The airline industry has pushed back against claims that systems at its core are unreliable and not fit for today’s digital consumer.
Alex Cruz, former boss of British Airways, made the damning comments at a CAPA Live session earlier this month saying that some systems were more than 50 years old with “thousands of software plasters, band-aids been added over time, which are managed by a convoluted mix of internal and external partners. It’s no wonder that light cyber-attacks bring those software to their knees.”
He went on to criticize the mindset of airline executives and said retailers such as Amazon were poised to steal share of wallet from airlines because of the experience they provide.
But senior airline industry executives have defended the industry saying it has been modernizing and that systems are secure, which was a further criticism levied by Cruz.
Cory Garner, group co-CEO and president of distribution at T2RL and former American Airlines VP of sales and distribution, says: “While archaic processes like PNRs and tickets do indeed slow down airline innovation, the technology itself is increasingly based upon the same modern systems and cloud hosting environments as any other world class companies. They are not less secure.”
Others agree that while there is a need to modernize airline systems, it’s not a reliability issue.
Tamur Goudarzi Pour, senior vice president, channel management at Lufthansa Group Network Airlines and CCO of SWISS, says: “The outdated design and underlying processes are limiting us in terms of speed and cost in order to meet changing customers’ expectations and achieve true retailing capabilities. Indeed, we have extracted as many ecommerce capabilities as possible out of those systems that were mostly built before the internet era and never meant to be ecommerce solutions.
“Further enhancements of those systems and processes are exponentially driving the complexity of the entire setup. Therefore, a new setup with Offers & Orders free of legacy processes is essential to bring the airlines into a true ecommerce world.”
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He believes some airlines can live up to the growing digital expectations of consumers.
“Despite some gaps between our current digital retailing experience and the ones of other industries, there is a lot of movement in this sector. As far as the Lufthansa Group is concerned, we have achieved major breakthroughs in terms of modernizing our tech stack e.g. with NDC.
“We developed the NDC standard at an early stage and consciously engaged in conversation with our sales partners. Today, the overall share of digital channels – much driven by our direct online channel – is at a level where 75% of our customers already have access to our best offers, thus it is a big opportunity for airlines to improve their digital customer experience overall.”
The group says its renewed distribution agreements with both Sabre and Travelport are a sign of its move to modern retailing and technology innovation.
Retailing mindset
Goudarzi Pour also says that going forward the traditional airline mindset will be complemented by “a retailing mindset in a digital-first context.”
He says airlines have used the pandemic to rethink their customer and commercial set up with Lufthansa Group launching a channel management department.
“I truly believe we have designed the most modern organizational structure in the airline industry, which also works mainly in agile product organizations.”
Anand Krishnan, CEO of IBS Software, agrees that airlines have used the pandemic to push digital transformation and believes there “is a significant mindset shift afoot in the industry.”
“Airlines have identified technology as the critical route to a better and faster recovery, and those who already have in place a progressive approach to digitisation have found themselves far better placed to improve efficiency and increase revenue opportunities.”
He adds that airlines can use the latest technology to up the retail experience for customers as well as “drive preference by revolutionising loyalty propositions and transforming customer experience through a new approach to operations.”
In sum, Krishnan says airlines have the opportunity to carve out a “competitive differentiator” and proposes SaaS technology as the way forward.
Looming threats
Differentiation will be key not only in attracting customers but also fighting off the looming threat of Google and other potential retail giants.
During the CAPA Live session Cruz said companies such as Google hold a lot of data on flights as well as consumers and could do a better job on pricing than carriers in the future and improve margin.
But airline industry executives don’t see it as that simple.
Lufthansa’s Pour Goudarzi says: “It’s not that easy. While AI can take you already much further in this context, there is a lot of proprietary information involved, where search data can only get you that far. Still, there is a strong push towards innovation drivers in the airline industry, also in pricing.”
He cites Lufthansa’s rollout of continuous pricing is an good example and adds “that marks a new milestone in modern airline retailing, ensuring our customers always receive the most attractive flight offers.”
Meanwhile Garner says that Google and others have all they need to be the “next dominant intermediary” and need only change their strategy.
“The airline industry is constantly under threat of being dominated by an intermediary but if history has taught us anything, it’s that such dominance has little to do with the intermediary’s travel technology superiority and more to do with its ability to maintain and monetize its stranglehold on a lucrative customer set.”
Overall, there is a feeling that despite airline industry losses running into hundred of billions during the pandemic, there is the opportunity to emerge stronger through ongoing digital transformation, increased openness and collaboration.
Decius Valmorbida, president of travel, Amadeus, says: “Thanks to greater collaboration, the industry is now leveraging touchless solutions, enhanced retailing capabilities, open and cloud technology, revenue management products, and focusing on what really matters to travelers. These are further areas Amadeus has focused its investments, areas we will continue to invest and innovate in for the benefit of the industry.”
He adds that the ability to think beyond silos will enable the industry to “improve the entire journey and unlock greater margins for all providers.”
