AIRLINE RETAILING
(air·line \ -līn \ re·tail·ing \ rē-tā-liŋ )
The process of pricing and packaging air and non-air products and selling those products consistently across all channels. This ensures the right offers are targeted appropriately to travelers at the right time in their purchase process.

While progress has been made by trailblazers over the last few years, many airlines are still constrained in their ability to influence travelers and retail successfully across the entire customer journey. Siloed data, a lack of customer insights and disparate distribution strategies have limited airlines’ access to the information and resources necessary to excel as world-class retailers.

In looking back at the genesis of airline retailing and exploring the early years of NDC, we see new tools and standards, emerging technologies and inspired approaches putting airlines and their distribution partners ahead in the retailing game.

Dynamic 1: Thinking Beyond the Seat

Historically, airline retailing revolved around the selling of a single aircraft seat – simple, straightforward merchandising. If a seat was available on a particular route at a specific time, an airline made it available for sale.

The seat availability process was relatively easy, too. Airlines chose to distribute their product (the seat) via two primary retail channels, either directly to the customer through their own websites and/or indirectly via third parties such as travel agents, online travel agencies and travel management companies. Often, this third-party distribution is managed through a global distribution system, or GDS.

This two-pronged approach didn’t fully address the need to personalize offers, and airlines required more sophisticated ways to create, distribute and sell more dynamic content. The expansion of the product catalog, driven by the growing importance of ancillaries as a revenue stream, added complexity. Airlines now not only have more content to sell, but also more content combinations to merchandize in a differentiated way.

Traditional airline retailing model: Today, most airlines file schedules, availability and fares with third parties. They distribute options directly through their websites and indirectly via travel sellers.

Dynamic 2: Low-Cost Models

The impact of low-cost carriers further prompted airlines to broaden the range of products and services offered, unbundling them from the sale of the seat.

Dynamic 3: Personalization

As a result of these dynamics, personalization has emerged as the ultimate goal for successful airline retailing. Understanding why someone is traveling and being able to infer the types of products and experiences they care about increases opportunity for conversion. Similar to Amazon, Spotify or Netflix, travel suppliers and sellers would like to deliver personalized suggestions to enhance the shopping experience (i.e., customers who bought X also bought Y).

Consider this: a traveler could spend US$20,000 annually without the airline knowing so much as his or her meal preferences or activities that could be of interest in destination. In our ultra-connected world, travelers have come to expect their retail experiences to be tailored to them.

The Ultimate Goal

To align with the expectations of modern consumers, airlines and travel agencies must think and behave like true retailers. They need to…

  • Analyze consumer behavior and market data to better target future offers
  • Understand the full customer journey and determine how they can fulfill as many needs as possible
  • Predict what their customer might also want or need, then deliver it

None of this can be managed on intuition alone. Airlines need intelligent systems to create these smart offers.

Making the Shift

At the heart of delivering personalized offers to customers is an intelligent offer and order management platform, which centralizes offer creation, supports omnichannel controls and provides sophisticated order management capabilities across multiple suppliers. Unlike the EDIFACT modes that accounts for seats, fares and availability via relatively static third-party filings, airline offer management platforms use market and customer data and decision-support tools to create dynamic, persona-based offers and deliver ultra-fast shopping responses.

Today, the airline offer management process is typically made up of three parts:

  1. Schedule
  2. Availability
  3. Ancillaries

Fares are mainly constructed with no visibility into who is making the request, meaning that the ability to offer the right person the right fare at the right time is nonexistent. Past shopping behavior, consumer preferences and the possibility to sell additional products and services are unavailable to the airline, and the airline seat once again becomes a commodity. Furthermore, the only real differentiator a traveler sees is price and schedule. If we compare this to other retail experiences, we start to see a widening gap.

Airlines are ready to present the same content and brand differentiation available via their brand.com website across all channels. They’re ready to adopt new technology to do so. How can airlines and agencies make the shift to better diversify and upsell, giving air travelers the true retailing experience they expect?

“There is a clear distinction between NDC and a broader distribution strategy. NDC is a technical standard. Distribution strategy is a technical capability, which may be enabled by NDC, plus a commercial model to drive new value.”

Caroline Strachan, Managing Partner, Festive Road

Seizing the Future

At Sabre, we are uniquely positioned to invest beyond the NDC standard in a traveler-centric, end-to-end retailing ecosystem. By evolving retail, protecting key agency operations and workflows, and partnering across the value chain.

If we return to the complexities of airline retailing, one of the key challenges is the lack of information that airlines have about the person requesting the travel. NDC would allow the static process of schedule, fare and availability to move to a question-and-answer-based process.

Based on who is asking for the fare and how much information the shopper is prepared to provide during the search process, the airline can answer with a contextually appropriate result. It can also, based on traveler preferences, as well as historical and real-time data, offer a range of other products and services designed to enhance the customer journey.

For example, an airline would be able to see that a customer purchased Wi-Fi and a seat with extra leg room on his or her last two flights. The next time the customer searches for flights, the same airline may bundle these ancillaries as part of the seat cost, creating a personalized experience where the traveler feels like the airline truly understands his or her needs.

“Early on, NDC was perceived as a GDS killer, but now, it is quite the opposite. In any industry, and certainly in travel, the more fragmented the content becomes, the harder it is for customers to find what they want and, in that world, aggregation actually becomes much more valuable. The function of a GDS has always been to aggregate content from a variety of sources, applying additional sophistication from a retailing perspective to be able to ensure that we are getting the right offer at the right time to the right customer,” said Kathy Morgan, Vice President of Channel Delivery for Sabre Travel Solutions.

Why go “beyond”?

NDC is an important part of airline retailing and will take the conversation to the next level. Today, it’s not NDC OR traditional distribution – it’s NDC AND traditional distribution – that’s where the hybrid world sits. Content will flow through both “pipes” at least for the foreseeable future, which creates additional complexity and even greater need for technology that supports both worlds.

Though it is not just about supporting traditional and NDC offers, it’s also about thinking beyond the NDC standard. NDC is an industry standard, not actual innovation. Our vision is much broader – and we think airlines should think bigger, too. With our revenue management history, there is opportunity using decision support to make our offer-management platform a lot smarter, a key differentiator. We are uniquely positioned to deliver retailing solutions across the end-to-end customer journey from offer creation all the way to fulfillment.