By Alexander v. Bernstorff
I stumbled over a statement made by the CEO of Sabre during their recent TTX event in Las Vegas. Referring to flight distribution and NDC, he said
Of course, he is right. And that’s exactly the problem.
Amazon is a tremendously successful business that managed to grow from a small bookshop to, well, we all know what and where they are now. The magic of successful retailing is to continuously re-balance your assortment of goods and services (requires trial-and-error and speed-to-market), based on thorough knowledge about your customers to be able to turn your assortment into relevant offers. Amazon is a champion in this.
Airlines become retailers
Ryanair, another tremendously successful business, has made clear several times that it wants to become the “Amazon of travel”. It can already be seen. Ryanair Labs, a serious effort compared to other some airline’s labs, is there to build capabilities to enable experimenting with and also expanding Ryanair’s assortment, while being able to collect (customers have to register to be able to buy) and analyse data. After a while, Ryanair will be able to make more relevant offers to visitors of its platform – leading to more, but also to happier customers.
Current technology not fit for retailing
The current technological ecosystem for most traditional airlines has never been designed to sell things other than a flight. In the meantime, some things have been made possible, but it took years and millions to implement, it doesn’t work well and there is still neither speed-to-market, nor any satisfactory capability to sell goods and services of 3rd parties. Really, the current environment is not efficient.
Many traditional airlines are struggling to admit that over the past 10-15 years, they have lost significant market share to new entrants [for intra Europe flights and between 2000 and 2015, LCCs have grown from approx. 5% to almost 50% market share, according to OAG/Innovata data] not only because of their lower production unit cost, largely due to simplified processes, but also (or much more) because of their improved capabilities to sell and to collect and analyse data – potentially due to not using one of the existing fulfilment and delivery platforms, i.e. the PSS.
Now is the time to invest and we can currently see airlines like Ryanair, easyJet and Sunexpress taking bold steps to renew their existing platforms, aiming at state-of-the-art digital retailing and data utilisation capabilities. In contrast, traditional airlines seem to stick to the traditional PSSs.
A retailing strategy is needed
In times of fuel prices still being low, but on the rise, airlines should hurry and get prepared to compete with retail airlines, selling to digital generations of consumers via distribution channels unheard of (such as Wechat) in markets previously out of focus. Otherwise, they may find themselves in an uncomfortable situation in a few years from now. Or be completely disrupted. InteRES has deep and broad expertise in all commercial and technical aspects of airline distribution and we are working with airlines on theory and practice of a retailing strategy. A joint pilot based on our “from-scratch” NDC and ONE Order retail engine for airlines can accompany our consulting package to make visible what is possible and what this means for the organisation and the IT setup of an airline.