Blog

Meet the Team

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.

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.

Evaluating the success of a distribution strategy

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.

  1. 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.

  1. 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.

  1. 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.

  1. 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.

  1. 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.

  1. 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.

 

 

ESG in the world of airlines

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

 

 

The orchestra that can help solve airlines’ payment challenges

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

 

 

Airline Distribution and Retailing Masterclass

Airliners: Join our first 2024 Airline Distribution and Retailing Masterclass of Travel In Motion and Oystin.

The Airline Distribution and Retailing Masterclass will take place:

We’ve evolved and expanded our content to reflect the latest developments in airline distribution and retailing. Thus, this Masterclass will focus on:

  • GDS: pushing the limits and overcoming the GDS vs. NDC dichotomy through multi-channel models
  • Payments: a crucial component of a holistic commercial strategy
  • NDC: making a difference with differentiated content and functional maturity
  • Offer and Order: from concept to design

The event will be conducted by our partners, Daniel Friedli and Felix Dannegger. Please note that this is an airline only event.

Please register here for the Airline Distribution and Retailing Masterclass.

We are looking forward to discussing and seeing you in Singapore!

 

Offers and Orders: an industry outlook at what will happen in 2024

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

 

 

Dynamic groups: diving into an untapped market of upsell capabilities

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

 

Sustainable Aviation – challenges for airline distribution?

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.

 

Our latest whitepaper: Offer and Order – Moving from Concept to Design

 

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!

Navigating the Skies: Onboarding New Talent in the Airline Domain

 

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.

 

Approaching the Business Case for the Order Transformation

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.

Look-to-book: the (old) new evil

Since the creation of NDC, Airlines have been offering access to their API for free without enforcing many restrictions. The main reason is that it encourages the adoption and usage of the API by travel agencies and other third-party developers, which can help to increase the distribution of the airline’s content and services. However, with volumes growing in the NDC world, a new issue arises; “look-to-book”.

In the late 90s and early 2000s, look to book was already a challenge, with availability queries increasing considerably as airlines started to offer direct access to availability to the GDS. This was somewhat managed over time, but now has come back in full force.

1. About look-to-book

The look-to-book ratio is a comparison between the search requests (AirShopping) versus the actual bookings. The term is an industry-specific version of the more general “conversion rate”. While airlines earn money with bookings, shopping requests cost money. Indeed, high look-to-book ratios impact both performance and costs of airlines, as they require significant resources to process large volumes of search requests.

There are two aspects which an airline must consider – security and cost. In terms of security, OWASP, a group of leading security experts, identify “unrestricted API usage” as a security risk that can “lead to DoS due to resource starvation, but it can also lead to operational costs increase” (https://owasp.org/API-Security/editions/2023/en/0xa4-unrestricted-resource-consumption/). From a cost perspective, the airlines will be paying both availability calls as well as the shopping engine consumption, which is often limited to levels which were agreed pre-NDC. This does not allow for the high look to book seen today, which can easily reach 10,000:1.

2. AirlineProfile: the mitigation step

AirlineProfile, an IATA NDC Standard message, is a way for airlines to indicate their supported itineraries to agencies. By supporting this, agencies can avoid sending shopping requests to the airline for routes it doesn’t sell.

While this does reduce the number of shopping requests, it still has a lot of limitations. It does not account for seasonal routes (all supported routes throughout the year need to be included), it requires the agency to implement it, and it still does not reduce the number of queries for routes that are sold by the airline.

Thus, while the airline profile is helpful, it will not solve the airline look to book issues.

3. Taking action

There are several actions available for airlines when it comes to look-to-book:

  • Absorb the costs: Most airlines, today, pay for those shopping costs. While this is viable short-term, when it comes to very large shopping volumes, it may result in exponentially growing costs.
  • Block/Throttle: By applying limits/quotas, and applying blocking or throttling in the shopping requests, it is possible to mitigate the costs. This comes with the risk of losing some sales and is not an optimal solution.
  • Put a price on it: By asking the API users (aggregators, agencies) to pay for their excess usage, airlines can shift induced costs to the agencies.

To put it in more crude terms, excessive shopping queries must be blocked, or someone will pay for them.

The fact is, by implementing a pricing model for their NDC API, airlines can incentivize travel agencies and other third-party developers to use the API more responsibly and efficiently.

This can help to reduce the costs associated with high look-to-book ratios while also improving the performance of the airline’s systems.

4. Looking outside

Airlines have become API Providers, and by entering this realm, it would be wise to look at the existing giants.

Google, Microsoft, and plenty of other companies have been providing APIs for a long time now, having to deal with high volumes of search queries as well. All of those APIs have two things: usage limitations, and pricing models for users who need higher look-to-book ratios.

Some common pricing models include:

  • Pay-as-you-go: This model charges users based on the number of API calls they make. It is a flexible model that allows users to pay for only what they use. An example of a pay-as-you-go API pricing model is Apigee by Google Cloud.
  • Subscription-based: This model charges users a fixed fee for a certain period, during which they can make an unlimited number of API calls. This model provides more predictable revenue for the airline. An example of subscription-based pricing is Azure API Management by Microsoft.
  • Transaction-based: Stripe, a payment processing platform, offers a transaction-based pricing model where users are charged a percentage of the value of each transaction processed through their API.

Ultimately, it’s up to each airline to determine the best model for their NDC API based on their specific needs and goals, as well as their partners.

Travel in Motion still believes that the API should be available at a base level for free, with restrictions on look-to-book ratios. And, for any agency or aggregator needing higher ratios, agreements should be made based on one of the previously presented models.

Thibaud Rohmer, Travel in Motion AG

This blog was published jointly with Terrapinn.

Working towards a Gold Standard of Airline NDC API Onboarding

CURRENT STATUS

Airlines have been onboarding agencies, aggregators, and other partners for a couple of years now. With NDC presented as the holy grail of standardization, one would expect this technical onboarding process to be pretty… standard. However, when looking at the state of the industry today, we could not be further from the truth.

Let’s look at what it means for an agency to get connected to an NDC airline today. We will focus on the technical aspect of it, but of course, commercials are a key factor in the go-live process as well.

THE LONG PATH TO GO-LIVE

A critical step to going into production is for implementers to pass the airline certification process. However, this is only the third piece of the equation. First, implementers need to familiarise themselves with the API through documentation, before using the sandbox environment where they build the connections. As we will see, each step on this journey can be quite tedious.

 

1.    Documentation

The airline’s NDC API documentation exhibits significant disparities and limitations resulting in many challenges for implementers.

Firstly, the documentation showcases a wide range of formats employed by different airlines, each varying in detail and structure. While most airlines offer implementation guides, they differ in presentation and format. They are available in either PDF format or accessible through searchable Wikis on their websites. In more comprehensive instances, airlines go the extra mile by sharing Postman or SoapUI projects that include ready-to-run scenarios, facilitating implementers in jumpstarting their implementations with tangible, functional examples.

When examining the actual content, certain deficiencies come to light. While default scenarios are consistently addressed, there is a noticeable lack of information from the majority of airlines regarding API limits and error cases, let alone providing guidelines or mechanisms for testing them. As a result, implementers are frequently left to speculate or manually test these error cases without sufficient guidance.

Overall, the first thing the implementers will see of your API is documentation. Making sure it is easily readable and well-structured is key to being able to quickly kickstart any implementation.

2.    Sandbox

After understanding the API documentation, agencies usually gain access to a sandbox environment, or a test environment provided by the airline. The sandbox environment allows agencies to experiment, simulate transactions, and test their integration without affecting live systems or incurring any financial implications.

Obtaining sandbox access can sometimes be a multi-step process involving registration, approval, and acquiring necessary credentials such as API keys. The complexity arises from configuring the integration to work seamlessly with the sandbox environment, ensuring the correct handling of requests and responses, and addressing any technical challenges encountered during testing.

This brings us back to the first issue, with a lot of documentation skipping the whole “authentication/security” part of the API. Airlines should explain the required steps for authentication, including obtaining API keys or tokens, with clear examples.

The additional problem with some sandbox environments is how much they can differ from the actual production environment. Some sandboxes are lagging behind the production environment, while others are used for experimental features. Both cases result in instability and divergences between documentation and actual implementation.

3.    Certification

Once agencies have successfully tested their integration in the sandbox environment, they need to undergo a certification process. Certification involves demonstrating compliance with the airline’s technical and business requirements. This process ensures that the agency’s integration meets the necessary standards and is ready for production usage.

Certification processes vary a lot among airlines, requiring agencies to fulfil specific criteria, such as passing specific test scenarios, properly displaying the airline offering, and proving their technical capabilities. Agencies may need to provide test logs, validate the accuracy of offer display, handle many scenarios, and sometimes even demonstrate error handling capabilities. The complexity lies in meeting the airline’s expectations, ensuring that the integration is robust, scalable, and able to handle real-world scenarios effectively, while properly reflecting the airline’s values.

While some airlines are very upfront with the validation methodology (going as far as putting the full list of scenarios on their onboarding platform), others do not yet provide such a structure. Therefore, implementers end up seeing more and more test cases, without a clear view of the end of the implementation. This results in, undoubtedly, the most frustrating part of the process for the agencies, sometimes with many months of back-and-forth on the testing scenarios.

IS THERE A SOLUTION?

This article was a bit bleak, so let me reign it back a little. While it is unavoidable to have differences between various companies, there can be light at the end of your NDC tunnel.

There is undeniably a willingness in the industry to simplify. As a key example, IATA has been trying to help airlines bring a kind of “standard methodology” for many years. One approach that IATA took was the “At Scale” certification, which required a “good enough” onboarding methodology. This certification is now discarded, but its contents are part of the IATA ARM (Airline Retailing Maturity) index. However, while it is a good base, it is not yet “strict” enough to enforce similar methods for all.

The state of the airline industry, when it comes to onboarding processes, is very reminiscent of the early days of web APIs. Each airline is trying its spin on the onboarding formula, with some more successful than others. Luckily, airlines are now learning from each other and discussing this topic at various forums. Those discussions will drive the way to a more aligned, and hopefully better, onboarding method for all.

One question remains, though. Should we let the industry slowly define those better processes through trial and error, or should IATA drive this shift by enforcing strict guidelines for a proper onboarding standard?

From interactions with many airlines and agencies in the past, we feel strongly that there is a need for clearer definitions. If these are not standardised at an industry level, we should at least work together to define the best practices to follow.

BONUS: SOME RECOMMENDATIONS 

If you are part of an airline and would like to make your onboarding process as smooth as possible, here are some recommendations. To learn more from the author of this article, feel free to contact Travel in Motion where we can support you with these steps.

Note that those are not guidelines, but rather some suggestions.

1.    Documentation

  • Accuracy: documentation needs to be “to the point” and up to date. If at all possible, include versioning to indicate when the last update to the documentation was done.
  • Implementation samples: provide snippets in the documentation and a SoapUI/Postman project.
  • Easily searchable: have a proper structure, allowing for quickly getting to the needed documentation.

2.    Sandbox

  • Ease of access: make sure the “access procedure” is clearly described on your onboarding platform, to be able to provide developers with everything they need to do their first API call with as little delay as possible.
  • Stability: any issue with the sandbox will result in longer implementation time for the partners, and reduced trust in the API itself.
  • Up to date: to reduce the risk of surprises when going live, it is important that the sandbox environment is fully aligned with the production systems. In case the sandbox has any discrepancies, those need to be indicated to the implementers.

3.    Certification

  • Upfront validation: Indicate to your implementers all the requirements (test cases) for them to go live, as early as possible. This helps to build trust and shows that you both want to reach an accessible goal.
  • Regular meetings: To make sure the implementation is advancing as desired, regular checks are mandatory.
  • “Live support”: Either through a JIRA board or dedicated chat it’s important to provide as reactive and efficient technical support as possible. Any delay in the implementation caused by the wait for technical answers usually results in frustration and slower go-live.

4.    Learn!

Probably the most important advice here: take each implementation as a learning opportunity. At the end of those implementations, sit down internally, and (if possible) with the implementer, and try to figure out how your onboarding process could be made better. Implementers see a lot of different airlines and onboarding methods: their input is extremely valuable.

Finally, Travel in Motion is of the opinion that an onboarding platform, often referred to as an NDC microsite, is invaluable. TiM has considerable experience defining these microsite, and works closely with a technology partner if airlines require an “out of the box” solution which has been deployed for multiple leading airlines.

Thibaud Rohmer, Travel in Motion AG

This blog was published jointly with Terrapinn.

The Payment Jungle

Current situation

Even in normal times, the airline business is anything but easy. Competition, fuel costs, regulations and growing environmental awareness challenge the industry and make airline operations a demanding task. After the pandemic subsided, a certain recovery was felt, but the current rather difficult economic environment, the war in Ukraine and high energy costs bring new risks and challenges.

Not only the operational business faces challenges in this difficult environment, but also the back office of an airline. This is reason enough to take a closer look at the problems and developments in the area of payment handling for airlines. Specifically, we will take a closer look at service providers, markets and regulation.

Service Providers

Payment processing, credit card acquiring and controlling were carried out by the airlines themselves until the early 2000s. Growing regulation, new security standards in payment processing such as PCI and an increasing number of international and regional means of payment have led to more and more processes being outsourced to specialised and appropriately-certified service providers. In good economic times, the airlines were very attractive customers for these providers. This changed with the groundings of many airlines in the past decade, including some large and well-known carriers. For credit card acquirers in particular, aviation became a risky business as they were often the ones left out of pocket. Airline ticket sales are paid immediately but usually not used until weeks (or even months) after purchase. The total value of all tickets sold but not yet flown constitute the “unflown revenue”, and this quantifies the risk for the acquirer. In the event of a grounding, the acquirer is left with the ticket holder’s claims for reimbursement. More and more, airlines had to fulfil challenging conditions in order to get access to acquiring contracts at all, and the conclusion of such contracts is often linked to painful conditions for the airlines. These can mean providing security deposits such as rolling reserves (payments withheld by the acquirers), payment only when flown or the division of the business among several acquirers (risk splitting). For most airlines, credit cards are still the most widely-used means of payment, so these security deposits can have quite a painful impact on liquidity.

The number of external service and payment providers is also constantly increasing, which leads to higher processing costs as well. Payment service providers (PSPs), payment orchestrators, reconciliation services, fraud screeners and alternative payment methods charge fees for their services and thus make ticket sales more expensive.

Markets

Carriers operating worldwide usually have a very international clientele to which one must also adapt in the payment area. This means that the most relevant means of payment must be offered for each market. In addition, the credit card business can also be very different between individual markets due to legal regulations or regional standards. This not only generates more provider fees, but also increases the complexity of the processes. Airlines used to be able to map this complexity to their own system platforms, but today, this is no longer possible for the reasons already described. That is why PSPs were first forced to incorporate airline-specific features as “bespoke services”. Later, so-called “payment orchestrators” came onto the market, who inserted themselves as an additional application layer between the airlines and the PSPs, and from then on took over the control and routing of the payment processes.

Another topic is the change of customer needs. Payment should be secure, fast and simple all at the same time. It is possible to meet all requirements in this area of conflict, however the design of corresponding solutions is associated with great effort. Internationality and growing customer requirements create even more complexity, and this makes the development and operation of booking systems more expensive and slower.

Regulation

Dealing with customer requirements and external service providers is complex in itself, but national regulators, the EU and the card schemes add to this with their regulations. Especially in the areas of security and costs, merchants (including airlines themselves) and service providers are confronted with a growing number of regulations and restrictions.

With the Payment Services Directive (PSD) 2 regulation, the EU issues regulations on fees and security. Credit card fees, for example, may not exceed a certain amount (which for once is in favour of the airlines), but so-called “surcharging” (charging the payment fees to the end customer) is severely restricted. This is a painful cut, especially for the airlines. Furthermore, a two-factor authentication process is mandated for online payments.

The credit card schemes (Visa, Mastercard, American Express etc.) have reacted to this regulation with the security standard “3-D Secure 2”. Since the policy limits revenues by capping acquiring fees, the schemes are reacting with an almost unmanageable number of new fees.

With PCI DSS (Payment Card Industry Data Security Standards), the card schemes want to prevent the theft of credit card data. Since the complexity of the corresponding requirements makes it almost impossible for merchants and service providers to implement them on their own, a market for specialised service providers for tokenising credit card data has also established itself here. Of course, these providers do not work for free either, which leads to a further increase in the cost of payment processes.

Change as an opportunity

Many of the topics described above are given – especially when it comes to service providers and sales markets – and simply have to be implemented. Here, it is advisable to work with a specialised payment orchestration service.

When it comes to regulations, on the other hand, there are a number of exceptions and intelligent solutions with which negative effects can be neutralised. For example, there are simplified checkout procedures for registered customers, payment surcharges are still allowed under certain conditions, and the regulations concerning PCI DSS can be adhered to with little expense through the integration of tokenisation services. 

The facts described above could give the impression that service providers, customers and regulators have conspired together to make life difficult for the airlines. However, if you take a closer look at the new regulations and restrictions, you will discover advantages for all market participants. All the policies and regulations were not invented to make life difficult for the industry. By consistently adhering to the guidelines, companies can significantly reduce the risks of data theft, fraud and the resulting chargebacks. 

At its core, payment process design is about getting to grips with three factors: cost, risk and conversion. Despite all the issues described above, a well-balanced payment landscape can be customer-friendly, secure and comparatively cost effective. The basis for this is a good concept and, as so often in our industry, the choice of the right partners.

At Travel in Motion, we can help you finding your way in the jungle of customer needs, regulations, regional characteristics, cost pressures, scarce resources and security requirements. Both airlines and vendors can benefit from our expertise and experience.

This post has been published in collaboration with Terrapinn.

(Urs Kipfer, 8. June 2023)

 

 

Untapped potentials of AI in the Airline Industry?

Inspired by a follow-up on my customer insights blog last December and an AI assignment for my Executive MBA studies, I wanted to share some learnings from that work. The aim was to look for an AI use case that can be implemented for an airline venturing onto the new distribution transformation path – something that many airlines are just starting to consider. There is a wealth of data to be tapped into, but what exactly might some of the possibilities be for using this data in a meaningful way? What does the new world allow an airline to do that it didn’t before? Will it deliver as promised, and how can this be measured?

  • While there is much talk about how AI can revolutionise pricing and revenue management, are there other potential uses of the data that can now give insights that an airline didn’t have before?
  • Much has been said about the ability to make more targeted offers and thereby increasing revenue per customer and flight, might there be other untapped golden nuggets to be derived from the offer data?

The airline industry is highly competitive, where customer satisfaction and operational efficiency are crucial to success. As airlines have access to vast amounts of data, it is no surprise that many are turning to artificial intelligence to help them gain a competitive advantage.

One of the most significant benefits of AI for the airline industry is its potential to improve customer experiences. Especially when looking at finding patterns and opportunities that might be undetected today, AI has the potential to process a huge amount of data with an efficiency that only a few solutions already do. Including more and different data sources than what is traditionally done can provide customer insights from a different angle. By analysing customer data, airlines can tailor their offers and services to meet their customers’ needs and preferences better.

A look at some use cases

Traditionally, airlines have pushed out the availability (or made it available in a “pull” fashion) and the prices, and only got to know about the customers when they purchased a flight. However, there is considerable knowledge about how customers behave before they buy – knowledge which airlines to date have never had access to. But my interest was piqued when thinking about what offers customers didn’t buy, since this says as much about their needs as what they finally purchased. Having a complete picture of who did not buy what can lead to new insight into what appeals to whom – in a different way than previously possible.

For example, AI can provide personalised recommendations for flights, hotels, and other travel-related services. AI can analyse a customer’s past purchases, preferences, and other data to deliver tailored recommendations more likely to meet their needs.

AI can also provide real-time information and support to customers during their journey. Chatbots, for example, can provide instant customer support, answering their questions and providing guidance throughout their journey. This can help to reduce customer frustration and improve their overall experience.

Airlines can increase operational efficiency by optimising their processes and reducing costs by using AI. For example, to optimise flight schedules, crew assignments, and other operational tasks.

AI can also improve maintenance operations, reducing downtime and increasing aircraft availability. By analysing data from sensors and other sources, AI can predict maintenance issues before they occur, allowing airlines to address them before they cause disruptions proactively.

Finally, AI can help airlines to boost their revenue by optimising pricing and increasing ancillary sales. AI can analyse customer data and market trends to predict demand and optimise pricing accordingly.

AI can also be used to increase ancillary sales by providing tailored recommendations for ancillary services, such as seat upgrades, baggage allowances, and lounge access. By tailoring these offers to each customer’s preferences and needs, airlines can increase their likelihood of purchasing.

The challenges

While the potential benefits of AI in the airline industry are significant, several challenges come with its implementation. These include the cost of implementation, the complexity of the technology, and the need for skilled personnel to manage and operate the systems.

To overcome these challenges, airlines need to take a phased approach to AI implementation, starting with small proof-of-concept projects to demonstrate the potential value of the technology.

Another challenge is data privacy and compliance. Airlines need to ensure that their use of AI complies with all relevant data privacy regulations and that customer data is adequately secured. This requires a strong governance framework and robust security measures to protect sensitive data.

Airlines need to ensure they have the right personnel to manage and operate AI systems. This requires a mix of technical skills, such as data engineering and data science, and soft skills, such as communication and stakeholder management. Airlines should invest in training and development programs to build these skills in-house and ensure their personnel are up-to-date with the latest AI technologies and best practices.

Potential – but only by doing it right

In conclusion, AI has enormous potential in the airline industry, providing airlines with tools to increase revenue, improve efficiency, and provide customers with personalised offers that cater to their needs. However, implementing AI solutions has challenges, and airlines must be aware of them and take steps to mitigate them. It’s essential to have a dedicated team with the necessary skills and expertise to manage the project and communicate the process and results effectively. With AI, the airline industry can move towards a more sustainable customer-centric business model, identifying new opportunities that emerge from the direct distribution model.

AI has the potential to transform the airline industry, and airlines that embrace it will have a competitive advantage over those that don’t. While the airline industry is still in its infancy in using AI, it’s clear that it is a technology that will play a significant role in shaping the airline industry’s future. It’s exciting to see what the future holds, and we can’t wait to see how AI will continue to transform the airline industry.

 

This post has been published in collaboration with Terrapinn.

(Mona Kristensen, 5. May 2023)

 

 

What is the Future of Revenue Management?

Many years ago, I used to work as a TPF mainframe software developer, building applications for one of the leading global PSS providers at that time. Over the years I have had the privilege of working on some ground-breaking projects. When I first started in the mid-nineties, we were putting in place API layers for web services to power some of the first airline e-commerce platforms. In the early noughties, I was involved in the integration of one of the first origin and destination (O&D)-based revenue management systems, promising to deliver incremental revenue gains of 1-2% for airlines. This was, and still is, big money for any carrier.

Around 15 years after this project, in my role as solution architect I was responsible for integrating another airline with this same RM application. Not surprisingly, considering the pace at which the airline industry evolves, this integration was more or less identical to the initial implementation, although with a different PSS provider. Every night, a dump of booking, inventory and schedule data is pushed to the RM application which ingests this data along with numerous other files containing flown ticket data and who-knows-what else and begins running its nightly optimisation processes. Around eight hours later, new steering controls, bid prices and so on are pushed back into the reservation system and the process is complete for another day. Outside of this, ad-hoc changes may be triggered for a flight, either manually or automatically based on certain events. Essentially though, for almost all of an airline’s network, each flight goes through this process once a day.

Optimising the price of every seat on every O&D of an airline’s network is a very complex process, and back in the eighties when the first airline RM systems were implemented, this daily cycle was all that was technically possible. The enormous computing power needed was both expensive and scarce, and only available to airlines with deep pockets (we carry more computing power these days in our pockets!). Pretty much every airline RM system still works this way today: batch data is downloaded from booking systems (i.e., the PSS), optimisation processes run, and the output is uploaded into the airline’s pricing and inventory control systems (usually PSS). However, the (technology) world has moved on since then: computing power has become much more affordable, and the growth of cloud technology has made this available on demand and instantly scalable. At the same time, the volume of airline shopping transactions has increased exponentially in the last decade or two. Airline products have also become diversified and more complicated, with the advent of de-bundling components of the air ticket (seats, bags etc.). Markets have become more competitive, with demand exceeding supply in most cases. Considering all these factors, one must consider whether the RM approaches still used today are effective.

In one regard, the answer to this question is clearly yes: the RM methodologies themselves. Many clever people have dedicated their lives to perfecting the algorithms used to forecast demand based on all manner of data sources, statistical methods, and highly complex algorithms. These continue to adapt to the new ways in which airlines price and sell their products, although this is still predominantly limited to the air fare only. However, it could be argued that the manner in which these powerful algorithms and calculations are applied is somewhat outdated, considering the technological capabilities available today. Let’s consider an airline carrying 50 million passengers a year in a typical hub-and-spoke network. Using some schoolboy mathematics, this might give an average of around one booking created every second, give or take a few. For reference, Amazon gets something like 18 orders per second[1]. Assuming the airline is using O&D-based revenue management, this potentially means that the demand on a significant portion of the network has changed – and therefore of course the price. But these incredibly dynamic changes are not ingested by the forecast algorithms until the RM machines get their batch files to churn through and deliver new demand forecasts hours later. Of course, airline pricing is much more complicated than most products sold through online retailing, where prices are (relatively) static, but does that not mean that it is even more important that airlines stay on top of pricing and adapt in real time?

What is holding us back?

So why don’t airlines do this non-stop, 24x7x365? Well, the answer is the same as for many questions in the airline world: silos. Way back before many of you were born, there was just PSS – schedules, inventory, PNRs and tickets (eek!). The RM systems were bolted on using big interface files. But today’s computing world looks different – we have real-time integrations, artificial intelligence and machine learning engines that never sleep and enough computing power to run the numbers over and over again and get the results instantly. With the advent of offer and order management systems, we are also a goldmine of offer, pricing and conversion data that is just waiting to be tapped into. Sending a dump of booking data can tell you a lot about what was sold, but nothing about what was offered or who asked. Unlocking the value in this data and understanding what it tells you is the key airline retailing – offering the right products in the right channel at the right price.

Traditionally this data has been difficult to interpret – EDIFACT messages, tickets, fare base codes, RFISCs, RBDs all in cryptic formats. NDC and ONE Order bring some standardisation to these key sources of data, but we need to work harder to break down the silos and truly start working with offers and orders (instead of just bolting them onto our legacy systems).

Indeed, this issue is not only to be found within the RM domain. Many of the initiatives in the industry at present are reliant on removing these silos in the end-to-end chain of distribution. Instead of a set of standard integration points based on interfaces from the 1990s, a dynamic and real-time exchange of key data is needed to be able to make offers that are truly relevant, targeted, and likely to lead to conversion. The flow does not simply end with the completion of a booking. Real-time delivery of sales into financial accounting can simplify settlement and revenue recognition. Real-time operational data can drive automated, proactive service recovery in case of disruptions – a task today that often requires extensive manual intervention. For far too long, as an industry, we have looked at these barriers individually – and indeed, in the execution this is the way forward. However, we must also to step back and look at the flow in its entirety – offers, orders, service delivery, payments, financial accounting, RM, customer management and so on. This transformational journey will involve many steps along the way, but without seeing the big picture, the course cannot be plotted.

At Travel in Motion, we are passionate about driving this change forward – let us share our expertise with you and help guide you on your transformation to a world of offers, orders and airline retailing and unlocking the value in that vast amount of data.

[1] https://landingcube.com/amazon-statistics/

This post has been published in collaboration with Terrapinn.

(Nick Stott, 5. April 2023)

 

 

The super-app experience of Southeast Asia

The Travel in Motion and Oystin teams attended Aviation Festival Asia this week. We had the opportunity to catch up with industry colleagues in warmer climates, and the opportunity to taste some fantastic local dishes too! Though there was one experience that we rarely get to trial at home in Europe: the super app.

Super apps are prominent here in Southeast Asia and China. They offer a wide range of financial instruments and online-to-offline services such as food delivery, package delivery and transportation. These super apps position themselves in their user’s daily life and create a marketplace around just about anything. The apps are typically connecting buyers with suppliers that, until now, may not have had a digital presence, for example taxi drivers, takeaway houses, and laundrettes.

The super apps have the similar measures for success: user acquisition and retention. It’s all about user activity (and accompanying revenue, of course). They prioritise having access to the right content overlaid with making a customer’s shopping, booking and fulfilment experience excellent. In doing so they increase their share of sales with the supplier, putting them in a superior distribution position. For some services they even set the price, for example with ride hailing.

Customers who find something easy to use return time and time again, often no longer giving the competitors a second look. The super apps are a snowball, the value users place in their brands are increasing and the more daily users they acquire, the easier it is to launch a successful new service.

Airlines too have capitalised on their well-known brand to become part of a user’s daily life, albeit in a different way – the loyalty programme partnership. Your wallet may contain a credit card with an airline logo, your supermarket may advertise the opportunity to earn points and whilst you top up fuel for your car, you may also be topping up your air miles account too.

Whilst airlines are striving to become better retailers, a super app is an extreme form and its value versus cost is unproven. Here are some questions to consider before going down this path:

  • “Is it a feasible proposition for an airline to execute on? Would it lead to positive daily experiences with its brand or lead to negative brand impact?”,
  • “Why would consumers choose an airline over Grab, Uber, WeChat etc…?”,
  • “Should an airline offer these additional services and become a more integral part of users’ daily lives?”,
  • “Does the current loyalty play, where airlines partner with everyday brands, already go far enough to build brand loyalty and affinity to the airline?”, and
  • “Would it lead to consumers valuing the airline brand so much that they don’t shop for flights elsewhere?”

Super apps are built on a deep motivation for excellent user experience, consistency, and commercial policies which promote an ease of doing business. To meet these expectations, super apps have modern, fast, and scalable systems.

One question that arises is whether super apps pose a risk to an airline’s distribution and commercial strategies, could a super app change the airline market in the same way it did for ride hailing. Very few super apps offer public transportation services today. Air Asia’s super app does sell flights and hotels. However, it is powered by an online travel agency (OTA) so the experience is limited to what the OTA can provide, which in turn is often limited by the functionality of the airline. Uber has recently launched trains and coaches on its app and has shown an intent to sell flights too. However, they obtain their content, they are likely to face the same issues as Air Asia, the experience they can provide is limited to what the airline’s capabilities are.

So, should an airline enter this space too? Are they at risk of missing out? Airlines have a lot of competing priorities to contend with, such as their own financial stability as they recover from the COVID-era. Purists may argue that airlines should focus on efficient, safe, and enjoyable transportation. Others within the airlines are focused on a diversification of income streams by leveraging the airline brand. An example of where this has been successful is the airline loyalty business units. They were able to raise funds during COVID, which for some airlines provided a significant lifeline.

Travel in Motion’s (TiM) opinion is that running a consistent experience across multiple services is not for the faint-hearted. This takes considerable focus to get it right, and that will lead to less attention on the airline’s core business. However, we do believe airlines still can learn a lot from the super app experience to guide their own digital offering. Offering relevant and personalised offers, easy-to-use booking systems and a well-designed digital experience to accompany the physical travel journey is extremely valuable to a growing segment of customers.

Airlines have already started down this path by pursuing modern offer and order management systems, a key enabler to meeting the modern customer’s expectation. Those systems could help airlines become a super app. However, we at TiM believe there are many areas airlines will choose to improve once they have a modern technology stack. In doing so they will strive to improve customer satisfaction, revenue, and de-risk being commoditised.

In the meantime, whether you are attended Aviation Festival Asia or not, consider downloading a super app and experience what your customers are experiencing on a daily basis.

 

This post has been published in collaboration with Terrapinn.

(Jason Balluck, 7. March 2023)

 

 

Join one of our 2024 Airline Distribution and Retailing Masterclasses

Airline distribution continuous to be in full flux all over the globe, leading to a fundamental change in airline’s commercial processes and a shift of the dynamics of offer creation and customer ownership. This has triggered a fundamental change in the airline’s commercial business processes and a shift of the power play of offer creation and customer ownership to the airline.
Travel in Motion and Oystin Advisory have been actively supporting airlines to master and make full use of these opportunities. Through multiple airline engagements, as well as actively driving the change through our engagements with IATA’s distribution and innovation teams, we provide not only insights into best practices, but also thought leadership. 
We want to share our learnings, views, and actionable insights with you. Also, in 2024 we will continue our series of Airline Distribution and Retailing Masterclasses, with updated content and opportunities to further exchange.

Therefore, please already mark one of these three dates in your calendar:

Please remember, the Masterclasses are for airline employees, only. We are looking forward to meeting you either in Singapore or Amsterdam in 2024!