Episode 7: A Conversation about Airline Digital Transformation

PROS Travel Podcast, Season 1, Episode 7: A Conversation about Airline Digital Transformation
In this episode, we chat about the exciting future of Airline Digital Transformation. Resources are being poured into this important topic and its initiatives. The buzz is contagious across the industry, so PROS partnered with Hanover Research to deep dive into what digital transformation means for airlines.

PROS surveyed almost 400 airline executives globally and found that even though digital transformation goals can vary, the survey results show that digital transformation is a huge priority for all airlines, especially in terms of customer experience and technology innovation.

You can listen to The View from 30,000 ft. on Apple Podcasts and Spotify. Or listen to the full audio version below.  

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In This Episode

[1:34]: How direct distribution fits into airline retailing
[3:42]: ATPCO's role in enabling airlines to be better retailers
[6:17]: Barriers airlines face when moving into direct distribution and retailing
[11:33]: NDC's role in airline retailing
[14:01]: How NDC can help airlines go beyond the limitations of traditional GDS distribution and extend the airline brand exposure across its various channels
[16:22]: The components of a great user experience and how airlines can enhance it

Full Transcript

Aditi Mehta: Hello and welcome to PROS Travel Podcast series, the view from 30,000 feet. I'm your host Aditi Mehta. In this episode we're doing something a little differently. PROS recently partnered with PhocusWire to host a webinar that had some spectacular responses. The topic was around direct distribution and how IATA’s NDC standard is poised to make airlines better retailers. On the webinar, we had a conversation between Mike Sloan, principal of PROS Travel and Graham Wareham who leads NDC and partnerships at ATPCO. The conversation was moderated by Kevin May from PhocusWire....

Aditi Mehta: I highly recommend listening to the full webinar on PhocusWire's website or on pros.com if you're at all interested in direct distribution and the world of airline digital retailing. But for those of you who want the cliff notes version, I wanted to provide some key takeaways and food for thought as you consider your airline's distribution strategy. One of the questions Mike and Graham explored was around what constitutes direct distribution. What's the difference between indirect and direct? How has airline distribution evolved and how does NDC fit into it? Also, Graham touches on how ATPCO is serving airlines in this space. Let's take a listen.

Kevin May: So, okay, Mike. So the topic of today's discussion, as we said earlier, we've seen the next steps in airline retailing, direct distribution. When we talk about airline retailing, it's typically around direct channels, like an airline's website or mobile application. How does direct distribution, would you say, fit into the mold of airline retailing, would you say?

Mike Sloan: Well, I think ultimately airlines have always wanted to sell more direct. As I mentioned in my intro, I first worked with Southwest Airlines and it was a pleasure to work with them. And I thought at the time airline direct was just what all airlines did. I think Southwest was close to 100% direct. It wasn't until I moved to Europe and I learned that still, I think today most of the airlines in Europe, maybe if they're lucky are at 35% direct or less.

Mike Sloan: I think the landscape has changed a lot over the last 10 years with smartphones. I think the landscape used to be much simpler in the past and now we have a multitude of different places where customers can book, from OTAs and metasearch engines, all the traditional routes. And I guess what really happened was, IATA and others started talking about opening up the travel industry and they started talking about standardization and terms like NDC. So NDC has been a hot topic for many people, and I think there's good things and bad things about this. I think NDC is opening up the airline retail channels, which is super important, but I believe that NDC is only one of the many ways that you can have an airline direct distribution strategy and move beyond that, basically. So to me, direct airline retailing and direct distribution sort of go hand in hand for meeting the needs throughout all phases of travel and across the full customer experience.

Kevin May: Okay. Graham, what is ATPCO's role in enabling airlines to be better retailers? The second part of that, I suppose, is how do they better manage their distribution channels?

Graham Wareham: Yeah, thanks. I think ATPCO has been around for a very long time and our role has been providing fares and rules and infrastructure for airlines to produce their products and distribute their products out to the environment. I have a bit of a different view than Mike's on indirect versus direct. I think that the struggle has been around control, or ensuring the airline's product is represented accurately. So NDC has enabled, I think, retailing to kind of get supercharged in that there's more control of what the customer sees and interacts with from the airline's products. The airline's able to better represent itself, whether that's through pictures, words or personalization. I just think NDC is not a fight to bypass or to get anyone some direct they didn't want to. It's really around representing the product as it were, as it was designed so that the customer can really experience the airline's products as they should.

Graham Wareham: So ATPCO was always been involved in that. Most recently, I think we've... With our merger with Routehappy, we're really trying to build infrastructure and support airlines as they move into the world of retailing. So we have a number of initiatives going on. NGS, the Routehappy Rich Content, dynamic pricing working groups, our original fares and rules and taxes, along with our latest NDC exchange, which really helps airlines easily connect into the NDC environment. ATPCO really supports interoperability and... Our goal is to facilitate and provide infrastructure so that airlines can really represent themselves in the market as they want to.

Aditi Mehta: So you hear a lot about NDC and distribution in the industry, but it's only recently that this conversation has transformed into airline retelling how carriers are building their digital storefronts and designing the digital customer experience. One of the questions Mike touched on was why we've moved into this retailing discussion. What airlines are doing right now and what are the barriers they are facing? Let's take a listen.

Mike Sloan: I think what we've learned is that in order for airlines to really take retailing seriously, whether that be direct or indirect, is that they have to take more control of their digital experience. In the past, airlines have really relied more on legacy IT providers who have provided these hosted, sort of less flexible, or cookie-cutter solutions. And it was really the airline who was putting the hands of the storefronts with these legacy IT carriers. And I think, from talking to most airlines, they've learned that in order to become true retailers, they're the ones that need to build that true storefront. They're the ones that need to control the storefront and not just rely on a transactional company to provide them with the retailing opportunities. So in order to do that, I think a lot of airlines have to look at their organizations differently.

Mike Sloan: We've seen many of them start to build their own digital labs. We've seen them begin to bring creative retailers on staff. We've seen some experiment with, like I said, building their own labs, with building small teams internally and really start to learn what it's like to have a retail shop, not just to be an airline. And so I think they have to go through those steps before they can really start to bring retail to life. They have to have control of their storefront, they have to have control of their content so that they can distribute it consistently and really take control of that experience. So it's sort of like walking before they can run. And a lot of airlines today, they may have, obviously an IBE, but they don't even have the underlying web services or access to those that they need to do things like NDC.

Mike Sloan: So it's sort of like getting their house in order, reorging and making sure they're in the right place.

Kevin May: Okay. We’re gonna come to a lot of NDC as we move through this. I mean Mike, again, I mean, what else... What do you say are some of the barriers for transforming into a digital retailer? Cause it often seems like there are many of them or some would argue that are actually very few. What would you say?

Mike Sloan: Well I think Graham said it earlier. I mean it's flexibility. So making sure they have flexibility in their technology platforms. I think many times airlines are... Internally, they're arranged around... Their organizations are actually organized around the IT or the tech providers that are providing things to them. So I think internally they have to reorg in the right way that responds to customers.

Mike Sloan: You know, I've done, I have no idea. 30 plus maybe 50 customer journey app, customer journey mapping workshops. I've done countless user testing, customer audits and things like that. And typically what you find from most airlines is they're producing a bad user experience. And that's typically behind the scenes, they have a siloed approach because they're using a multitude of different technology providers without stitching it together in a way that makes the customer comfortable in a seamless environment. So I think another piece is that airline retailing is a lot different from distribution, and the organizations internally within airlines, I think a lot of times the IBE and E-commerce have been people... The people managing that are people in charge of distribution. But I think if you look at outside and other industries, you need to bring people in that understand what retailing means. And I think you'll slowly begin to see change in the industry which we're already seeing.

Mike Sloan: I think the other thing which is a barrier for most airlines is that they're not really looking at the customer throughout the full life cycle. So, you know, retailing is about understanding the customer needs, not just from when they've purchased their flight, but from the beginning when a person first has an original idea or they're inspired to travel all the way through their trip, staying with them through that trip and then at the end of that trip. Throughout that entire customer journey, there's a lot of opportunity to have a concierge-type approach to the customer which makes them feel more comfortable, makes them feel like the airline cares, but ultimately it opens up the door for the airline to sell more to them and meet their needs.

Aditi Mehta: Of course, we also had Graham's take on what NDC's role is in airline retailing. His point of view looks at NDC as the enabler for changing the way the industry has been selling products and services without removing the need for airlines to actively build on top of NDC foundations. Let's hear what our expert has to say.

Graham Wareham: Yeah, NDC to me is foundational, right? It isn't really transformative in and of itself. It's an enabler. So when we started back in 2008, 2009, 2010, around there somewhere, we thought NDC was the end game, that once we got control of the channel, everything would be great. But what it really has done, NDC is quite simple actually. It changes... Airlines have always been in control of the product. They just haven't been in control of the formation. So they've always set their fares, set their schedule, set their availability, but let a third party build the offer. NDC just transforms that so the offer is now built by the airline. They can build the exact same product as they did before and distribute the same means just... What NDC enables now is much more than the old platform did and having control of the offer, or building what the customer sees, is truly transformative.

Graham Wareham: But that's where, as Mike pointed out quite clearly, it's where the airlines now have to start working. They have to think about their product, they have to think about their customer experience and they have to transform their product and make it more meaningful to customers. NDC doesn't do that for you. NDC just allows you to have the foundation to get there. With us, NDC is a standard and it allows everybody to talk in the same way. But it's done more than that. It's served as a platform for an industry-wide conversation on the evolution of airline distribution and leading to retail. And in 2009 we weren't talking about retailing, we were talking about distribution and control and product and stuff like that. But with this new technology, airlines have far better capabilities in order to bring their sophisticated retailing strategies to life and ultimately provide better shopping experience for their travelers.

Aditi Mehta:
We typically talk about how NDC can help airlines in the context of the agent or GDS connection. How is this different from other channels an airline could own? Mike explains how NDC can help airlines go beyond the limitations of traditional GDS distribution and extend the airline brand exposure across its various channels.


Mike Sloan: Well, I think that you hear a lot of talk, as you said, about the NDC and how that will either offset GDS, or modify GDS, or something like that, but I guess the way that I look at it, as I go back to the customer journey and what it comes down to is that customers today expect that airlines are able to sell them something anytime, anywhere. If you look at the use of mobile devices, most of the customers that are using those mobile devices, they're using applications like Facebook or WhatsApp or communication messaging and social media advice applications on those devices. So it's still interesting to me that we've seen very little action taken there in those different types of channels. So what I'm most excited about NDC is that it gives the airline to branch out and create those anytime, anywhere commerce opportunities.

Mike Sloan: So traditionally it's been either airline.com, maybe it's been on an OTA, but I really think that the airlines do the best out of the experiences that they provide the customer. It's their seats, it's their airline. So I think NDC gives them the opportunity to extend their brand, extend the elements that make the airline different and special, whether that be the elements about their planes, about their overall experience and I think NDC allowed them to spread that content on a consistent basis. Obviously, NDC is being used today for travel agents and a lot for B2B, but we know of airlines and we're working with airlines who are actually using it on a consumer perspective to build consumer websites using only NDC and not web services from PSS.

Aditi Mehta: We closed out the conversation with a discussion around customer experience. A customer journey in travel can consist of over 200 digital touch points. Take a listen at what are the components of a great user experience and how airlines can enhance it, even in indirect channels.

Mike Sloan: ...who are measuring customer experience. Look at Net Promoter Score and things like that. I think obviously, overall direct retail... revenue increases of ancillary revenue, increases of third party revenue, all of those things are important to airlines and we continue to hear about the importance of ancillary and third party revenue increases as being successful to an airline, but I would also say that there's other ways to look at it. I mean, I think if you're building a relationship with a customer, they're going to be starting to download your digital assets. And we haven't talked about that today, but mobile applications for frequent flyers are one way to indicate if a customer... the customer experience is great with an airline, and people are starting to actually download and use the mobile application of an airline and adopt it because they know that they're going to have a closer and a better, more personalized relationship with the airline that way.

Mike Sloan: You know, I think when you're... we're seeing airline customers go beyond being guests and instead being authenticated, whether that be a loyalty account or accounts, or another way that airlines are beginning to... Or not beginning, they've been doing it, but are starting to really measure that because their goal is to take these customers that may be indirect customers and really create them to their direct digital customers in one way or the other to be able to continue to communicate and build a relationship with them, not just on the plane but, but through their digital devices that they have in their hands constantly.

Aditi Mehta: From listening in to this conversation, it's really clear what Mike, Graham, and many others are wanting for airlines: greater control of their products and the ability to influence a customer experience regardless of the channel the airline is selling in. It's fascinating to see the industry marching to the same beat. We at PROS will definitely be talking more about airline retail and distribution in the coming months. If you'd like to join in on the conversation, be sure to reach out to me at amehta@pros.com, that's A-M-E-H-T-A at PROS dot com. Thanks for joining the view from 30,000 feet. Until next time, this is Aditi Mehta. Special thanks to PhocusWire, Graham Wareham, and Mike Sloan. This episode was produced and edited by Genevieve Todd.

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