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

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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!

 

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…And we’re off!

A new year, a renewed focus on our products, our services, and our customers.

Plus, an invitation will be forthcoming to our airlines prospects and others on our radar to join us this year for a spring event.

Farelogix is ready for 2017.

Our mission is clear: To deliver the best, most innovative and efficient airline distribution engines to airlines taking control of their offer.

Our products are ready!

And our team is stronger, smarter, and more talented than ever.

We Are Farelogix!

 

 

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Yesterday in New York City, an 11-person jury determined that Sabre, through certain provisions in the Sabre/USAir contract, violated U.S. antitrust law and found those provisions harmed competition. The jury awarded USAir/AA a little over $5 million, which will be trebled to $15 million due to the case being an antitrust case, plus attorney’s fees. However, the money was never the real issue in this case.

The real issue was the jury 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.

The impact of this decision should make it much easier for airlines to offer competitive content, generate more competition among GDSs and pave the way for much needed competition and innovation in the airline distribution market.

Farelogix applauds the jury’s finding and looks forward to a more open, transparent and innovative distribution market.

Happy Holidays!

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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.

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.

toronto-symposium

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.