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Airline Executives - Take Control Soon or Risk Losing It (Again)

It’s an understatement to say that we are living Moore’s law in terms of the pace of technological change. The adoption of smart, wearable technology, and voice-controlled systems — and the fact we can do nearly everything we need to do on our phones — was not part of our reality just a few years ago. To keep pace, retailers of all types are challenged to engage with their customers using the latest technologies and methods. Airlines are no exception, and the pressure has never been greater for airlines to up their game.

Airline executives realize that they must find ways to engage with travelers at any point in the trip process, and make it easy for travelers to shop or be presented with offers anywhere, and at the right time. “Show me you know me” is the name of the game, and if the airline doesn’t figure out how to be a “single source of truth”, they will lose the customer relationship. (And by the way, there is a long line of entities willing to take over that relationship if the airline doesn’t claim it – more on this later).

For many airlines, shifting to the world of dynamic retailing is exceptionally difficult. Why? Because it means they have to take control of their offer – something most airlines have never done. And yet with Moore’s law in play, there is a need to do it now or risk losing out for years to come.

Here’s some good news: recently there has been an increasing amount of practical discussion about airlines taking control. Airlines are responding by examining available options to take control of their offers, distribution channels, distribution costs, and brand. As an example, Farelogix hosted a “Control Your Offer” event in April that was attended by airline executives from around the world, spanning Revenue Management, IT, Ecommerce, and Distribution - http://farelogixoffersymposium2017.com/. This demonstrates that this next wave of change is big, and involves the full range of airline stakeholders.

There is growing recognition that effective airline control means not only “single source of truth” API’s (NDC), but also airlines taking control of their own merchandising, pricing, and inventory (availability). Yes, I said it. Airlines must have control over their own pricing and availability for all channels. When you think about it for a few minutes, it’s these ingredients that command the respect of distribution companies from any sector around the world. Yet for reasons steeped in history (“it’s always been this way”), or performance (response times), or cost (excessive scan fees, MIPS charges, and look-to-book fees), or simple convenience (easier for someone else to worry about it), many airlines freely give away control to third party distributors, GDSs, Metas, OTAs, PSSs, whereby these entities “re-manufacture” the airline’s pricing and inventory in ways that they (not the airline) see fit. For decades, airlines have essentially given away control over their brand and product. And this is precisely what has to change if airlines want to succeed in the world of dynamic retailing.

Here’s more good news: Believe it or not, airlines today can easily retain or regain control by simply in-sourcing and controlling pricing and inventory, and requiring any and all distribution partners come to the airline for this information. Now I say easy and simple, two words that seldom get tossed around our industry. But, a few things have changed that make airline control as defined above a reality.

First, there is real competition in airline pricing and availability providers. The GDS/PSS and ITA/Google are no longer the only games in town. Farelogix, for one, has made a significant investment in developing a highly scalable, performant, and cost effective airline pricing engine (FLX Shop & Price) and real-time availability engine (FLX Availability Calculator) capable of serving the “single source of truth” requirement for airline pricing and availability, and interoperability with our merchandising engine (FLX Merchandise). I’m sure others are also innovating in these areas as choices grow for airlines that are ready to take control.

Second, the cost of computing power has drastically reduced, and this enables airlines to up-end decades of legacy IT models. For example, the new Farelogix pricing and availability engines run on commodity hardware and can be easily managed, configured, and even hosted (cloud or physical) by any airline, accessible by any distribution partner, and with better response time than any cache or incumbent solution can offer. This eliminates the need to have expensive legacy PSS-based community pricing and availability systems, and makes the words “scan charges” or “look-to-book” sound about as relevant as “hey bring over your VCR and we can watch a movie”.

With technology no longer the barrier, the biggest challenge for airline executives now is to move quickly before someone else takes the opportunity away. We know that incumbent PSS/GDS providers will certainly do their best to contractually delay the inevitable shift to airline-controlled engines, and airlines need to address this. But it’s not just the PSS/GDS vying for airline control; I attended a recent CAPA conference in Dublin where Bobby Healy, CTO of Car Trawler, made an impassioned presentation about airlines losing control over their customers to the world’s most powerful search engine. He also has elaborated on this in writing, and I encourage you to have a read: https://www.tnooz.com/article/google-enemy-airline-distribution/.

The clock is ticking. If airlines don’t find a way to regain control over their offers, there is a line of entities ready to take it from them.

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