SPENDERS AND PENNY-PINCHERS

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

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

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

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

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

RE-THINKING ANCILLARIES

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

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

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

ORDERS: THE KEY TO DYNAMIC GROUPS

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

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

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

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

Thibaud Rohmer, Travel in Motion AG

 

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

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

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

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

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

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

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

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

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

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

 

Boris Padovan, Travel in Motion AG

This blog was published jointly with Terrapinn.

 

 

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

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

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

 

DOWNLOAD OUR WHITEPAPER NOW!

 

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

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

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

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

1. Comprehensive Orientation Program

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

2. Mentorship and Shadowing

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

3. Online Learning Modules

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

4. Continuous Evaluation and Feedback

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

5. Cultural Immersion

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

6. Emergency Response Drills

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

7. Cross-Training Opportunities

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

8. Customised Training Plans

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

9. Regulatory Compliance

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

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

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

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

 

Mona Kristensen, Travel in Motion AG

This blog was published jointly with Terrapinn.

 

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

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

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

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

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

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

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

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

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

Daniel Friedli, Travel in Motion AG

This blog was published jointly with Terrapinn.