Rethinking Airline Retailing for Recovery and Beyond

Just getting passengers back in the air is imperative to the recovery of the airline industry. But what is the long-term impact of the pandemic on the overarching digital retail strategy that has been developing over the past few years, focusing on limber data-driven retailing and the broader adoption of IATA’s NDC standards?

Consumer trends that have appeared over the last year of the global shutdown might provide the answer. While consumers have been in extended lockdown, they have had an opportunity to embrace technology as a tool to manage their personal and professional lives and experience the limitations of technology. While video conferencing platforms like Zoom have now become household names, awkward moments have also attracted headlines.

And while subscription entertainment and home-delivery services, like Netflix and Amazon’s enviable retail model, may have made some gains from those stuck at home, nothing beats the escape of actually escaping–going to the beach, meeting face-to-face with clients, and having a darned good reason to change into a suit (be it a swimsuit or business suit).

Consumers may now be more open to retail offerings from airlines that feel familiar, from their lockdown life: airfare by subscription contracts, quick and safe getaway offers tailored to their profiles, and VIP packages that encourage businesses to fill those higher-revenue seats.

The industry’s path will depend on vaccination’s impact in re-opening borders, but creative retail is the ultimate booster shot for what ails airlines.

Refining Retail Strategies

On Tuesday, April 20, 2021, at 17:00 (UK Time), the Retail Panel will examine the pandemic’s impact on airline retail strategies and technology transformation during the World Aviation Festival. Stephan Cars, CEO, Snowfall; Esamatti Vuolle, Head of Digital Commerce, Finnair; Alison Taylor, Chief Customer Officer American Airlines; Johannes Walter, Head of Channel Partners, Lufthansa Group; Conor O’Sullivan, Chief Product Officer, Datalex; and Henry Harteveldt, President, Atmosphere Research Group will address critical questions facing airlines as they work to put together the right mix of proven strategies and new opportunities.

The group will discuss how airlines have restructured, and the impact of that restructuring as commercial teams scale back up. They will also review changes in customer behaviors during the pandemic and discuss the opportunities those new habits open up, including the possibility of subscription-based services. Experts will also discuss sentiment on IATA’s NDC and its advancement in distribution and·examine which investments are most likely to help airlines recalibrate and rebuild.

To encourage and facilitate ongoing NDC adoption during the pandemic, IATA took inspiration from social media platforms, introducing a networking element. Its free NDC Matchmaker web-based tool brings airlines, aggregators, and sellers together to facilitate planning and manage NDC implementations.

https://youtu.be/NzNTIgzXBnI

 

Whatever retail strategies airlines devise, and however they implement them, they will have some hurdles to overcome.

Mixed Signs of Recovery

IATA reports positive signs for the US market, where vaccination is advancing with domestic travel at two-thirds of pre-crisis levels and improving international travel demand.

• US domestic travelers accounted for most airline passengers (85%) and generated the majority of their passenger revenues (73%) in 2019.
• The recovery of international traffic still depends on the epidemiological situation in other countries. For now, most tickets sold are to leisure destinations in Latin America and the Caribbean.

John Grant notes on OAG (March 22) that airline capacity is improving but calls attention to some adjustments.

• Scheduled airlines’ capacity “creeps forward” by 1.4% to 59.8 million.
• 17 million more seats were removed from sales this week (March 22) through to the end of May.
• At the beginning of March,scheduled airlines were planning approximately 309 million seats for April; down to 284 million by March 22; around 9% of capacity cut less than eight weeks before the scheduled date of operation

OAG Table– Scheduled Airline Capacity by Region

Source: OAG

 

OAG Table – Scheduled Capacity, Top 20 Country Markets

Source: OAG

 

The Competitive Landscape

OAG also notes that American Airlines is still the world’s largest carrier, but there have been some significant competitive landscape shifts.

Measuring a minimum capacity of 100,000 seats operated as of March 22, OAG identified the “top” capacity losers compared to January 2020.

• Ten of the airlines listed are operating less than 25% of their normal pre-COVID capacity levels.
• Air Canada, Cathay Pacific, and Singapore Airlines have no real visibility when they could relaunch

“Such a list of global brands and market leaders stranded just highlights how far many airlines still have to go before seeing a recovery,” John Grant writes.

 

OAG Table- Top 20 Airlines Capacity Cuts. W/C January 20 ’2020 V’s W/C March 22, 2021

 

See You Later

Another trend that digital teams and airline retail strategists will need to consider as they ramp-up for recovery will be the pandemic’s impact on connecting passengers.

As John Grant states on OAG (March 10): “As the recovery rebuilds from COVID-19…connecting passenger[s] will become increasingly important, but will also bring a series of operational and scheduling challenges for the airlines. It really could become a question of ‘can we live without those flows’.”

• In 2019, 8.5 million flew from the United Kingdom to the United States; just under 4 million of those (46%) were making a connection as part of their journey.

New Covid-19-related travel processes (many of them likely to endure as part of new Flying Healthy protocols) will have a long-term impact on connection times. Some airlines may need to reconsider their plans for hubs and city pairs as they adapt their fleets to smaller aircraft. Keeping passengers up-to-date on the conditions for a connection at any particular airport and even highlighting “low hassle-factor” flight combinations in search results may prove to be a competitive advantage, as well as effective crowd-control and brand reputation management.

Previous efforts to introduce “disruption management” technology, including using airline apps to keep customers apprised of potential delays en-route and offer alternatives, will likely be a boon to the industry as passenger numbers recover.

It’s important here to note that digital consumers may expect seamlessness in the digital solution offered by airlines which compares to their shopping experience or queuing up their lockdown entertainment. Suggesting solution “packages” which can be easily clicked, approved, and purchased is likely to yield more positive results than having consumers search and put their alternatives together. Airlines have an opportunity to direct consumer demand where it is needed most—for example, offering a quick to re-book “hassle-free journey” package for under-served city pairs, which make an effective connection from the point of origin to the ultimate destination.

Holidays

Holiday travel usually helps airlines recover, and with business travel demand still relatively weak, leisure travel is essential. However, in Europe, some of the confusion around vaccines and mixed news on renewed restrictions put that recovery at risk.

IATA has reported positive signs for summer (as of March 12).

• Limited recovery in travel is possible starting March, but Q1 and Q2 will be weaker than expected at the beginning of this year.
• Recovery in the summer period is critical for the industry as airlines will continue to burn cash.

 

IATA chart bookings from UK to Greece and Spain for the summer period

• Daily bookings from UK to Greece and Spain for the summer period more than tripled, following the news that UK set out a roadmap to ease lockdown restrictions.
• Bookings are still 50% of pre-crisis levels, consistent with IATA’s scenario one recovery profile, i.e., RPKs reach 42% of pre-crisis levels in 4Q21.

“In our previous analysis, we identified two possible recovery scenarios for the second half of this year based on the progress in vaccination in the developed economies and the removal of travel restrictions,” IATA explains. “Scenario one assumed that travel restrictions would be lowered, following the vaccination of the healthcare and vulnerable populations, leading to a sharp rise in travel. Recent booking behavior of UK travelers suggests that the demand for travel is indeed alive. Nevertheless, better coordination between governments to restart the international travel is critical for widespread recovery.”

 

In Europe, Becca Rowland notes mixed messages from Spain for OAG (as of March 23).

“Current schedules show a huge ramping up of capacity from May 17 with easyJet, Ryanair, Jet2.com, TUI and airlines in the IAG group (British Airways, Vueling and Iberia) all piling in,” Rowland writes.

OAG Chart Scheduled Capacity from the UK to Spain

“If these airlines really do manage to operate half a million seats in each direction each week through the summer, it won’t quite take the market to the scale of August 2019, but it won’t be far off. They’ll have taken the market from just 7% of what it was operating two years ago in mid-April to 83% by July,” Rowland notes.

How will the lean and agile airlines that have reshaped aviation operating models over the past 30 years respond to these challenges?

During the World Aviation Festival on Tuesday, April 20, 2021, at 11:00 AM (UK), the CEO Keynote Interview will provide some answers. Bloomberg’s Guy Johnson join’s easyJet’s Johan Lundgren to discuss the airline’s pathway to recovery. During this candid Zoom chat, they will discuss how the intra-EU competition and market share may settle by the end of this year and what digital solutions might reignite passenger confidence and boost demand. Not forgetting the long-term impact of aviation on broader social concerns like climate change, Johnson and Lundgren will also the future of sustainability at easyJet.