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Airlines

Changing channels

Airlines need to increase their global reach through efficient and cost-effective channels. Keith Mwanalushi looks at how carriers, especially low cost and regional, can maximise distribution capabilities
 
Each airline has its own commercial and distribution strategy. This strategy will inevitably consider several factors depending on the business model of the airline and its core objects. Airline sales have continuously evolved over previous decades. With the automation of the reservation process thanks to Computer Reservations Systems (CRSs) in the last century, and the introduction of 100% electronic ticketing 10 years ago, flight distribution has meanwhile become completely computerised, including rebooking and cancellation, as well as the addition of ancillary services.
 
Nevertheless, Jörg Troester, Head of Corporate Strategy, Industry and Government Affairs at Hahn Air, observes that there are still challenges for which airline sales processes need innovative solutions that would help to make it fit for the current shopping habits of customers, and reduce the gap between direct and indirect sales channels. Numerous projects launched under the IATA programme ‘Simplifying the Business’ have advanced the development of new technologies and processes in sales.
 
One particular project that will have a tremendous impact is ‘New Distribution Capability’ (NDC) along with the initiative called ‘One Order’. The widely reported NDC is a travel industry-supported programme launched by IATA for the development and market adoption of a new, XML-based data transmission.The importance of NDC is that it will enable the travel industry to transform the way air products are retailed to corporations, leisure and business travellers, by addressing the industry’s current distribution limitations: product differentiation and time-to-market, access to full and rich air content, and finally, transparent shopping experience, according to IATA.
 
“If you ask experts in the field of airline sales, more than two-thirds will respond that NDC is a major milestone for the airline distribution industry,” indicates Troester. He says NDC will enable a more transparent booking process including dynamic pricing by the carriers. “Over half of professionals in airline sales believe that NDC provides the right resources to meet the challenges of tomorrow in their field,” he adds. Ian Heywood, Global Head of New Distribution at Travelport believes the world around us is changing fast, and technology is enabling companies like Travelport to deliver for customers in ways like never.
 
“As airlines move to act like retailers, rich data and analytics are giving them better customer insights so they can start to sell both fares and ancillaries exactly when travellers are most likely to buy.” Heywood agrees that the biggest change in airline distribution now is with NDC. “We’re currently the only GDS operator managing live NDC bookings, and we’re sharing our learnings and insights as we progress in the new distribution era, because we know it’s crucial to ensure NDC works for everyone,” he reports.
 
In January, Travelport revealed that it had completed the onboarding of the first group of travel agencies to receive access to NDC content. A larger number of airlines are implementing the full set of NDC messages, with both offer and order management messages and functionalities. Haywood is content that Travelport is leading the way with NDC implementation – “We’ve deliberately taken a considered approach to implementing NDC, because it is a change which necessarily impacts the whole industry – as we’re at the forefront of this innovation we’re building the feedback from our customers into our product roadmap.
 
We were the first GDS operator to be level 3 certified late in 2017, and have used our leading position to ensure we’re convening a conversation around NDC.” Besides NDC, Troester from Hahn Air reckons the other key trend worth mentioning is the consolidation of players due to an increasing number of partnerships and joint ventures. “Moreover, due to a focus on profitability in the airline industry, we see a rise in privatisation, as well as an increasing number of airlines changing their business models.
 
Consequently, we’ll see more hybrid carriers flourishing in the future,” he predicts. Interestingly, two topics that are not primarily aviation-related, but will notably affect the airline distribution market, are the global economic and political outlook with looming issues, such as Brexit, traffic rights and regulatory compliance, Troester notes. Additionally, he says there is the topic of digitalisation manifested in the increased demand for Electronic Miscellaneous Documents (EMDs) allowing agents to book additional airline services, such as seat reservations, additional luggage and special meals, conveniently in their GDSs. “It is expected that there will be a digital transformation driven by the need for simplification throughout the supply chain and greater demand for automation at every step of the way.” 
 
LCC penetration
 
The LCC market is of great interest to the GDS and distribution community. “If you look at the way LCCs distributed their content from the beginning, it’s clear to see the rest of the industry is following their lead, rather than the other way around,” says Heywood. Heywood is excited about some of the work being done, and seeing from one of Travelport’s partners, easyJet, who are integrating social media content into their booking platform through the new ‘look and book’ functionality, and using augmented reality to add a fun element to things like checking bag sizes.
 
“It’s clear that where LCCs lead, others will [eventually] follow, so hopefully they’ll continue to pioneer interesting, customer-centric innovations.” LCCs may need to have the right IT systems in place to ensure they have the right low cost distribution model. Troester says several low cost carriers initially opted for direct sales on the airlines’ websites. “Today, this strategy has evolved to a more broad-based distribution approach.
 
Challenged with an increasing number of players and thus more competition in the low cost arena, these airlines are now looking for new and alternative distribution channels, and expanding their business model, for instance to become hybrid carriers.” In addition, he says these airlines have also embarked on yield and revenue-management optimisation by selling ancillaries. >>
 

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