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

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I’ve been thinking quite a bit about how inefficient our airline marketplace really is, and how it continues to heighten consumer stress and add unnecessary costs for both airlines and their customers.

Specifically, I am talking about the market inefficiencies and related costs and unproductive consumer behaviors in the process of searching for the “best” airline offer down to the penny – let’s just say, the inefficiencies in search.

Today, it seems consumers feel compelled to search multiple sites, i.e., various OTAs and meta search, because prior experience has taught them that airline prices do vary from one site to the next. I am not referring to negotiated rates, but rather published fares where despite the fact the airline intends a consistent fare, variations exist from storefront to storefront. Often times this price variance is minimal (perhaps taxes rounded up or down!), yet this is enough to motivate consumers to keep searching, believing that the airlines are “up to something” with how they are pricing their product.

The reason for this is, for the most part, that the airlines themselves are not even pricing their own product. Instead, it’s a few third-party companies – primarily the airline’s PSS and the GDSs, using their own home-grown pricing and availability applications – that actually create these pricing discrepancies throughout the marketplace. Why? Well each of these pricing systems use “interpretive” pricing algorithm logic and tax calculation methodologies that, in the end, can (and do) easily create pricing discrepancies. And since the consumer search sites deploy these various pricing applications, variability in pricing exists.

The unintended (or maybe not so unintended over time) consequence of this situation is higher costs to the airline from excessive search and availability transaction costs (or scan charges) imposed on the airlines by those very same third party companies that create the airline prices. It’s a bit odd when you think about it. And, to top it off, the prevailing consumer perception appears to be that the airlines are taking advantage of their customers, when in fact the airlines are powerless over this issue… or are they? What if airlines could replace those disparate pricing systems with a single, airline-controlled pricing engine capable of delivering a “single source of truth” to all channels?

Perhaps now is as good a time as any to Ask the Question.

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Airlines are beginning to rally around the idea that they need to be able to create and control their offers. This is not only the very premise from which NDC was born, but it’s also the new airline oxygen in terms of creating and maintaining More Revenue and Happy Customers in today’s world of personalization, digital commerce, and product differentiation. But you may be asking this question: “What exactly constitutes an airline offer in this new world?” So, we’re going to break it down for you.

Unlike the days where an offer represented the best filed fare, today’s airline offer is comprised of a number of dynamic elements. These include the flight schedule, seat availability, a price, and in most cases, some kind of merchandising element such as a product bundle, a la carte item, or even third party ancillary.

Now, wait just a minute. How is it that schedules, fares, and availability are considered dynamic elements of an offer? Aren’t those the very same “static” pieces of “everybody-the-same” data that got airline distribution into such a decades-old commoditized mess in the first place, and that NDC was designed to fix? How exactly is this any different from what we’ve done before?

The answer is that today’s airline offers are very different from days past! First and most obviously, merchandising has been added to the mix – all those delightful a la carte items, packages, bundles, and fare families have unleashed new levels of product differentiation and ancillary revenue. But even more importantly, today, each element (merchandising, schedules, availability, and price) can be dynamically adjusted through a set of business rules and real-time calculation logic that is applied at the very moment an offer is requested in any channel. Furthermore, all of this is achievable using engines that the airline – not a third party – controls.

With the airline finally in control of its own offer engines, it can design offers for maximum consumer relevancy, competitiveness, and choice. Airlines can create offers that are fully optimized to entice the consumer to buy what he or she specifically wants, and at a price point that makes sense for both the airline and their customer. Plus, with the airline in control, each offer is delivered in milliseconds – with no need for caching, huge investment costs, or reliance on legacy systems that are not only ill-suited for the task but very expensive to use.

Yes, this new world of airline-controlled offers is radically different from airline commerce just a few years ago, and represents a huge step forward for our industry. Even more exciting, all of this is possible using technology available today. Want to learn more? Check out our latest product line up.

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It’s hard to believe another Halloween has come and gone. It’s a time of year that the team at Farelogix looks forward to, with just about everyone showing up to work in their most creative costumes. But come November, it’s time to stop telling the same old ghost stories, and put the costumes, scary movies, and decorations away. I also give up on my attempt to lose the 10 pounds I put on chomping away at Halloween candy “for the kids”.

However, Halloween 2016 has had me thinking a lot about NDC. Since its inception just a few years ago, NDC has become a popular target for myths, scary stories, and some good old-fashioned fear mongering. “NDC is impossible!” “NDC will never work!” “NDC will end the world of travel agency distribution!” “NDC. Boo!”

I’ve even seen blog posts and articles where pro-NDC comments I have made have been twisted, morphed, and transformed into pessimistic anti-NDC rants and untruths. How crazy is that?

The time to be fearful of or worried about NDC is long gone, for a couple of reasons. First, there’s nothing to fear about a new technology standard that enables airlines to be the “single source of truth” for all their sales channels (for the first time in our industry, I might add!), thanks to a robust XML API technology that is in favor with more than twenty airlines that I know and plenty more in the queue. Second, and most importantly, NDC is – in production with live orders – already happening. It is in production with many of the world’s leading airlines and lots more have plans to follow. In other words, the NDC train has left the station, and it is now time for us, as an industry, to be full-on in execution mode. Perhaps it’s this last point that explains the recent flurry of NDC phobias and falsehoods; after all, don’t they say people tend to get nervous when planning is over and it is time for action? Well, we promise there is no monster under the bed, so let’s stop with the scary stories and instead focus on taking action.

And yes, there is plenty of action to take: Airlines are beginning to take control of technology that enables them to create and deliver their offers; GDSs need to up their game when it comes to integrating an airline’s NDC API and displaying and transacting on all this wonderful new content; corporate booking tools need to stop worrying about what the GDSs think and retool their booking apps to connect to, and display, all this wonderful new content being negotiated between airline and corporation; and the PSSs need to let their airline customers stop using their community-based applications and help their airline customers integrate the best-of-breed offer creation tools. Yep, plenty to do, but nothing too scary. (Well, unless you really just enjoy telling ghost stories…)

If you’re ready to put the scary talk behind you and look ahead at NDC-aligned technology that can help you put your airline in control of its offers, we lay out all the details here. You can also ask us any question you may have to allay your fears!

To provide airlines with greater control over their offers, Farelogix has added FLX Shop & Price, FLX Schedule Builder, and FLX Availability Calculator to its flagship Airline Commerce Gateway. With the addition of these three NDC-aligned engines, airlines can use the enhanced platform to provide dynamic merchandising, pricing, availability, and schedule building as part of real-time offer creation and delivery across all channels. FLX Shop & Price, FLX Schedule Builder, and FLX Availability Calculator are currently in test with three airlines.

The new engines are rules-driven, fully under the airline’s control and, in an industry first, eliminate costly look-to-book or search volume limitations. Designed for unlimited scalability and millisecond response times, the new Farelogix pricing, availability, and scheduling engines deliver superior functionality and performance at a significantly lower cost of ownership than legacy solutions from airline PSS/GDS providers. They are fully interoperable with the FLX Merchandise platform, and feature a common graphical user interface (Offer Designer) that allows intuitive and highly flexible rules definition for all engines. The new components are also integrated with the Farelogix Open Connect (formerly Direct Connect) technology, which provides PSS-agnostic connectivity to airline systems and orchestration of shopping, booking, ticketing, ARC/BSP reporting, and order management workflows. A certified NDC XML API serves as the airline’s single delivery vehicle for all sales channels and touchpoints.

“To become the ‘single source of truth’ for every offer in every sales channel, airlines must be able to generate dynamic, personalized offers in milliseconds, without cost-prohibitive look-to-book or search query limitations. As legacy systems were not designed for this, the industry has been conditioned to believe that dynamic, real-time offers are not feasible. But that is outdated thinking,” said Jim Davidson, CEO of Farelogix. “With the new additions to our Airline Commerce Gateway, an airline can now deliver real-time offers – based on flexible rules designed entirely by the airline and for use across all engines – significantly faster than many less-accurate cache solutions. Plus, the airline now also has the option to host the engines and thereby fully control its technology infrastructure, using commodity hardware with unlimited scalability. Farelogix is pleased to be leading the way in this new world of NDC shopping and airline retail.”

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With the addition of the three new engines, the enhanced Farelogix Airline Commerce Gateway now includes six interoperable components:

FLX Shop & Price (new): Provides an airline with a purpose-built shopping, offer, and pricing engine to handle NDC-aligned shopping, offer-creation, faring, and pricing requirements within the Gateway, including published fares from ATPCO, private fares, fare families, dynamic pricing, affinity and attribute shopping, and merchandising and ancillary offers generated directly by the airline. Built to process pricing data from multiple sources – traditional fare filing, airline direct-to-engine data, bid/sale data, or any combination – FLX Shop & Price provides the airline with complete long-term pricing flexibility.

FLX Availability Calculator (new): A high-performance, high-scalability solution that enables an airline to calculate its own availability on demand, without taxing the PSS and while retaining full airline IP over its proprietary rules algorithm. Designed for high transaction volumes, NDC shopping, large date-range processing, and affinity and attribute shopping, FLX Availability Calculator provides dramatic PSS cost savings and new revenue by optimizing search results including dynamic, personalized availability searching with unlimited query capabilities.

FLX Schedule Builder (new): Puts the airline in full control of dynamic, personalized schedule building, and also opens the door to new revenue opportunities by optimizing schedules based on the most profitable connections and routes. FLX Schedule Builder provides support for large date-range processing and point-of-interest and merchandising-driven schedules, with unlimited scalability and unparalleled response time – all without taxing the PSS or any third party (e.g., GDS).

FLX Merchandise: An airline-controlled merchandising and rules engine that allows the airline to create custom-tailored product and service offers for dynamic retail across multiple sales channels, including airline.com, mobile, check-in kiosks, call centers, and travel agencies (direct or via GDS) – all without hard coding and in a manner that is PSS-, channel-, and IBE-agnostic. Offer creativity and personalization, speed to market, and extended development tool capabilities are signature components of this industry-leading engine.

FLX Open Connect (formerly Direct Connect): Allows the user to make and manage bookings and reservations out of the Airline Reservation system using whatever type of messaging protocol is required (e.g., EDIFACT, OTA, XML, GDS, or proprietary messaging) and with full support for NDC Offer and Order Management. All content is standardized and normalized in XML. FLX Open Connect manages all required orchestration, including integration with the airline PSS and other systems, channel management, ticketing, settlement and reconciliation (including ARC/BSP), travel agency integration, and a comprehensive Developer Support program.

FLX NDC API (NDC Level 3 Certified): Provides a single, robust delivery API by which the airline’s full suite of content reaches the marketplace, including the airline’s kiosks, call center, website, and mobile channel. The airline’s NDC API can also be implemented directly with agencies, OTAs, and corporate booking tools, or through a GDS or other content aggregators.

Farelogix also offers the SPRK Point of Sale tool, a web-based travel agency point-of-sale system that is fully integrated with the FLX Airline Commerce Gateway. In use by thousands of agencies worldwide, SPRK showcases the airline’s product using Brand Standards and Customer-Specific Offers in an intuitive and efficient agent-selling environment. SPRK provides comprehensive support for shopping and sales (including custom fare bundles, fare families, and à la carte merchandising), document issuance (ticket and EMD), and servicing (exchange, refund, etc.) of air travel content.

I thought I would summarize a few of the concepts and themes I heard throughout the recent IATA WPS held in Dubai. I didn’t take copious notes so quotes are not exact and quotations are for emphasis only.

  • “Legacy airline systems and GDS technology just can’t keep up with the innovation required by airlines” – various airline executives on panels and delivering presentations.

Comment – Frankly, I can’t keep up with how many times I have heard this over the last few years. It’s clear that the legacy players are not going to make the required investments regardless of how often the airlines complain. It is probably time for the airlines to stop waiting for legacy providers to deliver, and consider taking a different approach to get what they need. Or at least, Ask the Question!

  • “NDC is just not happening fast enough.” – various airline executives.

Comment – There are two root causes that explain the slow pace of NDC. First and foremost, the PSS and GDS providers (yes I refer to the handful of powerful companies that control the lion’s share of airline distribution technology) don’t really want NDC to happen, despite their countless public proclamations of NDC support at prior WPS events. If the GDS/PSS community wanted NDC, we would see evidence of rapid, game changing innovation and unfettered attention to airline and agency unmet requirements. Actions always speak louder than words.

The second cause of slow NDC adoption is the legacy procurement processes of many airlines. Even airlines that say they want to move fast and invest in new NDC-aligned technology solutions such as their own offer creation engines (shopping, merchandising, availability, etc.) are often stymied by impossibly long procurement processes (RFIs/RFPs) that can easily take more than a year to complete. And that assumes the business people involved in the “RFP Marathon” stay in those positions long enough to see it through. In our experience, RFPs take just over a year at best – often resulting in outdated requirements by the time a decision is made. In addition, 50% of the time, a key stakeholder leaves, and this further paralyzes the process for another 6-12 months. (And meanwhile, how many millions has the airline lost in missed opportunities for more revenue and happy customers? It’s time to Ask that Question!

  • “Corporate buyers need access to airline ancillary services & content” – various airline executives, a couple of corporate buyers and consultants, and even a few travel agency representatives.

Comment – They sure do! The last time I checked, almost 80% of corporate bookings were transacted via a corporate booking tool. I can honestly say that after more than three years into NDC that I still can’t point to one corporate booking tool that is supporting airline ancillary services and content in a meaningful way. Why? Airline content finding its way to a corporate booking tool is controlled by the GDSs. Refer to Notable Quote #1.

In summary, these are the common themes:

  • Airlines need to invest in innovation and use faster procurement processes.
  • The PSS and the GDS need to put up or get out of the way.
  • And the corporate booking tools need to be free to take content directly from the airline’s NDC API.

We will continue to invite all of you to Ask the Question—specifically the tough questions.

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TEAM AMADEUS WINS IATA NDC API HACKATHON CONTEST IN DUBAI

COMPANY TAKES HOME $6,000* IN PRIZE MONEY AND EARNS PRODUCT INCUBATION PERIOD

This past weekend, the IATA NDC Hackathon took place in Dubai. This was the first hackathon I have attended and I have to say I was impressed. Over 100 young and enthusiastic developers, representing 24 teams in size from one person to eight (Amadeus had the 8-person team), converged on the Emirates HQ in Dubai. For 28 hours, these teams worked away innovating and creating travel-related applications utilizing the available NDC APIs. Farelogix was present with some technical engineers to support and help out those teams developing against the Emirates and/or American Airlines APIs.

Unlike the teams participating in the hackathon, I admit that I did not spend the night, opting instead to head back to the JW for my cushy bed and pillows, selflessly not wanting to deprive the deserving developers of one of the oversized futon cushions scattered throughout.

I did make it back on Saturday in time for the team demonstrations. 20 of the 24 teams qualified to demonstrate. A quick four minutes for presentation and demo, and one minute of questions from the judges. This part was absolutely great. Certified geeks from high school, college, and small startups, all jumping on stage to show off their work. Some awkward with a microphone, some running out of time before getting to their demos, and even a few technical glitches.

But here is what I saw. Passion and drive. Unencumbered belief that they could find a niche or vein of opportunity within an industry that has generally been less than open to innovation and outsiders. I saw fresh blood and it made me feel really good. I saw this group of innovators crack the code of ancillary delivery without the self-imposed hurdles of our status quo.  Kudos to the IATA team for a job well done!

I also saw Team Amadeus blow everyone else away. Their team of eight, which I have no doubt was comprised of seasoned developers, put on a show and it was a very cool concept and app. They clearly worked hard and it looked like they had fun. But, I have to admit that I was surprised to see Amadeus participating in an IATA NDC API hackathon.

The idea behind a hackathon is to recruit fresh talent, encourage industry innovation by a new generation of developers creating new apps in an unreasonably short timeframe, and of course, there is always great prize money and other incentives for the winner.

What surprised me about Amadeus (or any other well-established company for that matter) competing in this event is that they are already the 800 pound gorilla in the industry. In my eyes, hackathons are about finding those needle-in-the-haystack innovators – the ones that fly under the radar and are mostly hidden away from the rest of an industry, yet have some brilliant ideas that everyone should know about. It was kind of like Google participating in a hackathon on consumer search and then winning the competition with their Google developer team.

Look, I am not trying to take away anything from the Amadeus folks that worked so hard through the night. They did a great job. I am simply saying that IATA, through this outstanding NDC API hackathon initiative, is attempting to stimulate innovation and competition in our generally otherwise stagnant industry that long ago abandoned the stewardship role and encouragement of new entrants. Ours is an industry in need of fresh and innovative new ideas, and I don’t see how a $6,000 prize pack and product incubation period being awarded to Amadeus is going to encourage the next generation of travel industry developers to participate in future events, especially if there is absolutely no chance they can ever win against the 800lb gorilla’s “A” Team.

As we have never been a company to point out a problem without offering a solution, Farelogix plans to donate $5,000 to IATA to either award to a new co-winner or apply it to the next NDC API Hackathon.

Looking forward to the next IATA NDC API Hackathon.

 

*Hackathon first place prize money was $5,000, which was awarded by IATA, and a $1,000 Amazon gift card from SITA.

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Although the year is almost over, it is never too late to develop, modify or enhance the merchandising strategy for your airline. Farelogix’s final master class of 2016 boasts an impressive line up of speakers who will share strategies and tools to help airlines differentiate their brands, delight their customers, and grow revenue and loyalty.

Attending the NDC in Action: Best Practices in Airline Merchandising & Digital Commerce Master Class will help you create more revenue and happy customers.

At this event, we will tackle the full, end-to-end process of merchandising and personalization, including how to differentiate your product and brand, creating and optimizing the best offer, leveraging NDC, and understanding what technologies can help your airline stand apart while increasing revenue per passenger.

Attendees will:

  • Hear from industry thought-leaders Henry Harteveldt (founder of Atmosphere Research Group) and Jim Davidson (CEO of Farelogix).
  • Learn how leading airlines, United and Air Canada, have successfully designed and deployed omni-channel merchandising.
  • Experience hands-on technology demonstrations from industry leading companies Switchfly and Routehappy.

Space is limited and time is running out, so register now.

Also, please be sure to attend Airline Information’s Loyalty, Ancillary Revenue & Travel Co-Brand Cards – 7th Mega Event. This conference will bring together industry stakeholders responsible for ancillary revenue generation to discuss the latest trends, best practices, actionable strategies, and insights.

If you would like to set up a personalized meeting in Toronto, please contact us via email at merchandising@farelogix.com

We look forward to seeing you in Toronto.

 

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“The Offer” is now the airline’s biggest asset.

Sound silly? Hard to believe? I mean come on… airline’s biggest asset…it must be the people, right? Or the fleet of new airplanes? Or maybe those fancy remodeled lounges…. Oh wait, no, the biggest asset must be that new seating configuration or the stand-up bar in the back of the plane. Right? Wrong. All of those things are important…but they are not the airline’s biggest asset when it comes to competitive advantage and earning More Revenue and Happy Customers.

No, the airline’s biggest asset is, without a doubt, the offer it makes to potential customers literally millions of times per day through its various sales channels. Because at the end of the day, if potential customers don’t turn into real live customers, all those other “hard” assets mentioned above become extremely burdensome for any airline. The airline’s ability to monetize those assets essentially comes down to the offer it makes to its potential customers via its web site, call center, mobile app, corporate booking tool, or travel agency, including OTAs and meta search.

Yet, most airlines today put the creation of their offer – and control of their biggest asset – in the hands of strangers! Bizarre, isn’t it? OK, maybe 3rd parties like the PSS and GDS are not strangers, but it’s safe to say the offer is not their biggest asset…and that those companies cannot possibly understand what is the best offer creation methodology for you, the airline. Worse yet, some of these 3rd parties may not even have your best interests at heart when it comes to what drives their business model.

So, what to do if you are an airline seeking to take greater care of, and invest in, your biggest asset? First off, Ask the Question. Then take action! By action, I mean grab back control of your ability to Create, Control, and Deliver your offer to your sales channels – using technology that is fully scalable and under YOUR control. In other words, become the “Single Source of Truth” and don’t look back!

 More on how to do that coming up.

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I recently attended T2RL’s New Generation of Airline PSS conference held in London. The audience included several of the world’s top airlines as well as a slew of companies representing the hungry crowd of vendors just waiting to get their bite of this lucrative PSS market.

Observation #1: The PSS market has massive opportunity…

…well not really. In Richard Clarke’s opening remarks, he put up a slide of the top 28 PSS providers. That’s right – twenty-eight technology companies, most of which had representatives in the audience. The problem is that once you get to number 4 on the list, you are pretty much done in terms of real opportunity. If you take TravelSky out (as that market is a bit tied up at the moment), and put Navitaire in its rightful category (under Amadeus) then voila… the list is down to two – Amadeus and Sabre, dominating the world’s PSS provider market share. Yet, bless their hearts, 24 other PSS provider companies are still giving it a go, hoping against all hope that they will land “the big one”!

This Notable Quote is from Cormac Whelan, CEO of Mercator and a man I look up to and probably always will: “The perceived technology challenges facing the PSS are not technical at all. They are commercial. The technology is already here.”

Observation #2: The airlines that attend a New Generation PSS conference are looking for a change…

…well again, not really. When the general audience was asked by a panelist “how many airlines are looking for change to happen in the PSS industry?” I could count the number of airlines raising their hands on one of my hands. Seriously! And of those airline hand raising rabble-rousers, Farelogix already has a commercial relationship with most. Which begs the question, why did we come to this event? Why did those other airlines bother showing up? My advice to those non-hand raising airlines – stay home next year. Save your money; you’ll probably need it to pay your rising PSS bill.

Notable Quotes: “I look at the PSS as I am standing on the bank of a rushing river of money flowing out of the airline to the PSS.” And on what a PSS migration does to an airline: “It constipates them; they can’t do anything for years.” ~ Tim Catling, PSS Program Manager at Cathay Pacific Airlines.

Another Notable Quote: “The people that made the mechanical diggers all sat back and laughed at the people making the hydraulic diggers because they were big and expensive and no one wanted them…until they were no longer big and expensive and everyone wanted a hydraulic digger and no one wanted a mechanical digger.” ~ Tim Hartford, Columnist and Author, Financial Times.

Final observation: The PSS business seems to be a really good model for the PSS companies, well at least two. But what’s in it for the airlines?

There you have it. Maybe I’ll be a reporter in my next life, because sooner or later someone needs to Ask the Question!

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What’s the real story with Amadeus and its Fare Families?

On September 23, 2016, an article was published by Tnooz with the following headline:

“Amadeus admits fare families are not working for all its airlines”

That same day, the headline from the story was changed as follows:

 “Amadeus says fare families work well for some airlines but not all [UPDATED]”

So what is all this about? Why the different headlines? In my book, it’s called editorial influence and it is usually quite rare to update an article with a different title, but we’ll leave that for what it is.

The real story is not the change of headlines, or even that some (or all) of the airlines that invested in the Amadeus merchandising offering are not getting the results they expected. The real story, if you are an airline, is getting a better understanding of the technology tools available so you don’t make costly mistakes that will significantly limit your airline’s future when implementing one of the most revolutionizing aspects in ensuring Happy Customers, and More Revenue.

Is the Amadeus offering a true merchandising engine? Perhaps you should Ask the Question. In my view, it’s actually just a merchandising “program” that airlines sign up for and Amadeus, rather than the airline, sets up and determines how the airlines will participate. If my thinking is correct, then frankly, it’s no surprise that the results can be sub-optimal. Any attempt to utilize existing GDS and PSS systems and industry processes – that were never designed for anything close to airline merchandising – to implement an airline merchandising program is bound to be fraught with difficulties.

From the Farelogix point of view, our FLX Merchandise airline merchandising engine was created from scratch, and designed as a “built-for-purpose” technology solution for airline merchandising. It was created with input from the airlines so that it addressed their particular needs. Our technology solution is designed to be integrated into the airline’s actual technology stack servicing all distribution channels. This is a fundamentally different approach and yields fundamentally different results. Just ask our FLX Merchandise customers*.

We’ll spend some more time in the near future providing more details of the different approaches to building and delivering airline merchandising solutions. And, of course, we will continue to Ask the Question.

 

* Skift published the following headline…and only once:

United Generates More Ancillary Revenue Than Any Other Airline – Brian Sumers, Skift – Sep 21, 2016 6:30 am