This is our last article before the World Aviation Festival in Amsterdam in a couple of weeks. We will end the series of articles with a reflection on airline payments, like a shopping experience usually ends with a payment transaction. Bref.
Should airline payments come as an after-thought of a retailing strategy, as a cost of doing business? What is the strategic dimension of payment for travel suppliers? As payment costs have grown bigger now than distribution costs for airlines, is there any new capability that could both enhance the customer experience and reduce costs?
The airline payment topic is closely related to the customer confidence topic and to the retailing topic which we discussed earlier. We also highlighted payments in our White Paper in proposal #6 (vouchers & e-money) and in proposal #16 (customer accounts). So what will digital airline payments look like?
A world of credit cards
Credit cards are still the ubiquitous method of payments for travel purchases, both in the leisure and corporate worlds. Notable exceptions, such as payment apps like WeChatPay and AliPay in China, or e-wallets like PayPal in the US or Lydia in France, show what the future of digital will look like.
The concept of linking a bank account to a 16-digit number was revolutionary when it was invented about a century ago… by airlines. Credit cards have improved a lot, for example in the physical card experience with the contactless payment, which became the norm during the pandemic. Mobile wallets, like Apple Pay, add an authentication layer on top of the card and enable contactless payment… without entering a PIN.
In the online world, paying with a credit card stored on a website is relatively seamless (as long as the real-time check on the card mobile app works smoothly). The issue remains when dealing with a new website, entering all the card payment details. The entire payment process, including the authorization, may still result in poor conversation rates.
If credit cards still work well, why change? It is a mix of convenience for customers and cost reduction for merchants (estimated at $20.3bn or 2% of the $1trn sales by McKinsey), with an evolution of technology.
The combined effects of Uber, Fintech and the pandemic
In the past few years, the perception of airline payments evolved from tactical considerations (credit cards work well, why bother?) to strategic thinking (payment options are a key differentiating factor for a travel business).
The Uber “seamless payment” experience, whereby the customer does not need to worry about paying a cab driver, was a catalyst in the change of perception. It became even more relevant and obvious for e-scooters, because users would not enter their credit card details for each ride, as there is no card reader on the e-scooter.
The Hopper “peace of mind” proposal, where customers don’t need worry about finding the cheapest fare or making changes to their bookings, extended the payment discussion to financial services. Indeed airlines imposed those constraints (non modifiable tickets, non refundable tickets, 10x price variation on one route…) with their revenue management practices, and it took the likes of Hopper’s fintech to compensate for the constraints and restore the confidence.
The Covid pandemic added uncertainty to travel planning and to health, with the effect of boosting travel insurance for changes and health. Insurances and other financial services have complemented the simple payment transaction, which would otherwise be definitive and risky from a customer perspective.
A customer-focused roadmap
The last decade has seen consumers opting for a variety of forms of payment (FOP) beyond credit cards. Airlines have faced at least three options: 1) adopt as many FOP as possible 2) steer customers to use cheaper FOP 3) promote their own FOP.
The proliferation of new FOP makes the payment market more fragmented. Airlines willing to reach more customers in every market need to support these FOP, without bearing the cost and complexity. Payment gateways enable airlines to reach customers in all markets.
Payment is not limited to the ticket purchase. It covers all the transactions during the booking process and the journey. What if a passenger could enter a lounge or go through a security fast track like they enter the subway (In London, not Paris)? The FOP should be convenient for customers’ online use as well as for a physical use, like access control.
If some FOP are cheaper for airlines to accept, it should be up to them to incentivize customers in using them. Indeed customers tend to have their preferred methods of payment (e.g. a bank credit card, a neobank card, a mobile app) which come with perks, and the perks are funded in part by merchant fees. Airlines have perks too (e.g. seat selection, priority boarding, loyalty points) which may be attractive to customers.
Promoting the airline’s own FOP may sound ambitious. Retailers like Amazon do it with Amazon Pay, or Alibaba with AliPay. In a corporate sale environment, the adoption of the FOP can be part of the airline’s contract negotiation. However in a leisure world, FOPs are ubiquitous and used by consumers daily, not only for air travel. Unless the airline can propose the same value as online retailers, they won’t be customers’ preferred option.
The future of digital airline payment
Air Asia is a pioneer in building a lifestyle brand, not only an airline. Many airline brands are household names, offering co-branded credit cards and loyalty programs, with the potential of becoming a “wallet”. The airline wallet can be used as a payment method for any type of physical and online purchases, while giving access to airline perks and other special offers.
Going one step further, airlines may reach out to communities that have moved beyond credit cards. For example Web3 communities in the metaverse may use crypto-currencies within their own environment and for the payment of physical goods and services.
While credit cards will continue to serve the airline industry for the coming years, digital payment alternatives pave the way to a more convenient and integrated experience for customers, and to more cost effective and flexible solutions for airlines.
For decades, passengers and airlines alike have been suffering from the inconvenience of the manual processes surrounding physical travel document verification.
Slow boarding processes, longer lines, tedious counter transactions, and higher ground handling costs have all negatively impacted the travel industry and the overall experience of an airline traveler. Whether it is surge hiring due to sky-high talent shortages or widespread flight delays, it has become clear that the effects of these manual processes are unnecessary, outdated, and costly for airlines.
Why Go Digital?
When you think of all the physical travel documents that airlines need to verify and process—ESTAs, visas, and passports, just to name a few—it’s quite a long list. Digital verification, done in advance of travel, is the way to go: a simplified checklist enables a more user-friendly experience for passengers, giving them sufficient time to obtain any missing visa or health pass and to renew expired documents.
The time it requires for passengers to visit a check-in desk or interact with an agent can be reduced, if not eliminated, eventually, with the digitization of document verification. Airlines who have already implemented these measures are boosting online check-in rates, increasing on-time departures, and improving their customer experience for passengers—many of whom are keenly interested in moving to an entirely digital, self-service travel process as soon as possible.
Old News
The desire for seamless, contactless travel didn’t just start with the COVID-19 pandemic. Nearly all the behavioral shifts in airline passengers today have merely been accentuated and accelerated by the pandemic.
In fact, Tom Grissen, CEO of Daon—the company behind VeriFLY, the world’s most popular travel app for health credentials and travel documents—knew that these trends would soon demand the biggest innovations in travel. In a recent travel magazine interview, Tom stated: “We created VeriFLY to solve a much broader problem than COVID—how to remove the total burden of physical travel documents.”
Looking Forward
For the foreseeable future, checking for vaccinations, up-to-date boosters, and other health credentials will most likely remain an intermittent obligation for airlines.
As an industry, travel is still only scratching the surface of what’s possible through digital transformation. Artificial intelligence (AI) and machine learning (ML) capabilities, which have already proven to significantly drive down costs and spur operational efficiencies, will be of great benefit in removing the burden of errors and misinterpretation that takes place during the manual handling and verification of physical travel documents.
There is a critical need to continue to move away from siloed document verification systems so that passengers can share and receive data across their entire journey—and not just at one or two stops along the way.
Airline and travel industry leaders are now tasked with imagining, designing, and delivering innovations for the faster, smarter, and more seamless travel experiences of tomorrow.
By Daon.
Daon has been the most trusted name in biometric identity verification and authentication for over two decades, chosen to secure over one billion identities around the globe, and trusted by many top brands in the financial, telco, healthcare, travel, and public sectors. VeriFLY®, Daon’s purpose-built solution for seamless travel, is the world’s most popular travel app for health credentials and travel documents, including visas and passports. Developed alongside travel operators, VeriFLY has helped more than 10 million travelers, reduced staffing requirements by up to 30%, increased processing times by up to 45%, and is used by many brands including American Airlines, British Airways, Carnival, and Hyatt. Learn more at Daon.com/verifly.
As the impact of climate change becomes more apparent with each passing day, the airline industry, which accounts for about 3% of global carbon emissions, has made it a strategic priority to tackle sustainability challenges. In October 2021, the International Air Transport Association (IATA) approved a resolution to achieve net zero carbon emissions by 2050, aligning itself with the Paris Agreement. As per IATA’s estimations, with approximately 10 billion people expected to fly in 2050, it may be challenging for the industry to achieve net zero emissions by the mid of this century.
While IATA has a concrete plan in place to achieve this target with Sustainable Aviation Fuel and more efficient airframe and propulsion technologies set to do the heavy lifting, for the airlines to be truly net zero, it is essential to look beyond these two factors. The need of the hour is to adopt a holistic approach across the entire aviation ecosystem. Airlines must create a comprehensive view of their emissions and start taking initiatives across the value chain for their reduction. They must understand their carbon footprint across Scope 1, Scope 2, and Scope 3 criteria as laid down under the GHG protocol and then establish a plan of action to achieve net zero.
Figure1: Comprehensive view of Airline Scope 1, Scope 2, and Scope 3 emissions as per GHG guidelines
The above diagram illustrates the emissions across the airline value chain. There are several initiatives to reduce Scope 1 emissions (such as through the use of combustion jet fuel) and Scope 2 emissions (by opting for the use of renewable energy sources). Reducing Scope 3 emissions is still a grey area for airlines. Areas such as waste management and staff travel are vital areas contributing to Scope 3 emissions, but today, airlines are struggling to account for these factors.
Going all-in to achieve the net zero goal
With each passing day, climate changes are becoming scarier and also, more and more eco-conscious passengers are demanding to travel sustainably. Airlines today need to make bolder moves to achieve net zero, and we have defined a 3-pillar approach to help them:
Get control of your carbon footprint
The first fundamental principle to achieving net zero is for airlines to control the carbon footprint across their value chain. From direct to indirect sources and from owned/operated to supplier governed, airlines need to start tracking the carbon emissions generated across different operations and processes. This makes it crucial for airlines to track the lifecycle of carbon footprint generated across airline operations to understand the distribution, trends, and effectiveness of the measures taken to reach the net zero goal. We believe that the comprehensive process of understanding the Carbon Footprint life cycle will have the following steps:
Emission source identification: Identify and list down all the emissions sources across the airline value chain (Scope 1, Scope 2, and Scope 3). Create a mapping of the emission factor used to calculate the carbon footprint for the respective emissions source.
Data collection: Track and collect resource utilization data, create energy use records as per fuel type, and model the carbon footprint records by converting energy uses into emissions.
Data validation: Check for data accuracy, connect with different stakeholders to understand the process flow, and ensure that no detail is missed.
Data gap filling: Identify the missing energy use records and fill in the gaps from actuals or through statistical computations.
Carbon offsets and renewable energy allocation: Identify and record the offsets such as tree plantation initiatives, sustainable aviation fuel, renewable energy sources, and purchase of carbon credits.
Forecasting: Forecast emissions and waste generation for the remaining part of the year based on historical data and industrial assumptions. This is basically a comparison of the targets set and the actual emissions/presumptions happening for the year. Makes it easy to visualize the targets and work accordingly
Airlines can now set sustainability goals and measure their progress with this complete understanding. The data can be used to create dashboards to generate actionable insights for organizations to define their net zero initiatives. Going a step further, it will even ensure successful and faster carbon audits and help publish reports to raise awareness about efforts towards sustainability.
Figure 2: Carbon footprint lifecycle management for airlines
Transform operations and supply chain
After airlines gain control of their carbon footprint by understanding the carbon lifecycle across operations, the next step is to decarbonize their operations and supply chain. There is considerable room to take up sustainability initiatives across the value chain, creating environmental impact and driving operational efficiency and cost benefits for airlines. Emerging technologies such as AI/ML, RPA and the metaverse provide the necessary fuel for airlines to transform their operations and supply chain.
While it is impossible to reduce carbon emissions across some of the operational processes, there are some areas where airlines can start acting immediately.
Blending digital workforce personas across business functions
Creating digital personas for the crew, ramp agents, etc., to digitalize some of their operational tasks would help airlines achieve operational efficiency and add to their sustainability goals.To explain how that is possible, let’s take the example of crew members. One of their tasks is to share feedback on cleaning services, an activity that is still being done through paper checklists. Automating the process would help make an environmental contribution by reducing paper usage and help in a faster turnaround. Now, let’s take the second example of the ramp agent responsible for marshaling aircraft. Connecting the ramp agent and providing all the details with just one click can significantly impact the taxiing time for aircraft, thereby saving precious fuel.
Managing cabin waste
Cabin waste essentially comprises two different types of waste—cleaning waste, which includes the leftover from the items given to passengers, such as towels, magazines, blankets, and catering (galley) waste, which consists of leftover food and drinks, packaging, etc. As per a study conducted by IATA, 23% of the total waste generated per passenger for a flight consists of untouched food and drink. This is another low-hanging fruit airlines can immediately pick that will help them reduce their carbon footprint and costs. For instance, a vision analytics-based solution could help airlines analyze the food consumption across the routes and then correspondingly optimize their food menu.
Incorporating predictive approaches across the value chain
Airlines are sitting on a data mine that is yet to be fully explored, and airlines need to start tapping into it to achieve net zero. By predictive modeling, airlines could estimate their wastes, better organize aircraft maintenance, and optimize their operations. For instance, airlines could reduce fuel wastage by predicting when an aircraft would be due for maintenance activities. Further on, airlines can even simulate the impact of maintenance activity on aircraft performance.These are just some of the examples of the use cases from the vast universe of innovative approaches possible today by leveraging emerging technologies. By identifying and implementing them, airlines can create an environmental impact and take steps toward lean operations and supply chain.
Seek differentiation with eco-conscious passengers
Today, there is a new segment in the market—eco-conscious travelers. Undoubtedly, the first-mover advantage to capture the considerable market share for this segment would be applicable here as well. So, airlines’ measures to reduce their carbon footprint can directly correlate with their revenue. It allows differentiating themselves from competitors and establishing an emotional connection with the passengers, further translating into loyal promoters for airlines. This helps raise the brand value for the airline and enables it to capture the market share at a premium price.
There is always the question of how premium pricing will be perceived in a price-sensitive market where airlines are competing for each penny. Well, to answer that, we can always take the inspiration from other industries, such as retail, where you will find fair trade products (where customers don’t mind paying up to 15% premium) occupying more and more shelf space and eco-clothing options selling at a higher price for all brands.
According to a recent Ocado research, 64% of their customers say that it is important to include fair trade products in their shop and 22% reveal that they buy a fair trade product weekly, indicating a high intentional purchase of fair trade products in the UK market.
Suppose airlines incorporate an appropriate marketing strategy powered by the right tools such as CRM enabling segmentation and right targeting at the right time and across the right channel. In that case, we believe the first movers in this area have a strong chance to capture this budding market segment.
By Ashish Sapra
Nagarro bring in much-needed technological and domain capabilities to help airlines embrace the challenge of sustainability. To know more about how they can support you in your net zero journey, contact their experts at explore.tnl@nagarro.com.
The idea of dynamic pricing – optimizing prices based on demand and propensity to buy – is not a new concept. For centuries, businesses have implemented this strategy to adjust prices for products and services based on customer demand. Revenue leaders have adopted this across many industries, including hospitality, tourism, entertainment, retail, energy, public transportation, and commercial airlines with the goal to maximize sales volumes and product or service value by stimulating pricing urgency and market demand.
While the retail and entertainment industries have excelled in innovating their dynamic pricing models and technology, the airline industry has been left behind with legacy methodologies that are no longer able to keep up with today’s volatile market and ever-changing landscape. With market demand fluctuating, historical reports and sequential modeling used today can only tell a fraction of the story. And without the proper context, airlines are stuck in the past, lagging behind other industries and far from realizing the full revenue potential of dynamic pricing.
Many airlines still rely on static pricing, which uses a limited number of price points tied to the reservation booking designators (RBD) which are then filed through ATPCO. To provide their travelers with more optimal offers, some airlines started to introduce continuous pricing, offering more gradual prices. Lufthansa Group was amongst the first airlines to serve continuous priced offers on their direct and New Distribution Capabilities (NDC) channels in 2020 and immediately saw an increased revenue and conversion rate. However, with the constraint and heavy reliance for this industry on filed fares and RBD, there are comparatively few successful initiatives that involve true dynamic pricing applied to all sales channels.
On top of this, ancillary revenues – those generated through extra baggage, in-flight refreshments, internet access, seat selection, etc., which bring the industry around $55 billion according to McKinsey – are often managed through separate and isolated IT systems, meaning airlines struggle to understand how changes in dynamically priced fares also impact ancillary sales and total revenue optimization.
As long as outdated systems and obsolete methodologies remain in place, airlines will continue to fall behind other industries in maximizing revenue potential. Technological advancements, alongside successes in other industries, indicate the time is right for airlines to unlock the potential of dynamic pricing for their sales channels. This industry needs to break free from legacy technology constraints and start implementing optimal pricing strategies that take into account how decisions such as price, offer, channel or customer may impact the business outcomes and revenue performance. So what is the next step to transforming airline pricing?
Artificial Intelligence (AI) enables a transformation in airlines’ commercial performance and customer experience. Specifically, deep learning – a cutting-edge form of AI that uses neural networks trained to perform specific tasks under different conditions – creates context by looking at past behaviors, identifying good behavior versus bad behavior, and rewarding good behavior. This results in reduced forecasting errors, allowing analysts to rapidly respond to changes through added context (i.e. search data, ancillary revenue, cargo capacity, etc.). This revolutionary technology can find its path to desired business and revenue outcomes by correlating vast amounts of data, even in environments where data is sparse or noisy, a very real situation experienced by the travel and transportation industry today.
Dynamic Pricing with Deep Learning
Airlines need to sell the right product to the right customer at the right time, in the right channel, and at the right price. When embracing advanced deep learning technology, it provides automated, AI-driven revenue management capabilities that maximize airline profitability and total revenue optimization.
When it comes to dynamic pricing, deep learning and cloud development empower real-time customer segmentation and react much faster to any market change or surge in demand or commission rates. The Revenue Operating System puts into action AI-driven revenue management using deep learning to make predictions directly from context such as market forces, competitive forces, customer forces, and network changes.
Harnessing the Power of Data
Through the adoption of advanced AI, digital-first airlines are able to harness the power of data, going beyond historical data and leading the charge in dynamic pricing and other commercial decisions. With The Revenue Operating System, airline analysts can discover similarities between markets, competitors, leading demand signals, and events.
Identifying such signals before they are clearly visible in data-sparse subsets of the airline network helps focus attention where it’s needed most. With the right insights readily available and continuously updated, airline teams can, in real-time, start to resolve complex questions that used to be answered with guesswork or tribal knowledge.
Dynamic pricing powered by deep learning is the key to creating optimal offers for airlines. And as part of FLYR’s total revenue optimization ecosystem, commercial teams are now able to automate pricing decisions in real-time, optimize total revenue including ancillaries, create personalized offers optimizing customer conversions and lifetime value, create trusted load forecasts to optimize capacity plans, direct marketing spend and energy towards high yielding returns, and confidently sell cargo capacity earlier.
Charles Ruesch, Head of Offer & Distribution at FLYR
Follow @flyrlabs on Twitter and LinkedIn for the latest news and updates on AI-driven revenue optimization.
The aviation industry connects people and countries, opening the gateway to many economic and social opportunities. Given the benefits aviation brings, the need for connectivity is growing. IATA estimates that the demand for air passenger journeys in 2050 could exceed 10 billion, and the expected carbon emissions between 2021 to 2050 will be approximately 21.2 gigatons of CO2. This vast amount of emissions will need to be mitigated! A resolution was passed by IATA member airlines committing to achieve net-zero carbon emissions by 2050.
Roadmap towards net zero
The major focus on achieving net zero carbon emissions is on using sustainable aviation fuel (SAF), investing in new aircraft technology, and carbon offsetting methodology. We believe that the 2050 objective can be accelerated by realigning the existing infrastructure & operations, which can contribute directly to reducing carbon footprints.
Figure 1: Contributors to achieving net zero carbon by 2050s (Source: IATA)
1. Fuel-saving schemes
Reduce CO2 emissions from aircraft ground movements by overcoming long taxi-in and taxi-out times.
Taxiing aircraft contribute significantly to fuel burn and emissions at airports. Taxiing delays are frequently caused by congestion and queuing, which occurs when there are last-minute changes in the departure sequences, gate allocation issues for arrival flights, delays in departing flights, etc. To overcome these challenges, airlines can deliver an on-time flight turnaround process. They can also update ATC and airport operators with accurately predicted off-block time (POBT) to plan runway and gate utilization effectively.
The single largest operational expense for airlines is fuel, which accounts for nearly 30-60% of expenditure in an average year.
Also, many airlines rely on the manual calculation of the EOBT (expected off-block time) and TOBT (targeted off-block times) for pushback timings. To overcome chances of error, airlines and airports can build a smart turnaround model that leverages technologies like computer vision and AI/ML. The model can associate each of the turnaround tasks with an object which can be visually identified from the camera stream at the airport.
Combining the real-time events with historical data and understanding of the airport, airline, and ground handlers, this model can evaluate the performance of the turnaround activities and utilize it to alert the stakeholders in case a process hasn’t started or if a delay is expected. All this while continuously predicting POBT and helping ATC and airport operators optimize runway and gate utilization.
Reduce CO2 emissions in the air by upgrading flight plans with best practices
Data analytics can enable better decision-making, reduce carbon emissions, and improve flight efficiency. Data can be used to boost the flight plan with the best practices for the operating crew. Airlines can leverage AI/ML-based algorithms that analyze billions of data records from multiple data sources, including flight data recorders (FDR), operational flight plans, ACARS messages, engineering systems, load sheets, and tech logs, and combine them with real-time environmental data and actual flight conditions to identify the best practices for fuel saving.
Post-flight, the data from the Electronic flight folder (EFF) can be extracted, and a report can be generated. This will tell the amount of fuel that was saved during the flight, giving multidimensional insights to relevant stakeholders for necessary actions.
Reduce flight turnaround process time by digitalizing the refueling process
Today, if the cockpit crew makes a small change in refueling figures, it takes a long time to pass on the message to the refueling agent. Airlines still use a combination of paper-based transactions and outdated systems to manage their operations, which often adds extra minutes to the flight turnaround process. Digitizing this process can improve efficiency and increase transparency in many ways, leading to increased sustainability and reduced carbon footprint, with the bonus of saving time and money.
2. Air Quality Index improvement schemes
Reduce APU utilization at apron
APUs are small engines located in the aircraft tail and are used to power electrical systems onboard when the main engine is turned off. It can power cleaning equipment, run air conditioning systems, and even start main engines before or during pushback. The problem? APUs run on jet fuel with higher carbon emissions.
Aircrafts should transition to ground power units (GPUs) for their ground operations whenever possible. Airports and airlines can work on identifying the aircrafts that continue running on APUs at the gates, even when GPUs are available. Microphones positioned at gates can act as IoT sensors that pick up the sound of the APU running. This data can then be cross-referenced against schedules and other data to determine whether an aircraft is running its APU instead of using the power grid. Relevant stakeholders can then be informed, so necessary actions can be taken to improve air quality and reduce carbon emissions.
At the same time, airlines can also track the APU utilization from APU logs available in the cockpit, which provides data on-time units, cycle run, and even the average produced by APU engines. This information can further be mapped with respective flights, routes, and operating crews to understand when APU was overutilized. This solution on blockchain technology can help airlines build the APU lifecycle which can accurately report the carbon emission per APU.
Even today, airlines’ staff rely on paper-based transactions and manual tasks, which are often time-consuming and error-prone. Some of them, like flight dispatch documents and operating manuals, cannot be avoided as regulatory authorities lay them down. But there is a lot of scope among the other operating areas which can be digitalized.
Airlines must develop a new approach to amplify human potential with a blended workforce where human skills are complemented with digital skills. Depending upon the operational scale and workforce distribution, airlines can curate personas for specific roles that play a major role in the operation. Airlines can easily target roles like cabin crew, ramp agents, and engineering staff to start their journey. They depend on paperwork. You can empower them with a mobility solution that caters to all their needs starting from managing their roster in the morning to getting a cab and performing all their mundane tasks while also connected with all other airline systems. This solution will holistically cover their work lifecycle.
Overcome thermal bag tag and asset reconciliation challenges
During the pandemic, airlines and the airport accelerated their contactless journey by onboarding self-bag drop kiosks and home-printed bag tags. But, even then, more than 95% of baggage operations across the world depend on thermally printed bag tags which are extremely dangerous to the environment. When you consider the thermal paper’s chemical composition, it contains Bisphenol A (BPA) and other phenolic chemicals that pose many risks to the environment and can’t be easily recycled. The easy solution is to use digital bag tags, which can be reused by the passenger every time they travel. Digital bag tags are easy to reconcile and deliver a complete baggage journey view across various scan points.
Similarly, assets reconciliation challenges across various other functional areas like GSE, engineering, catering, and even aircraft safety equipment could be solved by using IoT technology. For instance, today, the reconciliation of lifesaving jackets installed under the aircraft seats is done manually by the security staff on paper. This can easily be transitioned to a one-click reconciliation using IoT.
4. Cabin waste management schemes
Airlines must focus on minimizing their cabin waste by reducing, reusing, and recycling to minimize their environmental footprint. Cabin waste comes from 2 main streams—cleaning waste and catering waste.
As per a study by IATA, 23% of the total waste generated per passenger consists of ‘untouched food and drink’.
To overcome this challenge, airlines can leverage technologies like computer vision along with AI/ML for understanding travelers’ likes and dislikes of a particular food item across different sectors and booking classes and on various routes. This data can help caterers understand the food consumption patterns, and revise the menus accordingly.
5. Facility usage optimization schemes
Another big challenge adding to airlines’ carbon footprint comes from their facilities like back offices, training institutes, corporate offices, and even self-operated terminals.
Airlines can optimize their buildings’ energy consumption by deploying IoT sensors on various assets in their facilities, including lighting, cooling systems, doors, and toilets, to track their energy utilization and automatically shut them down when not in use. Data from all these sensors can be brought together to create dashboards, delivering actionable insights that can help facility managers optimize energy consumption. This data can be further used to build predictive analysis to identify and replace dysfunctional equipment without creating bottlenecks and downtime at the facility.
While the airlines are doing the heavy lifting by bringing SAF and investing in new aircraft technologies, a lot can be done within the existing operational setup and reduce their carbon footprint.
By Vinay Yadav
Nagarro bring in the much-needed technological and domain capabilities to help airlines implement green schemes and embrace the challenge of sustainability. To know more about how they can support you in your net zero journey, contact their experts at explore.tnl@nagarro.com.
Airlines have concerns and incorrect assumptions about the role of AI in powering the future of pricing. In this blog, we share insights from airline questions to Datalex regarding the role of AI in transforming airline pricing for the better, and for better revenues.
True AI-powered pricing, that eliminates rules and automated tasks, is a relatively new concept and is not fully understood industry-wide. Conor O’Sullivan, Chief Product Officer at Datalex and Navin Gupta, Product Manager for Pricing AI were on hand to answer burning questions, demystify some of the myths and addressing concerns that airlines have about AI-powered pricing.
Myth #1 – AI-powered pricing will replace my revenue management team
While some industry providers claim they will replace revenue management functions entirely, Datalex knows this is not what the industry needs. With Datalex Pricing AI, instead of replacing, we work collaboratively with airline revenue management teams to enhance what they do today, except in real-time and at scale.
Myth #2 – The airline will lose all control of its pricing strategy
We know from Datalex’s own research with airline executives that 93% of airlines say it is important to retain an element of control with AI-powered pricing so that the pricing strategy supports strategic objectives such as those to enter new markets, remain competitive, ensure customer loyalty, gain new customers, and maintain brand reputation. It’s important that an AI-pricing product is transparent the airline is satisfied that a degree of control is retained through supervising and monitoring techniques that give airlines peace of mind that they are very much still in control of their pricing strategy.
Myth #3 – Our airline will run into privacy / consumer rights issues with personalised pricing
This is a common misconception with AI-powered pricing and this concern is assuaged by the fact that we do not incorporate customer willingness to pay in order to sell the same product at different prices. The aim should be not be ‘personalised pricing’ in the strictest meaning of this; this aim should be ‘optimal pricing’ for optimal conversion dependent on demand and other inputs. This is the approach we have taken with Datalex Pricing AI, which is based on the concept of efficiency, in that the customer benefits from the optimal price based on market conditions at any given moment and this is beneficial to the airline because it is the most efficient price. For this reason, instead of mistakenly believing that AI-powered pricing is a customer-specific endeavour, it should be thought of as customer-centric as it is the most efficient price for any customer at any given moment. AI-powered pricing should be customer-centric, not customer specific.
Myth #4 – Our airline can make the best pricing decisions quick enough because we know our business and our customers
What your airline does today is most likely a limiting price decision-making process that tracks demand and does not take real-time competitor pricing and customer segmentation into account. Once revenue management teams consider and deal with each input and constraint, they must immediately start all over again. Thus, creating a trade-off between accuracy and speed which is a vicious circle with current revenue management processes, and a significant hindrance to an airline’s ability to react. A revenue management team cannot process all relevant demand factors, competitive insights and suggest the most optimal price at every given moment. Some products, like Datalex’s Pricing AI product, can process all inputs at any moment – within 200 to 500 milliseconds to be exact.
Myth #5 – Our airline data is exposed, we will be exposing our data to other airlines
It’s a common misconception that AI is a generic tool used across customers, but powerful, intelligent AI tools are uniquely trained and completely bespoke to each airline because it leverages an airline’s proprietary data and no other.
Myth #6 – We don’t have the internal resources needed to integrate with our revenue management system / We don’t know or have the right AI expertise
Internal resources and a lack of AI expertise are cited by airlines as obstacles to overcome in implementing AI-powered pricing. What is different about AI is that it is built on scalable, easy-to-integrate technology that is a huge change from existing legacy systems. Despite the technology being SaaS based, AI-powered pricing products still integrate seamlessly with existing legacy systems and an airline’s existing Revenue Management tools and processes.
AI education and awareness must not be underestimated. It’s important for airlines to trust technology and experienced technology providers like Datalex to fully embrace the potential of AI and lean on AI experts in the process to bring them along on this journey.
Myth #7 – Our revenue management team will not learn anything if they hand all the data over
It is important for Revenue Management to feel close to and involved in the AI process. To this end, we at Datalex work closely an airline’s revenue management team directly when models are trained initially. Decisions made by models which are reviewed with Revenue Management teams to assure them that it works as expected. We do not take a “big bang” approach and we always advise deploying the product initially into a small number of markets. AI adoption is a journey.
Summary
Beyond the obvious revenue tailwind that AI-powered pricing represents (which has been proven to increase revenue by 2% – 3.82% in Datalex production trials), there are many more opportunities for airlines to stay competitive in-market.
With demand patterns ebbing and flowing, customer confidence changing like the wind, geo-political issues and staff shortages – all industry-wide problems – airlines must have a dynamic, fast acting product that they trust is ready to react at any given moment to such a an ever-changing travel landscape. environment.
Many airlines are keen to start their AI-powered pricing initiatives, but it must be seen as a journey that is taken in steps, with existing revenue management teams in control every step of the way.
Conor O’Sullivan, Chief Product Officer at Datalex Navin Gupta, Product Manager for Pricing AI
The one last errand before you rush to the airport. Making sure rides are arranged for the kids’ activities while you are away. A few fretting moments as the shuttle bus takes too long to get you to the gate.
And then…just as you get in the security line…you learn your flight has been cancelled. It takes the wind right out of your travel sails, no matter who you are, where you are going, and whatever the reason is for your trip.
Some form or fashion of this is happening to thousands of passengers, every day, all around the world.
After unprecedented pandemic-driven slashing of load factors and balance sheets, our industry finally has the passengers back filling planes. And yet, for reasons well covered in media, we’re stepping on the passenger experience at the exact time when so many look forward to resuming their traveling lifestyle.
Airline Schedule Disruption & the Quick Cascade of Personalized Negative Ramifications
All the complications rush to one’s mind. Will I make my connection? Will I miss my meeting? Can my cousin still pick me up if my flight lands really late? What if the fix takes so long that we don’t fly till tomorrow? And does that mean I now have to find a hotel near the airport tonight? Does this airport have taxis available at this hour?
Regardless if the passenger sits in the plush comfort of seat 2B up front, or is snug in the middle seat of aisle 44 in the back, every single one is processing some form of the above queries when a disruption takes place. Anxiety cuts across every price point. Moreover, irrespective of the reason for the delay – be it weather, a mechanical or some other factor – many passengers instinctively hold the airline accountable for all the cascading challenges of an interrupted journey.
All Signs Point to Service Challenges This Summer for Airlines
The mainstream media stories on airline service issues are seemingly recurring weekly. In mid-June, a story on challenges facing European carriers was even published over the water by the New York Times. Over the recent Memorial Day holiday weekend in the USA, more than 2,500 flights were cancelled. Worldwide, more than 7,000 flights were cancelled that same weekend. During the weekend of June 17-19, FlightAware reported more than 10,000 flight delays or cancellations in the USA alone. Extrapolate that figure to the number of impacted passengers, and one can quickly grasp the downstream problems for airline service leaders.
The confluence of factors impacting airlines this summer are well known to airline executives across all departments – operations, finance, scheduling, customer experience teams, to name just a few.
Airlines, handlers and airports remain short-staffed, even as both business and leisure volume surges back
Last-minute flight cancellations cause havoc for crew needing to get to the right destination…and/or needing to quickly find lodging near the airport
Global warming is driving unseasonal weather events
Stubborn variants of COVID are resulting in an unsustainable number of short-notice absences for industry employees globally
From a service and branding perspective, social media only exacerbates the challenges of airline disruption. Passengers waiting on hold or not getting the right fix to their unique issue are often quick to lash out. Monitoring and responding to these electronic broadsides across multiple platforms takes time and resource for already-stressed service departments.
Digitized Services – Driven by Data – Can Mitigate, Surprise and Delight
The scope of these challenges have led some trailblazing airlines to trial modern solutions that are tailored to the expectations of today’s connected travelers. Simply stated, passengers are people who are experiencing new, fast technologies in all facets of their life. Yet when it comes to traveling, far too many sigh when they hear the frustrated voice of a pilot or gate agent announcing a delay or cancellation, as they mentally lurch to the analog mindset of legacy service expectations.
Thankfully, proven digital services are increasingly in use today to address issues raised by disruption. These communication technologies promptly provide relevant information to passengers right as flights are delayed and cancelled. Passengers get pre-arranged personalized options for refreshments, lodging and transfers delivered directly into their mobile devices.
The moment of frustration is instantly mitigated, with passengers empowered to choose from options that solve these immediate problems. The seamless, digital nature of this solution – no standing in line, no waiting on hold – elevates the formerly taxing experience into one of surprising efficiency and delight.
Better yet, the overall benefits to airlines in initial rollouts are real and tangible:
Automation drives less frustration, prevents long queues and dramatically reduces passenger friction
92 percent of disrupted travelers using technology have their issues addressed on-the-go via digital communication
Airport ground staff are recording time savings of 80 percent
Data compilation and tracking gives leaders greater insight and the ability to plan ahead
Quick implementation – as fast as two weeks – expedites use of these solutions
Finally, the delivery of services in this manner creates goodwill with the passenger. Highlights include a greater loyalty to the airline, as well as the warm hue that comes from word-of-mouth storytelling – especially crucial today as business travelers get back to the office and share tales from the road.
With the problems of this unique summer travel season already apparent, the time for action is now. Full-time reactive mode will not suffice as the airline industry comes back to life. Airlines that are truly committed to customer service excellence are investing into digitized solutions across the spectrum of their operations.
Leaders taking in this article should not risk getting left behind.
By Luca De Angelis, CEO, HRS Crew & Passenger Solutions.As the CEO of HRS Crew & Passenger Solutions, Luca De Angelis works today with multiple airlines to enhance their service and crew management operations.
There has been a lot of talk about customer segmentation and personalisation in the past few years. However, there is little evidence that airlines are actually applying any sophisticated level of either – personalisation or segmentation. We may receive marketing emails from airlines with very basic “Dear Mr. Friedli” salutations as an attempt at recognition, however the content of the mail is the same as the next and usually has nothing to do with my travel patterns or signalled intent. While some airlines are better than others in content marketing based on segmentation, most are far from the level which retailers are at. And the furthest extent of segmentation is typically in marketing mails.
During the offer creation process, the airlines’ lack of maturity is even more visible, be it on an airline’s website or app, or via new channels such as the API-driven NDC-channel. In the best case, there may be some differentiation based on the classification as a business traveller or a leisure customer. However, often I may be both, and here things fail.
The purchase process on the website, in most cases, is standardised in terms of process flow and content. Rarely do airlines apply a level of segmentation based on user data or ongoing input from the consumer. Even the promise of new distribution methods enabling “better personalisation and targeted offers” has rarely been fulfilled.
This article focuses on segmentation – or the lack thereof – during the offer creation process.
Why segmentation?
Traditionally, airlines would use very basic indicators to apply customer segmentation during the offer creation process. Segmentation was mainly limited to two segments: business and leisure travellers. This was controlled through characteristics such as weekend stays, duration and other, rather simplistic fare rules and parameters. Today, customers expect tailored content. As a matter of fact, 80% of customers expect a personalised brand experience according to research by Epslion.
The advantage of the basic, fare parameter-based segmentation method is that it will work through traditional channels such as legacy GDS distribution with ATPCO-based fare filing. The disadvantage? It is not a very fine-grained segmentation, nor does it reflect the changed travel behaviours, changed willingness to pay behaviour and changed airline fare products nor the new and enhanced airline and third-party ancillary products.
Applying fine-grained customer segmentation can increase airlines’ revenue, both by increasing conversion and by upselling products to the customer, thus getting just that little bit more of the customer’s wallet share. In consumer retail, estimates and past research show that revenues can be increased by up to 3% to 5% using segmentation and creating tailored offers. Additionally, it is safe to assume that applying smart segmentation can improve customer satisfaction by showing the customer more relevant content.
As distribution is shifting to more direct distribution for many airlines, and a shift towards NDC-based direct-connect distribution on the indirect side, there is growing value in segmentation as it can be applied to a larger customer segment.
What is holding the airlines back?
A combination of a lack of focus or strategy for segmentation, technology challenges, a lack of resources with the knowledge and experience and the inability to analyse customer behaviour, purchasing data and other data-related deficiencies seem to be the reason why airlines have not spent more time on this topic. It could be that airlines are just not convinced that better and more refined segmentation leads to additional revenue and customer experience. Let’s discuss these factors individually.
Strategy and focus
As segmentation has typically been the realm of the marketing and loyalty department, this is not an area which has been in the focus of the product and pricing teams in the past, except to the extent where it was required for basic segmentation. Furthermore, there is often a silo-challenge, whereby the eCommerce team is not in close communication with the revenue management and ancillary team, and the distribution team focusing on NDC and newer offer solutions such as an OMS are different yet again. However, the segmentation strategy for offer creation should, in our opinion, be anchored at the highest level with the overarching distribution strategy, and encompass all channels, segments and products.
Technology
There are a few angles of the technology aspect, and these differ considerably between airlines, depending on the organisation, the solutions in place and the organisation’s digital maturity. However, technology is available to enable an airline to do refined segmentation during offer creation. Optimally, an airline would have a central offer creation solution, or OMS. This would not only feed the airline’s own digital channels, but also the direct-connect channels such as NDC. Within or supporting the OMS, the airline would have a segmentation solution allowing it to determine, based upon each request, a customer segment and in many cases, the context or intent of the request and thus the customer.
Widely available are solutions for the website and mobile app today already and airlines are urged to grasp at the low-hanging fruit of segmentation in the digital channels, as these can be implemented relatively quickly and even managed by third parties, should an airline not have the resources. At the same time, these solutions are often quite advanced and allow for in-depth A/B testing of the success of your segmentation approach.
Resources and skills
Perhaps one of the greatest challenges is within an airline’s organisation. Many airlines continue to have the traditional organisational structure which has been prevalent for decades. Very few have adapted their organisations to align to modern retailers. These typically have a structure which is very much optimised and focused on sales (or channels), products, customer experience and finally, technology enablement. This type of setup could be well aligned to a commercial organisation within an airline.
The second challenge is having the skillsets which understand retail, digital and (new, digital) customer experience. Typically, these will need to come from outside the industry, meaning that they will lack any understanding of the fundamentals of the industry. However, an airline needs to ensure that the complexity of the business is understood, as there are elements of our industry which do not relate in the digital banking, insurance, or retail world. The airline industry is still governed by many standards and interaction protocols, we have regulatory bodies which allow us to interact with other airlines and, for example, governments. Thus, while the outside-in approach is a great way to bring new talent and knowledge, there is a need for bi-directional training within the organisations.
Should an airline be lacking the skills or resources, these can often be acquired as a service.
Product and offer optimisation capability
While we touched on the technology and skillset above, we now need to bring these together. Based on the segmentation strategy outlined previously, using the technology and the know-how we now have, it is time to execute the plan.
There are a number of tasks to be undertaken:
Define the actual segments or demand spaces, and create all required sub-segments based on, for example, geography, point of sale, demographics, and channels.
Define which ancillaries or fare products are relevant to which segments or demand spaces
Define how pricing can be optimised to each segment’s willingness to pay, focusing on increasing conversion
Creating bundles of products and services likely to be purchased by the segments
Implementing the logic, business rules or algorithms within the offer engine or digital channels to analyse the request and the context or intent, select the right set of applicable products and create a number of tailored offers
Implement A/B testing to measure the success and confirm any hypotheses made, especially in the initial phases, However, there is a need to continuously measure and test, as the optimisation is a never-ending process.
Data
For airlines, there is rarely a lack of data. It is available in abundance, however, perhaps not structured or easily accessible. Data is essential, however, to create an initial set of customer segments as well as an initial definition of tailored products and services per segment. Typically, this can be defined based on past purchase data.
Further, data from each request, as well as data from customer history or your customer data management (CDM) solution (e.g., the loyalty system) can be used to create the “on-the-fly” offer. There is a lot of valuable information in requests made through digital channels or the API channel which can be used. This includes obvious elements such as the cities travelled from and to, the number and types of passengers and the date of travel. However, other elements can be used as indicators as well, such as the amount of time a search is done before travel, the duration and days, the season in combination with the destination and many others.
Can an airline take baby steps to improve?
While the five groups of activities outlined above may seem a lot to deal with, this does not all have to be done at once. And, while there can be compelling events which offer the opportunity to consider the overall strategy and execution thereof as part of the process (such as when redefining your distribution strategy or implementing an OMS or upgrading your eCommerce platform), bits and pieces of all the above steps can already lead in the right direction.
An isolated micro-segmentation strategy can be a great first step, based on existing booking data and analytics from the website. Alternatively, implementing software on your website which helps with targeted offers and segmentation can be done in a matter of weeks, with initial results seen in a few months. This can be procured as a service, allowing the airline to focus on other topics at hand. Categorising the existing ancillaries and fare products to a basic and simple demand space structure, and creating some static bundles aligned to these can typically be implemented relatively quickly.
In any case, if you go big or small, take a giant leap or a baby step, it is strongly encouraged to seize the opportunity and not to wait with segmentation. As we work with airlines around the globe, this has become one of the key topics of interest and development, and will help airlines take one more step towards becoming retailers within the travel industry.
Disruption is the new normal for businesses in every industry. In the travel and transportation space, airlines are applying new levels of technology in order to deliver value on faster cycle times. Meanwhile, they are experiencing an increasing churn of talent, plus added restrictions and industry mandates. To survive in today’s volatile environment, airlines must enable real-time situational awareness to combat operational threats. Managing their cargo below the wing as they revenue manage their seats and ancillaries above the wing will help them achieve their goals.
According to the International Air Trade Association (IATA), worldwide demand for export and import orders continues to fluctuate, while cargo capacity restraints tighten. IATA reported that both cargo demand and capacity were down in April 2022 compared to the previous year, with global demand down 11.2% and demand for international operations down 10.6%. Global cargo capacity was reportedly down 2% versus April 2021 (although international operations were up 1.2%), and both were down slightly from March of this year.
IATA also reported that total demand for air travel was up 78.7% year-over-year in April 2021 and up 2.7% over March 2022, with several international routes trending above pre-pandemic levels. So while it appears that wildly fluctuating cargo capacity and demand are here for the long haul, air travel for commercial passengers continues to increase, despite fuel costs, political challenges, and pandemic complications.
Meanwhile, airlines struggle to effectively price cargo capacity in an increasingly dynamic environment. In a time when year-over-year and historical data leave gaps in future demand and pricing, traditional methods are unable to help airlines convert their unique offering into long-term revenue. Beyond that, cargo revenue management isn’t typically considered in legacy revenue management systems. Instead, carriers rely only on ad-hoc processes, infrequent heuristics, and effort spent exclusively on managing near departures. In a nutshell, airline analysts rely on guesswork to make cargo revenue management-related decisions. This is not the best way to maximize the usage and profitability of airlines’ most profit-turning assets.
FLYR Labs utilizes artificial intelligence, deep learning, and neural networks to solve the industry’s cargo model complexities. The Revenue Operating System® harnesses this cutting edge form of AI technology to provide the context behind airline data, helping analysts make better informed decisions.
The Revenue Operating System does not rely on outdated predictive equations, but rather infers complex relationships in high-dimensional space. The deep learning models provide meaningful, organization-wide applicable outputs – driving capacity planning, B2B negotiation, and automated request evaluations to support sustainable cargo revenue. For airlines, The Revenue Operating System also informs the price of passenger fares and ancillary products like neighbor-free seat offerings for true total flight revenue optimization.
For cargo revenue management analysts, this means they can now focus their attention on strategic activities – deepening their understanding of the network, evaluating complex opportunities alongside customers, and leading the cargo organization as a true commercial center. This is enabled through The Revenue Operating System’s outputs removing the need for manual oversight of standard requests, dynamically reacting to changing market conditions, and identifying where human attention is required. Models and frameworks that have been price-focused since day one ensure that carriers will no longer have to resort to rigid pricing and simplified frameworks while enabling increased organization, agility, and speed of collaboration with customers.
The result is a robust, sustainable, unified cargo management plan that minimizes waste, maximizes revenue, and streamlines operations across the entire airline.
Learn more about how airlines can unlock cargo’s revenue potential using The Revenue Operating System in Air Cargo Magazine’s April issue (Page 16), or visit https://flyrlabs.com/product/.
While there has been much talk and debate since IATA published their vision of a world of offers and orders, the Passenger Service System (PSS) is a critical piece of the airline ecosystem that will not simply vanish overnight. Here’s a preview of a future state in which reliance on the PSS is reduced in favor of new practices that allow airlines to sell more, across more channels, all while streamlining legacy processes.
Delivering the industry vision for personalized travel retailing will be achieved through an API-based product ecosystem.
From an offer perspective, the end-state will include intelligent retailing via a retail platform and offer management system through which all product and customer attributes will be analyzed to create personalized offers. This retail platform will use an NDC-enabled offer and order APIs to communicate the offers to all partners and channels. For orders, the traditional PSS will ultimately be replaced by a new order management system which fulfills the offer, settles payment and creates orders as new centralized records for customer and trip data throughout a journey.
The order model will reduce operational complexity by eliminating passenger name records (PNRs), electronic miscellaneous documents (EMDs) and special service requests (SSRs). Since an order will serve as the single trip record, trip changes, bundling content across different supplier types, and servicing customized offers and orders will be easier than it is today.
The offer and order model is underpinned by a new foundation for data and analytics that supplies rich customer and operational data to the offer and order management systems as needed – and includes Artificial Intelligence and Machine Learning (AI/ML) based services to further optimize customer touchpoints.
The illustration below uses a modern grocery store analogy – with a wide choice of products, bundled offers, flexible shopping and payment options – to show a view on the core building blocks of an end-state offer and order solution.
The transition to offers and orders, while gradual, will see a paradigm shift in terms of technology and operations to support content and commercial model innovation.
The industry will move from a world of static information filings, and multiple piece parts required to fulfill and service bookings, to one that is more dynamic, intelligent, and flexible. IATA set an aspirational goal for the airline industry to transition to offer and order-based retailing by 2030. As a result, travel suppliers and sellers will need to manage hybrid processes associated with ATPCO/EDIFACT content and offers and orders for some time. This reimagining of travel technology will benefit all parties, with travelers being offered a wider choice of personalized content, and travel suppliers and sellers benefitting from improved efficiency and enhanced revenue opportunities.
New to offer and order management? Explore our glossary:
Offer management – The process through which travel suppliers define their product catalog and pricing (retail) to create offers, place the offers across all points of sale (distribute), and differentiate their brand experience (personalize).
Schedule optimization – Strategic analysis and tactical management of how every route can contribute to the airline’s overall profitability
Revenue optimization – Development of the product catalog (all air and ancillary inventory, fares and third-party content) that optimizes total revenue by considering market dynamics, competitor positions, and customer data
Retailing partners – Partner connectivity will provide all background information and data needed to facilitate the sale of any third-party content via the retail platform.
Offer store – Storage of all elements of an offer selected by the traveler until such time as the offer has expired or the customer has proceeded to purchase and the offer converts into an order.
Offer definition and catalog – The inventory free of booking classes that reflects what is available for sale. This includes any conditions attached to offers, such as change and refund policies.
Dynamic pricing and bundling – Revenue optimization, the pricing engine and the offer catalog come together to construct an offer that is intelligently personalized and available for sale according to the offer rules.
Personalization – The application of data science to customer relationship management (CRM) data, trip context details and market trends to generate intelligent offers that are tailored based on customer credentials and known/inferred preferences.
Order management – The process through which an offer is converted into an order (fulfillment). This includes the management of payments/settlement, travel bookings, inventory control and order fulfillment at the airport – all while accounting for total revenue.
Order store – Storage and management of the order throughout its lifecycle, including a record of all changes made by either the traveler or travel supplier, especially in case of reaccommodation.
Payments – Integration of all acquiring banks and payment providers supporting the forms of payment accepted.
Servicing and reaccommodation – Orchestration of the changes required for each voluntary or involuntary change scenario. This business system ensures closed-loop communication with the customer and reconciliation of inventory with any external partners or suppliers.
Departure control – A simplified workflow of order processing tasks needed on the day of departure, most likely to focus on exception handling and change management in the future.
Financial accounting – A future workflow where real-time revenue value from a flight ready to depart is available. This will be achieved by moving many activities currently in Revenue Accounting into the Offer and Order workflows, including revenue integrity protections.
Supplying partners – Partner connectivity will provide all background information and data needed to facilitate interlining, codesharing and the management of third-party services.
Omni-channel management – The consistent management of content and user experience across owned and third-party sales channels, including their sales performance. NDC-enabled capabilities will expand distribution reach by enhancing the consistency of what offers can be distributed across channels, as well as how those offers will be displayed.
Connectivity and APIs – Efficient API access and modularization will allow for new and flexible commercial models between travel suppliers and sellers. It will allow partners to embrace channel differentiation and sell existing and new offers.
Tech foundations, data & analytics, AI/ML – Cloud-based data and analytics will support the retail platform and offer and order management systems. Real-time, two-way communication between the data fabric and the business systems will allow for “in the moment” personalization of the full product catalog. AI and ML-based microservices support the business systems by further optimizing recommendations in the point of sale and service.
By Sabre.To learn more about how Sabre is helping to open the door to a future that means more flexible, modern retailing visit www.sabre.com/open.
In part one of our blog series, we examined how transitioning to an offer and order model would greatly enhance the traveler experience by addressing key pain points. In this piece, we turn our attention to airlines, exploring how technological advancements could help unlock significant revenue opportunities – estimated at $40bn by 2030 across the airline industry according to a 2019 study by McKinsey & Company.
Here, we demonstrate how Sabre and IATA’s shared vision for offers and orders will free airlines from the constraints imposed by today’s standards and systems. Instead, airlines will be able to sell and service a wide range of new and personalized NDC-enabled offers to drive incremental revenue while adding value for their customers. When combined with the cost savings and service level enhancements that can be realized through more efficient management of orders, the business case for change becomes unquestionable.
What are offers and orders?
Offers include the different pieces of an itinerary that come together to form a trip. Today, offers primarily consist of airfares and air ancillaries. Over time, offers will expand to include other types of content – for example, lodging, ground transportation and other ancillaries.
Once a traveler selects an offer, it becomes an order. The order model sets the stage to simplify a variety of long-standing processes related to fulfillment, settlement and reporting, which can help airlines reduce costs and save time.
Today, airlines…
Have limited visibility into individual traveler preferences
Face difficulty selling and servicing a broad range of personalized offers
Struggle to manage complex partnership agreements due to inadequate system capabilities
Enabling airlines to better meet the needs of travelers will enhance differentiation in a crowded marketplace, promote loyalty and ultimately deliver profitable, sustainable revenue growth.
In the future, airlines can…
Create, fulfill and service more personalized and higher margin content
Use real-time data flows from offers and orders to grow revenue and reduce costs
Embark on new partnerships for air and non-air products, improving choice for customers
The offer and order model opens new growth opportunities and gives the travel industry more flexibility in terms of what can be sold, merchandised and managed.
By Sabre. To learn more about how Sabre is helping to open the door to a future that means more flexible, modern retailing visit sabre.com/open.
The face masks are off, those big conferences with thousands of people are back on the calendar, and travel is now so popular that it’s causing turmoil at some airports. It may seem difficult to remember that it was just last year when countries had their borders restricted, we were getting this new vaccine, and all our meetings had to be online. This was the scenario when Air Malta decided to go forward with the idea of shifting its traditional approach to the digital experience.
Starting something innovative in your company might be scary at first. You must have a clear plan in your mind and the right team to execute it. You need to prepare a pitch to convince your CEO and stakeholders as their absolute support is crucial to determine if this idea is going anywhere. Even so, you decide to go ahead, but you can’t have any physical meeting because the world is dealing with a new virus. At this time many of us would have thought that leaving things as they were is the best option to avoid any headaches. That was not what happened with Wayne Grixti.
The CTO of Air Malta believed it was time for a major change in the way this airline was serving its customers. Wayne gathered all forces, including their digital team, to support and drive this digital transformation journey forward. Together with Branchspace, they were able to implement a modernized booking engine and a new website. The results are a constant increase in sales, and, most importantly, positive feedback from their customers.
The way this project had to be handled due to the circumstances, shows how digital is playing such a powerful role in our everyday lives. This wouldn’t have been possible a decade ago for sure, so it’s time to take advantage of what technology has to offer and use it to overcome any challenges. The demand for an innovative digital experience has changed the way we work forever and companies needed to adapt quickly. So why should the way we travel stay the same?
Thank you Wayne for taking the time to talk to us about the digital journey related to the Triplake implementation. As CTO of Air Malta, can you explain to us what was the role the technology played in this project?
I started envisioning what Air Malta could do in the digital space before I joined when I was only a passenger. I used to travel a lot, mostly on Air Malta flights, so I interacted with the digital channels quite often That’s when I started putting down notes on how I could improve this digital experience. Then I had the opportunity to be the CTO of the airline.
From day one I started pushing my vision and many people’s vision on how this digital experience would look like. Basically, having a unified user experience and an omnichannel for the user’s journey.
We started showing the RFP. This was back in July 2020 and we partnered with Branchspace, who understood our vision from day one and where we wanted to take this journey. After nearly two years, and most of it was done online without even having one physical meeting, we managed to launch a website and a modernized booking engine and we’re in the process of launching also a mobile app and a loyalty program.
Quite impressive. We were talking a bit with Antoine (Vella) as well about what it meant as everything was done virtually. The teams hadn’t actually met in person because it wasn’t possible with Covid. Yet, in spite of all of this, we managed it together and there were already the first results. By the summer, the booking platform was ready and started. What were the critical success factors from your perspective? How did you manage this side of a difficult underlying situation?
Yesterday, I was at a conference, my first after two years of Covid, and the topic was how we, as technology leaders, manage to convince our peers, our CEOs, our CFOs, and our chairmen to continue investing in the technology. Even during the restrictions, during Covid, during the impact we had because of these restrictions. So that when we’re back to normal, we will be there with a modernized, digitalized and transformed experience.
I think now we are bearing the fruit of the seed that was sown back then. If I had to summarize it, the critical success factors for me were two. The shift between the sales channels, to increase the sales from the new booking engine, and it was also in time when travel was starting to ramp up.
That was a key milestone and we managed to deliver it in the shortest period of time, but in time also when we were starting to recover and to the positive feedback which we had from our passengers and our customers.
We were used to receiving a monthly report and the first item on the feedback list was also saying: improve your website, improve your booking engine, improve this, improve that. But following the launch, those negative comments became positive comments. That for me is also another critical success factor.
Happy to hear this of course. Actually, you reminded me that in addition to all of these specific circumstances, there were also changes in the top management. The chairman, the CEO at the time the evaluation was made, left and then the chairman and CEO joined only in January when the project started, and the CCO joined even later, correct?
Yes, correct. We started issuing the RFP when there was a CEO and the board which then even the board and the chairman changed. So that was also a challenge in itself, but together we managed to convince the new board and the new CEO to continue supporting and championing the project. If we had to list it as another critical success factor, I think that would be one as well. So we have three now.
For me it was very nice to hear that there was this full support. When I joined Branchspace last year and wanted to hear the feedback, David Curmi, the chairman, said it is a critical part of the digital transformation journey and it’s only the beginning, and we see this as a long-term partnership. It was of course very nice to hear.
In this digital transformation journey that Air Malta has embarked on, you have planned quite a lot of other innovative approaches because you really want to differentiate from the competition, correct?
Yes. We had a very old loyalty program which we were also looking at. We have our technology strategy but in parallel, we also have our customer experience strategy which goes very much hand in hand with this customer 360 Experience or Customer Journey. We started with the website, the booking engine, but in the pipeline we are also looking and soon we will be launching the new loyalty program which is based on innovative technology as well. As an airline, we should be looking at innovative technology to empower the business to make our organization sustainable. I found a lot of support from senior management, from the board, from everyone
The mobile app is the next step. Hopefully, we will be able to launch it very soon and eventually other channels for businesses and companies and organizations.
Is there anything in hindsight you would do differently in the whole process?
Before we started, I was a little bit sceptical about how this will go through, when it comes to delivering from A to Z a project totally online without even one physical meeting. The area where I was a bit sceptical was not the development was not the implementation deployment but the business analysis and the requirements gathering. There you have a number of stakeholders and a number of users and you need a lot of interaction there.
Luckily we had the online tools to do it together, with you and the other stakeholders, because it’s not just Air Malta and Branchspace, there are other stakeholders that were involved in the project.
If you had to summarize the journey so far and the achievement just in one sentence, what would you say?
When there’s goodwill, when there’s a good relationship between the organization, the partner who is supplying, the application in the system and flexibility, and room for manoeuvre, I think you can take any project and deliver it with success. From day one we had a gentleman’s agreement between us that we would have retained this kind of relationship even before signing the contract and I think we managed it well and now we’re really seeing that it worked.
Probably something which many airlines forget: how important the whole partnership is because if that works you will achieve anything also in the future because the future is dynamic as well.
Is there anything Stephen from your side that you would like to add? Was there any criticism of the solution?
The feedback was very positive. Upon implementation, we immediately saw a sustainable increase in the number of bookings. The online experience of the new website was received very well. The two big projects coming up at Air Malta are customer-related. The 360-view of the customer in the sense that both the mobile app and the loyalty program focus specifically on making the customer journey and the customer experience with Air Malta. I believe this is the way forward. This is the way Air Malta would like itself to develop. So, the customer will be the central focus in the forthcoming months and years with Air Malta.
Yes, this will lead to success. Focus on the customer. Thank you so much.
The client is an aviation group with operations worldwide comprising over 110,065 employees. The ServiceNow solution is used globally by the client and its partners for IT Service Management and Cloud Management.
The Challenge
The client uses ServiceNow to provide support for operational tasks related to IT Infrastructure and wanted to enhance the platform on an ongoing basis, with quicker response time leading to higher user satisfaction and improved user experience.
They were looking for a technology partner who could support and provide solutions for improved user experience in a multi provider environment, and perform new module implementations and integrations with multi-provider ITSM Platforms. The technology partner also had to support in onboarding multi providers to ServiceNow, enhance their cloud utilizations and reporting capabilities, and provide continual improvement.
The Solution
Mindtree collaborated with the client to instigate a structured delivery process and governance model. They provided support services and solutions in:
ITSM upliftment, visibility in cloud management and reporting
Enhanced user experience, redesign and development of the service catalogue
Automation in user management such as the creation/modification of a cost centre via catalog item
UAT for cloud module, MFA and change management module
Client Benefits
Quicker response time leading to higher user satisfaction
85% work performed from offshore
SLA-based delivery and reduced backlogs
Faster deployment – Structured process for release management
Productivity increase via automation of group creation and management, change of TAG between ServiceNow and MS Azure for CostCentre and business service
With the advent of modern technologies impacting every industry, the travel sector has been ahead in terms of adopting it at a fast pace, specifically to help airline operations become more efficient and flexible. In the airlines industry, the margins are thin; it is imperative to innovate constantly to keep the margins high. It is an industry that cuts across all others like retail, entertainment, manufacturing, network and telecom, hospitality, transportation, payments, maintenance, insurance, cargo and catering. It is the only industry that is so diversified, in terms of inter-dependency. It is unimaginable to think of a smooth, safe and secure end-to-end journey without the advent of technology.
Some innovations and interesting uses of technology adoption include smart speakers in hotels, virtual reality tours from travel companies, new and seamless ways to check-in, self-driving guide robots, digital twin (digital twin is a virtual representation that serves as the real-time digital counterpart of a physical object or process) for operations etc. Technology is becoming all-pervasive, and we are now also witnessing new horizons of development after 5G.
At Mindtree, we have the expertise and experience in terms of validating and testing these complex systems and have reached the pinnacle in executing and providing support during multiple releases to our clients. We have worked with leading airlines and have understood their complex systems, which has helped us gain domain cognizance and align ourselves with their vision and goal. We have brought new and innovative testing solutions, and delivery and cost models to ensure that we deliver at and above pace with the industry.
In the past, the work that we have done has led to on time delivery, reduction in manual effort and cost, faster time-to-market, and less defects in production, leading to long term relationships with our customers. A few instances include:
Set up continuous test and manage delivery model for one of the largest low-cost carriers, saving millions over the years
Tested complex big data-based critical revenue management for a large European airline
Set up common framework and advanced automation tools for a Canadian airline, saving 70-80% effort
Validated multiple commercial and operational systems for another large airline in US, bringing in multi-million dollars in savings
Brought in digital and automation transformation for a few airlines in Middle East, saving 800 man-days of effort
Verified complex scenarios for seat assignment algorithm and UI
Provided inflight testing in a simulated environment using real devices to test scenarios that actually replicate the environment 30-40,000 feet above earth, and validate the videos, images etc.
Our testing of crew management, network planning, and MRO forms just a fraction of our testing expertise
To test the migration of cloud applications, we carried out multivariate and significant cross browsers testing through tools.
We all love technology, and I would like to quote from the book, ‘Factfulness’: “When we have a fact-based world view, we see that the world is not as bad as it seems, and we can see what we have to do to keep making it better.”
This is exactly what technological and digital transformation is doing to humanity and particularly the airline industry – making it better with each step. We are moving towards approaches that enable organizations to rapidly identify, vet and automate as many processes as possible using technology, such as robotic process automation (RPA), low-code application platforms (LCAP), artificial intelligence (AI) and virtual assistants. With AI/ML-enabled automation frameworks and more futuristic technologies like quantum computing, AI, IoT, 5G, metaverse, NFT and digital avatars, testing will definitely gain more momentum. Going forward, we will look to explore more innovative ways to test multiple scenarios to ensure that we reduce time-to-test and have 0% defect delivery.
During the global pandemic, Lufthansa Cargo faced many of the same challenges as other airlines: decreased passenger flights and increased freight requests. With growing demand for medical supplies, electronics, spare parts, and equipment during a supply chain crisis, Lufthansa Cargo had to pivot quickly.
Switching out passenger seats for cargo and bringing freight from the ocean into the air, the company retrofitted passenger planes into what have become known as “preighters.” Although adopting “preighters’’ was one of the most prominent adaptations Lufthansa Cargo made to accommodate market demands, the company still faced pressing issues involving freighter operations amid numerous travel restrictions, crew requirements, layovers, risk of crew quarantine, multi-leg trips, traffic rights, and more.
The company began its digital transformation journey years ago, but the pandemic accelerated the need to modernize additional processes to easily support rapidly changing global conditions. Before the pandemic, Lufthansa Cargo used several legacy applications to support its business processes. IT had to react on very short notice and adjust its systems within days while keeping operations stable and performing day-to-day.
To fuel its digital transformation and better respond to changing conditions, Lufthansa Cargo wanted to upgrade its technology to enable better responsiveness, speed time-to market, improve service support and quality, automate services, and reduce costs.
Lufthansa Cargo worked with TIBCO Partner Mindtree to integrate all its platforms into a single framework: integration, messaging, and APIs. With TIBCO’s comprehensive Connected Intelligence solutions, the Mindtree and Lufthansa Cargo teams created a model that improved Lufthansa’s current capabilities while pushing its transition journey forward.
The company had two main objectives:
First, become a digital company for digital booking, pricing, and revenue management.
Second, achieve digital fulfillment. Get rid of all the paper, automate processes, improve service quality, and provide a seamless transport journey for clients from original shipper to final consignee. Mindtree was responsible for gathering business requirements, maintaining applications, and migrating software. The TIBCO partner also developed a flexible API architecture on an on premises platform to host services and applications for end-to-end operations. The platform upgrade was key to cloud migration and cloud readiness.
With its new infrastructure, Lufthansa Cargo’s integration platform is now cloud-ready, and it has moved closer to its cloud-native goals. By moving to the cloud, the carrier can easily lower costs and accelerate service capabilities. Mindtree’s devOps support for the core cargo applications helped accelerate transformation and significantly reduce Lufthansa’s time-to-market.
The platform’s API-based programming connects to previously incompatible programs and legacy systems. Lufthansa Cargo reports successfully replacing 20-year-old legacy systems from start to finish and integrating all of its multiple CRMs. Its new integration platform brought together more than 80 applications and systems and bridged a wide data gap.
Besides installing a new API self-service platform, the company expanded its digital sales channels with dynamic spot prices that can be booked immediately. Dynamic prices are generated in real time via the company’s new Rapid Rate Response (RRR) mechanism, also enabled through the new integration platform. Lately, Mindtree has helped Lufthansa Cargo scale-up delivery capabilities according to business demand; development capacity on the central integration platform is no longer a critical resource bottleneck for the company’s digital transformation goals. Working in collaboration, TIBCO and Mindtree have empowered Lufthansa Cargo with integration solutions that bridged the company’s wide data gap and fueled transformation so it can soar to the cloud.
We’re hearing the church bells ringing, the waves of the Mediterranean Sea crashing into one of Europe’s most ancient forts, the smell of pasta is in the air, and the sky has not even one cloud. In case you haven’t guessed it by now, we’re in Malta, one of the smallest countries in the world, with a history that goes back thousands of years, and where new history is being made.
Exploring the island’s roads we’re taken back in time by seeing megaliths older than pyramids or the knights of Malta. But in a country full of ancient history, something really innovative is happening.
Like so many travels in the history of the Mediterranean Sea, embarking on the digital journey can be quite a challenge for many companies, and if we add a pandemic in the process it might seem like an impossible mission. Well, that was not the case for Air Malta. The determination this team has shown to make this digital dream come true was an example of how companies should face the many challenges that come in the way.
We had the pleasure to meet two of the members of this airline, Antoine Vella, Head of Digital Commerce at Air Malta, and Stephen Gauci, Head of Corporate Communications at Air Malta. Both are ready to be part of the change coming to the travel industry.
Can you tell us what this Air Malta project in terms of digital transformation entails?
We come from a legacy background where we were extremely tight down in our technology. We decided to reinvent the way we do digital, with a new website and a new e-commerce platform. We felt we needed to really move forward with our digital and leave the traditional legacy behind. The new way we’re doing things now gives us the flexibility we want from our technology to move quickly and grow faster and reduce our costs of distribution.
What is so special and innovative about the solution you implemented?
It’s modular so we can choose exactly what we want to take, for example just the website or just the e-commerce platform, or the mobile app. Apart from that, there’s also the personalization aspect which is very important. When you have data on your customers you can focus on creating products just for them. The engine will help us to provide the right product at the right time of the customer journey. It’s flexible, so it gives the airline people to change things as they want without having to wait for the traditional release cycle. All these aspects will help Air Malta to grow quickly and since the designs were very clear, UI was very good, it helped us in terms of conversion rate.
That’s amazing. Are you saying that before the digital team from the airline couldn’t just change something as part of the booking process themselves?
It was very limited. They could change some things like text or translations, but they couldn’t change big items because the previous platform was shared among airlines so it couldn’t be customized to a specific airline as much as we wanted to. So, if we wanted to introduce a new product it could take months because we had to follow a release plan and wait to see if that product would also make sense for the other airlines attached to this platform.
What does it mean for Air Malta’s customers? What’s different for them now?
The products are now clearly displayed, the way the customer flows from one page to another page is more user-friendly, so they see their flights first then they can move to select extras. These things are not constantly showing to customers so everything is well displayed. That improves conversion because there is no opportunity for the customer to get lost in the product offer. Everything is clearer.
You said you saw the results in conversion quite fast.
Yes, after two weeks. We went live in August and each month the results were better. We have more sales, better conversion rates, and more revenue.
I assume you compared it with the pre-covid time, so it was not just the peak season.
Yes, it was not just because of the peak season. The results were visible immediately after we launched the platform.
How long did it take to launch the platform?
We started working with the technology, in January 2021, and we went live in August. We’re talking about seven or eight months to implement a new website and a new booking engine. In my opinion, that’s extremely fast.
Yes, it’s fast. Particularly, if we consider that Air Malta faces all the complexity of connecting flights or interlining.
And we’re not just selling Air Malta-operated flights. We have to consider ancillaries like bags, seats, sports equipment, fast track. All of these were incorporated in the booking engine. We have the website operating in seven different languages so it’s quite complex. Being able to do this in just eight months is quite an achievement.
There must have been some problems as well. What were the problems and did you manage to solve them?
Problems were mainly related to APIs and getting the right information based on our PSS APIs. We had some issues, but with the Brachspace team, we were able to fix them quickly. Seeing the two teams working together was really important to see the results and get things working.
Air Malta has a big team in digital, it requires people with the right know-how and experience, right?
Definitely. In terms of the number of resources in Air Malta I would say we were a small team, but everyone was super immersed in building this project, and we had good support from the developing team and of course the Branchspace team.
So, collaboration is key.
Yes, collaboration was key. There was never a team trying to take over the other one so to have a clear synergy between teams is really important. The whole project was handled like a big family project so that’s nice.
This was more like a partnership than just a supplier-vendor deal.
It was much more. It was a big team.
That’s what makes this even more amazing. I understand you started this project amid covid so the team couldn’t really meet personally.
Yes, all the preparation was done online.
And now it was the first time that the Branchspace team could come to Malta and meet everyone personally.
To think about a project of this size, you’d think we need to meet personally, but we managed to do it successfully without any physical meeting.
And there must have been a lot of trust in the process.
Trust was very important. It was a very transparent project and everyone stuck to their timelines. That’s how we managed to deliver it on time.
Is there anything you would do differently if you had to start again?
Maybe invest in more resources for Air Malta. I think that would have allowed us to do more. And maybe the physical aspect of being able to meet would also have helped.
There are innovative things still coming up, some game-changing areas, what is happening?
One of the things is our mobile app. It will be the very first mobile app for the airline so it’s important for us. This will help not just with sales, but also so customers can have all the necessary information in their hands. Another thing is the loyalty program. For the first time, customers will be able to redeem points online. This can grow to other areas outside Air Malta and build a community in the country. That’s our vision.
That’s quite unique and that’s what customers are looking for.
We want customers to earn points not just by special travel dates or classes, we want to move away from the old manual process.
So this program will be applied in a much wider area, not just flying.
Exactly. We’re talking about restaurants, hotels, coffee shops, supermarkets maybe even car rentals. The more options the customer has to spend these points the better it will be for the airline.
It’s a lot of good customer-centric initiatives.
We’re trying to become more customer-focused in our approach. And through every channel not just digitally. Our focus should be the customer because, ultimately, we’re here to serve the customer. We need to provide a good service and the technology to serve that purpose.
It can make a difference to your competition. It must be great for you Stephen to be able to communicate about the project. It is a journey so over time there are so many new things happening.
Definitely. We’re having positive news and news that benefits the customers. The website has been having a great impact on the customers which ultimately will benefit the airline with loyalty and repeat visitors.
How did the cooperation in other areas work? There are elements linked to this project like loyalty, distribution, strategy…
It was very important from day one that there was internal alignment between all departments. Everyone knew what the end result was, so all were working in the same direction. Even though it was difficult with covid, the project brought the employees together, so it wasn’t just a digital department success, it was an Air Malta success.
I’ve been in contact with the chairman, David Curmi, and he said this is the beginning of your digital transformation journey. So, it’s a very important element.
It’s one of the most important parts for the airline in terms of how it should grow and how quickly. Digital is really important.
Looking back to January 2021 and now May 2022, in one word, what comes to your mind about the project?
Exciting. It had so many new things and it was happening so fast that sometimes we don’t even have time to process it all. So, that was very exciting.
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.
The air travel industry was hit hard by pandemic lockdowns and restrictions. Among the challenges for airports and airlines to overcome were red zone restrictions, vaccine passports, social distancing, and uncertainties around passenger volume. In fact, a McKinsey report found that the Covid-19 pandemic resulted in airlines haemorrhaging $168 billion in economic losses in 2020. While the leisure air travel market is now showing signs of recovery, the once-lucrative business travel sector has been slower (for now).
As restrictions have eased across the globe, the industry is working hard to build back confidence but also meet changed customer expectations around frictionless journeys. To achieve this, revive growth and ensure continued profitability, air travel operators are looking for ways to gain a competitive advantage that captures more of the available market while also minimising their costs.
Technological innovations are at the heart of improving efficiency and productivity for customer-facing airline operations. Automating processes on smart devices can enhance customer experience at every touchpoint, while actively reducing costs.
Winning the hearts of passengers
After two years of disruption, a smooth, frictionless journey is highly desirable for passengers, and offering this experience differentiates an airline. When facing unpredictable passenger volumes and changing safety requirements – which, let’s be honest, might return at any point – airlines need flexible and easy-to-implement solutions.
Using smart data capture on mobile devices has multiple benefits. Unlike fixed scanners, it enables customer service agents to perform multiple tasks anywhere in the airport. Airlines can automate processes such as check-in, security queues, lounge access, and luggage management, providing a modern, sleek impression from the first moment a passenger enters the terminal.
Compared with the old approach of using rugged devices at fixed stations, smart data capture on mobile devices delivers significant customer benefits and staff efficiencies. Airport queues have been big news recently, but with staff equipped with smart mobile devices, waiting times can be cut as they can patrol queues and scan IDs, passports and QR codes to speed passengers through check-in and deliver a more personalised experience – accessing details about a passenger’s seat preferences or dietary requirements, for example.
Customer service agents using smart mobile devices can easily manage oversized luggage presented at the gate and quickly check it into the hold. They can instantly issue vouchers to delayed or inconvenienced passengers by scanning boarding cards or codes, and provide smarter assistance when it comes to lost luggage. Giving an agent the power of mobility during check-in ensures that passengers who require assistance can be served at their seats, rather than requiring them to come to a podium.
Reducing operational costs with multifunctional devices
Managing the bottom line is critical, post-Covid. Replacing fixed hardware, like boarding gate readers, with scanning-enabled apps that work on mobile devices reduces the total cost of ownership by between 35% and 50%.
In the airport, efficiency is of the utmost importance. Freed from bulky hardware, agents can ensure faster flight boarding avoiding costly delays. Should a flight transfer from one gate to another, it’s a quick and easy task for customer service agents to pick up their mobile devices and walk to the new gate.
Using smart data capture solutions allows air travel operators to provide passengers with cost-efficient self-service options. By integrating smart scanning into a customer app or website, passengers can check in online, confirm their COVID certification or vaccination status, check in their bags and receive flight information. This helps to reduce congestion in the airport, ensuring a seamless experience and reducing costs incurred by delays or time-consuming procedures.
Employee onboarding and training is also improved when using a single smart device. The intuitive experience from a mobile app that employees are already familiar with eases acceptance and minimises the training required.
Smart scanning also provides opportunities for more upsells and cross-sells. More passenger insights are captured from the scans, and are available instantly, while the transaction can be easily completed with mobile point of sale.
Predicting the unpredictable
The global COVID-19 pandemic has highlighted the importance of future-proofing air travel operations. With customers flocking to airport gates in a post-pandemic world plus the risk of sudden changes in travel rules, having a scalable, flexible and cost-effective solution is the key to managing unpredictable passenger numbers in the coming months.
Scalability and flexibility are two significant advantages of smart data capture. Every staff member with a smart device can become a mobile agent delivering passenger services, so handling fluctuating passenger numbers and new operational demands is easy. It eliminates the need to have extra bespoke and expensive equipment to cope with peaks in demand.
With passenger experiences taken to new heights, businesses benefiting from reduced costs and increased efficiencies and employees transformed into customer service superheroes, smart data capture technology is the answer for a seamless, cost-effective travel experience.
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”.
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.
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.
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.
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.
