Questioning the travel industry status quo, one blog post at a time

Early last week I had an Op-ed published in The Beat on the topic of “Full Content” (if you are a subscriber to The Beat, you can see my Op-ed here). I then read, with interest, James Filsinger’s response to my Op-ed. I sincerely appreciate anyone taking the time to enter the conversation. However, James made a few assertions that, as they say in the news business, can be unpacked here.

The first point he makes is that consumers go to online travel agencies and service providers to procure travel and that is certainly correct. However, he asserted that GDSs have access to all content. While the GDSs have a lot of content, and they want the world in which they operate to believe they have all content, this is simply not true and never has been true. In fact, the GDS “full content” provisions came about precisely because they did not have full content, namely the so-called “web fares”.  Similarly, low-cost carrier content has been a major issue for GDSs since the early 1990s.  And of course, ancillary content is the latest gap to hit the GDSs. Not to mention hotel and car rental content which have never been close to being fully available through the GDSs.

You may also recall this research study undertaken jointly by IATA, WTAAA, T2Impact and Atmosphere Research that surveyed travel agencies worldwide. The resulting report concluded, among other things, that “GDSs are no longer the comprehensive ‘department stores’ housing all airline content” and that on average, agencies book 26% of their air outside the GDS.

Over the years, in an attempt to close some of their content gap the GDSs have been forced to accept disparate content from suppliers via APIs, primarily from Low Cost Carriers (LCCs). The difference today is that NDC makes it possible for the GDSs, and any others, to aggregate disparate content in an easier and much more cost effective way than the one-off efforts of years past. I’m certainly not saying the GDSs want or like to do this, but as more and more airlines become the single source of truth for their content and delivery (via NDC APIs), the GDS that reinvents itself into a new world content aggregator (think plug and play NDC connections with new display and selling UIs instead of Green Screens) will clearly win the new GDS market share game.

Let’s move onto Filsinger’s assertion that the GDSs are like Amazon. Sure, in an ideal world, a lot of people would all like to think of the GDSs like Amazon. Similarly, in my ideal world, I’d like everyone to think of me as a 30-year-old, with washboard abs, and flowing locks of gold. Of course, the problem that I share with GDSs is when you meet either of us, you are sadly disappointed. As a big Amazon fan, I really appreciate their intuitive user interface, their one-click selling capability, their smart-learning product suggestion algorithms, and efficient and straight forward product descriptions. Do you see the similarities with the GDSs? Me neither!

And, I’m sorry, but Filsinger is wrong on this point too – a seat is not just a seat. The number one desire for corporate travelers is seats, seats, seats – location, pitch, legroom, comfort – all matter.  And, many of us road-ragged warriors are more than willing and eager to pay for better ones. Just look at the numbers coming in around premium seat sales – it’s simply astonishing.

Lastly, regarding his comment about my broad brushing the GDSs as “anti-competitive evildoers”: in fairness, I don’t believe I ever said evildoers. But anticompetitive? You bet! And this is not just my opinion. A jury in a Federal Court found the Sabre Full Content provisions to be anticompetitive AND harmful to airlines and consumers. This is Sherman Act antitrust stuff, so yes, my broad paint brush works quite well, thank you. The Beat did a great job of covering the trial, so I’d suggest checking out their archives. Or, if you’re interested in prior actions directed at American, Northwest and other airlines, you can read the transcripts of the 2012 American Airlines v. Sabre trial here.

Thanks again for the comments on my Op-ed, and for continuing the conversation.

Previously, I discussed that airlines must be the single source of truth. The question is how do you get there?

Existing airline technologies and processes are perhaps the biggest challenge. Legacy systems and ideas were not designed for this new world of hyper-connected customer relationships. Just think about it – data is not integrated with the pricing engine; control of the offer is outsourced to the PSS or GDS; and there’s no dynamic pricing. IATA’s New Distribution Capability (NDC) to the rescue!

The hyper-connected relationship demands personalization. But the reality is that your airline might have some great CRM data, or maybe even some good analytics and propensity scores – but how do you integrate these into the pricing engine that creates your offer when it’s sitting at your PSS and outside of your control?

What about Dynamic Pricing and the new science of Revenue Management? I know some of you who live and breathe this stuff are mumbling at me right now or thinking: “Gee, everything you’ve said sounds great, but it’s not reality! We live and breathe filed fares, 26 inventory buckets, and pricing engines that can’t possibly handle the billions of requests of the hyper-connected consumer! Get real!”

Yes, yes, I hear you and yes, that’s a challenge.

In some cases, the airline is still outsourcing these essential elements to a third party – if not the GDS, then the PSS. And if it’s outsourced, guess what? You’re on somebody else’s product roadmap, not your own. That’s a problem.

And how about the airline as the single source of truth? This is where NDC and all the work that has gone into it comes into play. NDC is a giant leap forward in solving that challenge.

So how does an airline get control? Game-changing, transformative innovation! For example, Farelogix provides technology that enables better revenue management – from filed fares to dynamic pricing. Our next generation offer engine optimizes all aspects of the offer including merchandising, pricing schedules, and availability. And of course, artificial intelligence and predictive analytics will soon be the new normal.

I think Henry Harteveldt of Atmosphere Research put it best: “Dynamic pricing will require the ability to conceivably create and publish endless prices/offers in a frictionless manner tailored to a customer of one.”

As long as you remember that you and your airline are the single source of truth for your hyper-connected travelers, we’ll get there together.

To succeed in today’s hyper-connected customer environment, you must be the single source of truth, dynamically determining and delivering your best offer, in real time, through any channel.

What does this mean?

It means that you – and only you – must create your offers. You can’t outsource it to anyone. You create offers based on your knowledge of your products and services, knowledge of your customer, and strategic use of big data and predictive analytics.

Then, you deliver that offer to all the channels and points of contact with your traveler so your customer knows that no matter how they interact with you, it’s still the same relationship. They can rest assured that you will be consistent. In other words, you are the single source of truth.

If you don’t step up to this challenge, you will fail. If you delegate the creation of your offer to a middleman, your consumer relationship will be faulty and – you will fail. This is the competitive terrain we’re in now. It’s the world of the hyper-connected consumer. Consumers today are hyper-connected because they want to connect to the source – and that’s you.

The New Science

 Dynamically creating and controlling the offer is the new science of Airline Revenue Management. In a study published last year, Atmosphere Research Group reported that airline executives see that the impact of Dynamic Pricing and Predictive Analytics will drive the biggest change in their distribution strategies. There’s a reason why scientists at leading universities around the world are being recruited by airlines to help redefine how they create their offers.

This is the way our industry – at last – is transforming into the world of retailing. Without question, this is the single most transformative time since the Internet was created. It’s not going to be easy and we all know why.

In my next post, I will address the challenge that airlines face in becoming the single source of truth.

 

In my last post, I told you how technology is changing your conversations with hyper-connected customers. I also promised to tell you what your biggest asset is.

You might think your biggest asset is your airplanes, or your people, or your newest business class seats. But no, the most vital asset that any of us in the airline industry have in our relationship with customers is “The Offer.” Without the right offer, nobody buys and nobody stays loyal. Without the right offer, you lose the relationship and the revenue.

The offer is what flows from you to your customer throughout this conversation and this relationship. The offer is truly your biggest and most important asset.

The concept of an offer is not new, of course. Offers have always existed. But in the past, an offer was a price on a product or service, and everybody who came to shop in your store – or even your website – generally saw the same prices or close to the same prices as your competitors.

Today, the offer is complex. In fact, its every bit as complex as the customer relationship you are in now. Every offer needs to be personalized and optimized – created specifically for a specific situation, person, product, and service. In other words, every offer is unique; just like people are unique in their own ways; just like every customer you have is unique. You could even say the offer has its own anatomy, or DNA. Every offer is unique and created dynamically in real time.

Think about it this way. Every single time you interact with your customer, a new strand of DNA – a new offer – is created. And what goes into the manufacturing of this offer? A lot!

We’re talking about Merchandising, Dynamic Pricing, and Predictive Analytics. We’re talking about loads and loads of data! There’s customer data – things like demographics, shopping and buying history, and loyalty. There’s data about your products and services. What’s the aircraft or the load factor on the flight, and how many premium seats are left? These might impact what you offer and for how much. There’s also data that comes from Predictive Analytics. What is this traveler’s propensity to buy this particular product?

All of this data is assembled and analyzed, and an impactful offer is dynamically calculated in real time. Hopefully, this unique offer delights the traveler and makes you some money in the process. This is the future of Revenue Management, and it’s the holy grail for the world’s leading airlines.

And guess what? Nobody except you – as the supplier with access to all of this data and intelligence – can ever create an offer this good or this impactful. You can’t outsource this to a third party or a GDS, or even a PSS – because they don’t have all the data! They are not in this specific, hyper-connected relationship. It’s you, and only you, creating your offer – your biggest asset. Think about it!

Of course, you can also request an invitation to attend our exclusive event dedicated to technology for airline-controlled offers in Miami, Florida, April 5-6, 2017. Visit farelogixoffersymposium2017.com/ for more information.

It’s obvious, or at least it should be by now, that technology is changing the conversation between airlines and travelers. It all begins with the concept of the hyper-connected consumer, or, more specifically, the real-time relationship between your airline and your customers.

No matter how long your airline has been in business, relationships like this one don’t exist yet. That’s because, with the hyper-connected customer, the relationship is complicated. It’s a real-time, digital retailing relationship that many of us have never had before and we’re not sure what to make of it, or what to do with it — or how to keep up with it!

Anywhere, Anytime

In this hyper-connected relationship, the conversation is constant. It can happen anywhere, anytime, and on any device, computer, wearable technology, or even by talking to a real human being. Not only that, but to maintain the customer’s interest and desire to be loyal, the pressure is on to keep it interesting, keep it fresh, and keep it relevant – every day.

 As if all of this wasn’t enough to deal with, rest assured that what we do today won’t be good enough tomorrow. We have to learn constantly and keep gathering more information about our customers. Only when we do this, can we find new ways to build upon and keep these critical relationships as strong as possible.

Yes, the hyper-connected relationship can exhaust you if you don’t find a way to manage it effectively — and thrive in it. Managed properly, it will increase your revenue and keep your customers happy.

So how do we as an industry do that? Well, in this relationship, there is a language – a currency – that is the core of what keeps this relationship alive and growing. It is the single most important asset that you – as the airline – have to bring to the table. If you’ve been reading this blog regularly, you know what this asset is. If not, stay tuned for my next post and I’ll tell you what your biggest asset is (hint: it’s not what you think.)

Of course it’s hard to believe that we even have to Ask the Question as to whether or not the major PSS’ will allow their customers to innovate. After all, it is a “customer is always right” relationship whereby the airlines purchase a technology suite from their PSS provider, and then the technology is delivered with no strings attached. Done. Dusted. Right?

Not exactly; because in the airline industry, the “customer is always right” relationship (when the airline is the customer) is not the norm. In fact, airlines are contractually forbidden from seeking out some of the innovative new solutions available in the market today, based on the agreements they have in place with their PSS/GDS. So, when we ask whether an airline’s PSS will allow airline controlled offers, the shocking answer may very well be “No!

Hypothetically speaking, let’s say an airline shifts its strategic direction or finds itself wanting to create, control, and deliver its offer across all channels (a.k.a.: be the “single source of truth”). The airline decides to adopt third party technologies– let’s call them offer engines – that can integrate with and work alongside its PSS. Is this technologically possible today? Absolutely! Is it contractually allowed? The logical answer is: “well, sure, of course it is.”

But things are not as obvious in our world, as we recently found out from information exposed to all of us during the USAir vs. Sabre jury trial where the jury determined that certain contract provisions found in most GDS/airline distribution agreements were anti-competitive. These provisions, generally grouped together in contracts and labeled as “full content provisions,” include a full-content provision, a content-parity provision, a surcharge prohibition provision, and a direct-connect prohibition provision. Similar provisions are in the very fine print of more than a few airline-PSS contracts.

Provisions such as these undermine an airline’s ability to offer customer choices through things like dynamic bundling and pricing, content differentiation, sales channel optimization, direct connect content delivery, etc. – essentially tying the hands of the airline when it comes to adopting innovative airline distribution.

So the next question is: “How many of those contract provisions have found their way into the airline’s PSS contract?” You may think the answer is “none,” but we suggest airlines check their contracts closely as words may be different, but the intent could very well be the same.

And the next question: “Can the airline, through its existing PSS agreement, decide to deploy its own offer engines (Shopping/pricing, Merchandising, Dynamic Availability, Optimal Schedule Building) and have these engines integrate with its PSS?” Again, we suggest that airlines dig well beyond the simple “Yes” or “No” answer they may get.

They should also ask about cost reductions as the airline may end up handling many services itself rather than relying on the PSS. The airline should also ask about its ability to maintain an acceptable PSS service level when deploying its own engines. And lastly, the airline should ask about the costs associated with deploying its own applications connected to the PSS.

It’s really important that airlines Ask The Questions now before spending precious time developing an offer and distribution strategy, only to find out later the PSS won’t allow it. “Are you wearing handcuffs that will prevent you from being competitive in the coming years?” There’s the real question!

From February 8 – 9 in Hamburg, Germany, Farelogix will be onsite at the Hamburg Aviation Event. Our very own Jim Davidson is one of the event’s keynote speakers on February 8, 2017 from 10:10 AM – 10:30 AM, and will be focusing his presentation on the airline as “Single Source of Truth” and how dynamic, personalized offers are changing the airline industry. Jim will explore the changing anatomy of the airline offer as it moves far beyond traditional fares and ancillaries, and how the latest advancements in technology are changing what is possible in terms of dynamic, omni-channel customer engagement.

In addition to Jim’s keynote, there is a stellar lineup of other speakers and topics. Some of the hot topics that will be addressed include chatbots, mobile, customer segmentation, personalization, predictive analytics to optimize resources, as well as data and how to use it. And for all of us #AvGeeks in attendance, you’ll even have an opportunity to participate in a Virtual Reality Demo – Airspace by Airbus.

Come join Jim and the other fabulous speakers from Wizzair, Ryanair, Eurowings and more. It promises to be a fantastic two days where innovative ideas will be shared. You can find the full agenda online at http://www.hamburgaviationconference.com/agenda/, and the complete speakers list at http://www.hamburgaviationconference.com/speakers/.

Plus, if you haven’t yet signed up to attend, we have a deal for you! Using this discount code (2381) when you register, you will receive a discount of 30% off the current registration rate. We hope you will take advantage of this offer and that we see you there!

I am sure most everyone knows by now that just before the holidays a jury in the USAir v Sabre antitrust trial determined that certain provisions found in most GDS/airline distribution agreements were anti-competitive. These provisions – generally grouped together and labeled as “full content provisions” – include a full-content provision, a content-parity provision, a surcharge prohibition provision, and a direct-connect prohibition provision.

While the trial results will certainly take some time to play out in the market, one thing is for sure – airlines should be strategizing how they will use this anti-competitive determination to open up their market and distribution opportunities.  It is certainly going to be a once-in-a-long-lifetime of GDS contract provisions negotiation opportunity.

From my point of view, the trial was quite interesting on multiple fronts. So I thought I would share some observations regarding my first opportunity to testify in a jury trial.

As a non-expert witness, I could not actually attend any of the trial proceedings until after I testified. So my first glimpse into the trial was when I was escorted in through a back door and seated directly in the witness box, snuggled in nicely between the judge and the jurors.  No introductions, no handshakes, and no exchanging of pleasantries before getting down to business. In other words, this was not a business meeting that so many of us are accustomed to.  I was immediately sworn in, and then it was off to the races – pausing only momentarily for a sip of water or to look up a line or two from four large bound books (literally over 1,000 pages) of my previous multiple-year-old depositions. (In case you aren’t aware, I had three previous depositions as the Sabre lawyer attempted to, what is called in the legal business, “impeach me.” Yikes!)

A couple of observations:

  • Being a juror is hard work.  This was a very complex case and from what I could tell, the jurors were extremely engaged, attentive, and taking lots of notes.  At the end of my testimony (and that of others who were called to the witness box) the jurors were allowed to submit follow-up questions to the judge. After I testified, the lawyers and judge disappeared for a while,  after which the judge returned to  ask me five or six questions submitted by the jurors.  The questions were relevant, intelligent, and demonstrated the grasp that the jurors had on this case.  Quite amazing.
  • Look at who did and did not show up. An open court room doesn’t necessarily mean people actually show up to watch. I found this quite interesting. Here we were, at a trial that had significant impact on pretty much every airline in the world that is not happy with their GDS full content, parity provision, surcharge and direct connect prohibitions. Yet, not a single airline representative (other than AA) in the house.  What gives?  Lack of interest?  Didn’t know the trial was happening?  Figured you would read the transcripts?  Anyway, I thought this was quite interesting.

There was however one person that seemed intent on grasping all there was to grasp throughout the long weeks of trial – a GDS lawyer. Wonder what his motivation was?

Guess you’ll just have to Ask the Question!

Are You Shopping for a Shopping Engine?

Checklist for NDC “Single Source of Truth” Pricing

One of the visions for IATA’s New Distribution Capability (NDC) is the airline as the “single source of truth”. However, for an airline to control and create its own dynamically-priced offers across every channel requires new levels of performance, scalability, and flexibility not supported by conventional PSS or third party pricing engines.

Airline IT and Revenue Management executives at airlines around the world are scratching their heads as they consider what needs to be done to deliver on NDC, omni-channel dynamic pricing, and personalization. The problem? Most of the time, the airline’s incumbent shop/price provider (which may or may not be the airline’s PSS) cannot scale to accommodate high-volume search, and is limited to ATPCo-filed fares and ancillaries, and has no solution for real-time creation of an offer.

If this sounds familiar to you, then there is no better time than the present to explore the benefits of next generation shopping technology! But before investing in the time and expense of an RFP, consider this checklist as you embark on your search.

Checklist for Your Airline’s NDC-Aligned Shopping Engine

  • Handles extremely extremely high volumes of search requests with millisecond response time, and with unlimited scalability.
  • Supports large data sets, and calendar shopping without performance degradation or cost-prohibitive charges
  • Supports NDC shopping including Affinity and Attribute shopping
  • Includes a rules engine that integrates with any number of airline data sources to influence the offer (e.g. CRM, Frequent Traveler, Loyalty, Revenue Management)
  • Gives airlines unlimited control to configure business rules, with any level of desired granularity (by market, channel, seasonality, equipment, traveler profile/FF, or even individual travelers)
  • Supports ATPCO and non-ATPCO filed fares (i.e. fares created directly by the airline and/or based on bid price)
  • Supports dynamic pricing without reliance on cache or costly PSS hits
  • Provides optional engines for off-PSS Availability Calculation and Schedule-Building
  • Runs on commodity hardware with unlimited scalability
  • Includes an NDC API for delivery of the priced offer to any channel
  • Is PSS-agnostic and fully under the airline’s control

In the interest of full transparency, Farelogix’ new FLX Shop & Price engine just happens to support all of these requirements, and we would be delighted to talk with you about it. Contact sales@farelogix.com and we can answer any questions you may have.

Or, you might want to consider attending the industry’s first Control-Your-Offer Symposium, taking place in Miami April 5-6, where you can see NDC shopping and merchandising in action.

No matter what solution you choose, we wish you luck on your shopping trip!

If you’re currently figuring out your calendar for the year ahead, we have a great event for you to add. On April 5-6, we are hosting the industry’s first event dedicated to technology for airline-controlled offers.

This invitation-only symposium is specifically for airline IT, revenue management, and e-commerce executives that want to explore strategies and new technologies to dynamically manage all aspects of the airline offer – from pricing and merchandising to optimized availability and schedule-building.

For more information or to request an invitation, please visit http://farelogixoffersymposium2017.com.

Don’t miss this opportunity to hear from industry and product experts on the following topics:

  • How the new world of NDC and “Active Distribution” is transforming pricing and revenue management and driving adoption of new technologies.
  • Real-life case studies of airlines taking control using airline-hosted “offer engines” without taxing the PSS.
  • How Artificial Intelligence, Machine Learning, and Big Data is making it possible to achieve greater profitability per product, moving beyond history-based calculations.
  • How to present optimal search results including dynamic, personalized offers inclusive of custom-tailored availability, schedules, pricing and merchandising offers.

 Plus, we will take you through a technology deep dive into the industry’s only shopping & pricing engine designed for high volume, personalized, omni-channel NDC shopping.

This event will be jam-packed with actionable content to help airlines gain more control of and enhance their offers.

Request your invite today!