Getting Ready for the Future of Evolving Retail Distribution

May 28, 2018

CAPA Airline Leader Summit 2018 - Getting Ready for the Future of Evolving Retail Distribution

The annual CAPA Airline Leader Summit which took place earlier this month in Dublin, always provides provocative debate around some of the most pressing issues facing aviation today. 

This year’s event was no different, and welcomed global airline CEOs and senior executives who agreed, and disagreed, but above all generated debate in the areas of distribution, loyalty and marketing. They left the audience with plenty of food for thought at the end of what was a busy two-day conference.

Datalex is a proud sponsor of the event and CEO Aidan Brogan took part in the agenda, speaking on ‘Evolving Distribution Systems’ along with Ryanair’s Peter Bellew, Hugh Aitken of Skyscanner, and Travelport’s Derek Sharp. In this discussion, and indeed many throughout the summit, the topic of the use and management of data returned again and again. Particularly, Brogan was keen to get the message across that delivering at pace to the consumer is critical for success. Airlines do not have the luxury of sitting by and allowing the industry or technologies to dictate their pace of growth. 

The mismatch continues

The mismatch continues to exist: airlines have infinite opportunities every day to analyse and use customer data through a range of channels, yet many still fail to manage it to their advantage to serve and delight, whether this is for customer service, IROP management, up-sell, revenue management or forecasting. Yes, these Andreas Weigend at CAPA Leader Summitactivities already take place. And yes, airlines are well aware of the rewards that result in positive outcomes (more efficiencies, less cost, higher yields). Yet many airlines continue to operate at a siloed pace.

CAPA Summit keynote presenter Andreas Weigend (Social Data Lab & former Amazon chief scientist), estimates that the same volume of data generated in one day today will be generated in one hour in 2020. This is equivalent to the amount of data generated in the entire year in 2000. So, given the amount of data that airlines capture in any given moment in time, and the near doubling of global passenger traffic which IATA expects in the next 20 years, one can be sure that Weigend’s predicted rate of data proliferation will be matched if not surpassed in aviation.

What should airlines pay attention to?

As noted at the CAPA summit, it is vital that the ‘often uncomfortable’ bedfellows of traditional and future systems must coexist in order to achieve medium term success. With more data, more competition and higher customer expectations, what should airlines be doing now? When they’re busy in 2020 trying to manage all their new data, strategizing to account for shifting traffic patterns in traditional markets, and tackling pilot shortages to crew their growing fleets, what can they do today, so that they can at least rely on the infrastructures they put in place in 2018 to manage their distribution strategy in the future?

Artificial intelligence

Not to be feared (whether this fear of the robots taking over, or fear of the unknown), instead artificial intelligence should be viewed simply as a technology that will allow travel retailers to do what they are already doing today, just faster; much faster. AI is not going to replace the human brain to determine strategy. But AI does literally have infinite possibilities to help airline executives leverage the data they already have to help make those strategic decisions. Even in cases where assumptions and predictions are largely nebulous in nature, they still have data at their core. AI can help the revenue analyst to make those predictions based on a larger data set, take a wider range of criteria into account, or provide a wider range of output scenarios, which will help the airline to make better strategic decisions based on their own unique set of market and competitive circumstances.

Blockchain

Like AI, blockchain will provide any industry with the potential to do what they’re already doing today in a faster way. But it’s more than this. Certainly in terms of how it can facilitate payments, the airline’s processing and settlement procedures are arguably some of the most complex of any industry. Blockchain has the potential to transform how this is done, by:

  • providing the ability to process payments more quickly, if not immediately
  • allowing all parties to have full transparency of payments in progress
  • reducing problems relating to cash flow
  • increasing security and decreased the likelihood of errors
  • making it easier for all parties to trade in digital and alternative currencies

All travel retailers may not be ready to take part in the blockchain marketplace today. But it will be an inevitable element of the distribution mix in the future. So now is the time to get up to speed on what it will mean for your airline; for example think about the applications that blockchain could facilitate to propel and achieve your business objectives, or how you can prepare your payments platform for digital and other alternative currencies.

IATA NDC

IATA’s latest NDC initiative, the NDC Leaderboard, targets 20% of sales powered by the NDC API by 2020. This will enable the NDC program to reach a critical mass of volume and transactions, allowing the standard to maximize the benefits it can offer both to airlines and consumers alike.

As NDC-enabled transactions grow between now and the target year of 2020, and beyond, so too will the data. In tandem, the nature of data and how it is shared, mined and collected will also evolve in the years to come, in ways we may not yet have even considered. What if the consumers use an app to take control of those assumptions and predictions that the airline – or agent - makes about their behaviors? What if a visit to a leisure travel agent become a VR experience – a new distribution channel through which the offer can be personalized based on what the VR ‘traveler’ looks at or experiences?

Mass adoption of NDC will be a huge step for the industry. But it is simply a standard that will allow airlines more freedom, flexibility and control to sell indirectly. As such, airlines need to consider their NDC strategy not just in terms of their indirect channels today, but in the wider context of how data and other technologies will evolve and shape those channels in the future.

A travel retail strategy: 

Most airlines by now are aware of the importance of a travel retail strategy, and can personalize the offer to some extent. The key to maximizing this potential goes back to the data. The airline can make assumptions based on a travel request for 2 adults and 2 children travelling to Orlando for one week. But what other data sources does it have access to that can help to truly personalize that offer and maximize the customer experience, and what technologies can be leveraged to make this happen quickly and efficiently?

Personalize the product or service by learning from behavioral norms, habits and purchase patterns from both external and internal sources (and not just from the commercial side), which can help the airline to think like the consumer. What defines purchase habits determined by a persona (e.g. a personalized preference such as a window-seat), versus purchase behaviors, often defining an entire market segment (e.g. a last-minute travel purchase when the weather is bad at home)?

A perfect confluence

With the right retail strategy, a digital commerce platform enabling new and existing technologies, and the appetite to embrace the rapid pace of digital travel, a ‘perfect confluence’ for travel retail will be ripe for the airline to take advantage. Challenges will always exist. But once prepared, the airline will be best placed to leverage the opportunities that the growing travel retail marketplace can offer; to grow the business, be agile, and explore new markets at pace.

 

Theresa Quinn
Marketing Director, Datalex

Read our blog series, 'Delivering Successful Airline Digital Transformations'