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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)

 

 

OPPORTUNITIES IN AIRLINE RETAILING

 

We are happy to publish our first whitepaper in 2023, sponsored by OpenJaw. This whitepaper provides a comprehensive overview about opportunities in airline retailing. Our authors have taken a deep dive into modern airline retailing in combination with a view on customer’s expectations and also focussed on how to compete with LCCs – the “inventors” of airline retailing. We invite you to download a copy of the document here.