Never have airlines been so preoccupied – and measured – on the basis of their operational efficiencies. Financial savings or the prospect of operational and regulatory penalties have meant that they have become infinitely smarter as they constantly strive for a seamless, efficient operation. The obsession with saving fractions of gallons of fuel or seconds spent on the ground and in the air is managed with scientific exactitude, a process itself which requires an efficient, streamlined and cooperative understanding between many teams - from fuel hedging, through to flight crews managing on-board seating.
Compare this to the process many airlines undertake when it comes to commercial revenue management. While the airline will equally have its experts managing merchandising, pricing, technology or the customer experience, it remains that in many instances, a connected process to maximise revenue from these disciplines is lacking. Airline management teams are well aware of the potential toxicity of a disconnected scenario. However a number of barriers have manifested to contribute to this condition:
- The restrictions of legacy technologies
- The high cost of current distribution channels and practices
- The potential disruption – or fear of disruption – to the business.
In addition, an evolving travel industry and digital landscape means that airlines face new challenges; from changing customer behaviours and expectations of an omni-channel experience, from evolving digital channels, and from new entrants such as Google who are not traditionally associated with the travel sector.
Where airlines have not already taken control of the retail experience, the proliferation of the digital travel landscape means that the longer they sit idly by, the more difficult it will be – if not impossible – for the airline to compete.
OTAs, GDSs and ‘digital invaders’ like Google and Amazon are eroding revenue for every seat mile travelled. Indeed, airline leaders are expecting very little change in profits over the next 12 months.(1) While this pessimism is mainly driven by macro trends in the industry’s profit and loss cycle, and expectations of higher fuel costs in 2017, this only means that the impetus is more urgent than ever to take control.
In the cut-throat battle for market share of the digital travel space, what does the airline retailer need to do to prevail? They must take a multi-pronged approach to addressing the challenge. First, be prepared to adapt a connected commerce strategy. This will require a flexible, proactive approach to offer and order management across all channels of value. Create and socialise a strategic approach to the pricing and promotion of products and services which ensures that the necessary enterprise motivation, as well as systems, are in place to merchandise successfully. IATA’s NDC and One Order programmes are examples of initiatives that will contribute to a unified, connected infrastructure for the airline retailer.
Secondly, avoid the risk of disconnect with customers by developing a better understanding of their behaviours and habits. Analyse and manage the wealth of data gathered to personalize the offer at the right time, on the right channel, at the right touchpoint.
Finally, resolve to progress from the restraints of legacy technologies by introducing retail practices and systems that provide the agility and control needed to innovate and compete in a digital marketplace..
The challenge is not small; the future airline retailer must prepare for a rapidly evolving digital travel landscape, and relentlessly pivot to respond to ever changing market forces. However with the right organisation, partners and technology, it is an achievable goal that will return results.
To read more about developing the airline retail business in a connected commerce ecosystem, click here to read the Datalex-Skift report, ‘The Airline Industry’s Connect Commerce Future – Disrupt or be Disrupted’.
- IATA Airline Business Confidence Index – October 2016 Survey, David Oxley 27 October 2016.
Rory Pratt
Digital Commerce Manager, Datalex