When it comes to travel, digital behaviours, online retail expectations and strategic airline investments, COVID-19 truly changed the game for all.
Lockdown digital consumption has accelerated e-commerce across the globe. Although, e-commerce was growing fast before COVID-19 hit, the pandemic pushed record levels of consumers online. According to the Salesforce Q3 2021 Shopping Index*, global online sales grew 11% year-on-year in Q3 2021. A Q4 2021 dataset from Deloitte predicts online sales in the US will increase another 11-15% on 2020’s record numbers in the three months to January 2022*
This is a purchasing trend and revenue opportunity ripe for the picking. And yet airlines are continuing to miss out on real-time revenue opportunities due to limitations in forecasting, lack of automation and lack of real-time analysis.
For true digital retail success, long-established airlines have the opportunity to be ‘bold’ with digital investments and particularly in AI, to power more customer-centric, data-driven and real-time retail experiences. No more applying ‘digital lipstick’* (as McKinsey describes) to traditional technology. Airlines ought to aim higher when it comes to their IT and digital investments to make the bold digital moves of top performers. Airlines spent roughly 5% of their revenue on IT before the pandemic, relatively low compared to other sectors – retail spent 6%, financial services 10%.***
Airlines that leverage their direct channels to deliver a superior digital experience will in turn increase revenues and play a much bigger role in the end -to-end customer journey. This means airlines need direct offer control at scale and a digital partner to drive retail innovation at a pace that customers expect.
So should airlines spend more and if so, where should the spend be made?
This could mean investing in entirely new digital offerings from the outset, versus digitising existing products which in any case, may not be fit for purpose. Revenue Management is just one example where the traditional way of doing things – technically as much as commercially – has to change. Retrofitting legacy systems or waiting for some to catch up with true retailing, will not be the fastest path to growth. Legacy systems are hindering airlines’ ability to ingest real-time data and to react dynamically with the market.
Pricing innovation coupled with a transformation of Revenue Management and the shift to greater control of the airlines’ digital distribution for increased customer centricity are two critical areas where Datalex sees an appetite for action across the industry. In Datalexs’ own commissioned research with airlines globally, the transition to Dynamic Offer and One Order are high on the priority list with over 70% of airlines surveyed stating they are important areas for innovation as they emerge from the pandemic****. Much as many airlines would like to remove the PSS, or DCS, most recognise some sort of schedule and inventory management is needed. Why though, does the airline’s direct strategy, including retail and pricing, need to be secondary to or attached to the legacy PSS? Why not insert specialist tech players that can drive retail and pricing innovation and act as a key profitability driver?
Let’s not forget the rapidly changing competitive landscape. The airline start-up scene is hot with 90 start-up airlines across the globe expected by the end of 2021 as reported in the Wall Street Journal*****including those already in the mix like flypop, Play, Flyr and Breeze Airways. They can use more cost effective, more flexible, modular technologies that are not constrained by legacy limitations. These new digital challengers will shake up the old distribution traditions.
As the time comes to replace existing IBEs, established airlines have a unique opportunity to introduce a more flexible, agile, digitally sophisticated and AI powered retail engine.
This is a time for new beginnings. A time to be bold with digital investments.
Author: Alison Bell, Senior Vice President, Sales & Marketing, Datalex
For more information please visit: www.datalex.com
*Salesforce Global Online Shopping Index
**McKinsey & Company
***Airline Sector Poised for Change Post-COVID
****Datalex independently commissioned research via Censuswide with 100 Senior Airline Executives Worldwide
***** The Wall Street Journal