5 questions airlines should ask about their transition to Order management

5 questions airlines should ask about their transition to Order management

When low-cost carriers designed their business models to simplify their business and reduce costs, they went ticketless. But why do legacy network carriers need tickets (now e-tickets) after all? Will they still need to issue tickets to customers who accepted their NDC offers? What are the steps for airlines to move to Order management?

 

Would we invent airline tickets today?

If you ask the question “what is an airline ticket, and can airline live without tickets?” pundits may argue that it is critical to many airline processes (which is correct), and it makes no sense to get rid of tickets. But if you ask the question differently “if we invented network airlines today, would we invent tickets?”, the answer will certainly be different.

In today’s world, network carriers are selling through travel agencies and through airline partners, they are operating at shared airports, and they are doing business like retailers, making offers to customers and delivering their orders. Indeed, they don’t need to issue tickets. Being ticketless and moving to orders is a goal shared by other modes of transport, like railways.

In September 2016 IATA published a report that studied the transition to order management, meaning retiring tickets from all airline processes and replacing them by orders. The report was drafted by Travel in Motion, on behalf of IATA’s airline distribution standards team. What are the key questions for the transition?

 

1 – Cost benefit analysis

The customers benefit from order management because they can easily create their own order and modify it before or during the trip. The airlines benefit from the increase in ancillary revenue, including for interline flights, and from the reduction in costs related to customer servicing and IT systems. Of course each airline has a different mix of customers and product offering, which will influence their analysis of the costs and benefits of order management.

 

2 – Impact on stakeholders

The report explores the vast impact on stakeholders of such a transition. Within each airline, customer service will access orders, ground and inflight staff will deliver orders, revenue accounting will process and settle orders, reservations will create and modify orders, digital channels will display orders, sales teams will notice the satisfaction of customers, revenue management will create offers than can be fulfilled in orders. Outside of airlines, interline partners, travel sellers, ground handlers, and payment providers will handle orders and benefit from them.

The PNRgov message containing Advanced Passenger Information, sent by airlines to governments prior the flights, will be based on Orders instead of PNRs.

 

3 – End state Architecture

The report recommends an architecture based on an “Offer and an Order management system” that support sales channels and rely on internal delivery and accounting systems. This architecture is free from any legacy record or message, such as PNR, E-ticket and EMD.

The alternatives include the “encapsulate” option, where the legacy records and message are encapsulated into orders, and the “on-top” option, where the core functions remain in the PSS and the new management functions are built “on-top” of the PSS.

 

4 – Approaches to transition

The report recommends the “staged” approach, as opposed to the “shadow” or “big bang” approaches. Indeed the approach that takes place in phases or stages help minimize risks. The steps can be defined by channel or by product or by function, which progressively cutover from the PSS to the new Order Management System.

Each airline may start the transition with a different configuration, either a PSS and a website, or already a merchandizing platform creating offers and an NDC API distributing offers. Each airline may have a different end state architecture in mind, which generates as many possible transition paths.

 

5 – The right transition

The report argues that different profiles of airlines may choose different paths, which find the best compromise for them. At a high-level, the three airline profiles are network airline, hybrid airline or low-cost airline, and within those profiles there are innovative or follower airlines. The decision criteria include cost/benefit, architecture, transition approach, impacts and risks.

 

Conclusion

In summary, the air travel industry has moved from asking “if” to “when” to “how” the transition will take place. In the “how”, the 5 questions to ask are: What are the costs and benefits? What is the impact on stakeholders? What is the end state architecture? What are the possible transition paths? Which transition is right for my airline?

The airlines which will get this transition right will be the first to deliver a smoother travel experience to their customers.

Putting the (NDC) cart before the (distribution) horse

Putting the (NDC) cart before the (distribution) horse

Even though NDC has been around for several years, there are still many airlines either planning an implementation, just starting an implementation, or expanding a basic implementation to a higher level of functional maturity. NDC can change an airline’s distribution opportunities considerably and is much more than a technology project around API integration. It is very much about the opportunity to make relevant offers to the customers, sell more and better-suited ancillaries, potentially implement new pricing concepts in the indirect channel and controlling the offer and the order.

A common criticism, especially from travel agencies, is that NDC provides no added value and differentiation, but rather only leads to higher complexity. This criticism is fair in some cases, as a lot of airlines still barely differentiate the content distributed via NDC, providing largely the same products and services to the same conditions as in traditional GDS distribution. There are basically three reasons why that may be the case; it could be that the airline lacks a clear strategy on how to serve the NDC channel, the airline is constrained in their distribution via NDC by existing distribution contracts, or they may have a strategy, however, do not yet have the necessary systems and business process in place to execute the strategy. In many cases, it is a combination of all of them.

When an airline goes down the NDC route, its GDS contracts are often neglected, as is the overarching distribution strategy. The effects that these both have on an airline’s NDC strategy and the underlying system capabilities to fulfil the strategy is, however, critical. It is strongly recommended to not look at these in isolation, but with a holistic view on distribution, optimally combined with the direct distribution strategy as well. Often, NDC is implemented without much thought of the GDS contracts and the airline’s ecommerce strategy. This will typically not lead to a satisfying level of NDC adoption nor to happy agencies, as the content or functionality will not meet their expectations.

The challenge with all of this is that the GDS contracts are often dated, complex and difficult to understand. They are managed in a different department or have been recently renewed in a disconnect from the NDC team and cannot be changed in the short term. Often however, the GDS distribution contracts are simply not considered when creating an NDC strategy. In fact, airlines have in some cases implemented NDC with no holistic strategy at all, focusing on an initial technical implementation first with the idea to align it to distribution at a later stage.

Based on our experience working with airlines on distribution strategy and negotiation, as well as the NDC adoption engagements, we believe that it is key to view distribution as the combination of all channels, considering the constraints, opportunities, strengths, and weaknesses of each one of these channels. As a first step, the overall distribution strategy must be reviewed and potentially adapted to the new situation and capabilities that NDC has to offer. Then, it is key that the existing distribution contracts (primarily including the airline’s GDS contracts) be taken into consideration. The key elements in the contracts to be reviewed in this context are:

    • The definition of content and the differentiation between legacy or traditional content versus NDC technology or NDC content
    • The definition of channels, and potential differentiation of definition of these channels between home markets and other markets
    • The permitted freedom (or lack thereof) to vary content depending on distribution technology, distribution channel – and all of this potentially by market
    • The definition and scope of parity and non-discrimination commitments, and what this means for distribution via NDC based on the topics outlined in the bullets above
    • The contract language related to the provision of technology solutions and who is responsible for these. Additionally, if there are additional costs and responsibilities on the airline to ensure the GDS is technologically capable of a given distribution technology. In this context, it is suggested to also review the lead times for the implementation of new features and functions, and any restrictions related thereto.

In summary, it must be said that an airline’s approach to NDC, be it with a full-blown NDC strategy or merely with a plan to implement basic NDC, should always be planned with full knowledge of the airline’s obligations and freedoms in its GDS contracts, including any required changes for the next round of GDS negotiations. Optimally, the airline will carefully analyse the existing distribution contracts for any restrictions or opportunities to be exploited. For each contract, all key characteristics must be compared to each other to identify the most restrictive paragraphs in each, and the effect these will have on the NDC strategy. Just as important however, when renegotiating GDS contracts, is ensuring that NDC is an integral part of those considerations. Creating a negotiation strategy or approach for the distribution contracts can help, even if these are not yet up for renewal. Defining what the airline should and could do in the future to ensure these two distribution paths share common goals and enable the airline to meet the needs of the agencies as well as the airline’s own distribution needs.

Putting the distribution horse in front of the NDC cart will enable an airline to reach higher levels of NDC adoption, have more distribution freedom and address the travel agency, travel management company and corporate buyer needs better.


Daniel Friedli, Travel in Motion GmbH

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

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

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

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

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

 

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

 

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

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

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

 

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

 

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

 

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

 

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


By Marisa Garcia

Distribution

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

>> Watch on-demand on our website