The industry has made progress

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

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

A perspective on how the domains will develop

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

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

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

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

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

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

What are the vendors up to?

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

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

TiM’s Take

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

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

Daniel Friedli, Travel in Motion AG

 

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

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

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

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

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

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

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

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

This post has been published in collaboration with Terrapinn.

Boris Padovan, Travel in Motion AG

 

 

 

Our society is made of rankings

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

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

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

The ”it depends” problem

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

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

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

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

Conclusion

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

 

Thibaud Rohmer, Travel in Motion AG

 

 

 

 

We are proud to launch TiM Academy! TiM Academy is an online self-learning platform which covers topics related to commercial aviation. It is structured by curriculum, such as General Introduction to Civil Aviation, Airline Commercial Processes, Airline Distribution, NDC, Offer and Order Management, Revenue Management or Airline Commercial Systems. The number of curriculums keeps growing covering many different aviation domains. Each curriculum consists of courses that are made up by short modules. These modules are designed to provide a new self-learning experience with a duration of 10 to 15 minutes each.

• In the B2C environment, anyone can subscribe to individual courses and modules with a simple pricing and payment mechanism.
• For the B2B environment, we will setup your individual company learning space where you can manage users, TiM content and even your own content, and where we can hold blended learning sessions by expanding the online courses with webinars.

By structuring the TiM Academy content into digestible pieces we enable a flexible learning experience where you or your colleagues can learn at an individual pace. From a corporate learning and development perspective, trainings can be assigned to individuals and measured, and results be reported.

We are also very proud that we could engage some of the leading experts for TiM Academy. With this we ensure that each curriculum provides the depth for a perfect understanding, and that they are continuously kept up to date to reflect the pace of the industry evolution.

Are you interested in trying TiM Academy for free and with it a chance to win an iPad?

Sign up for free modules of the to TiM Academy here

and enjoy the new way of step-by-step learning, regardless of if you are new to our industry or if you want to stay aligned with the latest airline developments.

We are looking forward to welcoming you to TiM Academy, because knowledge makes the difference: create it – maintain it – grow it!

 

 

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

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

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

DOWNLOAD THE WHITEPAPER HERE

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

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

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

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

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

The People Make the Difference

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

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

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

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

The Perks of Travel: Fuel for Personal and Professional Growth

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

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

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

Conclusion

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

 

This post has been published in collaboration with Terrapinn.

Leila Rešidbegović, Travel in Motion AG

 

 

 

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

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

First, on definitions.

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

What does modularity look like today?

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

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

What is the benefit?

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

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

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

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

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

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

1. Is it standalone?

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

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

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

3. Bear in mind overall complexity.

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

How can the whole airline industry achieve modularity?

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

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

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

So, what next?

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

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

 

Jason Balluck, Travel in Motion AG

 

 

 

 

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

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

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

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

In a recent customer engagement, we interviewed travel agents on an airline’s behalf. One of the biggest complaints was the lack of communication from the airline to the agencies. This included both information and communication on roadmap, functionalities, and changes as well as communication about operational status or problems which had (or had not) been fixed.

 

What is my next step?

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

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

This post has been published in collaboration with Terrapinn.

Daniel Friedli, Travel in Motion AG

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

 

 

 

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

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

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

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

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

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

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

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

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

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

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

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

Boris Padovan, Travel in Motion AG

 

 

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

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

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

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

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

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

 

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

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

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

This post has been published in collaboration with Terrapinn.

Boris Padovan, Travel in Motion AG

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

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