By Andrew Charlton, founder and chief executive of Aviation Advocacy, part of the DAV Management Airline Consortium
When it comes to innovation most airlines are behind the curve. They remain saddled with legacy systems and processes and are tied up in a highly regulated space.
This is particularly evident when it comes to selling tickets, something you might think so vital that they would give it a laser-like focus. Instead, airlines effectively outsource this to the GDS, themselves a spin-off from the original airline reservation systems.
Currently, airlines are working through their trade association, Iata, to seize back some control of the process from the GDS. However, the current mind-set of airlines is to look at finding ways to make existing processes work better.
This leaves the airlines exposed to new consumer distribution channels that will revolutionise the market. Ask yourself: how would Amazon sell an airline ticket?
Using Big Data to upsell and cross-sell to customers by better understanding buying patterns and other relevant information is an established marketing technique.
However, airlines, despite having huge amounts of data about their most frequent flyers, are still struggling to understand how they can get into this data revolution.
They continue to rely on channel and distribution models that have stood the test of the last 40 years but certainly won’t catapult them forward.
Approximately 60% of airline ticket sales by value are sold by travel agents.
Iata’s initiative to create a New Distribution Capability (NDC), an XML-based data transmission standard for communications between airlines and travel agents open to all Iata members, non-members and any third party intermediaries, is all well and good.
But it continues to be based on ‘small data’; in other words a limited set of travel-related information.
The NDC initiative has two aims: first, to update the pre-internet messaging standard (EDIFACT) used to deliver airline fare and schedule data to the partners; second, to address the question of the ownership of vital passenger data.
Airlines argue that by using XML it will be easier, faster and cheaper to provide customers with information about fare alternatives, ancillary services, onboard amenities and graphics such as pictures or seat maps.
This will close the gap between the airline websites and those of travel agents.
Iata also wants to avoid the sort of situation that arose when the airlines each developed their own electronic tickets – it took a decade to untangle that technical mess.
A common, open XML-based standard will enable travel agents and consumers easy and transparent access to the same products, services and product information that are currently accessible on airline websites.
This is all well and good and I applaud the initiative. However, I believe that this is just a vain attempt to make what we have today work better.
The risk is that new well-resourced market entrants, such as Google and its innovative Flight Search capability, are introducing new distribution channels that will totally disrupt the market for good by adding their much more extensive data banks to the process.
In a world of Big Data, you may not be surprised to learn that it is all about the data. Airlines know a lot about their frequent flyers, but only when it comes to their flying habits.
Google, on the other hand, know all sorts of things about nearly all potential flyers. When was the last time you had a Google-free day?
Google’s Flight Search product can display the schedules, and more importantly the prices and availability, of airlines.
Couple that with the data that Google has about your preferences and you can start to see that this can be very powerful. All they need is airline data to close the loop.
That is why the announcement earlier this year that Europe’s largest airline, Ryanair, was listing its flight information on Google’s Flight Search was so significant.
This means that customers in Britain and many other countries including France, Germany, Italy, The Netherlands, USA and Canada can compare Ryanair live prices with dozens of other airlines via google.co.uk/flights.
Ryanair’s involvement with Google Flight Search will create a whole new marketplace, as other airlines are forced to provide their flight information.
Will it be disruptive? Ryanair’s chief executive, Michaels O’Leary seems to think so. “It will change the way consumers buy tickets forever”, was his pronouncement on the tie-up.
For Ryanair, there are a number of attractions to this tie up.
For a start, the Google business model means that this new flight marketplace is free for Ryanair (and indeed any other airline) to take part in. It is also free for the consumer.
The costs are paid for by the advertisers that get onto your incredibly-tailored screen as you start to think about booking your next holiday.
Secondly, as I say, name someone that does not use Google, in one way or another. For an airline, the chance to put its schedules in front of that many consumers is irresistible.
In fact, for the world’s airlines, once their competitors are on this platform, they simply cannot afford not to be on it too.
There are fears that in the next few years Google will eat the lunch of flight data companies like Kayak, Momondo and Skyscanner because they can mix their data about you with your requests for travel.
Google’s Flight Search has been available in the UK for less than one year, so companies like Skyscanner may still have a few years head-start.
For now, Google has certainly disrupted the market and will continue to shake things up.
While Google doesn’t have the breadth of partnerships of some of the traditional flight data companies, nor is it as user friendly as Momomdo for example, it does have access to a whole plethora of data that is meaningful to the consumer.
In effect Google has come along and delivered a new generation of reservation system, one that is sold differently (free to airlines and passengers is a very powerful inducement) and gives consumers greater choice.
Google doesn’t just know that you are interested in flying to Tenerife it also knows you are interested in lots of other things once you get there.
It has the capability to put this all together in a package that is most attractive to you – the individual.
All the other intermediaries only have access to flight data. As I observed earlier, now that Google has Ryanair on its system, other airlines are bound to follow: the more airlines that sign up to Google Flight Search, the more powerful Google becomes.
Airline seats need to be available for sale in front of every consumer, so they cannot afford to ignore Google.
Currently, travel agents remain an important channel too – particularly for complex itineraries. So airlines might need to keep spending money on the NDC front, as well as work with Google.
The interesting question is how long will that remain the case? It was an easier call for Ryanair.
Having not been in the GDS for over a decade it had no legacy investment to undo. What is clear is that airlines cannot dismiss this and, depending on their customer base, might need to consider where to utilise their resources.
What does this mean for the future of intermediaries? I think it’s curtains. Why go to Expedia when you can enter your flight requirements into Google direct?
Google has the wherewithal to utilise this intelligence in a way that no airline CIO has ever considered.
Moving forward, customer experience and being able to segment down to meeting consumers with contextualised offers and gifts will be the way this market evolves.
I question whether the intermediaries will be able to offer this level of breadth and depth of capability to consumers. Google certainly can.