In our previous post (Tomorrow’s Distribution for Today’s Passengers – Part 1) we have explored the current landscape of passenger demographics and their different expectations. In this second part, we will layout the main challenges that arise from those differing expectations, and then delve into several possible solutions.
To pick up where we left off: The 18-24, and to a lesser extent also the core 25-54 age group passengers are experiencing “analysis paralysis” – they feel that different airline offers are too similar and spread out over too many different channels, and they are getting tired of having to hunt down the best deal for their desired itinerary. On the other hand, the 55+ age group is estimated to be the fastest-growing one over the next several years, and they have quite a different set of expectations: They value “one stop shops” more highly than necessarily getting the lowest price on their travel, and they are more reliant on travel agents and similar packaged offers.
There is a common element in these disparate passenger expectations: Pretty much everyone wants to cut down on the number of channels they feel they would need to visit to get what they want, even if the specifics of what they want differ in the end – diverse and personalized product offerings on one hand and readymade bundles on the other. It stands to reason that an omnichannel distribution approach would be a good start for airlines to ensure that any product offerings would be as channel agnostic as possible, and that everyone can get to their desired product regardless of which booking method they prefer. While the principle is sound, things start getting a bit murkier when it comes to execution and to ensuring the right product mix is presented in the right way. Below we will take a closer look at several different best practices that can help airlines find their way through to their prospective passengers.
Direct Connect
IATA has been doing a good job pushing NDC, and with ever more widespread adoption making ripples in the industry a new kind of distribution is making its presence felt. Usually called direct connect, it is a hybrid approach that proposes airlines to harness the best of both worlds: The flexibility, personalization and rich product offerings of direct channels such as airline.com and mobile, combined with the greater potential reach of intermediaries such as OTAs. This can be achieved by exposing airline products and services directly to the “endpoint” instead of filing them through the rigid structure of a GDS. The endpoint in question could be an OTA, TMC, Metasearch or Aggregator, which then directly connects with the airline and carries their products including not just flights and regular ancillaries but also dynamic bundles, fare families, custom and/or non-flight ancillaries or even personalized offers.
On a basic level, the whole thing is made possible through NDC which offers a common standard for direct data exchange between airlines and their partner channels. Of course, one crucial requirement is that the airline’s own systems to have direct connect capabilities which can either be done at the PSS level as is the case with Hitit’s own NDC Level 4 Certified Crane PAX, or through additional “airline retailing” solutions that need to be used in tandem with traditional PSS to bridge the gap between their legacy architecture and modern capabilities.
Virtual Interline
While offering passengers the correct personalized bundle of ancillaries and other additional services is paramount, the fact remains that the core product of an airline is first and foremost the flight itself. After all, no one books just a car rental or just an airport transfer with an airline! It is dangerously easy to lose sight of this core fact in this day and age of increasing ancillary revenues, but the two should not be mutually exclusive: Each passenger the airline can capture and serve with their flight offerings is also a potential customer for all the additional services on offer. No airline in the world could offer all potential itineraries a passenger might be looking for, of course, and airlines themselves have been trying to mitigate this issue with codeshare and interline agreements since forever. However, these practices are again rooted in the olden days of air travel where everything moved at the pace of a booking agent and fail to live up to the expectations of the modern traveler. So much so that, according to the numbers from OAG, over 40% of passengers traveling on multiple flights book connecting itineraries by themselves in a practice called “self-connection”. This points at a lack of service on part of airlines with passengers feeling forced to take a part of their journey into their own hands, which means both the direct revenue and opportunity loss for the airline.
Virtual interlining is a relatively new practice arising in answer to this unmet demand: In a world of direct connect opportunities and smarter aggregators, there is nothing stopping an airline to list and sell another airline’s flight offers right out of the box without first needing to execute a complicated interlining agreement. This would allow airlines to keep self-connecting passengers in their ecosystem longer, and while they would still be losing out on the connecting flight revenues (as those would be booked directly with another airline), this creates new opportunities for additional revenue generation. If an airline can keep their passengers engaged for the whole passenger journey, even for those parts supplied by other airlines, they can offer suitable ancillary services such as transfers, lounge access, or accommodation at the final destination of the passenger. One caveat for this approach would be that the passenger would essentially still need to self-connect: In absence of a proper interline through check-in agreement in place, they would have to recheck-in at their connection point as well as collect their bags. Airlines trying their hand at virtual interlining should, therefore, make sure to sufficiently inform their passengers about what they should expect during their journey. Last but not least, just as in a passenger booked self-connection scenario, there is a risk of delays and flight disruptions breaking the connection and stranding the passenger. On the other hand, a smart virtual interlining approach could turn this around and offer connecting flight protection as a bespoke additional service at a suitable premium, providing airlines with yet another ancillary revenue opportunity that would otherwise not be possible.