Will commercial airline IT really become modular and open?

No doubt, commercial airline operations are going through one of the biggest evolutions in decades. Disintermediation continues to take place as traditional GDS-based distribution is increasingly replaced by distribution through new, often NDC-based, channels. In addition, customer-centric airline retailing is removing the legacy concept of trip-based commercial processes.

This leads to the replacement of well-established system environments such as Passenger Service Systems (PSS), which have been around for often thirty or forty years, by modern Offer and Order-based airline retailing platforms. These platforms are built on modern modular architectures, consisting of numerous single components. Therefore, the evolution of our industry is not only going through a path towards modern and customer-centric retailing, but also through a strategic path to substitute legacy, monolithic PSS by modern and modular systems.

In the upcoming world of Offers and Orders, airlines truly have the possibility to execute a “best of breed” approach when it comes to choosing components for their commercial IT landscape. In the traditional legacy PSS world, most of the commercial systems are provided by the PSS provider. Of course, there have always been individual components where solutions from highly specialised providers were used, such as Revenue Management or Revenue Accounting, but it is true to state that most of the commercial applications were provided by the PSS supplier. Therefore, airlines had little opportunity to bring together a solution environment that was provided by a heterogeneous vendor community. The need to integrate solutions was limited, business continuity was the job of a single supplier, and an airline CIO only (more or less) had to manage a single, albeit dominant IT partner. The legacy world was easy, but choice was limited.

Now we aim for a different paradigm. Modularity is key when it comes to Offer and Order-based commercial systems. Different components need to be integrated and work with systems often from competing suppliers, service levels need to be maintained in a multi-vendor set up, all based on an enterprise architecture which needs to be owned (or at least controlled) by the airline. However, this also leads to opportunities for airlines. Airlines can execute a real “best of breed” approach, choosing those systems and components that make most sense for them. The bespoke modular set up enables airlines to better differentiate and, in all consequences, also to provide “their flavour” to the customer experience. It is yet to be seen which airlines will make best use of this new freedom, as they individually need to balance complex, heterogeneous systems and the best individual set of solutions.

However, what does this mean for the IT vendor community? Until now the PSS market has been dominated by two major providers, Amadeus and Sabre (not considering Travelsky with their local dominance in mainland China). While this may be over-simplifying things a little, the commercial airline IT world could be separated into “Amadeus carriers”, “Sabre carriers” and “all others”. Providers of point solutions had to either integrate into the one or the other, if they were chosen over the PSS provider for a specific solution. Integration was often based on the APIs and other standards the PSS provider enforced.

And with Offer and Order management? Of course, on the vendor side of the equation, the big market players are aiming to provide a solution stack that covers all (or at least most) of the functionality an airline requires for their commercial operations. However, a lot of airlines are planning to make use of the new freedom of components and plan to choose solutions from different suppliers. This is driven by both a desire to break the transition into manageable chunks as well as constructing the ideal portfolio of solutions. Besides the complexity that the airlines need to handle for such a construct, the IT vendors also now need to re-think their interaction with their peers:

  • Vendors need to become more open to collaborate with each other, including joint project planning and taking joint responsibility towards airline delivery.
  • There is a difference between modularity and openness. A system environment provided by a single supplier can be modular but not open to third-party solutions. This applies not only to technical capabilities such as interfaces or open APIs, it also covers commercial terms. We have often experienced that the utilisation and integration of a third-party solution has been made commercially unfeasible by the main supplier, through extra (sometimes hidden) fees or other contractual terms such as weak service level agreements.
  • IATA is defining the standards for Offer and Order management systems, but are they detailed enough for vendors to easily integrate on a module level?
  • Airline first. Just as airlines are focusing on the customer, vendors should fundamentally shift their focus to serving the airline, even if this leads to some (short term) missed revenue opportunities. In the long run, airlines will most probably honour this, and it will be to the benefit of the vendor.

We will see over the next three to four years if modularity leads to openness and real airline-focused vendor cooperation. Or to put it differently, how will the new balance between “the winner (vendor) takes all” and “true collaboration in an open and modular world to best support airlines” play out? Whether you’re an airline, a vendor or just would like to explore this journey further, feel free to reach out to us!

 

 

This post has been published in collaboration with Terrapinn.

Boris Padovan, Travel in Motion AG

 

 

 

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