1. Simple question. Multi-faceted answer.

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

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

2. Defining your goals, monitoring your success

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

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

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

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

3. The Big Five

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

1. Sales and Revenue

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

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

2. Cost Efficiency

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

3. Reach

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

4. Conversion rate

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

5. Customer Satisfaction

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

4. The new KPIs on the block

1. ARM Index score

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

2. Channel contribution

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

3. Sustainability

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

5. Conclusion and call to action

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

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

 

Thibaud Rohmer, Travel in Motion AG

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

 

 

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

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

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

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

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

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

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

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

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

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

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

 

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

This post has been published in collaboration with Terrapinn.

Mona Kristensen, Travel in Motion

 

 

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

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

From PCI and 3-D Secure to PSP

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

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

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

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

The reliance on PSP and apparition of POP

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

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

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

The orchestra for payments

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

Costs are controlled via:

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

Risk is managed through:

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

Conversion is promoted with:

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

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

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

1. Analysis

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

2. Payment

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

3. Reporting

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

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

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

Urs Kipfer, Travel in Motion

 

 

Offers and Orders: where are we?

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

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

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

What will 2024 bring?

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

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

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

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

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

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

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

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

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

This post has been published in collaboration with Terrapinn.

Daniel Friedli, Travel in Motion AG

 

 

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:

• Our Singapore Masterclass on 27^th February, the day before the Aviation Festival Asia 2024 (register here)
• Our Amsterdam Masterclass on 8^th October, as part of the World Aviation Festival 2024  (Masterclass registration coming up)

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

 

SPENDERS AND PENNY-PINCHERS

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

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

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

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

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

RE-THINKING ANCILLARIES

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

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

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

ORDERS: THE KEY TO DYNAMIC GROUPS

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

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

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

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

Thibaud Rohmer, Travel in Motion AG

 

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

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

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

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

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

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

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

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

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

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

 

Boris Padovan, Travel in Motion AG

This blog was published jointly with Terrapinn.

 

 

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

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

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

 

DOWNLOAD OUR WHITEPAPER NOW!

 

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

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

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

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

1. Comprehensive Orientation Program

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

2. Mentorship and Shadowing

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

3. Online Learning Modules

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

4. Continuous Evaluation and Feedback

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

5. Cultural Immersion

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

6. Emergency Response Drills

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

7. Cross-Training Opportunities

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

8. Customised Training Plans

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

9. Regulatory Compliance

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

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

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

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

 

Mona Kristensen, Travel in Motion AG

This blog was published jointly with Terrapinn.