A path to profits
After years of battling downward pressure on revenue, much needed transformation is coming, bringing with it both challenge and opportunity for airlines.
IATA recently released v1.0 of a business case on value creation of retailing transformation. The brief validates projections from a 2019 McKinsey report to arrive at a benefit of $7 per passenger per year.
Distribute personalized offers across all channels
NDC opens 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 regardless of the distribution channel.
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).
Sell products and services at any price point
Dynamic pricing 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.
Dynamic pricing strategies also enable airlines to maximize revenue performance and benefits travelers because they gain access to new price points that were previously unsupported.
Seamlessly fulfill traveler requirements
Today, the experience of selling and servicing travel is too complex. Order management with ONE Order seeks to streamline fulfillment 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.
Organization and talent
Top-down inspiration is needed to effect extraordinary change
- Streamline and integrate the airline organization across functions to align with retailing flows, products or steps in the customer experience
- Develop new skills, capabilities and talent with functional digital retailing experience while retaining technical and functional airline knowledge
Technology and architecture
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.
- Transition from monolithic to modular architecture; from PSS-based to offer and order management systems
- Remove platform duplications, leverage new data sources and apply advanced analytics
Use data intelligently to build competitive advantage
- Aggregate data across customer touchpoints and elevate through meta data and data partnerships
- Develop feedback loops to continuously enhance data sources and aggregation layers
- Leverage automation models that exploit large amounts of data using AI/ML technology
$40B of additional value creation or $7 per passenger per year – however you look at it, retailing transformation presents an opportunity airlines can’t afford to pass up. With transition costs estimated by IATA at somewhere in the range of $1 – $2 per passenger per year, the math speaks for itself.
How can airlines claim their share of the prize?
Leveraging the McKinsey findings and working with their Modern Airline Retailing Consortium partners, here’s how IATA sees the financial benefits of transformation breaking down:
We believe the numbers present a compelling business case for transformation towards an offer- and order-based retailing model.
Airlines must evolve their strategy, technology and organization towards a customer-centric modern retailing model to generate more revenue opportunities and satisfy traveler demands.
- Early movers stand to gain most. Sabre offers a range of next-gen products that enable airlines to take meaningful steps towards modern retailing by creating dynamic and personalized offers for every customer – from NDC to our suite of Retail Intelligence products infused with the latest Sabre Travel AI™ technology.
- Airlines must be bold and make the necessary medium-term investments in retailing capabilities – technology, skills, fulfillment – to ensure long-term success. Capturing incremental value throughout the transformation journey is imperative. The development of rich and personalized offers will deliver revenue opportunities for airlines that can solidify the business case for change and fund future developments along the path to realizing their retailing ambitions.
Explore the path to offers and orders
The value creation opportunity unlocked by transitioning to a modern retailing model is significant, but it demands a new way of thinking. It will require airlines to think and act holistically, considering not just technological requirements but also the strategic and organizational changes needed to operate efficiently in a world of offer- and order-enabled modern retailing.
Progressive airlines are looking to unlock the huge opportunity that transformation presents by preparing now, building their transition-readiness and prioritizing progress over perfection. At Sabre, we are ready willing and able to embark on the journey alongside you.