Tag: customercentricity

Airline Distribution Masterclass in Singapore

Airline distribution is evolving faster than ever. Fuelled by advances in technology, communication standards such as NDC, and more recently by the disruption of established GDS commercial models, traditional channels are being complemented and challenged by new ways of distribution. 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.

Together with Oystin we 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 look forward to sharing our learnings, views and actionable insights. Thus, we invite you to our Airline Distribution Masterclass. During this half-day event we will discuss the following topics:

  • Pushing the limits of your existing GDS agreements
  • Overcoming the GDS vs. NDC dichotomy: Evolving GDS commercial models
  • Increasing NDC adoption – overcoming the hurdles to get to critical mass
  • NDC implementation and operational challenges – what to look for

On a recent podcast, Daniel Friedli discussed these topics and the general state of distribution in Asia.

The Airline Distribution Masterclass will take place in

  • Singapore on
  • February 27th, 2023,
  • from 14:00 till 17:30, 

just prior to the Aviation Festival Asia. After the hard work, we invite you to join us for a drinks reception for a further informal exchange.

Please register for this event – space is limited to 40 participants and for airlines only, therefore we will immediately work on your confirmation.

 

REGISTER NOW!

 

 

Big Fish Little Fish

Once a year, when I’m not busy helping airlines figure out their latest integration challenges around NDC or their IBE, I like to go scuba diving and snorkelling. If you’ve never been, I really recommend you give this a try – the underwater world will blow your mind. While scuba diving is allegedly an “adventure” sport, what I like to do most is just lay still in the water and watch the fish go by. It’s fascinating to watch the interactions between the fish, and soon you come to realise that a reef is a real community. The place is usually teeming with little fish going about their business – which usually involves avoiding being eaten by the big fish! However, the little fish also help to keep the reef clean, and some of them even clean the big fish of parasites contributing to a healthy ecosystem. All the fish have to get along, so it’s not simply a case of the big fish eating the little fish (luckily for them!).

One day I got to thinking about the plethora of airlines we have in the world, and all the various systems they choose to use for their various services. In total, there are more than 5000 airlines in the world and about 25 providers of what we would typically call “PSS” services. Here, just like in the underwater world, we also often have big fish and little fish happily living alongside each other. Smaller airlines have very different needs to a larger airline, but often use some of the same reservation system providers – small and big fish in the same big pond. Usually these are the bigger system providers, although there are also some pretty big airlines that use smaller, more niche providers. So, what motivates an airline to be a small fish in a big pond, or a big fish in a little pond? Let’s start with the small airlines, who essentially have two choices: one of the smaller, more niche providers or one of the big two providers of “classic” PSS services. While in earlier times the choice of vendor may be influenced by the airline’s chosen business model (LCC vs. FSC), there is less of a clear demarcation here these days. Most airlines operate a hybrid model with aspects of both an LCC and FSC, and as such need flexibility. The smaller providers tend to be more focussed on the retail aspects of distribution with extensive ancillary product and bundling capabilities in their base product offering. This matches well with the needs of the airlines, who also have to be nimble enough to react to changing market situations with great flexibility. New products can be defined on the fly, while cloud-native applications allow safe, rapid deployment of new features.

The obvious choice for a larger airline would of course be one of the larger PSS vendors. These may not be as flexible in terms of speed to market or modern airline retailing capabilities, as they tend to still rely on legacy artefacts such as PNRs, e-tickets and EMDs for booking, fulfilment, and settlement. However, they do make it work through add-on components and, if your airline has been in business for a few decades, this probably makes perfect sense. While this is not “wrong” per se, it does imply some upstream and downstream complexity within distribution and the afore mentioned processes. Complexity in IT systems typically equates to cost, and as such smaller providers may be able to offer more attractive pricing. On the other hand, the larger providers have the benefit of economies of scale and are often perceived as “a safe pair of hands” (the old adage “nobody ever got fired for buying IBM” springs to mind).

However, the industry is moving in a different, more modern direction with NDC, ONE Order and the transition to offers and orders, pushing the vendors to evolve. Some have embraced this change and are moving forward where they can, while others have been rather hesitant; big fish are not always the most nimble. There are also some airlines that are realising that modern airline retailing is the way forward and are also pushing where they can. But this is change that is of more an evolutionary nature, and as such will take time to show tangible benefits. Together though, airlines and vendors large and small must drive this change forwards and continue to innovate and evolve. Smaller providers have this in their own hands and need to invest in their products and show innovation in driving this transformation forward. The larger vendors have traditionally built-up capabilities based on the needs of their community of users. Here, the onus is on the airlines to communicate their expectations towards their providers in terms of industry change and ensure that the industry as a whole keeps moving in the right direction.

Considering all of the above, it really seems that, just like the coral reef, there is a real community within airlines and vendors, and the fish all need each other to get along, survive and indeed thrive. Without the smaller airlines and providers, the innovation needed to drive lean operations and enable airlines to grow would be missing. Without the bigger airlines, the economies of scale would not work and (at least in the case of some larger airlines) the thought leadership to drive the industry towards modernisation would be lacking.

Working for more than two decades in the industry, jointly my colleagues from Travel in Motion and Oystin Advisory have worked with airlines of all sizes and business models and discovered that the biggest challenge is not necessarily choosing the right PSS vendor – at least not initially. It is about understanding and formalizing the airline’s business needs and challenges based on the overall strategy. Part of executing this strategy is then to choose the right set of products for an airline to suit their own unique needs and enable to them to survive, thrive and drive their business to the next level. Based on this, and unlike the fish in the sea, you have the choice of ponds you want to swim on. Either, as a small fish in a big pond or as a big fish in a small pond. Or, you can even make your own pond.

 

This post has been published in collaboration with Terrapinn.

(Nick Stott, 5. January 2023)

 

 

Customer centricity in aviation

What does that mean to me?

I keep reflecting on the concept of customer centricity in the context of airline passengers. For a long time, I only saw it from the perspective of an airline loyalty programme, because having a particular status meant I got extra benefits to make my trip more comfortable (sometimes). Over the years, however, I have come to realise that this has little to do with the concept of customer centricity, but rather is used as a vehicle to bind a customer to one particular airline (or group of airlines). It is a one-way street that lures the customer in with the promise of benefits and privileges that are actually becoming less and less valuable as airlines reduce the level of service in order to reduce costs. Indeed, I can often get most of the common airline loyalty benefits with a branded credit card.

As an airline, when it comes to judging the loyalty of a customer, there are many factors that need to be considered beyond the simple mechanism of miles or segments flown. Am I really only judged as “important” to an airline if I flew a lot with them within a fixed timeframe? This is a potentially flawed assessment, particularly considering that, regardless of how much I paid for those flights, I might not actually have paid for them myself if I travel a lot for business. In this case, the “customer” may be the company paying for the travel, however “customer centricity” still focuses on the individual travelling. How should lifetime value be measured and assigned between the customer and the traveller when these are not identical? What about my changing needs and behaviours as a traveller, particularly as airlines evolve their product offerings? The airfare for a journey may be optimised to generate the highest possible revenue, but total spend is often not considered. Ancillary products such as more bags and seats typically have higher margins, however loyalty is often only rewarded on the fare paid or distance flown. The view of measuring loyalty over an arbitrary time period may not be the right way for all customer segments. If I only travel a lot every other year, is my total customer lifetime value not worth anything? By stripping benefits through the loss of a status level, airlines run the risk that customers may be less inclined to remain loyal to the airline, rather than recognising that loyalty spans more than a period of 12 months and providing incentives to keep wallet share even when customers are not flying.

My reasons for travelling are usually different for each journey – even if there are similarities. However, the service I receive (as a loyal customer) is almost always the same. While airlines cannot read my mind, does it always have to be the same service I receive when my needs are constantly changing? There may be clues in my travel patterns and behaviour that can be used to give direction when trying to become more customer centric. However, picking up on these subtle hints can be difficult and actioning them even more so. Maybe, as a result of my status, I get to take a second bag on a short business trip. While I may appreciate the extra luggage if I’m travelling long-haul for two weeks, I don’t need two heavy bags when traveling alone and using public transport upon arrival at my destination.

Recognising such situations is not difficult, but usually airlines do not take time to join the dots and figure out what I might really appreciate. The needs of every traveller are unique, and my needs are different almost every time I head off on a journey. However, there are patterns that are not necessarily common to me as an individual traveller, but rather to my demographic (“segment” or “cohort” if you prefer). Through tracking decisions and actions taken (or not taken), airlines can begin to make sense of a collection of seemingly random data points. If we then apply some machine learning to this and ask the right questions of this data, perhaps things become a little less hazy. When airlines begin to action some of these findings is when I will start feeling that the airline is focussing on my needs. Then I will finally start feeling the customer centricity, and can choose the additional services according to my needs. These needs may, or probably will, be specific to each journey. I may want to forgo the lounge because I prefer a short transit time to get to my destination faster. I may want to take two carry-on bags so I don’t have to go to check-in or risk the bag not arriving. I always want the option to upgrade my flight with miles or for cash if there is space on the flight – I always ask, so why do airlines not ask me, especially if there are premium cabin seats available and I have sufficient miles? Having to wait until I get to the gate only to be told there are not enough meals loaded is neither customer centricity nor good business sense. I am not unique with having these same behavioural patterns, but if we never look for patterns, we will never find them.

Travel is a journey rather than a flight between two points, and as a traveller, I make dozens of decisions along the way. I decide how I get to the airport, how I take my luggage, how comfortable and pampered (or not) I’d like or expect to be on board, where I stay when I get to my destination, how I get there. I make decisions about what I buy and what I don’t buy. And very importantly, I decide on whether I was satisfied with what I bought or whether my needs were not met. Did the airline ask me how I found the service on board or how the booking and check-in process was?

There is a vast ocean of data available on every single airline customer which can be collected from the time of shopping for flights and throughout the customer’s journey. Many customers will be happy to share even more data with airlines if it is used for their benefit and not just for maximising revenues for the airline. This is a call-to-action for airlines to rethink their customer-centricity processes, their availability of the related data, and for the airlines to collect and use the data to improve customer service and create personalised or tailored product offerings.

While I understand that airlines constantly have to balance customer centricity with operational and financial efficiency, a lot can be done with presumably manageable effort and investment. However, unless all organisations within the airline agree on what the airline’s goal and business model is, will there ever be agreement on what customer centricity means?

 

This post has been published in collaboration with Terrapinn.

(Mona Kristensen, 5. December 2022)