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

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As a precursor to Airline Information’s upcoming Mega Event Asia-Pacific 2014, we will be sponsoring a complimentary Ancillary Revenue Master Class on Tuesday, August 19, with a featured keynote from IdeaWorks’ Jay Sorensen. This event is a must see for anyone attending the Mega Event as it will shed some light on not only the “why” of airline merchandising, but also the “how,” while also demonstrating why delivering the right product at the right time and price to the right customer will put you on the path to more revenue and happy customers.

Farelogix will be providing some real life examples of merchandising in action, as well as putting our developers to the test with on-the-spot use case scenarios, so bring your ideas on how you’d like to generate ancillary revenue – maybe your use case will be selected!

Registration is still available, but space is limited so register now!

 

Now that DOT has cleared the storm clouds over NDC, airline conference rooms around the globe are being booked for meetings about NDC.  These meetings range from a simple, internal exploratory discussions on the NDC topic to serious “next steps” planning sessions on whether the airline will buy or build its own NDC API, while also prioritizing which GDSs and aggregators are ready to accept the airline’s NDC XML API when it’s ready.

© agsandrew - Fotolia.com

© agsandrew – Fotolia.com

Now before we get into whether to NDC or not NDC, I think a few clarifying facts and terms are in order. Along with the term “NDC,” one will quickly have to deal with terms and concepts like “NDC Solution Providers,” “Aggregators,” and “NDC Schema.”  So let’s start with some basic definitions.

NDC Solution Providers are generally technology companies, including those operating a PSS (Passenger Service System), that have both the capability and interest in building out airline NDC XML API connectors inclusive of comprehensive integration with the airline host and other systems, such as merchandising and pricing.  (In case you were wondering, Farelogix fits into this category). I like to call this group the Makers.

NDC-Capable Aggregators are generally distribution-related companies or travel technology companies that possess the capability to accept and integrate an airline’s NDC XML API with other airline content from one or more sources.  Obviously the GDS companies are the biggest of these aggregators, but there are a growing number of others making a name for themselves in this space.  I call these folks the Takers.

NDC Schema is the actual technical connectivity roadmap that is being standardized by IATA and airline/3rd party workgroups.  NDC Schema version 1.1 is anticipated to be finalized and published in Q4 of this year.

This version 1.1 schema will officially be the first technical “rules of engagement,” if you will, for those NDC Solution Providers and NDC-Capable Aggregators.  The Solution Providers (the Makers) will build out the airline connectivity, most likely starting with the NDC-shop, as this defines the offer/pricing creation at the airline level – the essence of NDC. The NDC Solution Providers will follow the NDC Schema so that the NDC-Capable Aggregators (the Takers) will have a reliable and consistent set of connectivity messages.  In other words, if an NDC-Capable Aggregator connects to two or more airline NDC XML APIs (even if for shop only) where those airline XML APIs were built by different NDC Solution Providers, they will send and receive consistent and expected data.  This makes the life for an NDC-Capable Aggregator a heck of a lot easier and enables them to scale and perform multiple airline connectivity for their customers in the most efficient manner.

Up Next… the real questions around “To NDC, or Not To NDC” because you know we just love to Ask the Question!

We recently had the opportunity, along with consulting firm L.E.K., to share our thoughts and insight on ancillary services and airline merchandising in a feature in IATA’s Airlines International magazine. Here’s a brief excerpt:

Ancillaries are not only a boon to airline economics but also an opportunity to enhance the customer experience and airline brand loyalty. Meeting the customer’s demand for greater choice, convenience, and value is the new competitive playing field. The key to meeting this demand is intelligent use of data—from customer demographics and trip purpose, to buying history, real-time trip conditions, and even revenue-managed inventory—to create the most relevant offer, and then deliver it no matter where the traveler happens to be shopping or browsing, even in-flight. Intelligent merchandising is, put simply, engaging with your customer, and acknowledging their specific needs.

You can read the article in its entirety, courtesy of Airlines International, here.

As the proliferation of airline ancillary sales advances, selling in the travel agency channel continues to stand as the last bastion. Airline websites have long been capable of selling these value-based products and services, and airlines are making considerable headway at selling via kiosks, mobile apps, and call centers. Yet trying to sell these same services through the agency channel continues to be problematic (one only has to think of AA’s fare families being marketed and sold by either an odd or even number).

© Maksym Yemelyanov - Fotolia.com

© Maksym Yemelyanov – Fotolia.com

With advancements in distribution communications (especially now that NDC has DOT’s blessing), sending and receiving ancillary product and service information to/from the agency channel is less a technical problem, and more an issue of change management. The technical problem of displaying and transacting those ancillaries is one that companies like Travelport—with their investment in the travel agency desktop—are quickly working to solve. But what about that pesky change management issue?

One must not underestimate the foundational challenge facing the travel agency community.  The reality is that with NDC finally getting the okay, more and more airlines will adopt this distribution methodology of delivering their content – in real time – directly via their API to the GDS who in turn will aggregate it and deliver it to the agent desktop.  Read the rest of this entry »

The DOT’s approval of IATA Resolution 787 (NDC) marks an important milestone for the industry, as it removes any last remaining uncertainty that the nature of airline distribution is evolving for the good of all supply chain constituents. By embracing a modernized messaging standard, airlines are enabled to distribute new products and services efficiently and effectively to travel agencies and corporations, in much the same manner as they do on their websites today, using a standardized API. This is essential to closing the distribution gap between airline.com and the indirect channel.

In the years that this has been debated, innovation has continued to propel forward. Airlines are already investing in powerful new merchandising and distribution engines that enable them to create a wider range of offers, bundles, and services that are proving popular with consumers. GDS companies such as Travelport are already integrating with NDC-like XML APIs from Air Canada, American Airlines and WestJet. OTAs such as Priceline are selling premium seats using the same technology approach. Change is already happening.

We believe DOT’s approval of Resolution 787 will fuel even more innovation among players in the supply chain who are competing to creatively adopt and implement NDC and differentiate themselves in the process. On the airline side, those carriers that have been on the fence about investing in their own merchandising, distribution and APIs may now move forward. On the agency side, the pressure is on for GDS companies, TMCs and OTAs to enhance their user interfaces to ensure they can competitively consume new types of airline content delivered via the XML API, including rich media, bundles, personalized offers, and more. This is the new footrace to determine who will lead the way in terms of delivering on NDC.

Don’t freak out yet, just keep calm and read on.

It’s been a few weeks now since our jaunts to Singapore and Barcelona where we, along with the folks from Airline Information, LEK Consulting, and a handful of great presenters, conducted half-day NDC in Action Symposiums to an audience packed with airlines, GDSs, TMCs, and other technology providers. These symposiums were not about whether NDC is good or not (because all the relevant players agree that it is), but rather focused on Merchandising Strategy, User Experience, and Mid-Sized (not Big) Data, along with performing some real-life demonstrations of “NDC in Action” to show the benefits available to airlines, travel agencies, and consumers.

© learchitecto - Fotolia.com

© learchitecto – Fotolia.com

But back to the question at hand: did LCCs invent NDC? Well, I think the basic premise of NDC lies directly with Low Cost Carriers like as EasyJet and others. These early renegades, when building an airline from scratch, took advantage of some technological innovation (primarily XML) to build their own individual airline APIs (Application Programming Interface), then publish those APIs to internal and external distribution touchpoints like their websites, mobile apps, the GDSs, OTAs, etc. It was pretty novel back then, but looking back it was very logical. They are low-cost airlines, with low-cost mentalities, working with low-cost systems. They are not tied into all the legacy complexities around a big PSS, EDIFACT, and the GDSs. Theirs is a simple and pure concept: distribute their content through their websites and other customer touchpoints using a single integration XML API. Read the rest of this entry »

With airline ancillary revenue expected to top $40 billion this year, it can mean the difference between profit and loss for many airlines. Generating this revenue isn’t about simply charging fees for services, but rather it’s about engaging with customers to deliver timely and relevant offers that bring added value to their trips. Delivering products and services travelers appreciate—not to mention, actually pay money for—will not only bring an airline more revenue, but it will also bear happier customers.

This strategy of More Revenue Happy Customers is new to airlines, especially when considering that for years the airline offer consisted only of a system of schedules and fares. But this new way of doing things will be essential in defining an airline and the way it does business. Put simply, it’s time to evolve the airline DNA.

 

View video on YouTube.

© adrian_ilie825 - Fotolia.com

© adrian_ilie825 – Fotolia.com

Location, location, location. It’s the phrase we all know when buying or selling property.  Well in the game of online selling it’s all about the User Experience, or UX.  In our world, the reality is very few people make the physical trip down to the local travel agency to buy travel.  Take me for example, with the exception of the occasional trip to the grocery store (a bit obsessive about picking my own fruits and veggies), I avoid physical shopping at all costs.  Initially, I thought it was because I was suffering from a touch of agoraphobia, but after a few visits to my head doctor, I realized what I fear most about physical shopping is the actual experience.  The driving to/from (I tell my family it’s an environmental issue, but I drive an SUV), the waiting for the person ahead of me to finish writing a “check” (what the heck is that?), the putting stuff in bags and carrying it (I can’t tell you how many times I leave perishable groceries in the car, and remember I live in Miami)—it’s just all too much!

Generally I know what I want or need.  I am more functional than status-conscience, so for me the User Experience is pretty much everything.  So most of my purchasing is done via Amazon.  I love Prime and even pay the extra $3.99 to get it delivered the very next day just to satisfy my need for instant gratification. Waiting two days is not the experience I am looking for. I have a choice and believe I am in control, which is what the User Experience is all about.  Take it from me when I say never underestimate the power of consumer choice! Read the rest of this entry »

© RTimages - Fotolia.com

© RTimages – Fotolia.com

After going over the top 10 reasons for not starting an airline merchandising program in a previous post, we thought it might be good to provide a little encouragement, along with what we believe are foundational principles necessary for any airline wanting to start or enhance a merchandising program.  Because let us not forget that in a relatively short few years, those airlines already practicing the art of airline merchandising are reaping their slices of a new revenue pie that is expected to exceed $50,000,000,000 (yes, that’s billion) this year, almost exclusively attributable to airline merchandising.  This year it is projected the average revenue generated per passenger boarded (PB) from what I call “true ancillaries” (those optional purchases excluding bag fees, change fees, and affinity credit card revenues) will exceed $7.50.  That’s more than most airlines make on a ticket sale!

So if you are thinking of starting a merchandising program, or expanding the one you currently have, here are a few considerations we have picked up on over the past couple of years talking with airlines about merchandising.  Our top three considerations are*: Read the rest of this entry »

© md3d - Fotolia.com

© md3d – Fotolia.com

We’re excited to kick off the first installment of our blog series on airline merchandising with,  “Top 10 Reasons Not to Get Started with Airline Merchandising.” We’ll share with you some of reasons we’ve heard why airlines don’t want to or are not ready to start merchandising. We’ll also share our rebuttal to those reasons. Enjoy!

10. We are a full service airline.  We offer an all-inclusive product. 
Are you able to tell the world that and demonstrate to customers your brand differentiation?  When travellers shop for a flight online, can they tell the difference between you and your LCC competitor? Merchandising isn’t just selling products and services; it’s differentiating your product so consumers know what they get when they choose your airline.

9.   Our customers aren’t asking for these products and services. 
Well, they’re asking someone for them, otherwise they wouldn’t be spending over $50 billion on those services this year.

Read the rest of this entry »