Airline retailing, meaning the transformation of distribution away from legacy processes and artifacts into the world of modern retailing, has become a hot topic in the post-pandemic world. As such, it forms an important track at the World Financial Symposium in Doha, Qatar.

“The last two years has seen the journey to digitization accelerate, and modernizing distribution has remained among airlines’ top priorities,” says Yanik Hoyles, IATA’s Director, Distribution. “It shows that it creates value for our members and their customers and that is what will drive its success.”

Airline retailing aims to give the airline ownership of the offer regardless of shopping channel and put the customer at the center of the shop/order/pay ecosystem. To support the airlines in their move to retailing, IATA has been working on several programs based on standards: New Distribution Capability (NDC), ONE Order, Settlement with Orders, Dynamic Offers, and the Future of Interline. The goal is the de-commoditization of the airline product and a focus on customer centricity.

Though the NDC standard is the crucial gateway to airline retailing, achieving true customer centricity also requires the industry to retire legacy systems and processes associated with ticketing and back-office accounting. The move to e-tickets in effect electricized the related legacy paper processes but did not otherwise change them. Hoyles explains that it is impossible to come anywhere close to true online retailing if fulfilment is dependent on e-tickets, electronic miscellaneous documents (EMDs) to record ancillary purchases, and Passenger Name Records (PNRs).

This is the focus of ONE Order (the “order” in offers and orders). A unique identifier replaces PNRs, e-tickets, and EMDs and helps transition airlines beyond the Passenger Service System (PSS) to retailing platforms common to other consumer retailing businesses.

Revenue management will then be able to move away from traditional pricing, based on filed fares and booking classes, to indefinite price points and dynamic bundles. And whereas before a change of ticket would also require changes to the EMD and PNR and then force another reconciliation of these information silos, a retailing architecture simplifies matters There will be just one order to handle and the industry will move from being record centric to customer centric.

 

What does it mean in practice?

The key point is that airlines can be more creative with their offers, expanding them through third party products where appropriate, updating them in real time, and personalizing them—no matter the sales channel.

Whether customers buy via the airline website or through a travel agent, they will be able to see the value in the offer through a multitude of options beyond fare and schedule.

And whatever offer is chosen is fulfilled with a single order. No longer will customers have to wrangle with different reference numbers for different providers, no longer will airlines struggle to reconcile different elements of the journey should it be disrupted. There will just be one order for the entire, bespoke journey.

And to complete the cycle, new payment options will make it possible for a customer to use the payment method of their choice while airlines may benefit from reduced merchant fee costs and the ability to onboard new forms of payment as demand dictates.

 

Individual journeys

Each airline will have its own journey to a retailing environment. More than 60 airlines have some degree of airline retailing capability and already the end of EDIFACT messaging by 2025 is being talked about by the likes of Finnair.

“A successful transition to airline retailing and customer-centricity is also dependent on C-level management buy-in,” says Hoyles. “This is a strategic choice for the long term. There needs to be a vision and a change of mindset and skills within an organization.”

The necessary changes in an organization to make airline retailing function correctly is an ongoing project. But it is clear that the status quo cannot be maintained. Already, some airlines have created new roles in offer management, a combination of distribution and revenue management skills. And revenue management professionals will revamp their abilities to consider ancillary products and bundled packages.

Business travel is another area in need of some work. There is no issue with the business case in this sector but rather it is a question of how that business flows through a travel management company (TMC) and online booking tools. User interfaces need adapting, for example, to better display content.

“But all players in the value chain realize this is the only way to go,” says Hoyles. “And there are benefits for them all. They can each choose their partners based on the value they bring. It will make for a stronger, more competitive market and that benefits the end customer.

“There is momentum in the short term and alignment in the long term,” Hoyles sums up. “Airline retailing means customer-centricity and a more efficient and effective distribution value chain. Airline boardrooms throughout the world are recognizing that this work can spearhead the industry recovery.”

 

Credit | iStock
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