The Aviation Festival in London is proving itself to be one of the top aviation events in the world. The Festival takes place in the first week of September each year, and the 2017 event was at least 20% bigger than 2016, which was in turn much bigger than previous years. Each stream is packed, whether it is wide-ranging conversations with aviation CEOs or a presentation on more esoteric topics such as Blockchain.
We at OpenJaw found that there were a set of common themes, indeed, common challenges that came through at the Aviation Festival, and we thought it appropriate to share these insights. Our stated mission at OpenJaw is to ‘open the world of travel’, as part of our goal of ‘turning travel companies into travel retailers’, so we hope you can use these insights when putting together your 2018 business plans over the coming months, and help continue the conversations started at the Aviation Festival.
Challenge #1 – The rise of mobile, social media and the always-on consumer
The travel experience has expanded and is now multi-layered, multi-screen and fragmented. A recurring theme across all speakers was the inexorable rise of mobile, social media and the always-on consumer has resulted in two contrasting outcomes:
- Travel customers are elevating their expectations, whilst travel brands face the threat of commoditisation
- The multi-screen means that the customer journey is totally fragmented
All speakers at the Festival spoke about how mobile has grown so fast that it is used by everybody from your mother to the CEO. Mobile means that every aspect of the customer journey has changed: the fact that ‘everyone is a fingertip away’ means that there is a real opportunity to tackle this by having the customer at the centre of the airline. Mobile, social and digital enables airlines to:
- Create customer experiences that engage both the traveller and the employee
- Drive more personalised interactions
- Rapidly improve customer service scores
The challenge of connecting with what multiple speakers called the ‘digitally distracted consumer’ means that the traveller has less time to engage with airlines. The challenge is to ‘combat digital deafness’ – a great phrase that summarised the dilemma facing all travel businesses.
Challenge #2 – Digital Transformation and ‘Big Data’
Some of the best quotes on digital – and of the conference in general – came from Tim Clark, President of Emirates: ‘every organisation is going through a digital transformation whether they know it or not’. Mr. Clark proved not just quotable, but created a real map of the future for airlines:
‘Emirates has to move, and move at least at the pace of our competitors. We have put data and technology at the centre of the business. There is no compromise on the spend on technology and digital. Data is key – if you don’t embrace data, you will perish. New platforms in which our future processes are going to sit will be fundamental to our future, so deconstructing and reconstructing the firm in the digital environment is what we must do. The way we go about assembling the resources, and how you use back of house systems, are going to be completely transformed by digital’.
‘Current airlines‘ IT systems are looking a bit Jurassic to be honest’, said Mr. Clark, tying in with the sentiments of JetBlue CIO Eash Sundaram, who said: ‘Airlines hide behind the complexity of partners, and not on taking care of customers’.
This year, the real applications and use cases for Big Data in travel finally came to the fore. There were distinctions made about the three different types of data in an airline:
- Customer data
- Product data
- Operational data
However, as was pointed out by all, data itself doesn’t have any value, it’s what you do with it that matters. Having clean data – data that is accurate, collated, quantitatively measurable, and easily analysed – is half the battle.
Challenge #3 – Navigating the travel tech landscape
Fintech, martech, adtech, healthtech and now traveltech are all exhibiting the exact same pattern: an explosion of small, agile tech-driven businesses targeting airlines with all sorts of products and services.
All the talk about channels, data, predictive analytics, machine learning and AI is creating a confusing vendor landscape. Is this a good thing? The view was unanimously positive: these agile, nimble competitors are good, as Tim Clark said: ‘technology is the bedrock of being able to do a lot more for customers’.
The problem for airlines is to understand how these different pieces of technology stick together. All airline speakers openly admitted that the pace at which disruption is happening means ‘we can’t do it all ourselves’. Instead of being reliant totally on internal resources, airlines are radically changing their mindset about external vendors and partnerships.
Tim Clark took a slightly contrarian view on where to start: ‘Many businesses are going after customer facing innovation because that is the low hanging fruit and possibly delivers the value a lot quicker. In our view, deconstructing the company IT systems and reconstructing the digital platforms in which the new processes will sit is fundamentally different, and that is where to start. Back of house will lead us to do a better job for the consumer-facing front of house, where we know there are many external software houses and start-ups who can help us’.
There was one serious challenge that was pointed out by many of the aforementioned agile, nimble competitors: the business models and start-up culture are radically different to the control culture of airlines. Start-ups have a fail-early, fail-fast approach, whereas operationally driven businesses like airlines cannot have a failure culture. The melding of these two opposite cultures is bound to create an interesting dynamic over the next few years.Updated for 2020:
Challenge #4 – ‘They have not gone away, you know’
Notwithstanding all the excitement about digital transformation, there was an air of realism amidst the talk: many airlines are reliant on travel agencies and global distributions systems to get their products in front of their customer.
For instance, Gulf Air pointed out that they and other airlines in the Middle-East region are 80% distributed through agencies. Although these regions have a young population, the simple fact that many do not have credit cards means distribution systems are fragmented.
NDC got a lot of airtime across the 3 days, and it is now front and centre for airlines who wish to merchandise their products and content across all channels. There was a clear recognition that NDC will enable airlines to transform the way air products are retailed. Perhaps it is time for NDC to get the same billing as more ‘buzzworthy’ topics such as digital transformation, given that NDC initiatives have the capability to drive revenue sooner than many digital transformation initiatives can.
Challenge #5 – Conversational commerce goes mainstream
Chatbots are going past the proof of concept stage into production and real actual usage, with hotels leading the charge in the travel industry. The best definition we heard at the conference was that:
‘Chatbots take the intent of the customer, understand the intent through Artificial Intelligence, and point the customer in the right direction’.
One very interesting point made was that conversational interfaces can be seen as ‘retailing touchpoints’, because they reflect the way that people live and act. One eye-catching quote from technology consultants, Gartner, was that ‘by 2020 most people will be talking to bots rather than their spouse’!
So where are airlines with chatbots? The starting point for chatbots is to see development as an iterative process just to figure out where they can add value to the traveller, and in particular, reduce call centre costs. KLM are definitely the most advanced, with IcelandAir just starting out, trying to learn how to communicate with the customer and what works content wise.
Chatbots are a new tech and so a learning curve is required. Indeed, there are two very interesting issues that airlines need to think about: ‘empathy v speed’, as KLM called it. For example, if there is a problem with flights, customers want an immediate answer and are ok with lack of empathy. Chatbots typically know before a call centre that there is a problem or disruption, due to their connection with the back end systems, so a fast, fact-based reply is needed, stripping out niceties.
However, if there is a big emotional impact or empathy requirement, then the customer is better talking to an agent. With KLM, the Call Centre agents see all push notifications on their screen, so they can work out the right answer and the right tone.
The current use cases of chatbots are many and varied. Here are five we could uncover:
- Customer Service
- Ancillary Upsell and Cross Sell
- Servicing Customer Bookings (e.g. MMB)
You can narrow these themes to ‘cost reduction’ and ‘revenue increase’. By driving customers with simpler requests to a chatbot, airlines can reduce costs, and get the opportunity to upsell customers with air ancillaries and cross-sell. Indeed, the option to sell in-path is the real upside, as it offers another channel for airlines to reach customers outside of the traditional eCommerce channel.
Challenge #6 – Technology as a driver of ‘simplicity as a strategy’
JetBlue, Qantas and SAS have a view on their strategy: keep it simple.
Eash Sundaram, CIO, JetBlue credited technology for helping the airline deliver on their brand promise of simplified customer experience, and using it to create loyalty, rather than relying on frequent flyer programmes. ‘If you simplify the flying experience, you can build more loyalty than just throwing in points or miles, and all of those things. We firmly believe that simplicity is what will keep us in business and make our customers happy’.
Simplifying travel through innovation goes deeper into day-to-day operations for JetBlue: reduction of the ‘F’ word – ‘friction’ – for customers and crew – means that they can deliver a great customer experience with a great crew member experience.
Gareth Evans, CEO of Qantas International says technology has helped the airline make more of what is already a highly successful loyalty programme, building more customer-centricity around lifestyle and identity. The scale of the programme is what was impressive – more than half of the Australian population are members, and they are expecting 7-10% growth per annum. Mr. Evans’ best quote was: ‘we cannot make the beds any flatter’.
Like JetBlue, SAS has been focussed on simplifying the travel experience to build loyalty. They have their own version of JetBlue Labs, SAS Lab, to make customer travel more frictionless, using iPads to deliver personalised services.
Finnair has been won over to the idea of customer centricity, using the theme of simplicity in travel and combining this with new branding through applying technology to target a higher percentage of the wider travel ecosystem.
Challenge #7 – Airlines should be taking a much bigger share of the travel ecosystem
One of the starkest truths that struck home was that airlines bring a lot of passengers, and a lot of revenue into the travel ecosystem, but are not getting their fair share of the total margin and total revenue available.
What percentage is going to airlines and what is going to the ecosystem? One estimate was that 30% is going to airlines with the rest of the money going to the ecosystem such as hotels, transfers, ground transportation and events. Even worse than this, the airlines have the data on what the passenger is looking for, where they are going and why they are going but still the average airline margin remains at 6-7%. The resources and the repertoire is there, but not the appetite.
Consider the OTAs and other ‘gatekeepers’ of travel: Expedia, Kayak, CTRIP, for example. Equally, the big technology brands such as Google and Facebook play a bigger role in the travel industry, not as travel providers, but as tollbooths and curators to lead consumers towards making the travel booking.
Both the OTAs and Google/Facebook monetise this slice of the travel pie and are making it very profitable for themselves.
The question remains, what should the airlines do?
- Airlines becoming a platform: the view was that only airlines with large passenger numbers, deep pockets and the appetite (for example, Ryanair or EasyJet) can choose a strategy of being a travel platform with an airline attached.
- Airlines embracing retailing properly: the clear message coming through all the talks was that the opportunity still remains for airlines to up their game on retailing. Airlines are really only starting out on their journey to true retailing. The starting point is still to think about ancillaries: air/non-air offer, fulfilment and merchandising.
As I have written before, the primary need of an airline customer is organising a trip, not buying a flight. Savvy airlines are beginning to sell a full spectrum of offers related to the trip and by doing so, they provide convenience and value that ultimately enhances the customers’ travel experience.
The overriding themes at the Festival were about digital transformation, customer centricity and technology. Indeed, you could really feel for the first time that airlines have finally recognised the impact that digital and technology will have on every aspect of the airline, including:
- Airline strategy
- Product offering
- Customer interactions
- Organisation structure
- Partnership and platforms
At OpenJaw, we believe that the concept of ‘retailing’ is fuelling a revolution in how travel is purchased, and the Aviation Festival reinforced that view. However, it is clear that retailing in the airline business is still at the beginning. The role of digital transformation, technology and tools are the underpinnings of travel retail, and will speed up the adoption of retailing as the dominant mindset in aviation.
If you wish to transform your travel business through retailing, OpenJaw can help face these fundamental challenges head-on. We have exceptional domain expertise built up through hands-on experience working with some of the world’s greatest travel brands on travel retail, travel distribution, travel technology and business process design. The OpenJaw t-Retail Platform processes $2bn of transactions a year; OpenJaw t-Social is the only IBM Watson powered AI conversation commerce platform for travel; OpenJaw t-Data is the only Big Data platform built purely for airlines, and OpenJaw t-Marketing is the acquisition, conversion & retention framework that is custom-made for travel retailers.Updated for 2020: