realizing the full revenue potential of dynamic pricing.
Many airlines still rely on static pricing, which uses a limited number of price points tied to the reservation booking designators (RBD) which are then filed through ATPCO. To provide their travelers with more optimal offers, some airlines started to introduce continuous pricing, offering more gradual prices. Lufthansa Group was amongst the first airlines to serve continuous priced offers on their direct and New Distribution Capabilities (NDC) channels in 2020 and immediately saw an increased revenue and conversion rate. However, with the constraint and heavy reliance for this industry on filed fares and RBD, there are comparatively few successful initiatives that involve true dynamic pricing applied to all sales channels.
On top of this, ancillary revenues – those generated through extra baggage, in-flight refreshments, internet access, seat selection, etc., which bring the industry around $55 billion according to McKinsey – are often managed through separate and isolated IT systems, meaning airlines struggle to understand how changes in dynamically priced fares also impact ancillary sales and total revenue optimization.
As long as outdated systems and obsolete methodologies remain in place, airlines will continue to fall behind other industries in maximizing revenue potential. Technological advancements, alongside successes in other industries, indicate the time is right for airlines to unlock the potential of dynamic pricing for their sales channels. This industry needs to break free from legacy technology constraints and start implementing optimal pricing strategies that take into account how decisions such as price, offer, channel or customer may impact the business outcomes and revenue performance. So what is the next step to transforming airline pricing?
Artificial Intelligence (AI) enables a transformation in airlines’ commercial performance and customer experience. Specifically, deep learning – a cutting-edge form of AI that uses neural networks trained to perform specific tasks under different conditions – creates context by looking at past behaviors, identifying good behavior versus bad behavior, and rewarding good behavior. This results in reduced forecasting errors, allowing analysts to rapidly respond to changes through added context (i.e. search data, ancillary revenue, cargo capacity, etc.). This revolutionary technology can find its path to desired business and revenue outcomes by correlating vast amounts of data, even in environments where data is sparse or noisy, a very real situation experienced by the travel and transportation industry today.
Dynamic Pricing with Deep Learning
Airlines need to sell the right product to the right customer at the right time, in the right channel, and at the right price. When embracing advanced deep learning technology, it provides automated, AI-driven revenue management capabilities that maximize airline profitability and total revenue optimization.
When it comes to dynamic pricing, deep learning and cloud development empower real-time customer segmentation and react much faster to any market change or surge in demand or commission rates. The Revenue Operating System puts into action AI-driven revenue management using deep learning to make predictions directly from context such as market forces, competitive forces, customer forces, and network changes.
Harnessing the Power of Data
Through the adoption of advanced AI, digital-first airlines are able to harness the power of data, going beyond historical data and leading the charge in dynamic pricing and other commercial decisions. With The Revenue Operating System, airline analysts can discover similarities between markets, competitors, leading demand signals, and events.
Identifying such signals before they are clearly visible in data-sparse subsets of the airline network helps focus attention where it’s needed most. 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 or tribal knowledge.
Dynamic pricing powered by deep learning is the key to creating optimal offers for airlines. And as part of FLYR’s total revenue optimization ecosystem, commercial teams are now able to automate pricing decisions in real-time, optimize total revenue including ancillaries, create personalized offers optimizing customer conversions and lifetime value, create trusted load forecasts to optimize capacity plans, direct marketing spend and energy towards high yielding returns, and confidently sell cargo capacity earlier.
Charles Ruesch, Head of Offer & Distribution at FLYR
Follow @flyrlabs on Twitter and LinkedIn for the latest news and updates on AI-driven revenue optimization.
One Order: The proof of the pudding is in the eating
NDC has transformed airline distribution. Well, while that particular statement can be debated for many hours, one thing that can be said is that it has changed the vocabulary of airline distribution.
The mindset of airline distribution has genuinely been transformed to think in terms of “offers” and “orders”, about APIs and dynamic bundles and so on. Indeed, many airlines are implementing these concepts in their distribution landscape.
But what has really changed, beyond some terminology? Well, for certain, airlines are thinking much more like retailers. They are thinking about the customer (purchasing) experience, products, bundles, segmentation, and they are thinking about how to get these into their distribution channels as offers – through NDC and their digital direct channels. The transformation of an offer into a sale of products is resulting in the creation of orders. However, most orders still rely on a system which also uses legacy artefacts such as PNRs, tickets and EMDs.
“Airlines become more retail-focussed, more confident in their capabilities as retailers and more well-equipped…”
As airlines become more retail-focussed, more confident in their capabilities as retailers and more well-equipped with tools to enable this, the more creative and ambitious airlines will become. More products in bundles, different products in different markets, integrations with providers of travel-related services that see the market developing as the technical obstacles of legacy artefacts are steadily removed from the equation. This gentle transformation is also driving changes elsewhere throughout airline organisations, as the knock-on effects of these begin to be noticed. Orders created within an order management system provide a vehicle for simplified settlement processes between sales channels (retailers) and the airlines as sellers. While the full complexity of airline revenue accounting, proration, BSP and other settlement flows cannot be eliminated overnight, the ONE Order accounting standards are enabling change. As the maturity of NDC distribution increases and orders become more prevalent, airline IT providers are presented with opportunities to bring further simplification, leveraging NDC and ONE Order. Providers of Order Management Systems (OMS) are now able to integrate directly with airline accounting systems in real-time, bypassing much of the legacy complexity associated with PNRs, tickets and EMDs.
However, there is more to being a successful airline retailer than creating offers, converting them into orders and feeding the fruits of these sales into the airline’s financial systems. At some point in time, there will be a customer who has expectations based on their wider retail experiences. The retail possibilities that airlines are now becoming exposed to go far beyond their own domain. While the additional bag will (hopefully) be visible at the time of check-in, and the lounge may be run by the airline, what about the pre-booked parking, fast-track security or the express train to the airport? The airline is unlikely to be the entity responsible for delivering the service in these cases, but the expectations of the customer are the same as when they present at the desk to drop off their bag – it should just work. However, interacting with all these new parties to ensure “it just works” is unchartered territory for many airlines. More and more, this involves pushing an order notification to the external service provider via the OMS to fulfil a service. Interactive two-way messaging related to order fulfilment is new. And, in the envisaged world where the PNR and ticket are superfluous, even the interactions with the check-in providers need to be brought into the era of APIs and open integration standards.
“IATA has anticipated this and has developed a set of standards within the ONE Order framework to enable the delivery of services using orders…”
In conjunction with airlines, vendors and other industry stakeholders, IATA has anticipated this and has developed a set of standards within the ONE Order framework to enable the delivery of services using orders. These messages can be used by an OMS to trigger the delivery by pushing information to the responsible party or can be used by delivery providers to pull the necessary information proactively. They can track consumption of services as well, which is key to triggering accounting and settlement processes. However, certification for ONE Order capabilities is still very light compared to NDC. While the certifications only may only be taken as a loose measure of maturity, it would appear that there may be a vast gap between what airlines can now sell and what (or rather how) they can deliver.
The reasons for this apparent mismatch are manifold and varied in their nature (technical, process-related, commercial), and some may be easier to resolve than others. What is more concerning though is the apparent lack of awareness of this mismatch among the broader industry. Great focus has been placed on promoting the need for modernisation in how airlines define and sell their products and services. However, there is still one key component that will become a challenge sooner rather than later – where the customer gets to seamlessly experience all those products and services that the airline invested so much effort in to get the customer to purchase.
The collaboration between airlines and their OMS partners is, generally speaking, mature, collaborative and based on a common understanding of business value and goals. The relationship between airlines and their ground handling partners is of a very different, operational nature and is often very cost-driven to extract the maximum value at the lowest cost. On the other hand, the relationship between OMS providers and ground handlers is non-existent in most cases.
Planning and executing the smooth delivery of products is key to being a successful retailer. Achieving this requires close alignment between all stakeholders: airlines, their OMS providers and crucially, the ground handlers and other partners, in and around the airport, in the air or wherever else they may be. So far, the focus has been on the selling aspect of retailing and increasing revenue and airline wallet share. However, if airlines are really to succeed as retailers, customer satisfaction will be determined by what, and how, they deliver. The proof of the pudding is in the eating.
