The industry has made progress

Over the past years the airline industry has been working towards the concept of Offers and Orders to support the initiative referred to as Modern Airline Retailing. For the uninformed, there are plenty of articles and papers outlining both, so we won’t explain the two terms in this article.

Over the past two months, there have been three major industry conferences focusing on the airline commercial areas – retail, distribution, loyalty, payments, ancillaries and other related topics. What has become apparent is the progress which has been made in the last 12 to 24 months in these areas. Both the airlines and the solution providers are working towards the aim of business process re-engineering and moving in the direction of solutions which are more like ecommerce and digital retail solutions.

A perspective on how the domains will develop

While TiM uses its own solution capability blueprint with a somewhat more refined set of domains, for the sake of simplicity we will refer to the common four – Offer, Order, Settle and Deliver. The status of maturity of these domains varies considerably, with Offer being the most mature, followed by Order. Both Settle and Deliver are less developed, from both the perspective of vendor products as well as business process re-engineering. This gap is largely attributable to the flow of events in the retail, deliver, settle and fulfilment chain of events.

Looking into 2025 for each domain our expectation for each of them is as follows:

Offer – Airlines will continue to work towards higher offer maturity with a focus on dynamic offers – more specifically, dynamic and contiuous pricing. Increasing offer maturity is an “easy” revenue case to make, and there are plenty of solutions in the market. The vendors are enhancing their solutions in the same area, with some focusing additionally on segmentation and contextual selling as well as more advanced bundling capabilities. Another focus area in 2025 will certainly also be the Product Catalugue and the Stock Keeper.

Order – There are a handful of airlines experimenting with increasing the use of Orders. This is being driven either by airlines using a vendor which already supports components of the order, or their PSS vendor has built initial order structures independent from the PNR, ETKT and EMD as part of their roadmap. We use the term “experimenting” as there are no (full-service) airlines using the order fully yet, including servicing, feeding the order data to accounting and settlement flows, managing involuntary changes and doing journey management with it. The coming year will see an increase in maturity and the first airlines expanding the use of Order Management from a pure order storage to having the ability to work with the order.

Settle – In this domain, there are a number of very solid proof of concept implementatons with integration between Order Management Systems and Order Accounting solutions. The first airlines are testing the use of order accounting capabilities by not issuing EMDs for certain ancillaries. This simplification will help the Order Accounting vendors solidify their solutions and give the airlines the opportunity to learn new processes and truly identify the benefits, especially in terms of revenue leakage avoidance.

Deliver – In TiM’s opinion, this is the domain which will still require the most focus. The Deliver domain also has added complexity as it is closest to the airline’s operations and must work extremely reliably. Furthermore, there are potentially the largest number of other stakeholders which will influence this area – ground handlers, airport authorities, governments, biometric solution providers and many more. However, there are also a great number of opportunities here when we think ahead to the “touhchless airport” of the future, where dwell time is minimised or, for those who wish, dwell time is turned into a shopping, productive or relaxation experience as opposed to queues of people at check-in, security and immigration.

What are the vendors up to?

The logical answer may be that they are developing the solutions above. While this statement is indeed very true, the picture is not quite as straightforward as that. Various vendors are taking different approaches, with some having decided to go “all-in” and develop across the four domains (and beyond, in some cases). Others have decided that they are better focusing on a few key components (the ones they know best) and look for partners in others, building an ecosystem of like-minded solution providers. Others still have taken the risk of advancing into new areas, trying to expand to cover areas such as payment or the Deliver domain. In addition to this, we are still seeing a lot of new entrants, especially for niche or partial solutions. A lot of these new entrants focus on the use of artificial intelligence, especially in the pricing and revenue management domain.

While we think each vendor is unique and has business drivers and strategies guiding their direction, TiM believes that there must be a greater level of collaboration amongst the vendors. We understand the vendors compete with one another, and this must remain so. However, as an industry, we need to ensure that we don’t all run in different directions when building out new capabilities or components. How such an alignment between vendors, for example to agree on intra-component interfaces would look, is food for thought for us and the vendor community.

TiM’s Take

The journey to Offers and Orders is a long one, and we may well publish outlook articles like this for a few years to come. While not all areas are progressing at the same speed, we do not feel that is currently an issue. Most airlines that we work with directly or are discussing the transition with are taking a step-by-step approach. Typically, airlines start with some component of Offer as this is where it is easiest to demonstrate value, and most solutions are available. Offer enhancements are then followed by Order, often to enable even more progress on the Offer side. With a base level of Order competence in place, the airlines will then start considering both the Settle and Service Delivery domains. This is very much in line with the maturity scale, and we can assume that the maturity of the different domains has been driven by customer needs – meaning the airlines’ needs and requests to the vendors.

For airlines who have not yet started at all but would like to get familiar with Offers and Orders, we are more than happy to offer our two-day primer – an onsite training session covering all the basic understanding necessary, including risks, challenges, guidance on how to define a business case, future-state scenarios, the state of the industry and finally, how a transition could be planned.

Daniel Friedli, Travel in Motion AG

The airline industry has started moving from legacy Passenger Service System (PSS) focused commercial IT operations to a customer-centric offer and order-based retailing environment. Through our engagements, we know that this is a complex undertaking involving internal airline departments, traditional distribution entities and partner airlines, just to name a few stakeholders, often with conflicting interests and agendas. And, of course, IT plays an important role here and is often a key entity when it comes to decision making.

Sometimes it is not very explicit that the migration to offer and order also manifests a fundamental change in IT architecture: from monolithic environments to a modular set up, from functions to services, from legacy IT to modern architecture and from classical hosting in dedicated data centers to cloud-based IT operations.

When I started my career in airline IT, running a PSS host was the highlight of every data center operation. The Swissair data center was the core of its airline IT and the pride of most of Swissair’s IT staff. The (at the time mostly) guys running it were some of the most reputable individuals in the IT department of the company, sometimes quite similar to the cast of pilots in the flying part of the airline.

However, the current evolution to offer and order is also core to triggering or accelerating the move to a cloud-based IT environment. The advantages of the cloud are widely known, such as scalability to grow and “breathe” with volatile market requirements, highest availability of services combined with a latency that is now negligible, all operated in a highly secure environment and driven by continuous improvement processes. These advantages also come with an relative overall reduction in CO₂ emissions when compared to the on-premise hosting model. Of course, big cloud data centers create large amounts of CO₂ as well, but it is generally accepted that the overall volume is lower than having the same computing power operated out of numerous smaller entities. Therefore, the need for an airline to operate a dedicated data center has vanished. The head of IT does not need to keep the data center secure and alive by “refreshing” it every three to five years to e.g., avoid security issues. This has also enabled the evolution of company IT leadership. The role of a head of IT or CIO has evolved into a role that drives enterprise-wide innovation by making an airline digital and customer focused.

However, moving to the cloud is more than optimizing IT operations. It is also a key element of the commercial transformation of an airline, because it can only become a true retailer if its IT system and application landscape enable this fundamental change. Both transformations, the “IT infrastructure” and the “commercial” one need to go hand in hand. The move to offer and order management is a particularly critical factor if this dual transformation: the airline becomes a retailer through its cloud based commercial IT systems.

Both transformations will not happen without initial efforts of finance, resources and management. They resemble the famous hockey stick picture – there is a lot of investment before the gains can be realized. However, the gains may come in earlier and at an increased rate, if a voyage is chosen where leveraging early commercial benefits might flatten (though probably not fully compensate) the required IT investments. Therefore, a business case should take this into consideration and frame the sequence of the transformation activities. We will probably not reach a scenario where the revenue increase of becoming a retailer will immediately pay for the IT transformation in full, but it may be able to contribute a lot, particularly in the early stages. This proves again that it can be very beneficial to look into the transformation from a holistic view, taking both the commercial and technological aspects into consideration.

The major vendors of airline offer and order management platforms and the big cloud providers manifest these interdependencies in their own partnership strategies. The three big cloud providers (Amazon Web Services (AWS), Microsoft Azure and Google Cloud) are very active in the airline IT sector, especially in the offer and order management segment. They all not only have airline clients, but they also support major airline IT providers: AWS, who seems to be the biggest player in this area, works closely Accelya and IBS, Microsoft has a strong collaboration with Amadeus and PROS in place and Google works closely with Sabre – just to name a few publicly-known partnerships.

Will we ever reach cloud nine, as it is the place we want to be? Transforming an airline’s commercial and IT landscape is full of challenges, while fully making optimal use of it is an ongoing effort. But both challenges should be addressed jointly, and airlines should not sell themselves short by only considering the transition to offer and order or only looking at the IT cloud transformation. They should go hand in hand, based on an overall transformation strategy. Both paths need to be taken simultaneously and interdependently to reach ONE cloud nine – being a fully retailing airline driven by a cloud-based infrastructure.

This post has been published in collaboration with Terrapinn.

Boris Padovan, Travel in Motion AG

Our society is made of rankings

“Five stars”. “Recommended”. “Best hidden gem”. In today’s digital age, we tend to rank everything and refer to these ranks multiple times a day. From restaurants to gadgets, we are constantly bombarded with lists and reviews that claim to identify “the best”. I am no stranger to it, and while travelling, I often find myself searching for the best places to take photos, eat, etc. Ultimately, no matter how specific the search, I can be sure to find a large set of lists, all assuring me that they know exactly which one will suit me best. This phenomenon has created a self-enforcing loop of always wanting to select the best option available, whether it is for personal or professional use.

As a consultant in the airline retailing industry, I am frequently asked questions like “what is the best solution?”, “what is the best company?” or “what is the best approach?”. While these seem like straightforward questions, the reality is far more complex. The definition of “the best” varies significantly depending on the client’s unique needs, goals and circumstances. What works perfectly for one client might not be suitable for another, making it impossible to pinpoint a one-size-fits-all answer.

For instance, we have been looking at potential solutions for payment orchestration for airlines. One could think that the best Payment Orchestration Provider (POP) would be the one that supports the largest set of payment methods across the world, along with related features like fraud screening. However, looking at the actual markets where the airline operates made it clear that the relevance of some of those payment methods were entirely irrelevant. In other words, if your main markets are the US and Europe, you probably do not care about payment methods specific to Asia (and vice-versa).

The ”it depends” problem

So, how can we tackle this tricky question of “the best” and come up with a better answer than the laconic (and quite unhelpful) “it depends”?

In our view, the first step, before even looking at potential solutions to the question, is to properly define what “the best” truly means. To navigate this complexity, we can focus on three main criteria: cost, features, and timing.

1. Features: This criteria is often the first one that comes to mind when defining “the best”. The more feature-complete a product is and the more capabilities a solution brings to the table, the easier it is to get a clear definition of “best in class”. As a result, such a consideration is the most common approach to start contemplating a particular solution or product. But as indicated above, these features then need to be evaluated for their relevance and criticality. Therefore, listing these features is one thing, but prioritising them is even more important.
2. Cost: This is often the most important concern for airlines, and is usually in direct opposition to the “features-complete” argument. In short, the best option must fit within the budget constraints while still delivering value. Defining costs when evaluating approaches may be tricky, as it requires a thorough understanding of not only the implementation and operation costs, but also the potential reduction in costs due to the new solutions being implemented.
3. Timing/Quality: Lastly, the airline needs to clarify where it stands on the “time versus quality” scale. In the fast-paced airline industry, delays can lead to significant losses, making time a critical factor. However, any issue in a system is also a source of losses and reduced trust. Therefore, the best solution is often one that can meet tight deadlines with minimal compromises on quality, and airlines need to evaluate how much compromise they are willing to accept.

Once the airline has clear priorities on its requirements and a view on what truly matters when evaluating the solution, only then can we start looking at the solution. Depending on the topic, the airline may simply do an internal evaluation or start some heavier process, like running an RFP and thoroughly evaluating different approaches through detailed documentation and discussions. Then again, while these are useful means to evaluate solutions to a given problem, they may lead to the wrong conclusion without a rigorous definition of the airline’s priorities as a very first step.

Conclusion

To summarise, determining “the best” first requires a thorough evaluation of one’s priorities and specific requirements. It’s essential to move beyond the superficial allure of rankings and reviews and delve into what truly matters for your project, with regards to your own company. By carefully considering how relevant cost, features, quality and timing are for your project, you can make a more informed decision that aligns with your unique needs and goals. Remember, “the best” is not a universal constant but a variable that changes with context and perspective. At Travel in Motion, we will happily help you get clarity on these requirements, and walk with you on this evaluation journey, guiding you to finally answer: what is the best, for you.

Thibaud Rohmer, Travel in Motion AG

The road to Offer and Order: Airlines are making progress, as many have begun to tackle the design stage and IATA is providing support to help airlines resolve common issues.

If this is such a long and complex programme with incomplete standards and systems not yet fully designed, one could ask why even engage on such a long and arduous change programme.

Read our latest whitepaper about Offer and Order in 2025 and beyond, kindly supported by PROS.

DOWNLOAD THE WHITEPAPER HERE

Transitioning from one industry to another is never a straightforward path. It’s a journey filled with challenges, learning curves, and unexpected thrills. Coming from a finance background, I’ve spent years crunching numbers, analysing data, and making strategic decisions based on financial reports. The world of finance is intricate, logical, and, for the most part, predictable. When I decided to shift gears and enter the airline industry, I knew I was in for a whirlwind of change. What I didn’t expect was how exhilarating the ride would be.

The airline industry is a vast, dynamic ecosystem that operates on a global scale. It’s a world where customer experience, technology and operational efficiency converge. This industry is unlike any other, with its own set of rules, challenges and opportunities. Coming from a finance background, I had always associated creativity with fields like marketing, design or the arts. My previous work was heavily rooted in data analysis which is, frankly, not very creative. However, one of the most surprising aspects of transitioning into the airline industry has been discovering just how much creative thinking is required to succeed here in a way to find the best solution for the specific airline and find a way how to present it to the client in organised, yet engaging, manner.

One of the first things I realised was the sheer complexity of the industry. In finance, while complex, the systems are often centralised and standardised. The airline industry, on the other hand, is a patchwork of legacy systems, new technologies and industry standards that need to work together seamlessly. In addition, working with legacy systems alongside cutting-edge technology often involves creative problem-solving. Finding ways to integrate new solutions with existing infrastructure, or designing workarounds that maintain operational continuity, is as much an art as it is a science. This blend of creativity and technical skill is something that makes the work here incredibly rewarding. 

One of the first challenges I encountered was familiarising myself with the plethora of acronyms that dominate the airline industry. Terms like NDC, GDS, PSS, PNR and DCS were thrown around in meetings, leaving me scrambling to catch up. Many airlines still rely on decades-old systems for their core operations. As someone used to the fast-paced, ever-evolving world of finance technology, adapting to the slower pace of change in airline IT systems was a lesson in patience and understanding the importance of stability in operations.

The airline industry is moving towards a retail-oriented approach, where the traditional fare-based system is being replaced by a more flexible Offer and Order system. It’s exciting to be part of an industry at the cusp of such a significant change.

The People Make the Difference

While the technical aspects of the airline industry are fascinating, it is the people who make the transition truly unique. I have been fortunate to work with colleagues who are not only experts in their fields, but also incredibly supportive.

The airline industry is very collaborative and team oriented. My colleagues have gone above and beyond to help me get up to speed. They’ve patiently explained complex concepts, answered my endless questions, and provided guidance without overwhelming me with unnecessary details. It is also very helpful that each one of them comes with different knowledge and experience from different areas of the industry, which gives me insight into a wider scope of topics and insights.

This willingness to share knowledge and support newcomers is something I’ve come to deeply appreciate. It’s not just about getting the job done; it’s about bringing everyone along on the journey. This culture of mentorship and collaboration is something I’ve found to be highly emphasised in the airline industry.

Many conferences that the industry offers are a goldmine for anyone new to the industry. Networking at these events is instrumental in understanding the bigger picture of how the industry operates. Even though my first attendance at a conference is yet to happen, I am very much looking forward to engaging with professionals who have spent decades in the industry to provide me with insights that no textbook or online course could offer. These conferences highlight the importance of collaboration in the industry. Unlike finance, where competition can be cutthroat, the airline industry thrives on partnerships – be it between airlines, technology providers or regulatory bodies.

The Perks of Travel: Fuel for Personal and Professional Growth

Another delightful aspect of working in the airline industry is the travel opportunities. Of course, I knew travel would be part of the job, but I underestimated just how enriching it would be – not just professionally, but also personally.

Professionally, travelling has allowed me to experience at first hand the complexities of global operations. Visiting different clients, meeting with international colleagues and understanding the unique challenges faced by airlines in various regions have given me a broader perspective on the industry. It’s one thing to discuss global operations in a conference room, it’s another to be on the ground, seeing how things work in different parts of the world. This hands-on experience has deepened my understanding of the industry and improved my ability to contribute meaningfully to projects and strategies.

On a personal level, the travel opportunities have been equally enriching. Visiting new cities, experiencing different cultures and meeting people from all walks of life have broadened my horizons in ways I hadn’t anticipated. Travel has always been a passion of mine, but working in the airline industry has taken it to another level. It’s not just about ticking destinations off a list, it’s about truly engaging with the world and growing as an individual. The travel perks of working in the airline industry are more than just a benefit – they’re an integral part of the job that fuels both personal and professional development.

Conclusion

Transitioning to the airline industry has been an exhilarating and transformative experience, far beyond what I ever imagined. The industry’s complexity, coupled with the surprising need for creative problem-solving has challenged me in new and exciting ways. The supportive, collaborative environment has made the learning curve manageable, while the opportunity to travel has enriched both my personal and professional life. Ultimately, working in the airline industry is a thrilling adventure — one that continuously pushes me to grow, adapt and embrace the ever-changing landscape of global aviation.

This post has been published in collaboration with Terrapinn.

Leila Rešidbegović, Travel in Motion AG

Modularity is a term often used. It is well associated as one of the benefits of moving away from a legacy, monolithic Passenger Service System and towards a componentised ecosystem.

Earlier this year at a conference, unsurprisingly the concept of modularity came up a lot – but there were many different interpretations and assumed benefits. We hope with this blog post to leave you in a better position when it comes to modularity.

First, on definitions.

Modularity itself refers to a system design principle that breaks down a system into smaller, self-contained units or modules. Each module is designed to perform a specific function and can operate independently, but when integrated, they form a cohesive system. In plainer English, it is a stand-alone capability, it is triggered by passing information to it, typically via an API, and it returns a result. For example, a well-known IT vendor has the concept of a “Segmentation” module. It has one job; it will take ingest customer data and context and return the likely segment for the customer. This information can then be used by another module to tailor the offers a customer is given. You can buy a module off-the-shelf and there is no additional requirement to buy any other module to make it useable.

What does modularity look like today?

Some mature airlines already have this concept. They work with the concept of an orchestration layer. It is typically built in-house or by a system integrator. This layer receives requests from channels (e.g., their website, mobile app, call centre, NDC) and sends requests to a module. This provides the airline with full control. For example, it can allow an airline to send a set of offers to a dynamic offers engine for repricing but only do so for its direct channels as that is the channel where it offers dynamic pricing.

Each module can theoretically be swapped out without having to change the overall ecosystem. Airlines can even run multiple vendors for the same module at once. For example, an airline may have two shopping engines and can choose to route requests to Shopping Engine A or B based on certain conditions.

What is the benefit?

There are benefits to modularity from a commercial, technical and organisational prospective.

From a commercial perspective, an airline can procure modules from different vendors, choosing the best solution for each function. This can lead to better strategic options related to pricing and vendor selection and reduces the need to compromise on capabilities. Additionally, procuring many modules rather than one monolithic system can lead to improved negotiation power. Lastly, on the commercial front, an airline can spread their investment over time, adding modules as and when they need them, rather than a substantial upfront investment in a monolithic system.

From a technical angle, there is the opportunity to conduct maintenance more easily and push changes without having to take an entire system offline. There is also the possibility to scale parts of the system. For example, an airline may need to more compute capacity because it has a sale upcoming, it can scale the parts related to offer management, without doing so for other parts of the system.

From an organisational perspective, modules align with modern ways of working. As a company’s technology architecture often mirrors its organisational structure over time, adopting a modular approach allows an airline and its vendors to clearly define areas of responsibility, fostering a modern organisational structure. This modularity ensures capabilities are created once and owned by a single empowered team responsible for uptime and business KPIs. Currently, airlines often use a monolithic, channel-based architecture with different teams managing the same capability. For instance, seat selection by travel agents is managed by an airline’s indirect channel team, the e-commerce team for the website, and the operational team for airport enquiries.

Potholes ahead: What to watch out for as you drive towards modularly.

When designing and procuring a modular ecosystem, there are many elements to watch out for. Here are just three of them:

1. Is it standalone?

If a vendor offers a module that has a pre-requisite for other products, then it is not standalone. Be cautious of this especially when expanding with an existing vendor and ensure any new modules you are purchasing could work without existing products. You may well decide to change those in the future.

2. Understand the true cost of purchasing an orchestration layer.

If you are procuring an orchestration layer, then ensure you understand the cost of integrating other vendors into the ecosystem. Will the vendor charge a substantial amount to integrate a competitor’s product vs. their own? If the cost feels too high relative to the work required, consider whether this is to artificially better position their own product. It’s not an open and fair ecosystem if that is the case and this will prevent you from obtaining the best product.

3. Bear in mind overall complexity.

It may be tempting to shop for the best vendor for each module. Whilst at Travel in Motion, we do believe in a best of breed environment being suitable for some airlines, they must have the procurement and technology maturity to get the benefits a best of breed environment has on offer. Taking on board too many vendors, at this early stage of industry maturity, may leave you with headaches to run your ecosystem.

How can the whole airline industry achieve modularity?

To achieve modularity, an airline needs the capability to have control over its channels and orchestration layer. Not every airline will develop this, nor will they have the ability to instruct and monitor a system integrator. Airline-industry focused vendors have responded. They are developing channels and orchestration layers “as a service”. All major vendors are also now offering the ability to integrate other vendor modules, typically as a customisation. However, this customisation can be a lot of effort to set up. A vendor’s own modules come readily integrated, and sometimes this can be a benefit to get up and running more quickly but also to only pick up the phone once if it goes wrong.

It’s one thing to build and launch a multi-vendor ecosystem. It is another to operate it. Airlines, as risk averse beings, may be tempted to stick with a single vendor, based on promises of reduced risk and increased ease. Doing so would put aside the benefits a best of breed multi-vendor environment offers. Instead, airlines ensure that you are mitigating the risk in order to take those benefits. Airlines wanting to approach this environment must consider how it will:

• Run the ecosystem and rectify issues across a multi-vendor technology stack. For example, how will you ensure all vendors are cohesively working together, rather than blaming each other.
• Coordinate improvement to its capabilities, acknowledging it will need to do so across multiple vendors.
• Stay active in evaluating the market’s capabilities now that it has the options to swap out modules.

So, what next?

We recommend that airlines whose PSS or related systems contracts end in the next few years consider the options you have for the next generation of systems you will require, and which will meet your future needs. Consider how you can benefit from modularity, or where you see challenges in a multi-vendor environment.

If you are unsure, rely on the experience of companies such as Travel in Motion. We stand ready to help you evaluate your strategy in keeping competitive by moving towards a modern retailing environment. We have already helped several airlines to craft their ideal technology state based on its starting point, and its desired business ambitions. We have equipped such airlines with detailed transition plans, and some have already started implementation.

Jason Balluck, Travel in Motion AG

New Distribution Capability (NDC) has been around for a while. We have written many blogs, whitepapers, and other articles on the topic over the past years. However even today, airlines are challenged with certain aspects of the implementation and adoption. In our view, airlines fall into one of the following five categories:

1. All-in – These airlines have implemented NDC with a holistic distribution strategy. They had (or still have) an approach which drove volumes because they either had clear incentivisation for NDC, or disincentivised the GDS EDIFACT channel. However, they did this in a planned manner and could successfully grow their NDC adoption to 30%, 50% or even more of indirect distribution. This NDC volume shift could be with or without GDS NDC distribution depending on the airline. Based on public information, we would include airlines such as the Lufthansa Group and Copa in this category.
2. Getting there – These airlines implemented NDC with a good intent, however either not with the right strategy, potentially lacking incentive, and capabilities (e.g., lack of servicing capability) without the right internal “drive”, or with the wrong timing. Their NDC adoption is mediocre, and many of these airlines are now looking for a boost by implementing NDC via the GDS – many times with a suboptimal commercial or content model.
3. What went wrong? – This category represents airlines which implemented NDC without a solid plan. Often, this was looked at as a technology project, or “just something we need to do”. However, it was not tied to an overall distribution and channel strategy, nor was it widely supported throughout the organization. Some of these airlines have had NDC for 5 years or more and are still in the low single-digit percentages of channel shift.
4. Just starting – There are many airlines just starting with NDC. Recent announcements include Turkish Airlines, Korean Airlines and Delta Air Lines. They have the chance to do things right by benefitting from the learnings and mistakes others made (if they are willing to). The models and processes are better known, the NDC APIs are more mature, and it should be clear to the airlines what the agency community likes and dislikes. In theory, these airlines have a great chance of “getting it right”.
5. Oh that… – Yes, there are still airlines who are not yet invested or even thinking about NDC. And that is ok. These airlines have other priorities right now. They will adopt NDC naturally in many cases once it is the more common technology at the GDS – which, by the way, none of the GDSs dispute will be the case over time.

From doing many NDC audits for airlines of all sizes and regions, we have learned that airlines do the following things very right, or wrong – wrong also meaning perhaps not at all due to the lack of realisation of the importance, lack of time, lack of resources or other reasons.

1. Distribution strategy – A solid, future-proof distribution strategy is of the essence. This must consider the direct and indirect channels, GDS contracts and the overall system and solution landscape. Optimally, they will define a path towards their optimal target state of distribution, identify hurdles and risks and clearly understand the distribution model and its cost implications. We have worked with many airlines creating these strategies, and one of the main challenges we often see is that the airline distribution team only does this type of work every few years and negotiates with GDS and PSS vendors even less. Thus, the understanding of the airline’s distribution contracts is challenging. Even for us, doing this on a daily basis, it is often complex to understand the intricacies of these contracts and recognise the consequences of certain decisions made during the strategy phase.
2. Plan the growth – Create a target list by market, and optimally, follow the TAM/SAM/SOM methodology to correctly identify and qualify the potential sellers and seller types by market. Clearly assess your current (or planned) NDC solution to ensure it meets the functional capabilities as required / requested by the sellers. Educate the sales team and other parts of the organisation to ensure there is a good understanding of NDC basics, but also more complex topics such as incentivisation, connection methods, available content, etc. Equip the sales and account teams with confidence and with the information they need to go to the trade. Identify and work with the right aggregators to support the growth.
3. Prepare for adoption – This step includes more training, defining internal and external processes (and optimising them), monitoring and measuring the traffic and volumes, and managing communication. Let’s take that apart a bit more. Before we do, we’d like to suggest that airlines create what we refer to as an NDC Adoption Playbook. A document which is accessible to anyone in the airline implementing NDC. This should include the documentation to the topics outlined below and updated constantly to be the single go-to reference for airline employees. This should be developed and maintained by the NDC core team with support from sales, the product team(s), operational support, and technology.
   • Training – Helpdesk and support – both technical and business support – require training to understand new and changed processes. A travel agent may call with a problem but not know if this is a technical issue or a functional issue. This must be identified and then handled accordingly.
   • Processes – Define the actual support process and flow – where and how is the problem ticket managed, who communicates to whom, and how. Or the implementation processes – the more standardised these are, the more efficient the implementations will be. There are other processes which are key and must be defined, documented, and understood across the affected parts of the organisation. Furthermore, taking the time to optimise these processes allows for more efficient scaling.
   • Monitoring and measuring traffic and volumes – Ensure that the operations team knows what is going on from a technical perspective. Are we responding fast enough to the queries, are there an unusual amount of error responses, is the system being swamped with “useless” requests. On the functional side, how are the sales volumes and values, are we reaching our targets, is there an increase in wallet share, a shift of channel or an increase in sales – or whatever the defined KPIs are. This is also how you can evaluate the efficiency and adoption rate of new products, or new decisions taken in your distribution strategy.
   • Communication – Both internal and external communication are, in our experience, often not done well or the importance of it underestimated. We urge airlines to develop a communications plan to keep the trade informed of changes, new functionality, and operational issues.
     
     

What is my next step?

If you have identified yourself with one of the airline types above, you may be thinking “what should I do next?”. The answer, as is often the case, is “it depends”. However, we would recommend you do a quick step-check. Do you have “1. Distribution Strategy” covered and understood perfectly, and a path towards the distribution model which suits you? If not, start by defining it, as without this, your efforts to grow NDC may be futile. Then, step 2: do you have your plan for growth? Does it paint a clear picture of the actions you need to take and the KPIs which define success? If not, you should take this as the focus for your next discussions. If that plan is clear, then take a stab at step 3 and create your NDC Adoption Playbook. We have developed several of these with airlines, and the value of this single NDC data and process repository is not to be underestimated.

If you feel prepared and have completed the steps above, then there should be nothing in the way of success and growth.

This post has been published in collaboration with Terrapinn.

Daniel Friedli, Travel in Motion AG

[i] TAM = Total Addressable Market / SAM = Sales Addressable Market / SOM = Sales Obtainable Market

Panta Rhei, this is the name of the biggest excursion boat on lake Zurich. Sometimes, when we are in one of our shared workspaces downtown, we catch a view of this wonderful ship and think about the ship’s name: Panta Rhei, which means (according to Wikipedia, as none of our team members had ancient Greek at school): everything flows.

Panta Rhei also describes the status that parts of our industry are currently in: Airline distribution has started the next big evolutionary step. IT systems that have served the industry for decades are being replaced by modern technology that enables airline commercial operations to be focused on customer experience. Through this shift, airlines will be able to become retailers, replacing their legacy, trip-based system environments with modern offer and order management-based platforms. Under the stewardship of IATA, a lot of work on designing and defining the new world of commercial airline processes and airline IT has already been done. If we use the overall process of passenger, or rather customer experience from offer to order to delivery, we can also see that much more work has already been done on defining the “offer” and “order” parts compared to delivery. Delivery – some call it Service Delivery, others order delivery – covers the process and work that needs to be executed to deliver the services which were presented as offers and later ordered by the customer. In our airline industry, delivery mainly takes place in the airport environment. Numerous players, airlines, airports, ground handlers, security, customs, immigration, retail, etc. are stakeholders in an airport, leading to a great deal of complexity. Therefore, defining Service Delivery in the context of offer and order management is not an easy undertaking. At the same, time airports and their ecosystems need guidance from the airlines concerning the customer experience, otherwise the finger pointing between all parties may start (or in some cases continue) about why some strategic investment decisions have not been taken.

From an IT perspective, the Departure Control System (DCS) has traditionally played a pivotal role when it comes to passenger handling. As part of Service Delivery, the traditional check-in process becomes more of a back-office process, with the traditional boarding pass being replaced by a new format constantly synchronized with the actual order. This process is also designed to be supported by biometrics in the future. All information for serving and delivering to the customer is available in real-time to all involved parties at all touchpoints. The customer is consistently and continuously informed via mobile applications and the ground handler, or other airline airport staff have access to the order data with new and user-friendly front ends. This leads to a fundamental transformation of the legacy DCS to either operations management for aircraft handling and delivery orchestration or management of customer handling. For customer handling, the order remains constantly updated as a “single source of truth” and is integrated into all relevant airport processes, such as baggage management, waitlists, overbookings, etc. The order also feeds relevant parts of the airport and aircraft turnaround operations, such as fuelling or weight and balance operations. In addition, the customer shall receive relevant and personalized offers at touchpoints during the airport experience. Therefore, the future airport systems for customer handling must also be connected with the airline’s offer management system.

The (at least partial) substitution of DCS through Offer and Order Management systems (OOMS) leads to a call for action to DCS vendors. From a high-level technical perspective, vendors need to support passenger handling not only for order-based Service Delivery but also by providing the capability to offer relevant services to the customer at touchpoints at an airport. Overall, their future role can be summarized as the providers of the system that steers the passenger’s airline experience, by orchestrating and supporting the customer journey at the airport through interfacing into the relevant environment, especially the airlines OOMS and the relevant airport systems.

This requires an overall re-think of the vendor’s systems, integrations and capabilities:

• The (ONE) Order message suite needs to be fully supported.
• The system must be capable of working without legacy data formats such as PNL, ADL, PNR, e-tickets or EMDs, as they will no longer exist.
• At the same time, the system needs to provide the ability to still access the aforementioned legacy components and artefacts, as airlines may partner with other airlines whose operations are still in a legacy environment.
• In addition, an integration into the airline Offer Management System must be available to address retailing and ancillary opportunities at all customer touchpoints during the airport process, regardless of channel, such as a mobile app or airport service desk.

However, the roadmap for DCS might very well be an evolutionary one in which legacy DCS evolves over time to a Service Delivery system. With Order Delivery being at an early stage, DCS vendors have an opportunity to play a role in the new set up.

The legacy Passenger Service System (PSS) providers already have DCS in operations. With the evolution of their portfolio to cover OOMS capabilities, it can be assumed that they will also further evolve their current DCS to service delivery to meet the requirements of the future customer airport experience.

The market players that are not providing legacy PSS functionality have always been dependent on an underlying third-party PSS supporting their customer airlines’ operations. Thus, these vendors do not have a DCS and would have a significant gap to close if they were to develop all the required Service Delivery functionality. This product roadmap challenge is currently being addressed by numerous vendors separately. They have started looking at the market to evaluate potential partnership opportunities, either on an individual deal basis or as a strategic partnership.

Therefore, this offers a business opportunity for legacy DCS providers that are willing to evolve and become Service Delivery providers. Due to the overall modular design of OOMS in general, supported by defined APIs and business processes the system landscape is open enough to seamlessly integrate multi-vendor solutions. This modularity leads to new opportunities for Service Delivery vendors, as airlines are likely to be open to using a Service Delivery system from a vendor other than the one providing their OOMS, overcoming the usual monolithic design of legacy PSS.

This shows that the evolution within our industry offers opportunities for well-established providers, including DCS vendors. Embracing the change and being a front runner for Service Delivery may open new markets to be explored. We all know that the change needs to happen, as consumers expect airlines to digitally serve them as other industries have already been doing for quite some time: customer centric with relevant and personalized offerings at all customer touchpoints and the ability to deliver.

However, the Service Delivery part of the overall industry transformation will not be completely smooth and seamless. Hurdles will pop up that no one had on a risk sheet, timelines might be extended, but this is not unusual. When the MS Panta Rhei made her maiden voyage on Lake Zurich in 2007, the ship was floating in unfavourable positions and produced unusually heavy waves during the journey. As a result of this, some adjustments had to be made to the vessel to reduce the impact on other users of the lake. No one talks about these teething troubles any longer, as the ship is fully in service and the pride of the Lake Zurich fleet. We take this as a good omen for the transition in our industry.

Boris Padovan, Travel in Motion AG

And it happened again! I was constructing a complex flight itinerary online, reflecting the preferences of my wife and our three adult children. I managed to create the perfect combination of segments at a good price. Only one final step was still pending: payment. I entered my credit card details and … an authentication through the app on my mobile phone was required. But where was my mobile phone? Not at my desk, not in my office – so I tried to call it from my landline, but remembered at the same that I muted it. Therefore, I ran two floors downstairs to the living room, still could not find the damn thing, but saw my Apple watch. I pinged my mobile phone, after shouting out to everyone to be silent for a moment and finally found it on the terrace. I accepted the payment on my phone (pretending not to hear my wife asking me to help in the garden), went back upstairs to my office only to see that the session of my favourite flight portal had already ended. No payment, no conversion and not a good customer experience, but a very secure (unfortunately unfinished) payment process.

I am sure that I am not the only one who has experienced this. We all understand that there is a big need for an airline, as with all other online retailers, to execute payment securely as the number of fraud attempts (e.g., using stolen credit card data) has continuously risen over the decades. Increasing security by enforcing regulations such as PSD2 (Payment Service Directive) and 3D Secure are de-risking payments but are also creating complexity and may even negatively impact conversion, as customer experience suffers.

At the same time, payments are increasingly becoming a significant cost factor for an airline. Numerous studies assume that payment costs represent up to 3% of airline revenues, which is very close to the annual profit our industry is usually achieving on average. McKinsey summarizes that annual payment costs for airlines have already hit the $20 billion barrier.[1]

What does this mean for an airline that is working on a payment strategy? In essence, an airline needs to optimize three strategic components: conversion, fraud prevention and cost efficiency. But these targets are conflicting. Conversion can be increased by the provision of easy and straightforward payment processes. However, this approach may compromise on security. Indeed, in my illustrative, but “based on a true story” example, I have not converted as a client, because I wasn’t able to meet the security requirements of the payment process. In this case, security took precedence over conversion – and I think for a good reason.

Let us take another example: supporting local payment methods is becoming increasingly a necessity for airline retailing. In Switzerland, “Twint” is one of the most used alternative payment methods (APM). Many local retailers support it, as it is secure, provides a good customer experience and Twint claims to lead to increased conversion rates. But APMs are known to be costly for retailers, especially if they need to support different APMs in different markets.

We do not need a lot of imagination to identify and describe other combinations where increasing conversion, reducing fraud and reducing cost are conflicting targets. Our payment “guru” Urs Kipfer summarizes this dilemma in a triangle.

It is obvious, that an airline’s payment strategy must follow a holistic view, which defines the strategic target that should be achieved, and thus also takes into account the need to compromise on the other targets. As airline organizations traditionally have the tendency to be complex, it is essential to include all internal stakeholders – especially as the affected business units may have conflicting interests among themselves.

A strategic approach that clearly defines the targets to be achieved, includes internal stake holders and is driven with the airline’s senior management endorsement is essential for success. It is worthwhile to choose to follow this path. McKinsey estimates that our industry is not addressing an annual $14 billion in potential revenues and savings. Missing revenue opportunities during the payment process itself, too complex payment methods and unaddressed cost reductions all contribute. It is now time to strategically address the payment potential for every airline!

In the end I finally booked our flights – but used a different portal, as my initial itinerary wasn’t available any longer. But I still had to run down two floors afterwards, again – this time to help in the garden, but this is another story.

This post has been published in collaboration with Terrapinn.

Boris Padovan, Travel in Motion AG

Meet the team: Do you want to further discuss this topic or are you interested in an exchange about how airline distribution is changing? Meet us at the Aviation Festival Americas on 15 and 16 May 2024 in Miami, USA. You can register here and by entering the discount code INMOTION40 you will get a 40% discount on the admission fee.

—

[1] McKinsey Sep. 2022 – Airline retailing: How payment innovation can improve the bottom line. (https://www.mckinsey.com/industries/travel-logistics-and-infrastructure/our-insights/airline-retailing-how-payment-innovation-can-improve-the-bottom-line)

Personal interaction with our industry partners is key to how we work. This May will give us good opportunities to meet, discuss and catch up.

Daniel Friedli and Thibaud Rohmer will be at the Aviation Festival Americas in Miami on 15 and 16 May. Daniel will moderate the retail and payment track on the first day of the event. On the second day he will be on a fireside chat about airlines’ shift to retailing with Marc Rosenberg, the chair of the programme committee.  Register now through this link for the Aviation Festival Americas and receive a discount of 40% quoting the discount code “INMOTION40”.

We will also be present at PROS Outperform from 20 till 22 May in Orlando, FL. Daniel Friedli will be on a fireside chat on 21 May discussing IT and tech implications of the shift to offer and order. If you are interested in attending, please register here.

Our engagement with IATA is key for our work and therefore Mona Kristensen and Jason Balluck will be representing Travel in Motion at the IATA Offers and Orders Forum in Geneva on 21 and 22 May.

Urs Kipfer will represent Travel in Motion and Oystin at the ATPS 2024 Airline and Travel Payment Summit in London (on 22 and 23 May), further focussing on our engagements in the airline payment sphere. If you are interested in attending, please register here.

Jason Balluck will be one of the chair persons of the Digital Travel Connect conference on May 23 and 24 in St. Albans, London, UK. He will run the sessions on day 2 of this international conference and moderate several panels with high profile representatives of Accor, Iberostar, TAP Air Portugal, Virgin Atlantic, Club Med, Edelweiss Air, easyJet and Melia Hotels. If you are interested in attending, please register here.

Boris Padovan will host the IT track “Technologies that are Shaping the Future” of the Southeast Europe Aviation Network on 29 May in Dubrovnik, Croatia. This conference focusses on the booming aviation region of South East Europe and Eurasia and is attended by numerous airlines, airports and other aviation affiliated companies. If you are interested in attending please register here.

1. Simple question. Multi-faceted answer.

At Travel in Motion, we support airlines in defining their distribution strategy and the execution thereof, creating NDC adoption strategies, evaluating their NDC readiness, and other related topics. During these activities, one important question is bound to come at some point: “How do we ensure that we made the right choice?”

In other terms, how can an airline evaluate the success of its distribution strategy? While the question is very straightforward, the answer, interestingly, is not.

2. Defining your goals, monitoring your success

First, it is important to identify the goal of said distribution strategy. While most airlines tend to agree that the end goal is optimising distribution cost versus revenue opportunities, airlines will have different focal points to do so. Many airlines are currently focusing on shifting distribution from EDIFACT to NDC, enabling them to better support of Offer and Order processes and technologies: However, each airline has a different path to that end goal or even different visions of what those entails.

Some are going on that journey with the intent of reducing distribution costs, others focus on the customer experience with targeted offers or better servicing, and yet others aim to increase revenues with dynamic pricing and other new capabilities.

Furthermore, with airlines gaining more control over their distribution, new KPIs have started to appear, allowing them to monitor with more precision the efficiency of their strategic choices.

In the rest of this post, we look at some of the industry’s KPIs – old and new. Please note that we are focusing on distribution performance, so, while security, on-time performance, and other metrics are very relevant for airlines, they are not this post’s focus.

3. The Big Five

For a long time, the airline industry has mainly been using five categories of KPIs for distribution which can each be then evaluated per channel and as a global airline performance view.

1. Sales and Revenue

The main measure of a successful distribution strategy is its impact on sales and revenue. By analyzing sales data, airlines can understand customer preferences, optimize pricing strategies, and tailor their offerings to meet market demand. Revenue analysis, on the other hand, helps assess the profitability of different routes, flights, and services, enabling strategic decisions about resource allocation. Together, these metrics offer a comprehensive view of the airline’s retail performance, guiding the refinement of its distribution strategy for enhanced customer satisfaction and profitability.

This includes not just ticket sales, but also ancillary revenue from add-ons like seat upgrades, extra baggage, and in-flight meals. These ancillary revenues should be tracked as a percentage of total revenue, by market, customer segment, route and other metrics, allowing airlines to identify opportunities for diversification.

2. Cost Efficiency

The other side of the coin in evaluating the success of a strategy is to look at the evolution of distribution costs. Each channel has its own associated costs, and with airlines starting to shift their distribution to different channels, it is crucial to monitor the impacts of that shift. Furthermore, while NDC comes with new capabilities, the first steps for an airline with NDC may come with a lesser servicing capability than its other channels, resulting in an increase of customer care costs (and, as we will see later, a decrease in customer satisfaction). Then, by increasing self-servicing capabilities, these costs will start decreasing. Also, as indicated earlier, some airlines become airline retailers with the aim of reducing their distribution costs: for such airlines, this metric is paramount. Further, a shift in channels and distribution model may increase costs for some channels. While this is typically a calculated risk, and offset by channel shift or other means, this must be carefully monitored to ensure the cost increase remains within the bounds as set by the strategy, and the cost offset is successful.

3. Reach

Reach refers to the number of potential customers that an airline can connect with through its various distribution channels, such as direct sales on its website, indirect sales through travel agencies, or digital platforms. Reach is often related to market distribution but can also nowadays refer to customer segmentation or agency type.  The higher reach an airline has, the more customers it can target. However, as we will see in “conversion”, reach is just the first piece of the puzzle. Converting these potential customers to actual customers is the second. Measuring reach also allows the airline to create products and offer content which is better suited to the various channels, markets buyers and travelers. This, in turn, should increase conversion as well as revenue.

4. Conversion rate

Conversion rate measures the quantity of search requests that result in a booking. A high conversion rate indicates that the airline’s offering is well suited to the target markets and segments – or at least, the offering is more attractive than the competition. By evaluating conversion rate, and combining it with markets and segmentation, an airline can tailor its offering to ensure higher conversion, resulting in higher revenues. Most airlines evaluate conversion rates primarily for airfare sales, but a new trend sees airlines starting to monitor ancillary conversion rates as well.

5. Customer Satisfaction

Lastly, in the era of modern airline retailing, customer satisfaction is paramount. NDC enables airlines to offer a more personalized and seamless booking experience, which can significantly enhance customer satisfaction. High levels of customer satisfaction indicate that the airline’s distribution strategy and product offering is effective, with products and services being successfully and seamlessly delivered to the customer. Conversely, low satisfaction levels may signal issues, such as inefficiencies in the processes or a mismatch between the airline’s offerings and customer needs. As indicated earlier, during its first step in this new world, an airline may have limited servicing capabilities in its new channels, resulting in a higher need for the airline’s customer care agents to intervene.

4. The new KPIs on the block

1. ARM Index score

Becoming a full retailer is a journey, and a long one at that. IATA provides the Airline Retailing Maturity Index, which is a way for airlines to evaluate how advanced they are on that path. By regularly self-evaluating through that score, and tracking the evolution of its ARM index score, an airline can get a good estimate on how far along they are in their retailing maturity. And while these are not directly cost and revenue related, it is safe to assume that a higher maturity can generate more revenue and potentially lead to lower cost of servicing.

2. Channel contribution

Channel contribution refers to the percentage of total sales that each distribution channel contributes. If a particular channel has a high contribution, it indicates that the airline’s offerings and marketing strategies are resonating well with customers on that platform. With airlines aiming to see a shift in their distribution, from GDS towards digital direct and NDC (or other direct-connects), monitoring channel contribution is the best way to evaluate this shift. Similarly to previous metrics, this KPI can be evaluated through several factors such as the channel contribution for a specific market, customer type, or even agency type when focusing on indirect distribution.

3. Sustainability

Either due to regulations, customer motivation, or company policy: sustainability is a serious consideration. Travel in Motion recently published a number of posts on the topic on this very same site (go read it, it’s good!). Sustainability involves assessing factors such as the carbon footprint of flights, the use of renewable energy in operations, the implementation of waste reduction strategies in onboard services and many other aspects. A successful distribution strategy should align with the airline’s sustainability goals, promoting eco-friendly options and communicating the airline’s green initiatives to customers. Furthermore, by doing so, airlines can attract environmentally conscious customers, enhance their brand image, and ensure their operations are future-proof against increasing environmental regulations.

5. Conclusion and call to action

Deciding which KPIs to use in order to evaluate your strategy is quite complex. However, with airlines gaining control of their entire distribution, with more visibility, it is now possible for them to have a holistic approach to evaluating their success. Thus, once the airline has defined the key metrics, it must also evaluate where the data for these measurements is best gathered from, where they should be stored and how these can be visualized. Further, it is key to present the relevant KPIs at the right levels and to the right audiences, ensuring that there is no information overflow which will result in the data being ignored.

It is now up to each airline to define their goal, decide on a strategy to target them and pick the relevant KPIs to evaluate this strategy. Travel in Motion helps airlines in many ways, and part of designing a new distribution strategy is how to properly evaluate it. By setting proper goals and monitoring every step of the way towards these goals, we support airlines in moving forward in the right direction. There is no one path to modern airline retailing, but rather many interesting journeys.

Thibaud Rohmer, Travel in Motion AG

Meet the author: Do you want to further discuss this topic or are you interested in an exchange about how airline distribution is changing? Meet Thibaud Rohmer, as well as our Partner and Managing Director Daniel Friedli at the Aviation Festival Americas on 15 and 16 May 2024 in Miami, USA. You can register here and by entering the discount code INMOTION40 you will get a 40% discount on the admission fee.

In the fast-evolving landscape of the airline industry, the adoption of Environmental, Social, and Governance (ESG) principles is increasingly becoming a pivotal factor in shaping the strategies of airlines. In this blog I explore how airlines are integrating ESG to contribute to a more sustainable and responsible future for air travel – not only by compensation or using sustainable aviation fuel (SAF).

ESG in airline distribution, for example, starts with a focus on reducing the environmental impact of distribution processes. From paperless ticketing to digital boarding passes, airlines are leveraging technology to minimize the use of paper, thereby decreasing their ecological footprint. This move aligns with broader sustainability goals and reduces the demand for natural resources, contributing to a more environmentally-friendly distribution system.

Furthermore, airlines are exploring ways to optimize their logistics networks to reduce fuel consumption and emissions associated with the transportation of goods and cargo. By adopting eco-friendly packaging and optimizing delivery routes, airlines can make significant strides in reducing their overall carbon footprint.

The social pillar of ESG in airline distribution revolves around ensuring fair and inclusive practices that benefit both employees and consumers. One key aspect is enhancing accessibility. Airlines are increasingly investing in user-friendly digital platforms and mobile applications, making it easier for passengers to access information, book flights, and manage their travel itineraries. This not only enhances the overall customer experience but also promotes inclusivity by catering to a diverse range of travellers.

Moreover, airlines are extending their commitment to social responsibility to their distribution partners. Collaborating with travel agencies and third-party distributors that share similar ESG values is becoming a priority. This involves ensuring fair business practices, respecting workers’ rights and fostering partnerships with organizations that uphold ethical standards in their operations.

Governance in airline distribution capabilities involves adopting ethical practices, ensuring compliance with regulations, and maintaining transparency in dealings. The integration of ESG principles requires airlines to carefully evaluate their business partners, ensuring that they adhere to ethical business practices and contribute positively to society.

Airlines are increasingly focusing on data security and privacy as part of their governance strategies in distribution. Protecting customer information and ensuring secure transactions are critical in building trust with passengers. By prioritizing these aspects, airlines can demonstrate their commitment to responsible governance and ethical conduct in their business processes.

Implementing ESG principles in airline distribution capabilities is not without its challenges. One major hurdle is the need for technological investments to overhaul existing systems and processes. The transition to digital platforms and the adoption of sustainable logistics solutions may require significant upfront investments. However, these challenges present opportunities for innovation and differentiation.

Airlines that successfully integrate ESG principles into their distribution capabilities can gain a competitive edge. Beyond meeting regulatory requirements, they can appeal to an increasingly conscious consumer base that values sustainability and ethical business practices. By addressing these challenges head on, airlines can position themselves as leaders in responsible and sustainable distribution.

As the airline industry continues to undergo profound transformations, the integration of ESG principles into airline process, practices and capabilities emerges as a key driver of change. From environmental considerations like paperless initiatives to social responsibilities in promoting inclusivity, and governance in ethical practices, the adoption of ESG principles is reshaping the way airlines distribute their services.

The challenges posed by this shift are opportunities for airlines to innovate and demonstrate their commitment to a sustainable future. As passengers become more discerning in their choices, airlines that prioritize ESG in the way they think and act are not only meeting regulatory requirements but are also contributing to a more responsible and resilient aviation industry. In the journey towards a greener, more inclusive future, ESG in the airline world is steering the industry towards new horizons.

At TiM, we are unwavering in our dedication to maintaining a carbon-neutral footprint across every aspect of our operation, from travel and home office practices to digital engagement. We believe that every action counts, which is why every member of our team actively participates in reporting their individual home office footprints, striving to minimize emissions wherever possible.
But we don’t stop there. TiM takes proactive measures to offset all carbon emissions we generate, ensuring a substantial reduction in our environmental impact. Our meticulous approach to calculating carbon emissions, using the trusted MyClimate.org platform, ensures transparency and accountability in our efforts.
By investing in impactful global projects through MyClimate, we’re not just reducing our footprint – we’re actively contributing to a more sustainable future for all. At TiM, environmental responsibility isn’t just a duty – it’s our passion and commitment to creating positive change.

This post has been published in collaboration with Terrapinn.

Mona Kristensen, Travel in Motion

In the past, buying travel seemed to be simpler, especially as payment principles have grown more intricate over the last decade. Sales structures for tickets were refreshingly clear. Tickets were sold in ticket offices or by travel agents. Fares were only organised by booking class. Back then, no one thought of charging separately for gourmet delicacies, cappuccinos or some extra legroom. Payment was pretty much exclusively by credit card or cash. Card numbers were noted down carelessly, stored in poorly protected revenue accounting systems and transmitted directly to the acquirers for billing. The acquirers were still really concerned about the airline customers. Although the fees were outrageously high, authorization and billing involved little technical or administrative effort. Last but not least, governments and card organizations were still reluctant to issue regulations and guidelines with regards to payment processes.

The big game changer in ticket sales came in the form of the internet. Initially, they viewed web sales simply as an additional sales channel. The great opportunities for making offers more flexible and optimizing revenue through additional sales were not exploited by most airlines. However, online fraudsters quickly became aware of the potential of the online ticket sale. At the beginning of the 2000s, fraud cases (and the associated chargebacks) skyrocketed. This in turn triggered a flood of creative fraud prevention solutions. The Card Schemes essentially came up with two major initiatives to curb card fraud: 3-D Secure and Payment Card Industry Data Security Standards (PCI DSS). The implementation of the resulting standards and technologies was (and still is) a huge challenge for airlines stuck in legacy processes.

From PCI and 3-D Secure to PSP

These new standards and requirements have led to greater complexity in payment processing. PCI DSS regulates the processing and storage of credit card data. The associated certification is so strict and extensive that only a few highly specialized service providers are still allowed to process and store card data at all. 3-D Secure refers to the additional authentication of the cardholder. This standard also adds a great deal of complexity to payment processes.

PCI DSS and 3-D Secure have led to the emergence of a new type of service provider: the Payment Service Provider (PSP). The PSP helps merchants (and therefore also airlines) to process payments easily, with all the complexity being outsourced to the PSP.

The airlines now had to integrate additional service providers such as PSPs and fraud screening platforms. Moreover, the cost of developing and maintaining online retail platforms was constantly increasing. Airlines therefore began to pass on the costs of payment processes to their customers – the Optional Payment Charge (OPC) was born.

Of course, reports of online scams motivated law makers to draw up regulations and legislation. The most important of these is the “Payment Service Directive” (PSD), a set of EU regulations which means above all that all payment processes must be protected by “Strong Customer Authentication” (SCA) and that surcharging is no longer permitted.

The reliance on PSP and apparition of POP

To make matters worse, consumers started to expect more from airlines in the 2010s. After having made do with cash and credit cards for decades, they now demanded mobile payment, PayPal and payment by instalments.

In response to the turmoil of regulation, risks, costs and customer requirements, airlines initially adapted their applications and platforms. Services such as PSP, fraud screening and tokenization were implemented by the airlines. This resulted in highly complex networks of interlocking processes and applications that, over time, no one could really keep track of.

In their distress, the airlines turned to the PSPs, who looked at the issue in depth and came to the conclusion that a single PSP would inevitably be overwhelmed by the wealth of issues and regional peculiarities. The solution could only be a new type of service that would act as a new application layer between the airlines’ booking processes and the payment service providers. This was the birth of the Payment Orchestration Platform (POP).

The orchestra for payments

But which issues should a POP address, tackle and optimize? If the challenges, annoyances, threats and wishes from the airlines’ perspective are distilled to the essentials, the core issues that all need to be kept under control are revealed: cost, risk and conversion.  

Costs are controlled via:

• the choice of service providers
• the prioritization of means of payment
• the avoidance of complaints and queries
• the generation of FX profits
• OPC

Risk is managed through:

• secure means of payment
• Fraud screening and fraud management
• PCI conformity

Conversion is promoted with:

• simplicity
• trustworthiness
• local means of payment
• low rejection rates

The core goal of a good POP must be to have a positive impact on cost, risk and conversion. This also generates separate costs, although ideally these are compensated for by optimizing the processes. But what exactly is the role of the POP?

A POP essentially performs three tasks: analysis, payment and reporting.

1. Analysis

Factors such as the customer’s origin, shopping cart (routing), booking class, the desired payment method and the customer’s risk profile are checked using various databases and fraud screening.

2. Payment

The customers are shown the means of payment available in their region, any FX profits are skimmed off via DCC or MCP, an OPC fee is collected and finally the payment is authorized and settled either by the customer themselves or via a third-party PSP.

3. Reporting

A POP should also standardize the remuneration displays of the various payment methods and acquirers and offer them to the airlines for integration with other airline reporting solutions.

This is, of course, a very simplified description of what a POP is and what advantages it can offer to airlines. Ultimately, it is about outsourcing the complexity of modern payment processes to a third-party provider and only having to maintain a single payment gateway API.

In summary, the holy trinity in the payment business, “cost”, “risk” and “conversion” can be balanced through the use of properly-scoped payment orchestration. However, this requires a “payment strategy” instead of an opportunistic approach to solving the increasing payment issues.

Urs Kipfer, Travel in Motion

Offers and Orders: where are we?

For many airlines, Offers and Orders has been a key topic in 2023, and will continue to be in 2024. As a matter of fact, we predict that even more airlines will seriously look at what Offers and Orders really brings, and if deemed valuable will start analysis on how they can transition.

A brief look to the end of 2022 saw IATA and several airlines initiate the Airline Retailing Consortium. The consortium worked through 2023 to define an industry business case which can be applied by airlines at a high level and gives considerable pointers on where cost and benefit will come from. A business reference architecture was developed as well as an airline transition plan (with TiM’s support). Finally, an Industry Transition Paper was published in conjunction with the Boston Consulting Group. For 2024, the consortium aims to deliver some procurement guidelines. For those who have not had the time to review these documents, we urge you to visit the link above and skim through these documents.

We have heard from several airlines quite publicly about their ambitions and aims for the Offers and Orders Transformation (OOT). Lufthansa announced their path to be off PSS by around 2028. Air France KLM announced in October 2023 that their executives approved the funding and the business case to initiate their transformation. Saudia announced their move to Amadeus’ Nevio product by 2025. And those are just a handful of the public announcements. At Travel in Motion, we are working with several other airlines on concepts and transformation design towards Offers and Orders.

What will 2024 bring?

At an industry level, we think it is safe to say that IATA and the Airline Retailing Consortium will continue its efforts to drive forward the transition and provide additional support and materials to airlines. We also believe that at an industry level, we are beyond the concept phase, and have now moved to the design phase. We recently outlined this in a whitepaper we published. To support the industry efforts, we ask IATA and the consortium to focus on some of the more challenging parts such as:

• Interline and intermodal travel – less from a technical perspective, but rather from a business process and settlement perspective.
• Legacy conversion and backwards compatibility – supporting the industry with conversion processes and tools to support the airlines with the ambition to move forward but who are held back by having to interact with airlines which (currently) have no ambition to change.
• DCS and the related departure control processes and the ground handlers, by bringing them on board, getting their buy-in and perhaps most importantly, demonstrating to the ground handlers the benefits of change.

And while there are many more areas, these are perhaps the areas in which we have encountered the highest levels of uncertainty among airlines.

At an airline level, we expect that more large and mid-size airlines will be educating themselves on the value of offers and orders. At the same time, they will be talking to their incumbent vendors to understand their transition plans. Many will also be talking to those vendors which seem to have made the most progress in the past years towards the world of Offers and Orders. We project that dozens of airlines will start building their business cases and designing their possible transition path. We already see that this is front of mind with many airlines from the number of educational, analysis and design workshops we have been engaged to deliver in late 2023 and early 2024. Often, and this is the best-case scenario, this is tied tightly to an overarching distribution strategy review, as the alignment of the future of airline distribution and the world of Offers and Orders is extremely important to get the greatest benefits in the short and mid-term.

We urge airlines who have not yet started any activity in this area to review the IATA consortium documentation and to closely monitor what your competitors and more importantly, your close airline partners are doing.

We recommend to those airlines who have already done some research and analysis, but not yet initiated any true change to start the planning of the transition design, and identifying the areas of quick wins versus the complex areas which will take considerable time, and to not stand still.

We ask of those airlines well advanced with their journey to share their learnings with the industry to make the overall transformation less of a challenge for everyone. The greatest benefit to the industry and the consumer comes then when we have done a large-scale transformation and airlines can, at a larger scale, take advantage of the technologies and richer digital interactions with customers.

Finally, we ask the vendors involved to make clear their proposition, and to proactively work with airlines, IATA and other industry partners to drive forward on their paths, and to identify, address and eliminate technology challenges as quickly as possible. We urge new vendors to come into this space and provide modules and components, ideas and innovation – and we sincerely hope the airlines reward you for that by giving those new vendors their trust.

For Travel in Motion, we see a very busy year ahead. We have gained a lot of knowledge from our work over the past eight years working with IATA and airlines on NDC, ONE Order and Dynamic Offers. We have spent the past five years working with airlines on the order transformation by doing projects such as interline proof of concepts to engaging with airlines to define a transition concept and design a complete multi-year roadmap. We are convinced that this work over the past years has given us great insight into the challenges, the benefits and the methodology, but also into the vendor landscape and the airlines’ needs for the next years. Thus, our key focus for 2024 will be supporting airlines, vendors, and IATA on the continued transition to Offers and Orders.

This post has been published in collaboration with Terrapinn.

Daniel Friedli, Travel in Motion AG

SPENDERS AND PENNY-PINCHERS

While waiting at a bar counter the other day for the round of drinks I had just ordered, one thought occurred to me. There are two types of people in this world: the spenders and the cheapskates (or, a term I absolutely adore, “penny-pinchers”). While reading these lines, I assume you’ll figure out in which category you fit easily: either you are the guy that sits at the table, enjoying some free rounds, or you are the one going to the counter ordering one more round for all.

So, what does this all have to do with airlines?

Airlines love to upsell: ancillaries, upgrades… anything, really. Following the previous paragraph, you may already guess what category of people goes for these upsells. Nowadays, people often travel with others as a group, with each person or couple having their own booking. This means that airlines only target spenders, providing them with upsell options for their own reservations.

What if you could allow a spender to spend money on ancillaries and upgrades for the whole group?

Let us call this concept “dynamic group”. The airline would give the possibility for its customers to indicate that they are travelling together, giving each other the right to upsell their bookings. Everyone in a dynamic group gets to “buy a round”: this could be lounge access for all, priority boarding, meals, WiFi, or even a class upgrade. All these upsells that “penny-pinchers” would never have paid for are now sold to the “spender” in their group.

RE-THINKING ANCILLARIES

Another important aspect of this upselling is for the airline to be able to sell an experience, rather than only the ancillary. For instance, instead of selling seats, airlines would be able to offer a “sit together” ancillary, ensuring that the whole group gets seats in close proximity.

In that same theme, we can imagine “sharing a bottle”, and “play games together”. While these simply mean “buy X glasses of red wine” or “buy WiFi”, they ultimately are presented in a different, more meaningful package.

Note that these “ancillaries with meaning” do not require dynamic groups, and could also be presented to solo travellers. For instance, while I wouldn’t pay specifically to have a window seat, I could be enticed to get a “seat with a view of Mount Fuji”. Optimally, this may be tied to a motivation scheme that ties me to the airline’s frequent flyer programme, for example by offering me miles if the view is then obstructed by bad weather.

ORDERS: THE KEY TO DYNAMIC GROUPS

With Order Management Systems becoming a reality for airlines, the new capabilities associated with orders are interesting. These dynamic groups could easily be implemented, with a simple inclusion in the order structure of the list of other orders, that have the rights of either consultation (read), or even update (write) for that booking.

Filling in those read/write rights would come from various possible customer flows. Either the customer itself indicates it manually, or it could be automated during order creation. Lastly, the travel agency, upon creating several bookings for the group, could indicate those automatically.

Ancillary sales and ticket upgrades are just the tip of the iceberg when it comes to dynamic groups. These could also improve the customer experience by allowing travellers to get informed of any relevant update on their friend’s bookings. Or even upon involuntary changes, allowing the airline to ensure the group is reseated together or even rebooked together, further increasing customer satisfaction.

Overall, dynamic groups are an innovative feature which would benefit airlines and customers. I would appreciate being able to travel with my friends, with the airline acknowledging that we travel together. And I look forward to being able to buy a round of lounge access. 

Thibaud Rohmer, Travel in Motion AG

It began, like many discussions in our family, during a joint family dinner. One of my sons, then still a teenager, politically very active and vocal (maybe not for the right side, in his father’s opinion!) announced to all of us that he will never fly again – because of global warming and the contribution aviation makes to it. As an experienced father of three I immediately decided not to enter into a discussion, simply because his siblings would take side with him against their parents, so instead I proposed to look at the facts.

The facts are of course that civil aviation does indeed contribute to global warming – what doesn’t? McKinsey, among numerous others, has recently published an article about decarbonizing aviation that provides an excellent introduction to the subject. It is summarized that pre-pandemic about 2.5% of the total global CO₂ emissions were caused by aviation. Therefore, I think it is fair to state that our industry is not the main problem, although we all are fully aware that every ton of CO₂ counts and that the predicted growth of air traffic will further increase the need to act. It is also necessary to mention that recent research work sees that non-CO₂ effects should not be underestimated in this context, but this research work is still in a nascent stage.

As a result of the increasing need to take action, the aviation industry has committed to become net-zero by 2050. Numerous activities need to contribute to achieving this target, such as more efficient fleets on numerous levels, from better operations and individual flight planning to common airspace control, sustainable aviation fuels (SAF) and carbon offsetting. McKinsey estimates that a fuel efficiency improvement of 39% has been achieved between 2005 and 2019, and McKinsey’s work further quantifies each of the aforementioned activities in relation to a projected global 2030 view.

All that said, in my view two facts need to be highlighted:

• net-zero aviation cannot be achieved immediately, especially as a lot of the described activities take time to be implemented, such as fleet renewals or moving to a Single European Sky (we don’t even have a single European power plug yet, by the way!)
• it will lead to higher ticket prices for the passengers.

Still, we can already act now, mainly by offsetting CO₂ emissions and further pushing for SAF. Many airlines have taken action and offer CO₂ neutral flights. In some cases, CO₂ neutral flights are offered by airlines as a special fare family or product bundle. For instance, the Lufthansa Group offers “green fares” for all intra-European flights, with the fare uplift covering 20% CO₂ reduction through the usage of SAF and 80% of CO₂ reduction by offsetting. This offer is currently not available for intercontinental flights, although this is most likely just a matter of time, either for LHG or others. Indeed, many other airlines also offer CO₂ neutrality as an optional ancillary product available to purchase, very often based purely on CO₂ offsetting.

Both ways of reducing CO₂ (SAF and offsetting) can be integrated and embedded into distribution processes with relative ease. Third-party service providers such as Berlin-based start-up Sqake offer highly sophisticated and automated tools to exactly calculate the amount of CO₂ emitted by travel on a specific route and cabin class, as well as executing the CO₂ neutrality through SAF, climate projects on behalf of the airlines or a mixture of both. Assuming that airlines will not revenue manage the price of CO₂ neutrality, a cost-based price can be provided to the traveller. And even if the airline is not able to provide such seamless methods as special fare brands or ancillary services, travellers can still compensate emissions by offsetting these through stand-alone methods such as those provided by companies or foundations like Switzerland-based myclimate.org.

In essence, reaching CO₂ neutrality when flying is already possible today, either through a service, provided by the airline or by offsetting through independent providers (although not all CO₂ offsetting projects are equal and attention should be paid to where contributions really go!). But reaching CO₂ neutrality comes at a cost, and in the end travellers will have to cover them, either directly or indirectly. And this point is where I see the paradox. While 56% of travellers worry about climate change, less than 3% of them currently travel CO₂-neutral. Or in other words, most travellers recognise the problem and the mechanisms to achieve individual travel that is CO₂-neutral are available, but very few really “walk the walk.” Therefore, blaming (or even financially punishing) airlines for CO₂ emissions is not very helpful as long as travellers are not willing to cover the additional efforts of the airlines in the form of higher ticket prices.

It was again during one of our family dinners where spoke about our travel plans for 2024. After taking trains and ferries for the last couple of vacations, all family members are back to flying – although this is not necessarily a contradiction to the dinner conversation mentioned at the beginning of this blog. It is about flying in a responsible way by also compensating for our leisure travel. Travellers can already help our industry to accelerate the journey to achieving CO₂ neutrality and (if they travel on business) also help their companies reach their ESG targets. More and more companies have committed to reaching ESG targets and CO₂ reduction down to CO₂ neutrality is a key pillar. Thus, we see growing demand for CO₂ neutral flight products and airlines need to find ways to offer and to deliver them. NDC could also act here as an enabler, if all parts of the distribution chain agree to support this.

Of course, CO₂ offset does not equal CO₂ prevention, but every little helps, and it is a big step forward. Travel in Motion has compensated all of our air travel for many years, and when we entered into our strategic partnership with Oystin Advisory our wish that they also start compensating was immediately accepted. We now strive to become a CO₂-neutral company, and soon hope to be able to offset all emissions from heating the home office, hotel stays and public transport to the cups of coffee we drink and meals we take.

Boris Padovan, Travel in Motion AG

This blog was published jointly with Terrapinn.

Airlines are starting to transform towards Offer and Order Management based commercial distribution and retail processes. Thus, many airlines are beginning to look at their commercial technology stack for the future. Shackled by their PSS, these airlines are looking towards Offer and Order as a path to sell and service in an efficient and modern way. Today’s airline commercial organisation is highly process driven. To achieve a successful transition to Offer and Order, airlines must also consider how their organisation will adapt to make the best use of technology.

We at Travel in Motion are addressing this strategic move in our latest whitepaper “Offer and Order – Moving from Concept to Design.” The whitepaper reviews what has been achieved over the past year at industry level, and incorporates our experience from working with IATA and the Modern Airline Retailing consortium on the IT Transition. In a second step we look ahead into the design phase for the transition towards Offer and Order Management. The document explores the impact of the digital transformation on an airline’s organisation, provide key case studies of how leading airlines and technology providers pursue the transformation, and leaves you, the reader, with key steps on how and where you can start.

We want to thank Accelya for sponsoring this whitepaper. This sponsorship enables us to make this paper available to the whole industry.

DOWNLOAD OUR WHITEPAPER NOW!

As someone who made the leap from customer-facing passenger servicing into the complex world of airline Passenger Service System (PSS) IT at the turn of the century, I vividly remember my initiation into this intricate realm. Back then, a six-month comprehensive training program welcomed me, covering every facet of the PSS – from the business dynamics to the IT intricacies. It was a structured journey that armed me with the necessary knowledge and skills to thrive in the airline domain.

Fast forward to today, and the aviation industry faces a new challenge post-COVID-19. While business is picking up, there’s a pressing need to re-employ for talents that moved on. The catch? The industry has evolved, demanding a deep understanding of cutting-edge technology, cloud solutions, and compliance with ever-evolving regulations. All this must seamlessly integrate with existing IT infrastructures and the talents within the organisation during a transitional phase.

The job market, not just in aviation but across industries, often demands the impossible: “10 years of domain knowledge and experience” for newcomers. In the airline sector, where technological advancements are the norm, finding talents who understand the intricacies of this industry can be a daunting task. After all, if they don’t know what’s already in place, how can they ask the right questions to drive innovation?

So, how can we bridge this knowledge gap effectively and fast track the process of introducing new technical talents to the airline domain? Drawing from my own experiences in onboarding newcomers and engaging in conversations with industry peers, I’ve put together a roadmap for success:

1. Comprehensive Orientation Program

Personal Touch: Begin their journey with a warm welcome and a comprehensive orientation program. This should offer an immersive overview of the airline industry, the company’s culture, and the intricate components and processes within the corporation.

2. Mentorship and Shadowing

Learning by Doing: Pair newcomers with seasoned employees who can act as mentors. Shadowing these experienced hands offers invaluable insights into day-to-day operations and allows newcomers to learn not just theoretically but by example.

3. Online Learning Modules

Self-Paced Learning: Leverage online courses or modules created by industry experts. Cover essential airline industry topics, including jargon and terminology and use these also to upskill talents in the organisation when changes are on the horizon. Allow them to think about what impact the evolution has on their area within the organisation.

4. Continuous Evaluation and Feedback

Personal Growth: Implement regular assessments to track progress. Provide constructive feedback and additional training as needed, fostering personal growth and development.

5. Cultural Immersion

Harmonious Interactions: Given the industry’s diversity, incorporate cultural sensitivity training to promote understanding and harmonious interactions among employees and passengers. Share personal experiences of working with diverse teams.

6. Emergency Response Drills

Safety First: Given the industry’s critical nature, emergency response drills are essential. Train newcomers on how to handle various emergency scenarios like outages or security threats, underscoring the importance of safety.

7. Cross-Training Opportunities

Versatility: Encourage cross-training among employees. This enables newcomers to gain a broader understanding of the airline industry, making them versatile and ready to adapt to different roles if necessary.

8. Customised Training Plans

Tailored Development: Recognise individual strengths and weaknesses. Tailor training plans to individual needs, nurturing personalised development journeys.

9. Regulatory Compliance

Safety and Quality: Ensure all training programs adhere to industry regulations and safety standards, emphasising the industry’s commitment to safety and quality.

In a rapidly evolving industry, training newcomers swiftly is a formidable challenge. However, by adopting a comprehensive training program encompassing orientation, mentorship, online learning, and continuous evaluation, airlines and IT vendors can equip new talents with the skills and knowledge needed to excel. This benefits not only the newcomers but the entire industry, ensuring growth and success.

By sharing my own experiences and insights, I hope to inspire a more efficient and personalised approach to onboarding in the airline domain, where personal growth and industry knowledge go hand in hand.

If you want to know more about how Travel in Motion supports the UN ESG goal number 4, quality education, reach out to us at 

Mona Kristensen, Travel in Motion AG

This blog was published jointly with Terrapinn.

Within the airline IT and commercial departments, everyone is talking about the Order Transformation, or the airline’s digital transformation in more general terms. Ignoring this completely will put an airline into a position of vulnerability in the next few years – vulnerable to the competition which has moved forward, and vulnerable to your PSS (Passenger Service System) provider which might dictate your pace of change.

There are several elements to consider in the case for change – future state architecture, functional benefits, how to transition and many other aspects. However, none of the elements are quite as daunting as trying to build the business case.

Luckily, airlines do not need to start from scratch. Some work has been done over the years which can be used as a reference or starting point. These are mainly the McKinsey study from 2019 and the more recent business case created by IATA (International Air Transport Association) with the Modern Airline Retailing Consortium specifically for the Order Transformation. Of course, many airlines will have their own experience with similar business cases due to investments in NDC (New Distribution Capability), enhanced eCommerce and similar digitally transformative projects.

There are several factors to consider when working through the business case for the Offer and Order Transformation.

1. The starting point and approximate target state: without knowing this, or at least having an idea of what the target state may be, it will be difficult to identify costs and benefits. And, while we may not know with which solution providers we may be working, or which new ancillaries or better services we may be able to offer in three, five or ten years, having an idea of the direction is essential.
2. What the revenue drivers are likely to be: this will often be linked more to the offer transition than the order component, however several airlines have already found that they cannot realise their offer vision without solving the “order” challenge as well. Moving to dynamic pricing may be possible with enhancing the offer and not the order, however will you be able to exploit all the benefits? Or do you calculate factors such as a potential increase of conversion of sales due to the better offers or improved customer servicing you can enable through order? There are many potential revenue drivers, however many of these are often based on various prerequisites – some of these not being technical but rather contractual.
3. The cost savings: this element ranges from potential distribution cost savings to process enhancements which simplify the business to, potentially, having the ability to remove certain solution components altogether. Often, the challenge on the cost saving element in such a large transformation programme is that the business case is made for a three or five-year period. However, with the offer and order transformation, many of the benefits will only be achieved towards the latter part of the transformation, thus only having a positive contribution once the transformation is complete. Thus, we recommend creating a post transformation calculation as well, which should help show if the cost of the transformation will render financial benefits during or only after the project, and which savings (and revenue) can be expected after completion. The removal of software and solutions is an important one. There are considerable opportunities to modernise the system landscape and interfaces well beyond just the offer and order management solution, as the processes are undergoing considerable change. Thus, a solid sketch of the future potential solution and business processes will certainly help understand which solutions are needed in the future and where savings can be achieved.
4. The less obvious and substantiable factors: can factors such as customer satisfaction be converted into revenue? There are studies which clearly state that customer satisfaction and conversion are linked. Or that personalisation and increased conversion go together. However, conversion, the effects of customer service and satisfaction and similar are much more difficult to put into numbers which are not based purely on statistics. Furthermore, there are many other factors which could influence this. For example, if we enhance customer service capability considerably and NPS (Net Promoter Score) shows that we have great customer satisfaction, however we then have considerable delays due to airport congestion, customer satisfaction may well sink.
5. The investment: of course this could (and some may argue, should) be part of the cost aspect. I have separated this to differentiate between cost savings in operations, servicing, processes, and sales from the actual capex spend. The main investment factors will be in new solution components (or re-engineering existing ones) and into the workforce needed for the project. The investment into people and processes should not be underestimated at this stage. Moving to offer and order without considerably reviewing and rethinking business process and data flows will end up in the rebuilding of legacy. However, with the redesign towards a retail environment, we must also invest into a retail mindset, and an organisation which is structured and trained to understand, live and breathe airline retailing.

While the above categories (cost, revenue, etc.,) are obviously part of any business case, Travel in Motion has seen some of these ignored or forgotten. In some cases, we have seen airlines and vendors challenged to define and decide which elements should be considered for each, and for example, if the soft factors such as improved customer service should be considered or not. These choices will be individual to each airline, and may either be ignored (after careful consideration), included, or used to sway a decision.

Pulling the business case together will not be an easy task. It cannot be done in isolation. The business case must be part of a concept phase where the future target state is discussed, where the architectural concepts are outlined, where the business is involved in helping identify process improvements and current challenges to be overcome and numerous other aspects. Thus, to create a solid business case, there must already be investment into time and resources, and potentially external support from companies such as Travel in Motion or many of our other industry colleagues and competitors. There will be workshops to share knowledge and align concepts between departments, and some airlines have even held workshops with vendors to understand their views on the change. Not a single vendor in the airline commercial space is ignoring this change and each has their own ideas and plans for the transition, which makes them great sources of ideas.

Do not expect the business case to be completed in a week. It is complex and multi-faceted. Do not assign one person in your organisation to try to master this – it is an unfair expectation, as this is extraordinarily complex and requires many parts of the organisation. Do not ignore the true costs, and use a realistic view of the potential revenues. While we would never criticise what companies like Bain and McKinsey did in their studies, we would say that those are ideal and very generic cases.

After all those “do not’s”, here is what we think you should do: plan a process of several months for the concept design of your offer to order transformation, involving various departments in the airline with clear expectations of what offer and order should deliver. Do not shy away from external help, be that from IATA to get an industry perspective, vendors to understand their paths to the future or industry experts like us to give a broader perspective and potentially an “outside in” view.

Daniel Friedli, Travel in Motion AG

This blog was published jointly with Terrapinn.