Untapped potentials of AI in the Airline Industry?
Inspired by a follow-up on my customer insights blog last December and an AI assignment for my Executive MBA studies, I wanted to share some learnings from that work. The aim was to look for an AI use case that can be implemented for an airline venturing onto the new distribution transformation path – something that many airlines are just starting to consider. There is a wealth of data to be tapped into, but what exactly might some of the possibilities be for using this data in a meaningful way? What does the new world allow an airline to do that it didn’t before? Will it deliver as promised, and how can this be measured?
- While there is much talk about how AI can revolutionise pricing and revenue management, are there other potential uses of the data that can now give insights that an airline didn’t have before?
- Much has been said about the ability to make more targeted offers and thereby increasing revenue per customer and flight, might there be other untapped golden nuggets to be derived from the offer data?
The airline industry is highly competitive, where customer satisfaction and operational efficiency are crucial to success. As airlines have access to vast amounts of data, it is no surprise that many are turning to artificial intelligence to help them gain a competitive advantage.
One of the most significant benefits of AI for the airline industry is its potential to improve customer experiences. Especially when looking at finding patterns and opportunities that might be undetected today, AI has the potential to process a huge amount of data with an efficiency that only a few solutions already do. Including more and different data sources than what is traditionally done can provide customer insights from a different angle. By analysing customer data, airlines can tailor their offers and services to meet their customers’ needs and preferences better.
A look at some use cases
Traditionally, airlines have pushed out the availability (or made it available in a “pull” fashion) and the prices, and only got to know about the customers when they purchased a flight. However, there is considerable knowledge about how customers behave before they buy – knowledge which airlines to date have never had access to. But my interest was piqued when thinking about what offers customers didn’t buy, since this says as much about their needs as what they finally purchased. Having a complete picture of who did not buy what can lead to new insight into what appeals to whom – in a different way than previously possible.
For example, AI can provide personalised recommendations for flights, hotels, and other travel-related services. AI can analyse a customer’s past purchases, preferences, and other data to deliver tailored recommendations more likely to meet their needs.
AI can also provide real-time information and support to customers during their journey. Chatbots, for example, can provide instant customer support, answering their questions and providing guidance throughout their journey. This can help to reduce customer frustration and improve their overall experience.
Airlines can increase operational efficiency by optimising their processes and reducing costs by using AI. For example, to optimise flight schedules, crew assignments, and other operational tasks.
AI can also improve maintenance operations, reducing downtime and increasing aircraft availability. By analysing data from sensors and other sources, AI can predict maintenance issues before they occur, allowing airlines to address them before they cause disruptions proactively.
Finally, AI can help airlines to boost their revenue by optimising pricing and increasing ancillary sales. AI can analyse customer data and market trends to predict demand and optimise pricing accordingly.
AI can also be used to increase ancillary sales by providing tailored recommendations for ancillary services, such as seat upgrades, baggage allowances, and lounge access. By tailoring these offers to each customer’s preferences and needs, airlines can increase their likelihood of purchasing.
The challenges
While the potential benefits of AI in the airline industry are significant, several challenges come with its implementation. These include the cost of implementation, the complexity of the technology, and the need for skilled personnel to manage and operate the systems.
To overcome these challenges, airlines need to take a phased approach to AI implementation, starting with small proof-of-concept projects to demonstrate the potential value of the technology.
Another challenge is data privacy and compliance. Airlines need to ensure that their use of AI complies with all relevant data privacy regulations and that customer data is adequately secured. This requires a strong governance framework and robust security measures to protect sensitive data.
Airlines need to ensure they have the right personnel to manage and operate AI systems. This requires a mix of technical skills, such as data engineering and data science, and soft skills, such as communication and stakeholder management. Airlines should invest in training and development programs to build these skills in-house and ensure their personnel are up-to-date with the latest AI technologies and best practices.
Potential – but only by doing it right
In conclusion, AI has enormous potential in the airline industry, providing airlines with tools to increase revenue, improve efficiency, and provide customers with personalised offers that cater to their needs. However, implementing AI solutions has challenges, and airlines must be aware of them and take steps to mitigate them. It’s essential to have a dedicated team with the necessary skills and expertise to manage the project and communicate the process and results effectively. With AI, the airline industry can move towards a more sustainable customer-centric business model, identifying new opportunities that emerge from the direct distribution model.
AI has the potential to transform the airline industry, and airlines that embrace it will have a competitive advantage over those that don’t. While the airline industry is still in its infancy in using AI, it’s clear that it is a technology that will play a significant role in shaping the airline industry’s future. It’s exciting to see what the future holds, and we can’t wait to see how AI will continue to transform the airline industry.
This post has been published in collaboration with Terrapinn.
(Mona Kristensen, 5. May 2023)