5 things you need to know about order management
August 26, 2024
In this Article:
- What are orders?
- Why is order management important?
- What are the financial benefits of order management?
- What does the transition to order management look like?
- How can airlines get started with orders?
What are orders?
In the context of airline retailing, offers refer to the various products and services airlines present to customers. These include flights, seat upgrades, additional baggage allowances, in-flight meals and lounge access – as well as offerings from third parties such as car hire, airport transfers, accommodation and excursions.
Orders are the transactions through which customers purchase the offers presented to them. Once a traveler selects an offer, whether it’s a flight ticket, an upgrade or any other ancillary service, they create an order. This order contains details such as the chosen offer, the price, the customer’s personal information, payment details and any additional preferences or requirements.
Why is order management important?
The core function of an Order Management System is to maintain the integrity of the offer through the order and fulfillment process (i.e. to ensure that everything contained in the offer is accurately transferred to the order and delivered seamlessly to the traveler with a robust audit trail). This becomes particularly important – and more complex – when the offer includes products or services from a third party. But catering to travelers’ end-to-end travel needs while delivering high levels of customer satisfaction is vital if airlines are to increase revenue and combat dwindling profit margins.
Airlines could jeopardize their customer satisfaction, brand reputation and revenue performance by introducing new offerings that they can’t service.
Vanessa Gonzalez
Director | Sabre
Transitioning to offer- and order-based airline retailing will enable airlines to think of the customer journey holistically and embrace greater customer-centricity. Order management supports:
- During booking (where the focus shifts from offer to order) airlines can enable a more streamlined order process, including instantaneous booking and vastly expanded payment options.
- Frictionless retailing does not end once the order is placed. It becomes part of every pre-travel touchpoint, where relevant ancillary offers can be presented at the right time to enrich the customer trip experience while generating incremental revenue for the airline.
- On the day of travel, order-based servicing (with secure real-time data exchange across partners where necessary), can facilitate a convenient, consistent and connected traveler experience.
- The seamless customer journey experience enabled by orders extends post-travel with instantaneous loyalty accrual and automatic trip interruption compensation credits.
It’s not that things are impossible in the legacy world – it’s that the existing systems weren’t designed to respond to the market needs we’re experiencing in today’s digitalized world. The cost of doing nothing is that the status quo prevails, and that means airlines use complex workarounds that add cost and slow innovation.
What are the financial benefits of order management?
Today, the process of selling and servicing travel is too complex. Order management seeks to streamline fulfillment and delivery by simplifying airline reservation, delivery, and accounting systems. By phasing out traditional constructs such as PNRs, e-tickets and EMDs and combining them into a single traveler-focused order, airlines will be able to deliver a more seamless end-to-end travel experience – and in so doing, unlock significant financial opportunity.
There’s a potential benefit of $7 per passenger per year as a result of retailing transformation.
In their business case for airline retailing transformation, IATA validates projections from a 2019 McKinsey report to arrive at a potential benefit of $7 per passenger per year as a result of retailing transformation. It’s a huge opportunity. One that airlines can’t afford to pass up.
Those benefits are comprised of both increased revenue and cost reductions. Of the $7 per passenger incremental value, around 25% ($1.70) is unlocked through order management. A common misconception is that order management is all about cost reduction. The reality is that the value creation from order management is an almost equal split between increased revenue and lower costs.
Order management is essential if airlines are to unlock the full benefits of NDC – specifically when it comes to selling and servicing a wide range of lucrative third-party offerings – and airlines that do not have robust order management could severely limit their ability to service new offerings in the future.
What does the transition to order management look like?
Many airlines are already experimenting with more personalized offers and they are realizing the revenue rewards. It is a popular starting point in the transition towards modern retailing, with clear and easy-to-measure financial benefits.
But they are only scratching the surface.
If airlines aspire to create more complex traveler offers that encompass third-party products and meet the end-to-end travel needs of the customer, seamless servicing with orders becomes critical. A well-crafted order management strategy is therefore critical to airline transformation towards modern retailing.
Sabre’s phased transition path to order management is designed to:
- Deliver value by implementing order capabilities (such as the ability to generate partner interline seat offers)
- Mitigate risk by maintaining full synchronization between the order and the associated reference PNR
- Develop a ‘learning partnership’ as we move into the hybrid world, ensuring all EDIFACT dependencies are addressed before discontinuing use of the PSS
How can airlines get started with orders?
Getting started with orders can be relatively quick and easy, and most importantly it has the potential to add value for your airline from the outset. We’re already working with several airlines looking to progress along the path towards full order management.
A good starting point is to work with your tech provider to identify Minimum Viable Product (MVP) opportunities. This low-risk approach can be an efficient way to deploy a solution with real-world benefits – such as addressing an existing pain point – alongside your existing tech stack. It fits with Sabre’s phased and modular approach to industry transformation, enabling airlines to continue using existing systems while adopting new solutions as part of the transition to offer and order management.
