Written by Jitendra Sindhwani, President & Head, Aviation Business at IBS Software
Most people are likely aware that the airline industry has weathered tough times, with fierce price competition, major changes in passenger numbers and behaviours all impacting cashflow, margins and competitiveness.
This has presented airlines, and the way they price, package and market, with a major challenge, and the often-ageing technologies they use to sell, operate and engage with under real strain.
For the industry’s long-term future there should and must be wave of change centred around transforming the airline ‘customer experience’. What do we mean by that – and why is it such a hot topic? Behind the scenes, one of the biggest transformations the airline industry has ever undergone is quietly underway.
From selling seats to delivering great experiences
In simple terms, airlines have come to see themselves as ‘sellers of as many seats as possible’, through as many online distribution channels – like Online Travel Agents – as they can. This has led to a very ‘seat-centric’ commercial mindset and model, with competitiveness based heavily around pricing. The knock-on effect has been to commoditise offerings and make brands less distinguishable from their competitors. New sources of growth are also limited in this environment, and this is a big issue given the recent pressures on revenues, cashflow, debt, and margins.
In parallel, airline customers themselves now expect seamless, personal user experiences that match their wider digital lives. Consumers constantly compare their retail and service experiences to the best they’ve had with other online service providers of all. In fact, Customer Experience – ‘CX’ – has in recent years become the mantra and primary point of focus for modern digital business of all kinds. For the airline sector, this represents a major commercial and wider transformation opportunity. Management consultancy McKinsey believes that by 2030, the airline industry could create around $40 billion in additional annual value – through new forms of retail customer engagement.
All this means that as an industry the focus needs to shift towards catering to and personalizing the traveller’s needs, not simply pushing ticket sales.
How do airlines achieve modern, customer-centric retailing?
Whilst this is a logical path for the industry to transition around, it isn’t easy to achieve. In large part that’s because the technologies and core processes airline businesses rely on are increasingly very constraining.
Airlines struggle to become truly modern retailers due to the limitations of the web of fragmented legacy technologies they rely on, that is in many cases no longer fit for purpose. Nowadays, that means being able to do things like package relevant offers across channels, in real-time, identifying end users and their needs, launching new products quickly, pricing dynamically in real-time, tracking the consumption of products, or managing a wider set of partners and the ancillary products they offer. To better serve customer needs as true, modern retailers, all these challenges need to be addressed.
The industry is aware of, and highly focused on this challenge. Airline travel association IATA has set a goal of airlines working around a new, unified model for selling and servicing 100% of the time, by 2030. This initiative is about transforming the aviation retail experience, to what’s known as an ‘Offers and Orders’ framework – the industry’s New Distribution Capability (NDC). NDC aims to see the airline industry as a whole operating around a new model for selling to and servicing customers, based around modern, API-based tech standards. This means moving from individual Passenger Name Records (PNRs), electronic tickets and electronic miscellaneous documents (EMDs) to single customer records holding all relevant data, opening up the potential for a more personalized, dynamic, and efficient travel experience.
What could this look like for travellers?
There are a lot of upsides in all of this for airline passengers. Tailored offers and personalised deals will be easier to deliver, and can be priced much more fluidly, in real time, based on demand and personal preferences – more flexibly, even closer to the point of departure. Bundled offers that bring together flight tickets, accommodation, and destination experiences and activities could be ‘curated’ and offered by airlines, depending on traveller budget or interests.
And the digital CX around air travel itself should dramatically improve – whether that’s being able to make changes or upgrades much more easily, or through airlines being able to offer a far better suite of real-time information around even the little things, like baggage tracking or gate changes.
What does this hinge on?
Three key pillars underly making this happen. Firstly, airlines need to change the processes they know and rely on to put the customer truly at their heart, and then build everything around them. Process transformation here means not just ‘doing and thinking the same way, but with new technology’ – it means the whole ecosystem changes.
Secondly, airlines have to really look at their mindset, talent and skillsets – and how they transition to this new modern retailing world. A modern approach to airline retailing will have an impact on nearly every function within an airline. This is about effective change management, driven by the mindset of the people and carrying the whole organization along.
And, of course, technology is also critical in enabling change and reducing the risk that comes with it. A new standard for airline CX means a shift from today´s legacy and process-centric infrastructure to a modern, omnichannel, customer-centric one.
This will take time, energy, understanding, and needs to be supported by specific and focused business cases that support investments.
