It’s amazing how, over the years, so many people have said to me, “Jim, you really need to get some professional help.” I never really understood what they meant by that, but maybe someday I will.
This got me thinking about another situation where the need for quality professional help is evident. Just consider the plight of the world’s airlines as they struggle to make major and agonizing decisions regarding their PSS.
Should the airline change PSS providers? Renegotiate certain contract provisions? What can be changed, exactly, to ensure that airline innovation is not stifled moving forward?
Keep in mind, the PSS market is still dominated by just a few powerful players that impose contracts lasting 10 or more years. 10 years! During those long years together, the airline-PSS relationship can often be characterized by performance problems, rising search costs, and painfully slow delivery of new capabilities. Oh, and don’t forget the one-size-fits-all community model, which these days is a setup for disastrous results when you look at today’s requirement for airlines to create, control, and deliver their offers in real time.
So what can airline execs do today to protect their products, brand, and innovation over the next decade? Well, for starters, it might make sense to get some professional help before signing that new PSS contract. There are many areas that deserve a deep dive, but just to suggest a few:
PNR Data Control. Nowadays, airlines need to delve into the minutiae when it comes to PSS contract terms around who controls the data. That’s because it is key for the airline to have unimpeded access to PNR data to be able to market products, services, and ancillaries to the consumer throughout the travel journey. As an example, look at what Delta just did. Wow! Happy Customers and More Revenue! (Hmm, Delta has control over its PSS…there’s some food for thought.)
Access to Third Party Products/Services/Engines. Airlines seeking to control strategic elements of their offer – Availability, Schedules, Pricing, Merchandising – are striving to bring these capabilities under their control. As dynamic retail evolves, these critical elements will need to operate outside of the PSS, yet interoperate within it. Will that new PSS contract allow it? And at what cost? What might be heresy to some is the path to dynamic pricing and offer control for many others.
Dealing with Fail Cycles and Penalties. And, of course, there is the problem of how to deal with PSS product delivery and fail cycle management and penalties. Service level requirements are increasingly more critical as airline outages appear more common than ever; as is the ability to renegotiate financial terms as things like the cost of computing power continues to fall. Does that new contract give you the ability to renegotiate fees (up or down) every few years based on scorecard performance and product delivery?
Airlines use traditional RFP processes, driven by procurement for a new PSS selection. I admit I find this interesting when, in general, it’s a two-horse race. But RFP or not, what’s essential is that airlines get smarter before agreeing to contract terms that may at first glance sound innocent enough but in reality prevent any technological progress throughout the term of the agreement. An up-front price reduction that seems like a win for the airline on the date of signature is often-times a long-term losing proposition if key non-price contractual terms are not thoroughly negotiated.
Airlines making PSS decisions today are not just making a decision about the cost of services provided; they are also making future revenue generation, brand protection, customer engagement, and loyalty decisions for the next 10 years. They are also competing with airlines who are in fact getting smarter on these same topics today and ensuring their path to controlling their offer.
It’s probably not a bad idea to get some Professional Help.