What will air travel look like in the metaverse?

What will air travel look like in the metaverse?

In a famous interview in 1995, Bill Gates explained the Internet to Dave Letterman, the host of a TV show. Letterman argued that he could listen to the news on the radio and wasn’t sure why would someone need the Internet. Today, we can listen to the radio on the Internet.

As the metaverse is getting a lot of attention, including in a recent article by Johnny Thorsen, many are wondering if it’s another technology looking for problems to solve, if it’s going to be more successful than Second Life (the first attempt at a virtual world) and if it may have an impact on air travel (you can’t fly virtually, can you?).

Let’s understand first what the metaverse entails then let’s have a look into the current trials and a longer look into the future.

 

What is the metaverse? How does it relate to Web3?

My personal understanding of the metaverse is a term that covers computer-generated virtual worlds and the tools to navigate them. As such it is more than AR/VR tools, it is really a graphical interface layer on top of the internet, pioneered by developers of video games such as Minecraft and Fortnite.

In a related space, Web3 is the blockchain-based iteration of the Web, which was built originally on the internet. If you consider blockchain as a secured and decentralized evolution of the internet, designed to handle digital assets or tokens, your navigation layer is called Web3.

If you mix the two concepts – metaverse and Web3, you can visit a virtual world and handle digital assets in this virtual world. By digital assets I mean virtual properties, virtual currencies and other virtual goodies. Following this simplistic presentation of the new concepts, where is the link to physical travel and tourism?

 

Current air travel initiatives with the metaverse

The most recent example of current initiative is the airline Vueling that announced testing the metaverse to support customers will trip planning and to sell (real) tickets. They partnered with NextEarth, a platform in the metaverse, and Iomob, a mobility platform helping with the integration.

Another example is Qatar Airways presenting a virtual cabin crew, inspired by the avatars in the virtual world. This initiative focuses on giving the customers a taste of the inflight experience.

More airlines are exploring the technology based on their priorities: trip planning, product review, etc. Looking at the current initiatives gives us a hint to the future: the metaverse will be a new sales channel for travel and tourism, including air travel – like the internet enabled 25 years ago online sales, and 10 years later mobile phones enable mobile sales. Get ready for “meta sales”!

 

Looking into the future

The future of “meta sales” is two-fold: 1) reaching customers where they are and 2) showing the product to the customers.

As hundreds of millions of customers spend time in the virtual worlds they will come across people and brands, including travel and tourism brands.

In the case of a virtual world that represents the real world – like a digital twin of our world, think Google maps or Google Earth – the navigation in this world will lead to the digital twin of a hotel or of an airport. Airlines may want to offer a visit of their aircraft.

 

Next steps

It is difficult to predict how long it will take before we feel that it is normal to pay a virtual visit to a hotel and to an airline before making a purchase, like it is normal today to visit their website.

This exploration of the metaverse may seem to be a stretch as some airlines still need to fix the basic features of their mobile app. History shows us that new technologies don’t wait for everyone to master the old ones.

Most people and companies will probably adopt a “wait & see” attitude, while watching the pioneers who experiment and commenting from the side lines. As we’ve seen above, some players have already adopted the “test & learn” attitude. Indeed, the best way to predict the future is to build it.

One Order: The proof of the pudding is in the eating

One Order: The proof of the pudding is in the eating

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.

 


Nick Stott, Travel in Motion

 

Last Call for Customer-Centric Retailing

Last Call for Customer-Centric Retailing

From this week, face masks are not mandatory anymore on European Union flights and airports (except in Spain and Italy), more than two years since the start of the pandemic. We may all feel like the pandemic days are about to be something of the past and that things are now getting back to normal. The truth is that some things may actually be changed forever. People worldwide spent these last two years adapting to the “new normal” and, although most of us wanted our lives to get back just as they were, some changes came with interesting challenges. It’s not just about people adapting to a new world. When people start to have new habits and think in different ways, the global market has to adapt as well.

One of the most affected areas was, without a doubt, the travel industry and now, two years later, things seem to be moving forward in a new direction instead of going back to the same place. Last year, online traffic increased by 11% in the travel industry, more than any other (ContentSquare, 2021). Airlines must face the reality of a changing travel experience in a post-pandemic world and create flexible solutions to meet the needs of the “new normal customer”.

change in online traffic of selected industries worldwide

The world was already on a fast-paced journey to digital transformation and the pandemic came to accelerate the rhythm of change. Many customers who were hesitant regarding online shopping are now comfortable with that new habit, and generations Y (millennials) and Z were already shopping online not only for plane tickets but for everyday things like groceries. These times, when the world stopped for a moment, brought much uncertainty, and a strong effort to strengthen digital solutions can be quite a challenge. Fortunately, many airlines are facing this situation as an opportunity and that can only lead us to an exciting future in travel.

 

Flying Above and Beyond Expectations

Customer-centric OTAs and travel suppliers are moving to the next level. Let’s take the example of Airbnb which just launched a new way of selling travel, based on the experience that customers are looking for. Or Amazon introducing a beta in the US to sell digital travel experiences. Airlines such as Southwest which was already leading in digital experiences just introduced additional mobile self-service options to enhance and personalize the customer experience along the travel journey. Travelers will be able to add for example an upgrade for priority boarding before leaving to the airport, instead of having to queue at the airport or call the contact center. All airlines understand now that their business model and digital ecosystem needs a serious revision.

flying above and beyond expectations

Imagine someone — we all know this person — who started a new job in this post pandemic scenario. What new challenges come to mind for this consumer who now has to create a whole office in the house? The journey has shifted completely. This person will spend some time on a thorough search for the right products and maybe find out some other products or services that were unknown before. There’s the space for recommendations where the store will gain the customer’s trust and loyalty.

It’s not just about providing the right product, the expectations are already high. The companies who manage to surprise their customers by going beyond are the ones who will win this innovation race. The companies who do this properly make their customer feel they matter all the time, and right in the device we all can’t seem to leave — the smartphone. It’s Amazon that lets you know your new ergonomic chair is arriving today, it’s the fitness app that sends you a notification that you haven’t been working out for two weeks, or any food delivery service that sends you a reminder that tonight is perfect to order tacos from your favorite place. When it comes to travel it shouldn’t be any less than this.

 

The Future Customer Experience Is Now

If we agree that the customer journey has severely changed with the last pandemic then it’s imperative for airlines to invest in extensive research on user experience.

Airlines could learn a lot from retailers that are investing in this customer experience more than ever, and it all starts with how much they prioritize user research. Tesco, one of the largest supermarket chains, realized how many customers were tired of commuting to the office in the city center because they didn’t have the ideal conditions to work from home. The result is that Tesco is now creating flexible office spaces inside their supermarkets. This is a clear example of companies that listen to the customer’s needs and provide solutions beyond expectations.

the future of customer experience is now

Concepts like innovation and flexibility have never been so crucial and, in the end, it’s all about who takes off quickly to this transition. The airline industry has been able to reach a certain level of modernization since the general adoption of the internet, however, this evolution is still deeply rooted in the same concepts and flows from decades ago. Low-cost carriers, for example, have been driving digital adoption and agile commercial policies, gradually augmenting their products. Even these companies are now realizing the need to move to the next level to remain relevant. It’s urgent to implement leaner technology and processes or rather to simplify and get rid of unnecessary processes.

The latest digital retail platforms, tools, and methods are getting increasingly important for airlines if they want to become true retailers. Air Asia aims to generate 50% of its revenue with non-travel / non-aviation related revenue by 2025. The ultimate goal is that airlines become completely customer-centric in every area. It requires getting away from legacy technology fast, which was built around transactions and not around the customer. This could mean the end of booking classes or fare filing and the beginning of a simplified and flexible process. Alongside innovative platforms travel suppliers will be ready to adopt existing next-gen services and, at the same time, guarantee a first-class ticket to future trends.

People want to travel, and only a few airlines have really used the pandemic to lay the foundations for the transformation journey and move with full speed – and low risk – to ensure they have a state of the art customer proposition. With additional challenges – and opportunities – that sustainability and new mobility models present there will be a lot of new players joggling for positions and some unforeseen ones such as rail becoming stronger again. At the beginning of the next decade, in 2030, we forecast a fundamentally different travel experience. If airlines do not grab the opportunities of digital retailing they risk increasingly turning into operating units for the players who will.


By Dario Martinho, Content Creator at Branchspace

5 questions airlines should ask about their transition to Order management

5 questions airlines should ask about their transition to Order management

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.

 

Conclusion

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.

5 points to watch for business travelers who pick rail as an alternative to air travel

5 points to watch for business travelers who pick rail as an alternative to air travel

While safety, on-time performance and cost effectiveness made air travel the preferred mode of transport for business travelers, the new priority is on sustainability and carbon emission levels, and air travel cannot compete with rail on this metric. As business travel is coming back after the pandemic, is rail ready for business travel?

If we take a simple example of a trip from Geneva to London. By plane, the journey takes 1 hour and a half, produces about 100kg CO2 and costs about EUR 100. By rail, it takes about 8 hours with 1 stop (change station in Paris), produces about 5 kg CO2 and costs about EUR 200. Let’s assume the environment-conscious business travel favors low CO2 emissions compared to time and cost. What are the other points to watch when traveling by rail?

 

The itinerary

 

Air journeys including connection use “Minimum Connecting Time (MCT)” which build a contingency when connecting between two flights. Rail journeys don’t include MCT, i.e. an itinerary may show a 3-minute time between the scheduled arrival of the train and the departure of the next one, which is barely the time to change platform. This may work with Swiss railways that operate like clockworks, but not in other countries. Railways don’t track on-time performance of trains, in the same way FlightRadar tracks flights. Railways don’t check if passengers are on board and won’t wait for connecting passengers, unlike airlines. Railways don’t provide assistance in case of missed connections like IATA airlines do. These differences mean that it is safe to add contingency in the rail itinerary compared to what a website may suggest.

Websites may not recommend the best itinerary if they don’t search the right websites. For example, I searched a solution to go from Bremen to Berlin in Germany. The Kiwi website recommended a combination of flights via Palma de Majorca on the way out and via London (7 hour self-transfer from Gatwick to Luton) on the way in, whereas the direct 3-hour train connection was available on DB website.

 

The ticket

 

Air travel has made electronic tickets and boarding passes a norm since 2010. For rail, electronic tickets exist at national levels but are not ubiquitous for international journeys. In a recent example I booked a train ride from Germany to France using the SNCF (French railways) website which required to collect the ticket for the DB (German railways) segment on a kiosk in a French train station! Not only the delivery of tickets should be completely electronic and mobile, but in case of changes the customer expectation is to receive the new document on the mobile phone.

Intermediaries such as booking sites could help by bringing transparency. Unfortunately, websites like Omio don’t make it clear whether the ticket is booked directly with the rail operator or with Omio. The Terms of Use say that it may vary. From a customer perspective it is important to know, at time of booking, who to deal with in case of changes or refunds. Especially if the change is due to the operator, the traveler needs to be notified and proposed with alternatives.

 

The travel experience

 

The longer the journey the more important is the travel experience, for the business travelers who’d like to be productive. Forward-facing seat, wifi on-board, plug for the mobile and laptop, spacious table are examples of attributes valued by a business traveler. Assuming that the train cabin is equipped, the traveler should be able to book the seat and access the attributes.

While airlines have designed products for business travelers (calling it business class), railways still operate first and second, with sometimes very little difference. In another example, the fare difference between a first and second class on SNCF is 2 euros on a 52 euro fare, or 4%. The ticket can be modified with conditions in both options, bags are included and electric sockets are available in both options.

 

The disruption management

 

The longer the journey and the larger the number of connections, the higher the chances of missing the last train and ending up in a station closed for the night. While IATA airlines accommodation for the travelers who missed their connection, railways don’t have procedures in place. This is simply due to the nature of the contract with the carrier: the airline commits to carrying a customer at a specific time to a destination, whereas the railway simply allows the customer to occupy the car.

In a recent example in Germany, after all trains to France were cancelled for the day, I ended in a German train station at night, with DB offering to sleep in a parked train. There are no alternatives by bus or no hotel accommodation. Although the cancelations are not the norm, the business traveler must know that in this case hotels will be full and the only option to stay warm for the night is the car reserved to refugees and homeless people.

 

The refund process

 

The airline refund process is not designed for simplicity and automation. The airline fare may not be refundable, but the government taxes and fees collected with the fare are not due in case of cancelled flight and should be returned to the customer. I’ve not seen yet an airline ticket which can clearly show the refund value in case of a customer decision to cancel or in case of airline decision. This would not only add transparency but also enable automation.

In the case of railways, the complication is augmented by the lack of real-time traffic information. In my example above, SNCF didn’t know that their train stopped in Germany and I received a confirmation that the train had arrived in Paris, while obviously it was blocked in Germany. In the case of DB, the refund process requires to fill an online form and send it by post. The claim request is not valid without a “confirmation of delay” which is not provided by the carrier, defeating the entire process. In this case, I eventually found a hotel room, at EUR 100 for the night, which is unlikely to be paid by DB or SNCF.

 

Conclusion

I love traveling by train and live in a country with excellent rail services, Switzerland. But rail is designed for mass local transit, not for internal business travel. This article looks at the gap between the modes of transport from a customer experience perspective, trying to use rail for business travel.

It shows that there is a clear opportunity for rail operators to capture business travel demand in a time of sustainability-consciousness, until air travel deploys massive fuel alternatives becomes competitive from a CO2 emission perspective. Adapting rail for business travel means addressing ticketing, itineraries, customer experience, disruptions and refunds.

If any rail operators have already implemented some of the changes suggested in this article, I encourage them to comment below and I will gladly feature them in a future article.

The ‘AI’ Promise – A New Era of Airline Retailing. In discussion with Ryan Estes, VP Technology at Datalex.

The ‘AI’ Promise – A New Era of Airline Retailing. In discussion with Ryan Estes, VP Technology at Datalex.

As airlines emerge from the COVID-19 pandemic, what trends will outlast the recovery?

The pandemic was the single most challenging period for the airline industry, but equally it has proven to be the most opportunistic time in terms of adopting new, more modern and innovative technologies.

In particular, the pandemic highlighted the need for airlines to be prepared for periodic and unpredictable ‘demand reduction’ events and ‘demand enhancing’ events. Key to this is the need for a high degree of flexibility and agility to react in real-time. Examples include real-time dynamic pricing and offer management that reacts immediately to ‘demand impacting’ events.

Demand profiles from the two primary traveller market segments – leisure and business – have changed dramatically with business travel experiencing structural change, while conversely there is huge pent-up demand for leisure travel. While this bodes well for airlines in terms of traffic volume, leisure travellers are more price conscious and seek lower price points than more profitable business travellers. Airlines will have to maximise pricing to ensure the highest possible revenue is being generated in each ‘shopping engagement’ without impacting demand.

The pandemic also shone a light on issues associated with legacy systems underpinning airlines’ technology stack, as these systems were slow to react to rapidly changing environments.

The opportunity for significant change in airlines’ underlying technology, particularly leveraging AI, automation and SaaS is huge. And the opportunity is now.

 

You are leading AI initiatives at Datalex to transform airline retail, particularly in the area of pricing. What do you see as some of the key ‘AI’ opportunities?

We see several areas where AI could have immediate transformational impact in the travel industry.

One key area rife for disruption, leveraging AI, is pricing. The pandemic highlighted the constraints of the traditional pricing approach which is restrictive & static, limited to specific customer segments and demand scenarios, limited price points (via RBDs), that cannot adjust pricing in real-time.

With the traditional revenue management set up, airlines suffer from a trade off between ‘price accuracy’ and ‘speed to market’. For an airline to update its price predictions frequently, it must analyse less inputs and vice versa, if it wants to analyse more, it has to update predications less frequently.

AI is fundamental to overcoming this trade off by cultivating pricing strategies that adapt in real-time. RBD-less pricing, powered by AI is the future. This will allow airlines to understand and react to fluctuating market conditions, competitive landscape and other complex data which requires sophisticated data analytics and machine learning capabilities.

Customer service and end-to-end customer engagement throughout the travel lifecycle are other key areas. AI can be used across the board to enable airlines to be more reactive and engaged with travellers without the cost of implementing in-person engagement. Sophisticated, AI-enabled chatbots can be implemented to quickly resolve passenger queries, improving operational efficiency by reducing call center load and increasing customer satisfaction with real-time engagement.

Ultimately, airlines have a great opportunity to harness AI to transform how they do their business, to connect better, and with more customers and to drive new revenues
It’s an exciting time to work in this industry where real change, and at a pace never experienced before, is happening every day.

 

What do you think would be the ‘quick wins’ for airlines in their AI strategy? And what should be on their medium and longer-term ‘AI’ roadmap?

As described above, in the short terms airlines should focus on pricing and customer service.

The total cost of air travel has the most significant impact on a person’s decision to purchase an airline ticket. The likelihood of delays and cancellations, and loyalty status also play a significant part in the decision-making process. Airline customer service is crucial to support customers before, during, and after a flight. Improving customer service leads to happier customers, better travel experiences, and higher revenues. These are the areas that airlines should make a strategic priority when it comes to “quick wins” using AI.

AI-powered customer service chatbots is a quick win that delivers high impact. Chatbots provide significant customer support savings. Second, bots can also sell.

Another key opportunity that remains untapped by airlines is AI-powered dynamic pricing which has the ability to drive higher revenues for the airline and satisfy the pricing needs of the customer through smarter, reactive pricing based on actual real-time demand and customer price sensitivity.

Ultimately, capturing more customers and more opportunities in real time across the revenue cycle.

Personalised offers leveraging AI should be a medium-term focus for airlines as this will enhance the overall customer experience. Airlines can use AI to learn about the behavior of passengers and create offers that will convert better. We refer to this as product determination.

A longer-term focus should be on AI driven dynamic offers and eventually a move to ‘one order’, and those initiatives are coming down the track sooner than we think.

Furthermore, AI can hugely improve operations below the wing.

 

How else can AI powered dynamic pricing benefit airlines outside of additional revenue?

This is a great question, because this topic rarely comes up, and it’s a topic I’m really passionate about. Besides the obvious revenue uplift, AI-powered dynamic pricing also can generate significant operational efficiencies for airlines.

Revenue management’s goal is maximise their revenue across the entire network, with the “entire network” being the key phrase here. Once pricing strategies are defined and fare structures filed, revenue management will then use a combination of their RM tools to manually monitor market conditions.

There are only so many markets revenue management has the capacity to monitor and there is only so much time a human and the processes allow to react. As mentioned earlier airlines suffer from a tradeoff between ‘price accuracy’ and ‘speed to market’. AI powered Dynamic pricing can be used to offset these workloads, react more accurately in real-time and direct Revenue Management’s attention to strategically focus on the markets with the most opportunities, and other value driving tasks.

 

What other ways can AI be applied within an airline? What would you suggest are the top 5 ‘AI opportunities’ for airlines?

The adoption of airport robotics, blockchain technologies for data sharing, and VR technologies will be widely used in the future. Blockchain for data sharing was explored by Datalex in a recent hackathon.

AI is already being used to estimate the average lifespan of the parts on an aircraft. AI also has the potential to be fully integrated into the flight scheduling process to reduce offered flights during a significant demand restriction event.

During the pandemic and because of the route/gate rules airlines were frequently flying very low occupancy planes or empty planes on routes to meet requirements – these were referred to as ‘ghost flights.’ AI could be used to quickly and efficiently manage flight offerings based on demand. When a demand restriction event occurs, zero booking flights could be quickly cancelled and removed from the airline’s schedule. Low booking flights could be cancelled, and passengers automatically rebooked to other itineraries that meet their needs to consolidate more travelers on fewer flights.

What are the top 5 AI opportunities? I would say:

  1. Revenue Management
  2. Customer Service
  3. Network Planning
  4. Crew management
  5. Air Safety and Airplane Maintenance

 

What are some of the biggest challenges in applying AI in the airline industry? Are there any tips you are willing to share?

Applying AI to the aviation industry is an inevitable transformational change that is just beginning to take off. The biggest challenge faced is the lack of knowledge around AI and the true value it can add to an airline, so that educational piece is really important.

Another big challenge with AI is transparency, specifically the fact that humans should be able to form coherent explanations of the reasoning process in AI. That means providing airlines with clarity of what decisions were made by the AI technologies and why they were made. This is hugely important for airlines to understand that AI can be tailored to their business models. Transparency is important not only for trust, but also for debugging, testing and certification.

Another big challenge in applying AI, particularly in the airline industry, is the underfitting and failure to generalise Underfitting is defined as when the machine learning algorithm fails to learn enough from the training data during the training process. Failing to generalise occurs when the model successfully fits the training data, but has a high error on the validation/testing data. This is a challenge that we have successfully addressed in Datalex.

What tips am I willing to share? It requires specialist AI talent and technology partners focused on AI. When you are working with AI, you have to enjoy the process just as much as the achievement.


Kathrina Gallogly

Footnote:
Datalex’s purpose is to transform airline retail.
To learn more about key digital retail trends and AI-powered dynamic pricing opportunities, download the Datalex Research Report: The Digital Airline and Customer 2022.

Digital Consumer Retail Trends Airports and Airlines Should Keep In Mind

Digital Consumer Retail Trends Airports and Airlines Should Keep In Mind

The recently published Travel Retail Consumer report by analysts at m1nd-set, Future trends impacting travel retail, offers several insights which might inform airport and airline retail strategies.

Their report suggests that airlines and airports might want to plan their digital and social strategies around VR, AR and Social.

M1nd-set expects greater digitalisation of the shopping experience “will emerge more prominently over the next year.” That includes making further investments in CRM programmes, developing more retail and service APPs, a continued focus on making omnichannel retail seamless, and boosting the resonance of social commerce with Augmented Reality (AR), Virtual Reality (VR), and chatbots.

More than eight out of ten shoppers (83%) said digital presence and experience are as important as the in-store experience.

With travel coming to a stand-still over the past two years and non-essential retail accessible only online, consumers relied more on digital channels. They forged new shopping habits, which endure after reopening.

But it’s not just about the retail channel. This trend toward greater retail digitalisation also suggests that digital-only products will rise in popularity and demand.

What does that mean for airports and airlines?

M1nd-set suggests airport retailers “meet and service shoppers online first and attract them into stores when they next travel.” Products such as “e-books, vouchers and tickets to destination-based experiences, inflight and/or onboard services for airlines…photography and artwork or films and music” are expected to grow in the months ahead.

Airports that support online shopping with terminal pickup and airlines that offer IFE content and in-flight meal purchases through their apps will have an advantage. But airlines and airports may consider introducing digital-only items, either unique products or special discounts. These will encourage users to keep the app installed on their devices and engage with it frequently. “Many low-cost airlines have reaped the rewards of this niche for some time already,” M1nd-set points out. “Retailers in airport retail can also benefit, with the right strategy in place to meet the consumer digitally first with time, location and destination relevant communication and advertising.”

Shopping Experience Graph

Source: m1nd-set

“Brands can also meet consumer expectations and enhance the customer experience, with digital-first encounters, such as virtual distillery tours, educational programmes about the sustainable production processes that then entice the shopper to learn more and purchase a sustainably packaged or produced travel retail exclusive in-store when next travelling.”

More than half (53%) of shoppers interviewed say they prefer an omnichannel shopping experience, compared to only 37% in 2021.

M1nd-set also suggests that developing VR and AR experiences that support your retail strategy will help take the stress out of travel for returning passengers post-COVID while offering helpful edutainment content. Highlighting the sustainable origins of some featured local products, or offering bar-code activated videos that better explain the application of certain cosmetics, for example, will entertain and entice. M1nd-set believes there are ROI gains from VR and AR development.

  • More than half of shoppers globally say they value experiences more than products
  • Among Millennials, the tendency is higher still, with seven out of ten shoppers leaning towards experiences.
  • Consumers are considerably more likely to purchase products online where the shopping experience is more interactive and immersive through AR.
  • One well-known e-commerce platform reports that products displayed with AR content demonstrating use have double the conversion rate than products without AR.

M1nd-set also identifies social commerce as “a major trend that will evolve and grow significantly throughout 2022,” with growth driven primarily by Millennials and GenZ consumers.

Social Commerce Graph

Source: m1nd-set

The social commerce market grew by more than 30% in some developed markets in 2021 and is expected to more than double in market size over the next four years.

“Meeting shoppers where they are, whether on Facebook, Instagram, Twitter or Tiktok, or via live streaming services, is proving to be hugely successful to major brands who invest in social commerce and social media advertising. In China, the most commonly used platforms among consumers are Douyin, QQ, XiaoHongShu, Pinduoduo, and WeChat. Both in China and elsewhere globally, the younger generations will account for the significant majority of spend on social media platforms in 2022,” m1nd-set states.

  • Eight out of ten shoppers discovered a new product while on social media.
  • Around two-thirds of shoppers globally who use social media say they have purchased a product via a social media platform in the past year.
  • Two-thirds of those who bought something through social commerce say they purchased the product following an advert they saw on social media.
  • Facebook and Instagram are the most popular platforms for making purchases through social commerce.
  • Around a quarter of shoppers interviewed said they had used Facebook and two-fifths said they used Instagram.
  • Less than 10% said they had used other platforms such as TikTok, Twitter, Pinterest and Snapchat.
  • Of those who did bought something through social commerce, two thirds said they would do so again.

The most common categories purchased on the social commerce platforms include video gaming, toys and leisure activities, jewellery and watches, fashion & accessories and books, including e-books, m1nd-set states.

“As with other aspects of digitalisation, such as livestreaming and personalisation through sophisticated CRM, consumers will be using social commerce more and more frequently to make their purchases. Social media location tracking tools enable brands and retailers to target consumers easily when in or near an airport. The opportunities are endless, but failure to meet the consumer in a place where he or she is increasingly used to shopping will mean brands and retailers risk forfeiting considerable sales opportunities,” m1nd-set concludes.


By Marisa Garcia

Stroopwafels in demand: Corendon launches in-seat ordering 

Stroopwafels in demand: Corendon launches in-seat ordering 

Stroopwafels in demand: Corendon launches in-seat ordering

While prevalent already at sporting venues and on trains in-seat ordering is gaining traction with airlines.  

As air travel recovers, the technology is helping to boost revenue opportunities and enhance convenience for passengers. Factors that have prompted Corendon Dutch Airlines to introduce an in-seat ordering service across its fleet of three Boeing 737-800 aircraft. 

Working with AirFi, the Dutch leisure airline has already trialled the service, which gives passengers the ability to order their favourite snack or item of duty free onboard and have them delivered directly to their seat.  

According to Gert-Jan de Vries, Manager Cabin Crew & Inflight Sales, Corendon Dutch Airlines, “Passengers loved this feature and learned how to use the in-seat ordering functionality very quickly when we ran a trial in January. We saw an instant use of the system.”  

For those preferring to make their purchases in the more traditional way, a trolley service will continue, however, the digital ordering system allows those who didn’t use the trolley service, or simply want to purchase that second cup of coffee or extra Stroopwafel, to do so at any point during their flight, at the crew’s discretion.  

“With AirFi’s in-seat ordering, we provide a more discreet way for our guests to request what they want, when they want it. The result is that our guests are more content during the flight, and as an airline we earn additional revenue that might have otherwise been lost,” de Vries adds.

 

“They’re the first European airline to adopt our ground-breaking in-seat ordering capabilities”

 

As Job Heimerikx – CEO, AirFi explains, “Corendon has been a partner of AirFi for many years and we’re incredibly excited to announce that they’re the first European airline to adopt our ground-breaking in-seat ordering capabilities. By offering hybrid service that begins with the traditional trolley service then switches to in-seat ordering, Corendon is truly maximising the potential of its onboard retail programme.” 

The carrier’s onboard digital shop, The Corendon Café, is fully integrated with AirFi’s ePOS (point of sale solution) and IFE system, and under the full control of cabin crew, who can restrict the service during certain events, such as turbulence.  

 

“Passengers need simply connect to Corendon’s streaming IFE and shopping platform using their own mobile devices by selecting the appropriate Wi-Fi network onboard”

 

Crews will perform a first trolley service before activating the new service. To make a purchase, passengers need simply connect to Corendon’s streaming IFE and shopping platform using their own mobile devices by selecting the appropriate Wi-Fi network onboard. There they can select their choice of snack or drink from a virtual menu and place their order. 

Crew are then notified of the order on their tablets, marking the request “in progress” or “complete” for other crew members to see. Passengers also see their order status via messaging on the wireless IFE platform streamed to their mobile device. A crew member will then deliver the items to the passenger’s seat, at which time payment is taken. As a cashless airline, Corendon accepts all major debit and credit cards. 

 

“An additional benefit is the ability to monitor stock levels, with crew marking products as ‘out of stock’ when they become unavailable.”

 

An additional benefit is the ability to monitor stock levels, with crew marking products as ‘out of stock’ when they become unavailable. The airline is currently trialling optimised loading using data from its AirFi’s ePOS solution to help drive down operational costs without compromising sales opportunities. 

In 2020, AirFi and Singaporean LCC Scoot launched “ScootHub” with in-seat ordering in a regional first. The initiative facilitated a shift from printed menus and in-flight magazines at each seat to a fully digital solution, saving the airline 156 tonnes of paper annually. 

NDC: Steps towards a new distribution landscape

NDC: Steps towards a new distribution landscape

From its very inception, IATA’s New Distribution Capability (NDC) has evoked heated debate. Sometimes that debate is related to the purpose of the NDC technology but mostly it’s about who will pay.

Such fundamental challenges have hampered the standard from gaining significant traction before now and while adoption is progressing, many predict there are further hurdles ahead.

Traditional airlines in Europe, such as those in the Lufthansa Group and Air France-KLM, have largely embraced the NDC technology standard and talk about it in the same breath as their modern retailing future. Other carriers, meanwhile, have taken a step back and returned to traditional distribution methods.

It might be time to accept that NDC is not a magic wand transporting the air passenger transport industry into the e-commerce world of Amazon, but a stepping stone in that evolution.

By acknowledging that NDC is a means to an end, airlines, travel intermediaries and technology partners can more easily face up to the challenges of implementing NDC, some of which might be considered challenges to their overall future survival and growth.

 

An e-retailing mindset

 

A change in mindset from all players is critical to move towards modern retailing.

At a recent airline conference, one former airline executive said airlines risk losing share of wallet to non-travel retailers such as Amazon or Google, not only because of the traditional mindset but also because of the ongoing reliance on legacy technology.

Many advocate it is not just digital transformation that is required, but complete system transformation if carriers, and other players in the distribution ecosystem, are to meet the growing expectations of consumers.

 

Evolving standards

 

Going forward, IATA’s recently announced plan to move from the NDC certification index to an Airline Retailing Maturing (ARM) index might focus minds on the end objective rather than the technical barriers to getting there.

One further challenge to NDC achieving greater traction is the various versions of the standard that airlines have used to develop solutions. This might be resolved through the launch of a new version carriers can unite around.

With so many hurdles it’s hard for airlines and intermediaries to see the real value NDC might provide let alone achieve it. But there are small steps carriers can take to unlock the potential.

 

Unlocking the value of NDC

 

Small developments such as ensuring technical specifications and documentation are easily available to developers and automating contract signing are easy wins for airlines to implement.

Making it easy for aggregators to access and sell NDC content and even incentivising travel firms for selling could also help demonstrate the value in changing to newer ways of retailing.

Finally, and requiring more of a mindset shift, is the decision by airlines to outsource their IT function so they can focus on flying planes and the passenger experience instead of trying to make legacy systems fit for the digital world.

It’s not hard to see why it still might take a few years before NDC has more of a presence but it’s important to note that steps taken in its development and implementation will not be wasted. This is progress towards the potential rewards of airline retailing which, as McKinsey and IATA estimated in a 2019 report, could be worth up to US$40 billion in additional annual value.

 


By Viktor Nekrylov, Managing Partner, DRCT

Viktor Nekrylov is managing partner at DRCT, the trusted tech partner for airlines and travel sellers. Powered by AI, DRCT’s technology integrates with existing selling platforms to solve the pain points of dated, legacy distribution systems. http://www.drct.aero/

American Airlines’ Alison Taylor on Enhancing Travel Retailing to Drive Recovery

American Airlines’ Alison Taylor on Enhancing Travel Retailing to Drive Recovery

During a breakout chat conducted at Aviation Festival, London, Alison Taylor, Chief Customer Officer, American Airlines, shared some of the airline’s changes to its retailing strategy as it adapted to the COVID-19 pandemic.

One of the strategies has been offering customers menu options to book ancillaries and services on-demand on the day of travel, such as requesting wheelchair assistance, adding a lap child to the booking, getting a day pass for the airline lounge, or booking preferred seats.

“Even now, you can buy flagship dining—which was only ever for our first and business class—for that day for that airport. They’re opening at JFK, Miami, and soon they’ll be LA. We’ve tried to become more nimble at the options we offer for the customers and how we deliver those offers. Of course, NDC always helps us with that.”

 

“We want people to be able to purchase where they want to purchase”

 

Taylor said the airline had employed an “educational” approach to merchandising, informing customers on the options available to them more than pushing a sale or a particular sales channel. “We want people to be able to purchase where they want to purchase. It could be via GDS, or it can be direct. That’s not for us to worry about. We just want the customers to be able to purchase it, but it has enabled some things for us on the retailing side that we’ve never done before.”

Rich content options available through ATPCO and Routehappy have helped the airline get creative in presenting offers to different customers. “We had rich content that we could supply whether you’re a leisure agency, corporate agency, or corporate direct. For us, that freed up that content. We have a lot of leisure operators absorbing that into their systems, making sure that it’s enabled through ATPCO and NDC. That has helped us to deliver the content they needed. We dealt with some cruise lines as well. [The COVID pandemic has] broadened the audience that wants that [rich content]. They had to have a lot of information available to their customers on travel, health protocols, safety, wellness, and the leisure agencies needed that quickly. We could do that by working with Routehappy and ATPCO… We’ll continue that journey now, but it was very much at the forefront of the pandemic because the leisure operators needed to inform their team members and also the travellers.”

Taylor shared that the pandemic has also resulted in a marked shift in buying habits and preferred sales channels and increased the demand for customer support teams.

 

“One of the things that we needed to do for returning customers—who were younger—[was to simplify enrollment].They weren’t going to fill out a whole screen of forms.”

 

“It’s quite different depending on the country, of course. When you talk about American Airlines now, one of our major markets is the US, without a doubt. In the US, we have seen that many of our travellers are buying through agencies because they need that extra helping hand, and they want the servicing aspect of being able to travel. I’ve been seeing many operators here while I’m in the UK, and they have seen that shift as well. So I’m sure we’re not the only ones. But, at the same time, we have seen new customers, booking on AA dot com, and new customers becoming AAdvantage members. We had to change our AAdvantage Program very quickly. One of the things that we needed to do for returning customers—who were younger—[was to simplify enrollment]. They weren’t going to fill out a whole screen of forms. They just needed a one-click to join the AAdvantage Program and become members. We did that very quickly. It’s something we’ve been talking about but hadn’t done. We did it in a matter of weeks, which greatly helped the number of young millennial memberships for AAdvantage. Also, even our corporate brand card—we have MasterCard, Citi, Barclays, of course, very strong here in the UK. We even had to change how we talked about our partnerships onboard and on the ground, changing the scripts to appeal to a different audience when we send to different channels…[Another] shift for us was people needing more servicing. We have large servicing centres, and we added almost 3000 [staff] to reservations. Because those that did book direct, and all those agencies, just needed more servicing. The calls were much longer. The calls to our reservation teams are five times longer than normal because they’re asking about border closures, border openings, and of course, what you’d expect about [travel health] protocols.”

 

“…recognize our customers and understand what they may need without constantly asking them the same questions again”

 

Personalization continues to be a priority for American Airlines, Taylor shared. “Personalization has been on our roadmap for a while—this is really important for us so that we can recognize our customers and understand what they may need without constantly asking them the same questions again. It even means—eventually—we can serve up different surveys for them as well…We just want to be customer-centric in using our data. I’m going to give you an example. If we know that you never buy flowers on Valentine’s Day, why are we serving you up via AAdvantage, something to do with a florist, right? So [we want] to make sure that we’re relevant at every touchpoint. Maybe we also know that you don’t open emails at a certain time. We can be relevant with that in our communication or the offers we are providing you, whether on the ground or in the air. It also helps us to adapt our offers. We want to get to the stage where we know that if you’re in your seat, we can utilize our IFEC data and understand what you watch, so we serve that up to you more naturally. That’s down the track, but those are the things that we’re working through. We’re working through with AAdvantage Program on entertainment, understanding whether you enjoy lounges, as well. Data enables all of that. Our customer journey is very important to us. My title is Chief Customer Officer because we want to put the customer at the forefront, not just commercial or business deals, etc. This is important for us. We’re completely enhancing our AA dot com app to make sure that we’re at the forefront of that. What the app will eventually serve you up will be more personalized as a result.”


By Marisa Garcia

Distribution

Panel: How does American Airlines plan to offer enhanced travel retailing to help drive recovery?

>> Watch on-demand on our website

COVID Crisis Spurs Airlines to Double-Down on NDC and Other Digital Merchandising Projects

COVID Crisis Spurs Airlines to Double-Down on NDC and Other Digital Merchandising Projects

During the closing keynote panel on Day One of the World Aviation Festival, London 2021, a panel of airlines and experts in distribution updated attendees on their progress with NDC programs and answered questions on how the COVID crisis has affected the pace of new programs to improve distribution and merchandising. There was almost unanimous agreement that the crisis had helped accelerate these programs.

The expert panel consisted of Mike Croucher Group CTO The ATCORE Group; Steve Domin, CEO and Co-founder Duffel; Bas Hooft’t, Distribution Director Merchandising, Air France/KLM; Tina Larson, Director Online Travel Agencies and Distribution Hawaiian Airlines; Antii Tolvalnen, Vice President Revenue Management and Pricing, Finnair; and Sebastien Touraine, Head, Dynamic Offers, IATA.

“Back in 2020—the beginning of the crisis—we asked as part of the distribution Advisory Council..what we should be doing..”

 

As IATA’s Sebastien Touraine explained, “Back in 2020—the beginning of the crisis—we asked as part of the distribution Advisory Council..what we should be doing. They said, please don’t stop NDC. And actually, some of the airlines have been using this crisis to reflect and to use some new capabilities—continuous pricing has been a key investment for some.”

Tina Larson, Director Online Travel Agencies and Distribution Hawaiian Airlines, shared: “Prior to COVID, we just started getting traction on new merchandising initiatives, NDC, and marketing projects. Then COVID struck. I remember the day that our flights went to 13% of our original size, thinking COVID would kill every single one of these projects. But I have to credit our leadership team because they came to us and said, ‘Don’t stop. You guys need to keep moving. Because when we come out of this, we need to be more agile, more nimble, and we’re going to have to fiercely compete in the whatever the new normal is.’ Since then, we have invested heavily in data. Our data was an absolute mess before. We had disparate sources—my data and your data mentality. We worked together as a commercial team to build out this commercial data domain, and from there, we talked about what we wanted to do with this. That led to our revenue management team upgrading our revenue management system, expanding our merchandising capabilities…we took advantage of the downtime to double down on the plumbing. Restructuring is going to be so important when we’re back fiercely competing.”

Antii Tolvalnen, Vice President Revenue Management and Pricing, Finnair, suggested that the momentum to improve distribution will be ongoing, and COVID crisis or not, as part of the airline’s core objective—to reach the end customer and meet their needs.

“What’s behind the transformation that we are doing?”

 

“What’s behind the transformation that we are doing? It is not a digital transformation or a distribution transformation. It’s a transformation of the business model from B2B to B2C. We must keep in mind that we try to serve our customers. That is the main target. Then, of course, all those customers will not find our content on our direct channels. They’d rather use an agent or an OTA, a Meta channel, or something like that. Then it’s essential for ourselves as a sales channel. Again, we must think about how our products find the customer. I think this will be something that will add value to the whole value chain, but maybe some weights in the value chain will change in future. That might be a painful transformation to get [through], but I think we just have to make sure that everyone understands that we are just talking about the customer in the end.”

Bas Hooft’t, Distribution Director Merchandising, Air France/KLM, suggested, “GDS is morphing towards the aggregator models…we need them to get our reach out there. We’ve never said this is not about the interaction or moving everything direct. We need travel agencies. We are a global company. We are connecting a lot of passengers around the world. We can’t be everywhere, and there’s a role for aggregation in the marketplace. But that model is changing. We announced our Amadeus contracts, and this week we’ll announce another one.” Air France/KLM announced a new NDC Distribution agreement with Travelport. “We are also leaving space for new aggregators.”

Steve Domin, CEO and Co-founder Duffel, said they have also seen a lot of activity on NDC during this downturn. In terms of the company’s role in the new distribution landscape, Domin said: “At the end of the day, the work that we do as intermediaries, or aggregators, in the broadest sense of the term, is understanding the needs of the airlines and the products in a way that it an agent can do individually. I think we’re spending a lot of time and resources on the technology side to make that product available in the best possible way for the travel agent. Since the GDS have done that for a long time, we are trying to do it on new rails.”

“Every airline in the future—as the service tends to get more sophisticated—I expect will have different requirements of what they expect to personalize that offer.”

 

Domin believes there are opportunities to bundle over types of content. “Products like insurance are very popular. That’s an enormous opportunity for the airlines to push insurance through the NDC channel.” On the complexities of integrations, he said, “I think I kind of look at the problems in two ways. One is the complexity for us understanding the product that the airlines are pushing, then breaking it down to the travel agents in the way that they can display it, [but still] in the way that the airlines envision it. The other side is how can we get the data to the airlines that they need to create these dynamic offers. Every airline in the future—as the service tends to get more sophisticated—I expect will have different requirements of what they expect to personalize that offer.”

In the end, though, airline distribution is always about getting very complex information to be digestible by consumers logically, in a way that is easy to process, shop, compare, and book. That consumer demand for simplicity and ease of shopping is the key differentiating factor, in terms of competitiveness, regardless of the distribution channel. The critical engine of progress in airline distribution is a never-ending quest to simplify flight search.

As Mike Croucher Group CTO The ATCORE Group put it, “We’re nine years into NDC, and it’s coming to fruition, and people integrate in that way…When NDC was first there, they played off on the GDS and put their channels in place. And now they’re doing deals with the GDS to distribute NDC through it. The initial NDC proposition was to avoid aggregators, and now we’re seeing aggregators aggregate NDC content because it’s complex again, and they’re taking the complexity out. So I think there’s always going to be platforms to take the complexity out of distribution.”

 


By Marisa Garcia

 

Retail

Closing Keynote Panel: Delivering on the promise of Retailing, Dynamic Offers, NDC and the future of One Order?

>> Watch on-demand on our website

Undisrupt: Bringing Power Back to Airlines

Undisrupt: Bringing Power Back to Airlines

The travel industry has been disrupted

​​Historically, the relationship between airlines and travel agencies was one in which the airlines truly had all the power. The travel industry at that time included a highly fragmented set of agencies for distribution and each one of those agencies had their own segment of the market. During this time, the airlines, the travel brands themselves, had most of that control.

Today OTAs have grown into global entities with massive reach and the ability to scale infinitely to capture as many customers as possible. This upended the control of the value chain to where the brands, the airlines, no longer had the same standing that they did before. The disruption this caused in the travel industry persists today.

OTAs have been able to commoditize the airline, creating no differentiation in their products, or in the airline’s brands. Airlines struggle to bring offers in front of customers at all the various touchpoints, whereas OTAs can present offers at every touchpoint, including powerful comparison-shopping tools. OTAs have intercepted airlines’ customers and captured an outsized percentage of travel demand.

The opportunity to “Undisrupt”

When COVID-19 hit, non-essential travel came to a halt and the travel industry was severely affected. As a result, OTAs reduced their spending in paid media and on innovation, creating an opportunity for airlines to close the gap and move a higher percentage of sales to their direct channel.

Direct sales are not only more cost-effective, but they also build brand loyalty between the passenger and airline and provide more leverage to the airline in the market overall. When passengers purchase flights through OTAs, airlines become a commodity to the customer.

“Airlines have recognized for years the importance of driving online direct sales to reduce dependency on Online Travel Agencies for market share and own the relationship with the customer. This increases loyalty and lifetime value of their passengers,” said Seth Cassel, Co-Founder, and President of EveryMundo. “COVID-19 has been damaging for airlines, but it has also been a wake-up call: airlines must do more to own their customer relationships directly, and they require technology from partners such as EveryMundo to accelerate this effort. We are seeing energized motivated airlines use our fare marketing software like never before.”

We believe now is the time for airlines to take advantage of this unique opportunity by prioritizing customer acquisition and direct sales to drive customer lifetime value. It is time for airlines to “undisrupt” the industry and take the power back from OTAs. A key factor in capturing travel demand is improving the customer experience, including user engagement technology, enhanced visualization in offers, calls to action, and more that supersedes that of OTAs. By utilizing technology airlines can increase website traffic, improve booking conversion rate, enhance online user experience, reduce their dependance on OTAs, and drive brand engagement on and off the airline’s website.

Choreographing the New Distribution Capability ecosystem

Choreographing the New Distribution Capability ecosystem

It is incredible to see how much things have transformed for the airline industry! To understand just how radical this transformation is, let’s turn the clock back by a few years. The airline’s legacy distribution ecosystem involved publishing standard fares and showcasing generic products and services. It was a complicated fare filing process with multiple reference records like PNRs, E-tickets, and EMDs adding to the complexity. Given this reality, one can imagine the excitement in 2005, when IATA introduced a modern framework – New Distribution Capability (NDC). The NDC framework helped ease the operational processes and transferred the control back to the airlines to showcase their products and services across distribution channels.

Fast forward 16 years to 2021: The industry spent millions on building the backbone of the NDC ecosystem – the new-age offer management and order management systems. But the framework has failed to deliver on its promises.

The fault does not lie in the solution’s maturity but in its integration, which is still not seamless. Imagine the plight of airlines who know that the fix exists but are helpless as the overall ecosystem hinders them from progressing quickly and utilizing NDC’s true potential.

The asynchronous ballet of offer and order management

The airline ecosystem is complex and has taken decades to reach its current state. Systems have been layered, modified to dance together on the same rhythm. But the introduction of offer and order management systems changed the dynamic, resulting in siloes of independent systems.

For instance, a change in the itinerary would lead to OSIN (OrderSalesInformationNotif) messages from the order management system, but this must also be relayed to the existing accounting and notification systems.

Another most probable scenario is about offer creation. It requires interaction across multiple systems like, CRM (with customer 360 views), customer preferences, and dynamic pricer before the offer management system can bundle a personalized offer. The list of such scenarios is endless, and the fact that technology outdates itself even before it can be implemented, does not help matters. As also evident in the case of NDC – the contemporary XML schema for NDC is no longer the first-choice framework to curate new applications, becoming another hurdle in setting up seamless communication across the NDC ecosystem.

A dance with NDC middleware 

As an airline, you would not want to go ahead and create custom integrations for each system. Instead of solving the problem, this approach will only aggravate it by creating clustered silos. The need is to have a middleware that can choreograph the NDC ecosystem and bring back the missing rhythm. Further, the NDC middleware will transfer the control back to airlines to offer the right products to travelers.

By creating a common layer between internal and external platforms, a middleware can simplify things immensely for airlines. Be it mobile or web-based interactions, interline or codeshare interactions, PSS-CRM-Revenue management system interactions, etc., a middleware can induce agility and operational effectiveness in the airline ecosystem by bringing in replicability, thereby reducing duplication and saving the other APIs from constant changes. In short, a middleware with below capabilities can bring back the missing rhythm and help airlines realize the true value from NDC:

  1. NDC schema transformation: While the NDC systems have been developed on the XML schema, the modern B2C applications use the current schema such as JSON. The XML schema is required be transformed as per the application to fit into the existing ecosystem of applications.
  2. Integrating legacy and offer & order management systems:The complex airline ecosystem comprises many different systems – PSS, CRM, accounting, flight operations, etc. To ensure a seamless performance, it is essential to integrate and align all of them.
  3. Data streaming and processing:Before passing data on to the other systems, it must be processed across different systems. For example:
  • When an OSIN message would share only the new itinerary, leaving the old systems to figure out the changes
  • When a flight time change information must be communicated to the passenger
  • When in the case of information processing, it is imperative to pass the right information at the right time to the travel agents.

The count for such messages can be endless. The right answer is a middleware, which can stream and process the data to relay any changes to the airline ecosystem.

  1. Trigger processes across the traveler journey through wrapper services:NDC systems are not yet mature enough to handle things like order confirmation emails, initiating itinerary changes or order receipts generations. Middleware can take care of routines through wrapper services to support the new ecosystem and ensure a perfect ballet performance.

 

Middleware in action: Choreographing offer creation

Creating a personalized offering is one of the building blocks of the NDC initiative. It requires multiple airline systems to come together across different stages. A middleware can sync all systems together, creating the right offer by ensuring a seamless flow of events across the different platforms, as depicted below.

In a nutshell

The offer creation use case clearly shows that we have a fix to make NDC investments worthwhile. Airlines need to onboard the middleware to choreograph the NDC ecosystem so that it can live up to its expectations and deliver what it always promised.

Do you have the NDC middleware advantage or are still pondering over your NDC investments? It’s still not late! Make your systems dance to your tune and create the differentiation you always wanted.

Check out how Nagarro helped a Norwegian start-up airline Flyr reach a key milestone in creating a digital-first airline. Want to know more? Explore Nagarro’s offerings in the travel domain and connect with them: explore.tnl@nagarro.com


Written by Ashish Sapra, Nagarro

Venturing beyond dynamic pricing to personalized pricing

Venturing beyond dynamic pricing to personalized pricing

While the airline industry was the first to introduce advanced revenue management techniques to the world, including the dynamic pricing concept, other industries are leading in this area. Part of the reason for this, in addition to others we will look at, is the sheer complexity of the airline industry. Even as airlines use advanced pricing techniques based on real-time demand and more granular segmentation, dynamic pricing is still being refined with advances in continuous pricing that offer more flexible price points. But the real game-changer for revenue growth is when you look beyond dynamic or continuous pricing and apply the concept of personalization to pricing

The creation of tailor-made offers must be based on value as viewed from the customer’s perspective and not the airline’s. And that value will differ from customer to customer and will even vary based on the context of the customer’s travel. The same customer will value services differently depending on whether travel is for leisure or business or flying alone versus with family. This requires a mindset shift from airlines as they typically adopt pricing strategies that solely look at revenue or profitability. Today, airline revenue managers open and close fare buckets and allocate even reallocate seats among these buckets, to control the demand and maximize yield, thus achieving pseudo-dynamic pricing.

 

Factors behind pricing

Demand curves are fundamental tools to explain the concepts behind pricing, where the area under the curve represents the total attainable revenue. Economists argue that two factors influence a shift in a demand curve to the right:

  1. An increase in income in target customer segments, or
  2. A change in the price of other goods, either due to an increase in the price of a substitute product (e.g., when taking a train is more expensive than flying) or when there is a price decrease for a complementary product (e.g., when a bundled flight and hotel package is cheaper than the two separately).

Yet, these macro-economic factors are difficult to predict with any degree of accuracy. However, a third factor could help increase demand – personalization

 

Boosting demand

By creating personalized offers relevant to travelers, airlines can differentiate their value delivery from competitors, helping increase demand. Tailor-made offers improve look-to-book ratios (the percentage of purchases versus website visits) and help shift the demand curve to the right. Shifting the demand curve from D to D’ creates two revenue opportunities:

  1. The same quantity (Q1) can be sold at a higher price (P2 instead of P1) > P2*Q1 > P1*Q1
  2. The airline can sell more quantity (Q2 instead of Q1) at the same price (P1) > P1*Q2 > P1*Q1

While personalized pricing may sound lucrative, it also comes with a few challenges:

  • IT complexity: Airlines aim to build richer customer profiles and segmentation maturity through continuous feedback loops across touchpoints. To do so, their IT landscapes and data engineering capabilities need to evolve to handle real-time transactions with increased data volumes and variety. To deliver truly personalized pricing of air and non-air products, the broader IT ecosystem must be considered, including the impact on downstream activities, such as revenue accounting and fulfillment.
  • Data privacy and ethics: In addition to customer data usage authorization, ethical and legal debates around offering different prices based on personal attributes and choices are ongoing. Consumer groups argue that there cannot be price discrimination if the products and services provided are the same. However, airlines could begin by offering the same price to customers belonging to the same micro-segments. Furthermore, consumers need assurance that their data is secure and protected by airlines.
  • Personalization strategy and communication: Transparency and differentiation are critical to ensure customers are receiving the right messages. These need to be structured around value, not price. The value of personalization needs to be clear to customers to increase their willingness to share their data. Airlines need to carefully decide what parameters they will use to personalize offers, striking the right balance between yield, added value delivery, and customer segment. You don´t want your frequent travelers finding out that they are paying more for the same service than the person sitting next to them that has never flown your airline before.
  • Channel dynamics: While personalization on an airline´s direct channel has its challenges, these are compounded in the intermediated distribution landscape. In addition to data sharing regulations, travel sellers need to be willing to share customer data with airlines for the latter to be able to return a personalized price.

 

Unlocking greater customer value and airline revenues

While dynamic pricing innovation must continue, the potential opportunities to serve customers in a more personalized manner across the journey should not be overlooked. With customers willing to share more personal information in exchange for relevant offers, the scope for personalized pricing and the value it brings are still being explored. And while both dynamic pricing and offer personalization continue to evolve, the tipping points come down to trust and value. Customers need to trust that airlines will only use their data for their stated intention and feel rewarded for doing so, not penalized for it.


Written by Kelwin Kuriachan, Principal Consultant with IBS Software

A New Digital Retail Reality – The Future Belongs to the Bold

A New Digital Retail Reality – The Future Belongs to the Bold

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

*Deloitte
*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

 

 

Retail Forward: What could be better than the worst?

Retail Forward: What could be better than the worst?

Let’s get the ugly out of the way. IATA surprised no one by confirming that 2020 was the worst year on record for airlines.

  • 8 billion passengers flew in 2020, a decrease of 60.2% compared to the 4.5 billion who flew in 2019
  • Industry-wide air travel demand (measured in revenue passenger-kilometers, or RPKs) dropped by 65.9% year-on-year
  • International passenger demand (RPKs) decreased by 75.6% compared to the year prior
  • Domestic air passenger demand (RPKs) dropped by 48.8% compared to 2019
  • Air connectivity declined by more than half in 2020 with the number of routes connecting airports falling dramatically at the outset of the crisis and was down more than 60% year-on-year in April 2020
  • Total industry passenger revenues fell by 69% to $189 billion in 2020, and net losses were $126.4 billion in total
  • The decline in air passengers transported in 2020 was the largest recorded since global RPKs started being tracked around 1950

As Willie Walsh, IATA’s Director General put it: “2020 was a year that we’d all like to forget. But analyzing the performance statistics for the year reveals an amazing story of perseverance. At the depth of the crisis in April 2020, 66% of the world’s commercial air transport fleet was grounded as governments closed borders or imposed strict quarantines. A million jobs disappeared. And industry losses for the year totaled $126 billion. Many governments recognized aviation’s critical contributions and provided financial lifelines and other forms of support. But it was the rapid actions by airlines and the commitment of our people that saw the airline industry through the most difficult year in its history.”

More than halfway through, 2021 is not a huge improvement. The spread of the Delta variant of Covid-19 gives many pause. OAG finds that airlines are in a holding pattern.

“With some 81.2 million seats this week [2 Aug] we are half of one percent down on last week or 391,000 fewer seats, as we have said before, until some major international markets re-open then this is as good as it gets. The airlines frustrations are reflected by a further 24 million seats being removed for sale to the end of October and there remains many flights for sale that are very unlikely to operate soon. Many airlines and airports are now expecting 2021 numbers to be lower than 2020, a scenario that most people would have dismissed as impossible at the beginning of the year; well, the impossible can happen,” OAG’s John Grant writes.

But that’s only the bad news.

The reality is that this too shall pass, as inevitably as the passing of any storm no matter the size of it. What remains to do is rebuilding. That includes fresh opportunities for creative retailing which could make airlines and airports more resilient for the next unexpected storm. 

 

What Eludes Us

A new entry into the travel retail space has piqued interest with a simple solution to travel bookings. Elude is like Tinder for Travel with a budget-first search engine that that gives users immediate access to global flights, leaving from the nearest airport, and accommodations within their selected price range. You decide how much you can afford to spend and the travel booking app will find suitable matches and deliver a full travel package.

Their approach to launch on Instagram was as visually striking as it was interesting, with posts encouraging would-be travelers to spend less time searching and more time exploring.

“Shopping for travel is broken, and we are modernizing an archaic system by supercharging the way people plan their vacations,” said Alex Simon, Chief Executive Officer. “People deserve to feel emboldened to explore, and we want our users to have access to the transformative power of travel more often.”

Elude is the brain-child of avid travelers, Simon and Frankie Scerbo, and was designed to address their personal pain points in travel bookings. The co-founders raised 2.1 million in funding through Mucker Capital, Unicorn Ventures, Upfront Scout Fund, StartupO, Grayson Capital and Flight VC. Elude has also attracted industry veteran advisors, including global entrepreneur from Priceline.com Jeff Hoffman, former Airmap CEO Ben Marcus and prominent social media industry leaders such as former Instagram Chief Marketing Officer, Cliff Hopkins, and Snapchat’s Head of International Partnerships, Juan David Borrero.

“As an active investor and advisor in the travel industry, I have seen numerous ideas and attempts to reframe the travel booking process, and none of them grabbed my attention the way Elude did,” Hoffman added. “Elude reflects the way many travelers prefer to travel, and yet no one has been able to capture that until now. Frankie and Alex are constantly exploring the pain points travelers face as they create and reimagine the future of the industry. From the beginning, they presented a practical and methodical approach for building a product that will make travelers’ lives easier.”

Their primary targets are millennials, who spend over $200B annually on travel, and younger generations (though the young at heart may also enjoy this simplified booking process). Simon and Scerbo see their core users as individuals who “want multiple trips throughout the year instead of spending large amounts of their disposable income on just one trip each year.”

“Our users are craving to explore the world differently. Instead of planning trips to landmark locations, our users are searching for quiet treasures that offer refuge from the hustle of city life,” said Scerbo. “We’re thrilled to lead the industry into its next chapter, rebuilding an ecosystem of adventurers that was disjointed during the pandemic.”

 

Evolve store

Evolve and Partner Up

Airport retailer Hudson, a Dufry company, has launched a new store-in-store concept Evolve, which boils down to branded, dedicated retail space within their shops. Each Evolve store will be designed with a wide-open storefront, a footprint of at least 2,000-square-feet, and eye-catching digital signage on the store exterior, ensuring the brand offerings are prominently displayed. Beyond traditional checkout, each Evolve store will offer multiple state-of-the-art self-checkout kiosks as well as Hudson’s newly-developed mobile point of sale (POS) capabilities, which will allow Hudson team members to complete transactions from anywhere on the sales floor and spend more time assisting travelers at the brand ambassadors for the shop-in-shop concept.

“The strategy we’ve executed over the years has positioned the Hudson brand as an iconic and trusted anchor of the airport experience for travelers and landlords alike. Now, as we’re witnessing the dynamic transformation of the retail space, we’re taking the opportunity to further leverage what makes it successful: convenience and brand recognition,” said Brian Quinn, EVP and Deputy Chief Executive Officer of Hudson. “Our new Evolve store will transform larger retail footprints, with the existing Hudson convenience model in mind, to curate a multi-brand concept that will allow Hudson to continuously innovate for the modern travel retail environment now and into the future.”

The first Evolve store is set to land at Nashville International Airport (BNA) later this summer, followed by seven additional locations including Dallas Love Field Airport (DAL) and Las Vegas McCarran International Airport (LAS).

 

In-Flight Retail is Dead, Long Live In-Flight Retail

While the traditional Duty-free cart down the aisle approach to in-flight retail a relic of the past, Valour Consultancy argues it’s would be foolish to herald the end of in-flight retail. In fact, they foresee IFEC-Driven Duty Free and Other Travel Retail to Reach $8.4 billion by 2030.

Here’s their best argument: August 2020 saw an investor pay Korean Air $834 million for its in-flight retail and catering business.

“Korean Air has announced that it is working to improve sales efficiency by actively operating a pre-ordering system for its duty-free goods. Such products would be delivered on-board the aircraft, obviating the need to stock hundreds of reference items passengers may, or may not, ultimately purchase. Other airlines that have implemented similar pre-ordering capability to great success include AirAsia, Singapore Airlines, Lufthansa, Virgin Atlantic and Finnair.”

The shop-to-surf business model, involving partnerships with retailers and IFC suppliers, is also compelling.

“Viasat, for one, is banking on its abundance of satellite capacity to provide a pathway for a passenger to ‘earn’ a Wi-Fi session,” Valour’s Craig Foster writes. “In this scenario, the passenger would log onto the IFC portal and see a range of brands to interact with in order to be rewarded with the ability to surf freely. He or she could choose to watch an advertisement for a product from, say, L’Oreal, and then be landed on the website of a partner like Dufry (a Swiss-based travel retailer) to complete the purchase. When they do so, a Wi-Fi session is activated. In this way, connectivity is an enabler to connect a brand with a consumer.”

Here’s what’s interesting about that approach: it’s a familiar ask to many. Game apps, for example, will offer in-game perks for those who are willing to watch a short commercial.

Things were bad in 2020, and 2021 so far isn’t looking much better, but creative retailing can help fill the gaps. There’s no better time than the present to start exploring the possibilities and implementing creative strategies.

 

Inflight retailing: Let’s get digital! Part Two

Inflight retailing: Let’s get digital! Part Two

Last week we shared the first part of a thought-leadership roundtable featuring thought-leaders from three companies providing digital inflight retail solutions to the airline sector.

Our respondents were:

  • Nicole Grainger, Head of Cabin Marketing at Collins Aerospace
  • Michael Raasch, CEO at Omnevo
  • Vimal Rai, EVP Global Sales and Marketing at AirFi

In last week’s post, each of our interviewees provided candid insight into why the old way doesn’t work anymore, who within an airline should drive a move to digital inflight retail and how we can overcome crew apathy towards selling.

This week, we tackle a few more questions about this hot topic.

 

Many Aircraft cabins are still not connected. Does this matter?

 Michael Raasch, CEO at Omonevo: Connectivity is important to support the touchless and seamless shopping experience on board. Many airlines have a fragmented infrastructure, different providers and solutions within the fleet which can make this a challenge to support a consistent experience, but we have a variety of solutions to support that. The most recent example is Singapore Airlines, where we partnered with Panasonic and Thales/airfree in order to bring Omnevo fully into the cabin as well.

Vimal Rai, EVP Global Sales & Marketing at AirFi: Not one bit. Show me one airline that’s proudly proclaiming how inflight connectivity has raised onboard retail revenues. I’m not saying connectivity isn’t important or desirable. I’m just saying that right now, it’s often an expensive smokescreen for the fact that the overall onboard retail proposition remains lacklustre and irrelevant for passengers. If anything, connectivity is going to make the situation worse as passengers are going to dislike the limited onboard proposition even more than before.

Nicole Grainger, Head of Cabin Marketing Strategy at Collins: There are increasing levels of value and efficiency that can be achieved through connecting the aircraft, however there are eCB modules that can be deployed in an un-connected environment. In order for passengers and crew to experience the digital retail environment onboard and make use of the core onboard elements of the eCB service, having an onboard Wi-Fi network is required. This supports the communications between the passengers and crew, enabling orders to be placed, received, and acted upon.

 

Why should caterers be excited about digital inflight retailing?

AirFi: So many reasons! First, the fact that “digital” anything is likely to result in much more data being generated, data that could be used to drive operational costs down, revenues up, and understand customer behaviour and consumption patterns better. Second, remember that caterers remain the only authorised service provider to provision the aircraft on the ramp, so digital retailing offers them an expanded range of services and potentially even products to manage on behalf of the airline.

Collins: For caterers, digital inflight retailing offers a more robust data access method. Having more timely access to trend data, what is selling, which routes, which types of passengers etc, will help to support their own business and value chain activities. Data access assists in a number of ways including waste reduction. It helps to better predict how many meal options are requested in-flight vs pre-orders and recommendations on required quantities from the caterer.

Omnevo: For catering companies this is a huge change, since mostly the front-end systems are not connected to the back end systems. This offers new possibilities for integration and the implementation of branded concepts. In addition, real time is an important factor in making the ordering processes even more flexible. Airlines want the flexibility to switch between different concepts, whether complimentary, buy on board or pre-order. All of this should run on one platform without operating different systems, which saves high integration and running costs.

 

What kinds of passenger data can we feed into the onboard retail experience, and what can we take out of it? Then what?

Omnevo: Airlines already have all customer data and information. these data points are used across our system to personalize and expose relevant products based on these profiles. What has become the norm in modern e-commerce retailing is still largely untapped opportunity when it comes to airlines. Omnevo is also an Adobe Gold partner and our capabilities into omnichannel campaigning and merchandising are quite unique in the industry. We believe personalization, cross and up selling offer enormous possibilities and we have proven to triple conversion and quadruple revenue with our existing customers.

AirFi: The most obvious is Loyalty and FFP data, but there’s a treasure trove of other travel, demographic and even behavioural data that can be leveraged to improve the onboard retail experience. And most of this – with the exception of loyalty data of course – can remain largely anonymised and non-personally identifiable. To what end? Well, an example based on a classic behavioural science truism: it’s easier to get a paying customer to buy more than it is to make a non-customer buy anything at all. We have used this truism to design multiple promotions around retargeting highly-engaged passengers from one flight to the next.

Collins: During flight, the portal can learn based on the passenger interactions and serve adjusted content. If the aircraft is connected, via satcom for example, then any API can be supported to help personalize and improve the inflight experience. If the passenger is a repeat customer, then personalization and recommendations can be taken from their existing account/profile. Post flight, not only can transactional data be exported, compared with any prior historical data, but also behavioral information can be extrapolated from the portal, understanding the user flow following various purchase paths.

 

What’s next for this market segment?

Collins: Given the pandemic, the push to digitalise the onboard retail service has been accelerated to promote a more touchless cabin environment. Next, I think we’ll see more data aggregation across the airline value chain with collaboration between various stakeholders within that chain, to help drive improvements and enhancements to both the passenger journey and contribution of cabin retail revenues!

Omnevo: We are seeing an increasing tendency that full-service carriers are repositioning some of the offerings in combination with their loyalty programs to become lifestyle brands and leveraging on their customer data and loyalty programs. This makes sense as they compete against other shopping platforms for excursions, products, services, and F&B along the journey. With low-cost carriers the approach is slightly different, as they by nature have had a strong ancillary focus as part of the business model, here we see a strong move into digitalizing operations and processes wherever possible primarily with the focus to reduce cost and waste and increase revenue.

AirFi: We like to call it the “Mall in the Sky”. That’s our vision. It’s going to be digital, omnichannel and highly relevant to passengers’ needs, in a way and at a time that empowers them unlike ever before. The future will see more connected aircraft, but the real el dorado is in having that direct-to-passenger connection via their personal devices. The AirFi platform will offer multiple applications and microservices offering unparalleled freedom of choice to every passenger in the palm of their hand, at 30,000 feet.

 


By Maryann Simson

Inflight retailing: Let’s get digital!

Inflight retailing: Let’s get digital!

The age of digital inflight retailing is upon us! Airlines across the spectrum, from full-service legacy carriers to the newest and leanest ultra-LCCs, are adopting new solutions that enable passengers to browse, select, and pay for product and services – whether to be enjoyed onboard or for post-flight fulfilment – from the comfort of their seats and using their own trusted devices.

We spoke to three companies that are actively developing solutions in this increasingly competitive space about why the concept is finally gaining real traction, and how they’re each supporting airlines in the race to digital supremacy.

Our respondents are:

  • Nicole Grainger, Cabin Marketing and Strategy at Collins Aerospace
  • Michael Raasch, CEO at Omnevo
  • Vimal Rai, EVP Global Sales and Marketing at AirFi

 

What are some reasons why the old way of doing onboard sales is no longer fit for purpose?

Nicole Grainger, Collins: We’re experiencing advances on all sides of the aviation experience, evolving IFE, seat design, aircraft efficiency etc, however the actual methods of onboard service haven’t adjusted to meet either the improved cabin product, or the expectations of the digital, connected passenger. The traditional trolley service for food and beverage, as well as duty free, was overdue for a refresh to help passengers self-serve and reduce strain on the already overworked crews.

Michael Raasch, Omnevo: The buying behaviour of customers has changed completely, digital shopping has become the norm. Passengers want a more personalized shopping experience and offers that are relevant to them. The classic channels have many limitations and thanks to e-commerce and the expansion of the F&B and product range, passengers have more choice and less operational risk for airlines. Choice is indeed one of the most important factors. A 60 SKU in-flight selection can simply not compete on any level with a 40.000 SKU online selection as we offer it at some airports and airlines in our customer portfolio.

Vimal Rai, AirFi: Three simple perspectives: space, time and value! Onboard retail has traditionally suffered in all three domains, particularly with the onset of e-commerce and the scale of choice and convenience it afforded. Space will always be a premium inside aircraft that continue to shrink in size. These days nobody, least of all cabin crew, wants to see or buy anything off carts, with limited inventory and choice. Time continues to become increasingly precious; e-commerce has shortened the distance from discovery to comparison and finally transaction, to just a few clicks on one’s device. Last, but not least, value; there have been too many “value extractors” in the traditional onboard sales value chain. The end result has been a retail offer that lacked attraction and relevance to passengers.

What is your solution to this?

Omnevo: We design, develop, and implement end-to-end solutions that make airlines, airports and hospitality providers into true omnichannel commerce marketplace operators. We have many standardized product solutions that customers can test and implement in under a quarter. Our focus is on ancillary revenues for F&B, duty free and virtual products that we offer through our platform concepts.

AirFi: The solution is greater passenger recognition and customer empowerment. This is as simple as putting the power of discovery and choice in the hands of every passenger. Customer empowerment is when you give your customers the information, tools, and capabilities that they need to make decisions. By giving them resources and options, you’re providing them with a much better buying experience and allowing them to determine the kind of experience they’d want to have with your brand.

Collins: We worked with our airline partners to identify their pain points related to offering ancillary service, looking at how we can remove or significantly improve these areas of friction. This activity led to the creation of the Electronic Cabin Bag (eCB) solution. eCB delivers not only the functionality expected from an onboard retail solution, but also live payment authorisation and onboard inventory management.

Who should be leading the charge into digital retailing at the airline level, and what are some ways they can build a persuasive business case to make it happen?

AirFi: This ought to be a C-level initiative. If not, then it has to be led by whoever is ultimately accountable for ancillary revenues in the airline. There are many ways to build a persuasive business case, but perhaps the most impactful one begins with the realisation that digital retailing is a subset of the overall brand and customer experience that needs to be delivered sustainably over the long-term.

Collins: For the airlines, it makes sense for digital retailing activity to sit within an ecommerce team or form part of an omni channel customer journey. Onboard is just another facet of customer engagement for the airline, so there should be consistency in not just the look and feel, but also user preferences, and personalization. Building a persuasive business case should be viewed in the same way – as part of the total customer value. Looking at the cost to serve the customer across all stages of their engagement with the airline, considered against their level of contribution/value etc.

Omnevo: We are seeing that some airlines are now restructuring to orchestrate all of their retail activities. These are new departments that will develop concepts and make decisions across the entire organization and value chain. Digitization is cross-department, and it is therefore important to set the right course here. Almost all airlines have confirmed to us that ancillary revenues have to contribute to a significantly larger part in the future and many have to be digitally driven.

How cabin technology help overcome apathy towards inflight retail on the crew side?

Collins: Inflight retail causes a significant time impact on the cabin crews when you take into consideration the manual processes to set up and open the retail service, face to face passenger ordering, delivery, and payment collection, etc. eCB offers a way for passengers to self-serve, using their personal devices to access a familiar digital ecommerce experience. Reducing this friction for the passenger can improve the associated per passenger contribution and improve the onboard experience. Reducing the friction for the crew can decrease the level of apathy related to inflight retail and improve the quality of service they are able to deliver.

AirFi: Apathy is a result of disinterest and irrelevance. Technology needs to be intuitive, attractive, and fun to use. It needs to take on the repetitive and effort-intensive aspects of the inflight retail proposition. There’s an art and a science to designing the first page of the onboard shopping application on the crew POS, for example. We have designed ours to reduce scrolling AND have an uncluttered GUI for crew. Signing in needs to be a breeze, as does reconciliation. On average, crew who use our systems for the first time can get started in less than five minutes.

Omnevo: Technology supports the crew in many ways. Where we see a big change here, is to network the crew directly with the passengers on board. this results in completely new forms of communication and a change in the ordering process towards greater personalization and individualization of the service. Advanced features such as allergen management, sustainable sourcing and waste management contribute significantly to all process on- and off-board.

Want more??

Stay tuned for part two of this roundtable where we delve into the role connectivity plays in digital inflight retail, why caterers should be excited about these solutions, how to make the experience “sticky” and more.


By Maryann Simson

Airport Retailers Reopen With Fresh, Digital, and Sustainable Strategies to Boost Sales

Airport Retailers Reopen With Fresh, Digital, and Sustainable Strategies to Boost Sales

As air travelers return, airport concessionaires reopen with creative new strategies to encourage passengers to linger and spend, even before heading out to the airport.

At Munich Airport, where traffic has recovered to 400 take-offs and landings and over 30,000 passengers every day, more than 20 restaurants and bars, around 45 shops, and six car rental offices have reopened across the two terminals, the Munich Airport Center (MAC) and the Visitors Park.

New arrivals in retail include “Hard Rock Cafe Munich Airport Rock Shop” on MAC Level 03, in the passageway to Terminal 1, which offers collectibles and memorabilia from the Hard Rock Cafe. There’s also a new food and beverage provider dean&david — a Munich-based company offering healthy food options made with high-quality ingredients and focused on sustainable consumption. They offer salads, Bowls, smoothies, and other healthy choices after security control in Terminal 2, Level 04.

The “MyDutyFree” retail space in Terminal 2, Level 04, was enhanced with a hospitality area, with a bar and stools, where passengers can relax. At the same time, they learn more about the products offered and get advice from retail staff. For added fun, a new digital wheel of fortune gives passengers departing from Terminal 2 a chance to win prizes, including shopping vouchers or gifts.

Earlier this year, Munich Airport-owned retailer Eurotrade made it easier for shoppers to pay for their purchases by introducing a contactless PayPal QR Code feature to point-of-sale machines.

As International Airport Review reports, SEA Milan Airports and JFKIAT (which operates Terminal 4 at JFK Airport in New York) have introduced online portals for their on-site luxury retailers. These digital storefronts give passengers more time to browse from home or from the airport lounge to collect purchases on the day of departure.

“The Milano Malpensa Boutique Marketplace is a project started before the pandemic, strengthened by the crisis that accelerated its development,” said Luigi Battuello, Director of Non-Aviation Business Development at SEA. “Innovation, including in retail, is an essential part of SEA’s strategy to improve the overall passenger experience.”

Customers in T4, shopping from the JFKIAT virtual marketplace, can have products delivered directly to their gates.

“In the wake of the pandemic, it is critical for our customers and employees to feel as safe as possible, and ensuring contactless experiences is an important component to rebuilding confidence in air travel,” said Roel Huinink, President and CEO of JFKIAT. “As we begin to see more passenger traffic return, we are pleased to offer a new way for our customers to enjoy a premium shopping experience at T4. We look forward to more of our retail partners joining this new platform, as well.”

Capitalizing on Sustainable Retail

Airport retail analysts m1ndfull published a report earlier this year showing consumers have a greater interest in sustainable purchases following the pandemic.

“Our research shows that global consumers, in general, have become significantly more socially and environmentally conscious since the outbreak of the pandemic, with around two-thirds claiming to be making more environmentally friendly or ethical purchases over the past 12 to 14 months. It’s estimated that around 90% of these consumers also claim they will continue to place greater importance on sustainability,” m1nd-set wrote in their 1nsights newsletter.

“In research undertaken during the first quarter of 2021 among over 2000 international travelers from all over the world, we see that 35% of international travelers purchase more sustainable or environmentally friendly products compared to pre-Covid-19. This tendency is even higher among travelers who are willing to fly again immediately after bans and quarantines are lifted (45%), as well as among Chinese travelers (41%), business travelers (40%), and older Millennials (39%).

“We also see a marked increase in the importance given to sustainability compared to pre-Covid when shopping. 55% of travelers say they are giving more consideration to naturally sourced and health-conscious products than before the pandemic. This is particularly higher for haircare (62%) and fine food products (61%). The shopper segments for which this perception is higher than the average include travelers from Latin America (59%), older Millennials, frequent travelers and business travelers (all 58%).”

Offering sustainable products can have a significant positive impact on brand perception and could boost the profile of other airport sustainability initiatives. As m1nd-set found:

  • 86% of travel retail and duty-free shoppers say that a greater focus on sustainability by manufacturers positively impacts their perception of the brand. This is even higher among Millennials (93%), travelers from Latin America (92%), Female travelers (90%), and North Americans (88%).
  • 73% of shoppers say that a greater focus on sustainability by manufacturers increases the likelihood of purchasing a brand, in particular Female travelers (82%), Millennials (79%), and Europeans (76%).
  • When asked if they will actively look for more sustainable / environmentally friendly products when shopping at the airport on their next trip, 54% of shoppers said they would. Among Millennials, females, and North Americans, this was even more affirmative.
  • The categories for which sustainable products will be the most sought are skincare (68%), haircare (66%), and make-up (61%).
  • The main reasons those who said they would not seek out more sustainable products were the lack of knowledge on how to differentiate between sustainable and other products (26%), lack of time (23%), and trust issues with sustainable labels (19%).
  • 66% of consumers say they would pay more for sustainable products, particularly females (70%). 45% of shoppers say they would pay up to 20% more, 18%, up to 30% more, and 8% of shoppers would pay up to 40% more if the product is environmentally friendly.

 

Airports retailers can increase sustainability by offering alternatives to traditional duty-free plastic shopping bags, including multi-use cotton or hemp bags, which could be printed with a brand logo or airport code and sold on-site to serve as out-of-home advertising. Alternatively, they could offer biodegradable or soluble plastic bags. According to m1nd-set, consumers are willing to pay for sustainable shopping bag alternatives.

  • 75% of international travelers say they would be willing to pay for a reusable non-plastic bag, compared to 39% who say they would prefer to continue using traditional duty-free shopping bags but not paying more for them.
  • 22% say they would prefer to pay for a reusable plastic bag, and 15% prefer to bring their own reusable shopping bag.

 

And in a refreshing twist on sustainable retail, most airport travelers (8 out of 10) would prefer to refill reusable water bottles in fountains rather than buy water in single-use plastic bottles. “Well over two-thirds of shoppers would be willing to purchase filtered mineralized water from a dispenser in a refillable bottle,” m1nd-set writes. “Millennials and Females both show a higher-than-average tendency for these more sustainable options.”

 


by Marisa Garcia

The industry transformation to dynamic offering

The industry transformation to dynamic offering

In 2020, the airlines’ mechanism to create and manage offers continues to rely on traditional fares and ancillaries filing with booking class inventory control. Airlines are slowly maturing to move away from these practices by leveraging the IATA New Distribution Capability standard which enables them to be in control of the offer creation and the ONE Order standard which allows the fulfilment of a much wider variety of retail-oriented products. This article explores various methods of product & price determination applied in the airline business. Then, the author shares views observed across the industry. Finally, the document summarizes the industry business drivers which will move Pricing and Revenue Management practices towards a world of offer optimization.


As Published in Journal of Revenue and Pricing Management

Download the full article here