The airline industry is at an inflection point. Traveler needs and expectations have evolved. There’s a need to adapt; to identify smarter ways of working and increase profitability.
The industry has its eyes on a more traveler-centric retailing model enabled by offers and orders. But to achieve its vision, the airline industry must undergo extensive transformation.
The opportunity presented by industry transformation is well-trailed and significant – $7 per passenger additional revenue by 2030. So the question is: What can airlines do today to prepare, and maximize their chances of success?
Here are eight considerations for airlines looking to set themselves up for retailing success, split into categories spanning strategy, technology and organization.
Distribute personalized offers across direct and indirect channels
NDC is opening up the capability for airlines to create and distribute enhanced travel offers that incorporate more elements of a trip and ensure travelers can more easily find what they’re looking for. These enhanced offers could include upgrades, flight ancillaries, exclusive fares and promotions, limited time offers and travel packages with both air and non-air components (from third party vendors).
NDC is a critical piece of the modern retailing puzzle, and at Sabre we’re working with our airline and agency partners to bring this new content to market, enhancing the travel shopping experience for consumers and optimizing revenue opportunities for airlines.
2. Dynamic pricing
Sell products and services at any price point
Dynamic pricing is a departure from traditional, static filed fares and instead provides the flexibility to charge any price at any point in time. It can help airlines provide intelligent, tailored offers to different customer segments, taking account of both internal and external variables (e.g. the airline’s revenue management controls and data signals on the current competitive marketplace).
It enables airlines to maximize revenue performance and also benefits travelers because they gain access to new price points that were previously unsupported. The traveler experience is further enhanced because dynamic pricing means airlines can avoid surprising travelers with large price increases as fare classes sell out.
3. ONE Order
Seamlessly fulfill traveler requirements
Complexity is the root cause of many of the struggles faced by airlines in trying to sell and service consistently throughout the travel experience. That complexity manifests in various ways including multiple reference numbers for different trip elements, slower customer service as a result of different systems and processes for each trip element, and constraints when making changes to an itinerary.
Order management with ONE Order seeks to streamline fulfilment and delivery: eliminating complexity by simplifying airline reservation, delivery, and accounting systems. By phasing out 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.
4. Open, modular platform
The flexibility to meet evolving customer needs
The flexibility to evolve and adapt is critical to long-term success, and to do this, airlines must be in control of their tech platform, it must be an open ecosystem and it should be modular.
The concept of ‘openness’ – of airlines being able to select and combine modules developed in-house, built by Sabre or procured from third parties to create a customized solution – promotes innovation across the industry and aligns with the needs of travelers while opening new revenue opportunities for airlines.
It goes hand-in-hand with modularity and lies at the heart of Sabre’s next-gen solutions. Modularity ensures components can be selected and assembled in various combinations to satisfy specific business requirements. It also facilitates easier and more cost-effective integration, enhances operational efficiency and minimizes downtime.
Keep pace with demand to maximize conversion opportunities
The airline industry should expect significantly higher volumes of air travel shopping requests and for those requests to require vastly more complex responses. The solution: cloud infrastructure. Creating compelling NDC-enabled offers is crucial for success, but it’s equally important that airlines present those offers quickly to travelers.
One of the many benefits of Sabre’s strategic partnership with Google is that Google’s global network (part of the Google Cloud Platform) boasts the highest throughput available from any cloud vendor*. When fractions of a second define the difference between conversions and abandoned searches, network speed and scalability are crucial for maintaining optimal performance, particularly during peak volume periods.
* 2021 Cockroach Labs Cloud Report
6. Data, AI/ML and experimentation
Use data intelligently to build competitive advantage
Capturing, storing, analyzing, interpreting and applying data in a meaningful way to anticipate the needs of customers and drive competitive advantage is a critical piece of the airline retailing jigsaw puzzle.
The use of advanced AI/ML-powered experimentation will enable airlines to better meet the needs of modern, retail-savvy customers while maximizing conversions and developing a competitive edge. Sabre, in collaboration with Google, is turning the industry vision of advanced retailing into reality. We’ve already made big strides in this arena with our Retail Intelligence product suite, and there’s plenty more coming down the pipe.
7. Lead from the top
Top-down inspiration is needed to effect extraordinary change
Sabre has worked closely with Boston Consulting (BCG) to understand the organizational enablers of a successful airline transformation to modern retailing. First and foremost, we believe there’s a need for transformation to be driven from the highest level in an organization; for ‘top-down inspiration’.
At present, fewer than half of airline transformation programs are led by the CEO, meaning carriers are missing a huge opportunity, considering the potential revenue upside, cost savings, and opportunity to edge out the competition. CEOs are uniquely positioned to secure buy-in across the organization, set ambitious targets and build a roadmap to success – as well as inspiring and empowering their team to embrace this opportunity.
8. Functional adaptation
Redefining functions, roles and skillsets for retailing success
When it comes to which capabilities are needed for the future, Offer Creation and Order Management feature high on the list, with some airlines building a dedicated team to create and price bundles, real-time contextualized offers, and other products and services and to sell them to the most relevant customer segments. This is a move away from traditional pricing practices in favor of a stronger data-driven customer focus and product orientation.
Revenue Management looks set to evolve, moving from capacity optimization to total revenue optimization, with revenue management teams potentially having an expanded role in the future. And finally Data Science. Few airlines have a data science function in place today but this will change as leaders look to implement new AI/ML and other technologies that enable more sophisticated personalization and offer-creation capabilities. Making this transition constitutes a big leap for carriers, but it can boost top-line growth and significantly improve customer engagement and satisfaction. Those who move the fastest and most effectively will lead the industry.
Join the conversation
Did you miss Skift Live: ‘Are airlines ready for a new era of retailing?’. Watch the replay to hear industry leaders from Sabre, Oman Air and Travel in Motion discuss airline readiness to embrace offer- and order-based retailing and practical guidance on the transition path that lie ahead.
About the Author
Andrew Thorpe is part of the Sabre team exploring what the future of travel will look like and how airlines can succeed with offer- and order-enabled retailing.
Keep the lines of communication open
Be the first to know when we release new information on emerging technology, upgrading of existing systems, or updates to our point of view on the future of travel retail.