Datalex's Chief Product Officer talks about digital airline retailing, the potential in mobile bookings, the benefit of AI-powered pricing for airlines and interlining.
Q: What do airline execs see as the biggest ancillary revenue opportunity in 2023?
A: Well from our own data it’s really interesting how baggage tracking is one of the most popular at 40% - back in our 2021 survey this probably would not have registered on the radar at all as this was a huge problem in 2022 for the industry. Sustainability is obviously a welcome addition with over half indicating the potential this has. Some things never change though as it’s perhaps unsurprisingly that the high margin business of hotels and accommodation claimed the top spot. The key thing to note however is that new ancillary products or services like baggage tracking and sustainability initiatives are brand new products and airlines need a tool for effective speed to market of these timely complementary products.
Q: How strong is the desire for bundling from customers at the moment?
A: Despite an environment that is challenging with the cost of living and inflation, price is not always the deciding factor when shoppers are making purchasing decisions. A bundle that complements the customer’s journey has greater potential than many believe, with the practice presenting very low risk to the airline. They just need the flexible tools to do so and we can see there how an overwhelming proportion see this as a super important capability to have. We have extensive capabilities available right now and in use today, and also on our roadmap. Customer appetite and traveller propensity to complete bookings with bundles has only accelerated our stance behind the likes of dynamically bundled air offers which are flexible and easy for airlines to deploy in real time. It is very much top of mind
Q: How far do you think mobile internet booking can go as a share of the market against desktop?
A: The general consensus is that consumers may search on their mobile web or their app, but they are more likely to purchase a flight or bundle with an airline on desktop. However, this does vary by geography with APAC customers having a greater propensity for mobile bookings. With over half of all passengers globally purchasing via airlines’ web or mobile apps in 2022 however (T2RL), it shows that direct bookings on mobiles are still a strong proposition and a contender for desktop and travel agencies. Datalex’s focus on omni-channel shopping means that mobile can be used as a significant part of the booking process, including trip inspiration which will enhance its place as a significant contributor to conversion overall.
If we look at mobile apps generally, App Annie reports in 2019 that the average user has more than 100 apps downloaded but uses around 33% of them regularly, highlighting how difficult ‘app stickiness’ overall is. This is compounded by the fact that airline apps are not in regular use and are generally driven by situational usage. The Baymard Institute shows the average cart abandonment rate for mobile devices is significantly higher (85.65%) than desktop (69.75%) which poses a challenge for airlines hoping to integrate mobile into their offering. Datalex’s Shopping Cart capability facilitates omni-channel shopping meaning that airlines can counteract this abandonment tendency, allowing customers to retain any flights or ancillaries in their virtual basket for future purchases.
Beyond mobile bookings, it must be remembered that the mobile opportunity is much wider when it comes to servicing. In Datalex’s 2022 survey of airline executives and customers, it was found that over 50% of travellers surveyed think airlines can better support their end-to end experience through more sophisticated digital self-service like chatbots to manage flight booking and travel thoroughly via digital / mobile.
Q: What are the latest innovations in dynamic pricing, ensuring that the airline maximises the revenue from its inventory?
A: Firstly, it’s clear from Datalex’s recent research, conducted in November 2022 with 150+ airline executives, that ‘dynamic pricing’ continues to be a misleading term in the airline industry. While 4 in 5 (79%) airline executives claimed to be using dynamic pricing, of these, 42% ‘dynamically’ priced in-house. This in itself is a paradox as in-house techniques tend to be a workaround solution as those airlines that still operate in the PSS world are constrained in what actions can effect real change. In-house tools that claim to be dynamic but in reality, are suboptimal, misleads airlines in the true revenue opportunity that is open to them. There are different interpretations of what dynamic pricing is in the industry, with some providers touting their dynamic pricing, only for this to be found not to be truly dynamic as it is rules based and is updated daily at regular intervals rather than in real time. The innovations that have emerged from the realm of dynamic pricing have been in the areas of artificial intelligence in which the AI models are aligned with the objectives of the revenue management team.
Datalex’s newest product to the market, Datalex Pricing AI is an AI-powered pricing plug-in that learns to think like an airline. While traditional Revenue Management vendors are entrenched in traditional processes and still uphold these processes, our product circumvents legacy systems altogether. Pricing AI is a completely AI-powered product and its unique proposition is that it will not replace Revenue Management altogether. This product doesn’t claim to replace revenue management teams, instead it will work as a collaborative team member to scale decision-making in real-time. This means that not only can airlines use AI in conjunction with a revenue management team’s objectives to optimise their seat inventory in real time to bolster load factors, but they can also maximise additional revenue that is locked between traditional RBDs / fare classes
This product appeals both to airlines with a large revenue management team and smaller airlines with less resources. The larger airlines benefit from an advanced AI-powered plug-in that works as a collaborator and generates efficiencies straight away, while smaller airlines can use this low touch product to benefit from having the equivalent of a larger, more resourced team. The role of Revenue Management in an airline is set to change because a tool like Pricing AI means that the day-to-day activities can essentially be given to Pricing AI while the team takes on a strategic role and really hones in on how the airline can eke out competitive advantage through its offering.
Q: What are your thoughts on interlining and are there any misconceptions about it?
A: The interline framework outlined by IATA is quite complex and virtual interlining has emerged for third party travel agents to manage this transition stage towards a more seamless interlining capability whereby more carriers and partners can deliver richer offers to the customer. Datalex also supports traditional interlining via ATPCo fare filing in both its REST and NDC API. This can be seen as early as our JetBlue and Aer Lingus engagement which enabled the Irish carrier to sell onward connecting flights on JetBlue in the US to its transatlantic passengers. NDC, through its schema definitions, supports the evolution in interlining where the airline will generate the interline offers through sourcing content from other suppliers.
Datalex plans to embark on an NDC interlining project later this year, where one airline will act as the retailer for another airline (supplier). While the technology may be available to support these models, it is important the customer experience is kept as the focus for these projects, and the appropriate processes are in place in the airlines so the customer is not adversely impacted when something goes wrong with their flight or travel plans. What is not understood is that interlining is not necessarily a complex technology problem; it’s a complex business problem, which requires an additional focus on the customer experience.
Q: And finally, in a few short sentences, what is Datalex’s unique proposition for airlines and how does this proposition account for the future of Offers & Orders?
A: Our digital retail products enable airlines to optimise every customer interaction and grow revenue per passenger through our market-leading next generation retailing software. Datalex is a B2B SaaS product company that enables airlines become retailers. We are an Irish company with over 35 years experience in the airline industry with offices across Europe, Asia and US with headquarters in Dublin. We help airlines offer and sell any product or service (both to their direct customers and indirect customers). Not only do we help airlines offer these product and services, but we provide them with the capability to determine the best products to offer, at the optimal price and touchpoint in order to maximise conversion.
With regards to Offers & Orders? Datalex is committed to delivering against its Vision for Offers and Orders and has a clear transition path across all phases from initial optimisations for Modern Airline Retailing towards 100% Offers & Orders. Because our products are architected for the future, airlines can achieve a hybrid by optimising their digital retailing today, whilst also future proofing for tomorrow. What Datalex offers the market at the moment is extra capabilities that give you the potential to address downstream issues in the future. As our products are architected for the future you are already one step ahead.
Datalex – Who are we?
Datalex's purpose is to transform airline retail. Datalex is a market leader in airline retail technology, offering unique products that enable airlines to drive revenue and profit as digital retailers. Datalex has a strong track record of delivering digital retail transformation for progressive airline brands worldwide. The Group is headquartered in Dublin, Ireland, and maintains offices across Europe, the USA, China and Australia. In 2023, Datalex was awarded the 'Great Place to Work®' and 'Best Workplaces in Tech™' certifications. Datalex plc is a publicly listed company, on Euronext Growth, Dublin. Learn more at www.datalex.com