February 13, 2017

New technological era in distribution: so what does it take for an airline to win the next round?

In this thought piece, Faical Allou - Head of Business Development for Aviation Analytics - talks about how technology could and should be influencing airline planning. 

 Faical Allou

The way people purchase their tickets drives how managers run airlines. Being on top of the search results or "The first page" is paramount to make the sell.

Since the mid 20th century, GDS searches have been made airport to airport (or grouping of airports as citycodes) and the "neutral" display ranks the non-stop options first and the rest by total travel duration. To be visible airlines built hubs (to offer as many airport to airport combinations) and reduced connecting time to appear on the first page. In that world, airline management was fairly simple, network planning was independent from price and revenue management rules could segment travelers.

Since the mid 90s, in the “sorted by price” online world, airlines have taken longer to adapt. After spectating the rise of LCC for years, most airlines have made drastic cuts on the service level to reduce cost and offer the lowest price possible that can rank higher in the first page results. Yet today, some 20 years after the first online bookings, airline planning departments (network and revenue management) still operate on data and algorithms from the previous era. Most network management tooling and methodologies decouple the size of the market from the price, and assume people live inside airports. On the revenue management side, processes are still based on rigid booking classes and discrete price points.

We are reaching the end of the "sorted-by-price" era as we are witnessing a new generation of distribution: messaging and voice, which are fundamentally different ways to purchase:

  • While the amount of information available increased in recent years, screen sizes decreased (... will eventually disappear) and only a very limited number of options can be presented.
  • The sorting of results will come as a recommendation based on an aggregation of Schedule, Price and Service that users will eventually follow.

Airline planners still rely on decades old (...outdated) methodologies, data and tools which will be even less relevant in the new world.

So the big questions that will define the next era are:

  • Who will be on the first page?
  • Will a new type of airline emerge and thrive by being the top recommendation?
  • How long will it take incumbent to adapt their planning processes?

Take a look at the presentation below for a more in-depth analysis of the challenges and opportunities of getting to that all important first page position, and how having the correct data tooling will help airlines win.

How technology influences airline planning from Faical Allou.

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