airlines.iata.org
Issue 02: Wednesday 24 October 2018
Airlines.
Airline Industry Retailing Symposium
SPONSORED BY
October 23 - October 25, 2018 | Rome, Italy
Conversing with customers
ISSUE 01
Alitalia is experiencing a successful 2018 with both passenger numbers and revenue growing for the first time in seven years. An important factor in the airline’s turnaround is digital transformation, said Fabio Lazzerini, Alitalia’s Chief Business Officer (CBO) in his keynote speech yesterday. He described digitization as the fourth industrial revolution. And underpinning the concept is the realization that passengers have become customers. This means that providing each and every customer with relevant offers is just as important as the overall distribution strategy. For Alitalia, their digital transformation is based on three main pillars: digital marketing, e-commerce, and the customer experience. Digital marketing uses data to drive toward segments of one rather than blunt categorization. “We can now have conversations with customers,” said Lazzerini. Alitalia’s efforts in this field have performed so well that 41% of targeted email campaigns are converted into bookings even though those emails do not mention the price. Simply by producing relevant offers that provide value to that customer, the airline has grown its revenues. E-commerce, meanwhile, involves shifting the channels customers use to buy. Alitalia has changed the way it constructs its website and has seen digital revenue rise accordingly. Ancillary revenues in particular are growing strongly—up 21.9% this year—and have made a significant difference to the carrier’s bottom line. The new normal in terms of the customer experience is personalization and a
Day 01 highlights
Fabio Lazzerini
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Aleks Popovich
digital journey. This extends to the entire end-toend journey. Alitalia have managed to boost their online check-in rates to 50%, for example. This creates a cycle that starts with customer convenience and moves through operational efficiency to create a smoother travel process across the aviation value chain. “Online check-in is one of the ingredients in Alitalia being one of the most punctual airlines in Europe,” explained Lazzerini. Alitalia’s CBO emphasized that digitization is an ongoing process. Two years ago, some 92% of teenagers used Facebook once a month, he said. Now, that figure has dropped to just 19%. In other words, the pace of change can even overtake the supposed innovators. This is the brave new world of digitization that airlines must confront.
“Online check-in is one of the ingredients in Alitalia being one of the most punctual airlines in Europe.” Fabio Lazzerini, Alitalia, Chief Business Officer
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PLATFORM
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Wednesday 24 October 2018: Issue 02
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ATFORM
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Issue 02: Wednesday 24 October 2018
85%
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of American’s customers only travel once a year, yet they provide 55% of revenue.
Partnering for personalization In fireside chats with three leading airline distribution experts, it was agreed that becoming better retailers is essential to a stronger financial performance. Xavier Lagardere, Group Head of Distribution, Lufthansa Group, noted that IATA’s New Distribution Capability (NDC) has been underpinning the Group’s retail efforts. “It means the depth and transparency of retailing achieved in direct channels reaches to indirect channels,” he said. NDC has helped the Lufthansa Group in such areas as continuous pricing. Like most other airlines, Lufthansa once had about five steps in its pricing strategy— starting cheaper and becoming progressively more expensive as the flight date drew closer. But Lagardere said this blunt pricing method limited customer and partner access to the product as the step change meant many potential customers weren’t given the value for
which they were looking. Now, thanks to NDC and retailing facilitating data exchange, offers can be made all along the value curve. It is win-win-win as customers get a cheaper price, partners can construct better offers, and the airline has improved revenue management. The panel—moderated by the BBC’s Tanya Beckett—noted that partnerships were at the core of these personalization efforts. Customers must be able to book the way they wish, be it direct or other. Alison Taylor, SVP, Global Sales and Distribution, American Airlines, revealed that while 85% of American’s customers only travel once a year, they provide 55% of revenue. The top 15% may contribute 45% of revenue but clearly “appealing to all our diverse customer base is vitally important.” American is partnering with Alexa. By 2020, voice search will account for 50% of all searches, making the deal indispensable. Campbell Wilson, SVP Sales and Marketing, Singapore Airlines, explained
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that the best way for customers to understand the multitude of products and services on offer is by partnering across the board. Partners can help with innovation and the speed of implementation, major challenges for many airlines. Another obstacle is introducing the necessary scale to any concept. Here, artificial intelligence (AI) will be transformative as only technology will be able to work through the data and boil it down to personalized offers. “The concept of personalization as we are envisaging it cannot be achieved without AI,” Wilson confirmed. The panel concurred that developing technology to differentiate is essential, otherwise airline seats will remain a commodity. But that doesn’t mean conversations dictated by algorithms. Instead, technology must enable a human response, as Wilson concluded: “Every interaction has to be personal.”
Wednesday 24 October 2018: Issue 02
Day 1 at AIR Symposium
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Issue 02: Wednesday 24 October 2018
“There’s an incredible universality in flight shopping. We all care about very similar things—we want value for money, we want to be comfortable, we want to be treated well.” Robert Albert, Routehappy by ATPCO
A view from the leisure side
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Leisure travel is driven both by consumer behavior and socio-political changes that make new markets more attractive. That was the consensus of the View from the Leisure Side panel, moderated by Henry Harteveldt. The panel also agreed that the attributes of leisure flight shopping don’t necessarily vary by age group. “There’s an incredible universality in flight shopping. We all care about very similar things—we want value for money, we want to be comfortable, we want to be treated well,” said Robert Albert from Routehappy by ATPCO. “People want to have the right experience, they want things to be easy, they want to have transparency,” agreed Paul Butcher of Expedia. Kevin Wang of Google cited a structural change with the development of smartphones, particularly in the developing world, where often a user’s first access to the internet was via mobile. “The mobile totally changed user behavior and user
expectations. We see mobile users are much more curious about travel destinations and they are also very demanding. They want to see tailored content [and] they want the answer right away.” While Wang believes that people will migrate to using personal assistants such as Alexa or Google Home for flight shopping, others expressed skepticism about how much voice can be integrated into flight shopping. “It’s hard to see the seat pitch or what a seat looks like [using voice],” said one panelist. The panel also agreed that payment can be a competitive tool in the leisure travel market, and is highly important in parts of the world where users lack access to, or are not comfortable using, credit cards.
From legacy to excellence SPONSORED BY
In 2010, when IATA and the entire airline industry moved to electronic tickets and removed all paper ticketing from the process, it was a move in the right direction. However, the industry still maintained all the business processes, and the limitations of paper, as if the paper tickets were still there. Resolution 787 was a statement by the industry in one unified voice that recognized change was needed. NDC
has a positive effect on the customer. It allows an airline to offer a completely customized travel experience as its customers today expect and deserve to be treated as individuals throughout the entire travel experience, from sale to flight, from door to door, which just is not possible with the required processes of the legacy systems. By simplifying the business processes needed to serve the customer, NDC airlines can become more efficient and automated, which not only reduces
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overall costs but make their passengers happy. JR Technologies has worked at industry level with IATA to address these distribution- and delivery-related issues. We have developed industrialgrade solutions to address the need for micro-segmentation and personalization, agility in product design, speed to market, and payment solutions. If you are looking for a company that can take you from legacy to excellence, JR Technologies is the partner of choice.
Wednesday 24 October 2018: Issue 02
The transition to dynamic offers
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The revenue booking designator (RBD)—used to identify a fare level or booking class—has been vital to airline revenue management. Airlines have found it a useful parameter for managing both revenue and capacity. But a panel on the subject found that the RBD may have outlived its usefulness. Replacing the RBD with dynamic offer creation generates huge opportunities for innovation, and benefits customers and airlines alike. The perfect offer is now contextualized and priced dynamically. One element in this transition is dynamically pricing the seat. Continuous pricing, as opposed to block changes, will allow airlines to properly interact with customers and sales partners, providing both with greater value. Another element is dynamically pricing ancillaries. This is an idea still very much in its infancy in aviation. Fortunately, as airlines finally exit interlinked legacy systems and into open architecture it should become
possible to leverage the pricing practices of retail giants that have mastered the art of ancillary sales. This also makes possible a third transitional element in dynamic offer creation, which is product bundling. The panel agreed that airlines still have much to learn in this regard too, and must personalize bundling to meet each customer’s needs. “These elements are not necessarily sequential,” said Surain Adyanthaya, Senior Vice President, PROS. “You might be able to partially introduce each element at the same time.” Although Christian Popp, Head of Distribution and Revenue Management Strategy and Business Analytics, Lufthansa Group, said the transition to dynamic offer creation would be “severe” for an airline, he believed the work would prove worthwhile. “The target is real-time interaction, because you can’t just pull something off the shelf in the hope it will be purchased,” concluded Popp.
“The target is real-time interaction, because you can’t pull something off the shelf in the hope it will be purchased.” Christian Popp, Lufthansa Group, Head of Distribution and Revenue Management Strategy and Business Analytics
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Issue 02: Wednesday 24 October 2018
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