When low-cost carriers designed their business models to simplify their business and reduce costs, they went ticketless. But why do legacy network carriers need tickets (now e-tickets) after all? Will they still need to issue tickets to customers who accepted their NDC offers? What are the steps for airlines to move to Order management?
Would we invent airline tickets today?
If you ask the question “what is an airline ticket, and can airline live without tickets?” pundits may argue that it is critical to many airline processes (which is correct), and it makes no sense to get rid of tickets. But if you ask the question differently “if we invented network airlines today, would we invent tickets?”, the answer will certainly be different.
In today’s world, network carriers are selling through travel agencies and through airline partners, they are operating at shared airports, and they are doing business like retailers, making offers to customers and delivering their orders. Indeed, they don’t need to issue tickets. Being ticketless and moving to orders is a goal shared by other modes of transport, like railways.
In September 2016 IATA published a report that studied the transition to order management, meaning retiring tickets from all airline processes and replacing them by orders. The report was drafted by Travel in Motion, on behalf of IATA’s airline distribution standards team. What are the key questions for the transition?
1 – Cost benefit analysis
The customers benefit from order management because they can easily create their own order and modify it before or during the trip. The airlines benefit from the increase in ancillary revenue, including for interline flights, and from the reduction in costs related to customer servicing and IT systems. Of course each airline has a different mix of customers and product offering, which will influence their analysis of the costs and benefits of order management.
2 – Impact on stakeholders
The report explores the vast impact on stakeholders of such a transition. Within each airline, customer service will access orders, ground and inflight staff will deliver orders, revenue accounting will process and settle orders, reservations will create and modify orders, digital channels will display orders, sales teams will notice the satisfaction of customers, revenue management will create offers than can be fulfilled in orders. Outside of airlines, interline partners, travel sellers, ground handlers, and payment providers will handle orders and benefit from them.
The PNRgov message containing Advanced Passenger Information, sent by airlines to governments prior the flights, will be based on Orders instead of PNRs.
3 – End state Architecture
The report recommends an architecture based on an “Offer and an Order management system” that support sales channels and rely on internal delivery and accounting systems. This architecture is free from any legacy record or message, such as PNR, E-ticket and EMD.
The alternatives include the “encapsulate” option, where the legacy records and message are encapsulated into orders, and the “on-top” option, where the core functions remain in the PSS and the new management functions are built “on-top” of the PSS.
4 – Approaches to transition
The report recommends the “staged” approach, as opposed to the “shadow” or “big bang” approaches. Indeed the approach that takes place in phases or stages help minimize risks. The steps can be defined by channel or by product or by function, which progressively cutover from the PSS to the new Order Management System.
Each airline may start the transition with a different configuration, either a PSS and a website, or already a merchandizing platform creating offers and an NDC API distributing offers. Each airline may have a different end state architecture in mind, which generates as many possible transition paths.
5 – The right transition
The report argues that different profiles of airlines may choose different paths, which find the best compromise for them. At a high-level, the three airline profiles are network airline, hybrid airline or low-cost airline, and within those profiles there are innovative or follower airlines. The decision criteria include cost/benefit, architecture, transition approach, impacts and risks.
In summary, the air travel industry has moved from asking “if” to “when” to “how” the transition will take place. In the “how”, the 5 questions to ask are: What are the costs and benefits? What is the impact on stakeholders? What is the end state architecture? What are the possible transition paths? Which transition is right for my airline?
The airlines which will get this transition right will be the first to deliver a smoother travel experience to their customers.