Injecting digital into airline DNA
July 4, 2018
We’re transforming our business and technology to help take your airline forward
By Derek Sharp, Senior Vice President and Managing Director, Air Commerce, Travelport
These are exciting times for the airline sector. Thanks to the innovations and investments made by you, the world’s leading airlines, in recent years, we can see that the industry is at a pivot point of change. Global air passenger numbers are growing, according to IATA figures, by 7.1% in 2017 and a further 5.6% growth is expected in 2018 – well above the 20-year average.
In theory, more passengers mean more revenue. But only for the airlines which can differentiate, respond quickly to the evolving needs of today’s travelers and build brand loyalty. When the net margins for airlines in 2017 was estimated at just 4.6%, carriers must look for new ways to take their business forward.
We know today’s travelers demand personalized experiences, travel more than previous generations and are willing to pay for extras which enhance their travel experience. In tandem with this demographic-led change, airlines are gradually moving away from traditional revenue management to optimizing individual customer interactions by designing and pricing products around customers. The more data you have on a customer, the more you can tailor your offer to what you know they will need, making customer retention crucial.
The retail philosophy of ‘total offer optimization’ is changing the carrier’s role in the supply chain, selling an end-to-end travel experience including bundled and unbundled services that give customers the value and flexibility they need, when they need it.
Responding to the travel demands of Generation Z, who travel an estimated 29 days each year, often for experiences like festivals and sporting events, airlines must continue to offer unbundled services with menu-style pricing. When budgets are being stretched to maximize the money available for Insta-worthy opportunities during the trip, to be able to choose precisely when to pay to check a bag, or beat the boarding queues as they know they’ll be running straight from a concert to the airport make an airline highly desirable.
At the other end of the spectrum, “baby boomers” traveling for pleasure demand fast-track check-in and boarding, access to a lounge and full flexibility in their tickets. Having invested heavily in premium cabins, these high-yield travelers are crucial to airlines success and in 2017, 10.6% of global airline revenues, or $82.2bn, came from ancillary sales. Similarly, each ancillary is highly valued by corporate travelers, often time-poor and determined to arrive at their destination as relaxed and on-schedule as possible. A huge positive for airlines is that a lot of these highly-valued ancillaries cost relatively little to deliver and the data analytics needed to tailor offers to specific customers are becoming increasingly easy to manage. The Internet of Things offers airlines a new world of customer engagement opportunities, both for airlines and for airline/airport alliances. The result for airlines who have adopted this flexible approach to offer tailoring is more sophisticated pricing power, greater profit potential and a ten year high in passenger satisfaction.
It is not just the type of travel being booked which changes based on the traveler, but the means of booking can also vary greatly. Technology drives every stage of the customer experience, from booking online to downloading the boarding pass via a smartphone app. We estimate that one in three travelers now book via mobile, and that 70% of all OTA bookings will be made on a mobile by 2020 as global smartphone ownership rises by 50% to 5.7bn.
In future, we see every element of the travel eco-system being inter-connected, providing a constant stream of data which could deliver greater operational efficiencies and levels of personalization that were previously impossible.
Aircraft with broadband connectivity provide carriers with an inflight e-commerce platform that encourages passengers to spend whilst adding value to the travel experience. No longer limited to the choice of products on a trolley, passengers will have the opportunity to buy anything from ground transport to city tours. Every transaction will generate not just incremental revenues but priceless customer data to help shape and push the right offer, at the right time, to the right customer.
These branded fares are creating a new norm of transparency in pricing. Instead of fare comparison matrices plotting fare options and requested itineraries, airlines will display comparisons of ancillary services that are bundled into the branded fare. Passengers will then make their choices based on the total price of the package or buying each additional service individually.
As the first Level 3 NDC-certified aggregator, Travelport will continue to support airlines in their endeavour to connect with every traveler at every opportunity to build and strengthen their brand whilst identifying and generating additional revenue streams.
Find out how Travelport can help you take your airline forward at travelport.com/forward.