Where did it start?
We all know that the first steps of the airline reservation systems were taken in the 1950’s. Then, in the 1960's CRS’s developed, and in the 1980’s they evolved to GDS’s - the golden era of GDS’s and indirect sales channels. In the 1990’s with the rise of LLC’s and internet expansion, airlines built websites and started selling tickets online. Mobile applications, different CRM systems were built, and this software clutter became difficult to manage, that’s why they had to be consolidated in the 2000’s. After 2010 personalization and the customer experience trend began, starting with Google and Amazon and then spreading, leading to a significant shift in the airline business.
We work in a challenging industry: the supplier, the intermediary, and consumer relationship is broken. It is very difficult to manage increasing booking volumes as well as satisfying the customer.
Being frenemies with the indirect distribution, how to make commoditization work for you?
Since online businesses have emerged, the focus has been on the price, commoditizing all products and services. In any typical OTA or metasearch engine, airlines are all the same, compared only by destination and price. The brand or name is often not relevant.
If we talk about the negative impact of commoditization, (i.e. distributing through OTA or metasearch’s):
• You are a commodity, there is no differentiation
• It is more expensive than going direct, including the distribution and opportunity
• Intense system usage, such as screen scraping technology (It is very hard to support metasearch’s as they heavily use the airline systems).
If we talk about the positive impact of commoditization:
• You can sell in the regions where there are weaker distribution channels.
• It serves your primary goal: Selling the ticket first!
• UX is powerful, passengers are used to the booking flow, and the conversion loss rate is very low.
You can partner with metasearch’s since they redirect customers to your website and you can use a metasearch as a hook for the customer to upsell and cross-sell, it is a use of indirect channels where you can sell ancillaries.
Facilitated booking blurs the lines between direct and indirect. There are some companies like Kayak, SkyScanner, and Google, which offer facilitated booking, that is where the booking takes place in a metasearch, but the ticket is created in an airline's system. With this process the airline will gather all the information about its customers.
The more data you have, the more value you can create for your customer and with new technologies, such as AI, and machine learning, you can maximize your value added.
If you have data, you can do personalisation. You know your customer better and you can increase penetration. You can do behavioural targeting and use social media API’s extensively. Hitit understood the value of personalisation 24 years ago when it created a Frequent Flier program, which later became number 1 in the world. Starting with Loyalty, we have built our PSS system and other operation planning solutions around it.
If we are talking about an Uber age, we should talk about UBER first. What did Airbnb and Uber do?
Airbnb does not have any property, but it offers you accommodation. Uber does not own cars, but it is a car company.
Will the same happen to the aviation industry?
For commercial airlines, it is less likely since it is very expensive to run an aircraft, with all the regulations and fuel costs, plus air traffic rights make it complicated. However, for short-haul domestic flights: drones, driverless cars, hyperloops, high-speed trains are all coming soon.
What should we do?
We cannot ignore them and, so we should collaborate with them. Jet airways and Uber provide air travellers with a door-to-door service.
What is the current distribution landscape? How will it evolve?
You distribute through GDS’s, GDS distribute through travel agents, travel management companies, OTA's and metasearch’s.
You also have your own API’s for metasearch’s and OTA’s. You have your internet booking engine and mobile, which is the only channel you can get complete information about your customer.
If we have NDC, One Order and Facilitated Booking to sell the complete portfolio of products and services, and we are doing behavioural targeting and personalisation on our channels, as well as managing block sales with a single inventory and managing inventory, then metasearch acts like our own IBE or mobile. We will see if GDS distribution will disappear.
If you can control your distribution channels you can do merchandising in a much better way. You can sell hotels, transfers, car rentals, insurance and offer dynamic packaging on all your channels.
NDC and One Order is already defined. NDC is an XML standard and you sell everything, not only flights. It will bring you increased product differentiation, less time to market and a personalization capability.
One Order is a single booking reference for the entire journey, no PNRs and no ticket numbers. It is a new way of defining travel purchasing.
Where do Hitit and Crane stand?
Hitit is a one-stop shop for an airline, to support its daily operational cycle. Our wide solution suite includes a passenger service system, operations planning and accounting. We are already IATA NDC level 3 compliant and have successful NDC implementations for our airline partners.
You can view the presentation here