Air Transformation Lab: Learnings from the Lab

The COVID-crisis has uncovered a need for airlines to change, and fast.

There is an upside to this new imperative. There has never been a more necessary time for far-reaching transformation in our industry than now. And to be successful, the airline voice needs to be at the center of new thinking and technology. That’s why Accelya and Farelogix, now an Accelya company, have launched the Air Transformation Lab, a series of activities to explore the current state of airline commerce and uncover the DNA of a profitable future.

The Air Transformation Lab initiative includes virtual boardroom discussions, airline interviews, Think Tanks, a planned podcast series, and a survey developed by Atmosphere Research Group.

The Air Transformation Lab project has yet to reach its conclusion, but as Headline Sponsors of T2RL PSS2020, Accelya is digging into the latest findings to coincide with the event. So, let’s dive into these key themes and explore!

• Transformation is Now

The negative impact of the COVID-crisis cannot be overstated. Nonetheless, the majority of airline leaders acknowledge some positives. They believe this period to be an opportunity to transform commercial technology/processes, improve inter-departmental collaboration, and try new things.

“We’ve seen things drift back and forth as far as demand goes. There is nothing off the table for American to try. It’s a refreshing time, as hard as all this has been, a lot of hard and fast forever truths are certainly in question,” Neil Geurin, American Airlines (T2RL PSS2020).

• Customer-Centric Flexibility Gets ‘Priority Boarding’

Decimated demand has elevated customer-centric change to a strategic priority. Airlines moved quickly to enable more efficient servicing as the COVID-health emergency unfolded, and most airlines have now abolished change fees. Airline leaders report this shift is here to stay and for a good reason. The customer has changed.

With business demand at an all-time low, the leisure traveler is now the lifeline of the airline. Many are seeing important, new customer segments emerge, such as less seasoned travelers and younger customers. As a result, a spotlight is shining on customized products and bundles. Early data from the Air Transformation Lab survey reveals a two-fold increase in interest in “personalization” as airlines pursue greater offer relevancy.

For some airlines, Continuous Pricing will play a role in building a profitable future. As continuous pricing is executed outside of fare-filing, airlines will have more price points to meet the changing customer need. For example, this strategy will enable customers who book closer to departure to receive more attractively priced offers.

“Airlines want to get offer control and be able to master what’s released to the end customer. There’s value for everyone in the equation. Value for the customer, who gets the type of targeted offer that the airline means for that use case. Value for the supplier, because being able to craft something dedicated and tailored for that segment means that achieving optimal commercial performance. And value for anyone who can help service or power the transaction in the value chain. Continuous pricing is the first fundamental cornerstone of this new offering,” Xavier Lagardere, Vice President – Head of Distribution at Lufthansa Group, in our upcoming podcast on Airline Voice Radio.

• More Revenue or Reduced Cost? Yes, to Both!

It has never been a more critical time for airlines to be everywhere it makes sense. According to Air Transformation Lab participants, that means more content, an emphasis on core channel relationships, and a laser focus on cost reduction. When the Air Transformation Lab team asked what is more important, revenue optimization or cost reduction, the resounding answer was, “Yes, to both”.

The current situation has grown the appetite for airline controlled offers, and many executives are looking to NDC to deliver over the next 12 – 36 months. For the NDC-leaderboard airlines, as many as 1:3 tickets are now sold through NDC-channels.

Which sales channel-related changes do airlines anticipate? Airline professionals expect to see a continued shift in sales to their direct digital and tech aggregator channels between 2020 and 2023, predominantly at the expense of traditional indirect channels.

• An Instant Feedback Loop Around the Offer

There is no predictability right now with fundamental retailing disciplines, such as Revenue Management, shaken by the lack of useful historical data. So, airlines are looking for new ways to navigate uncertain terrain by creating instant feedback loops and bringing the offer closer to the transaction. In this way, airlines can quickly determine what worked and what didn’t and make adjustments to retailing strategy.

• Can the PSS Deliver on the Future?

The Air Transformation Lab survey has yet to run to a conclusion. However, at this early stage, Accelya is seeing general satisfaction in the PSS’s ability to meet current requirements. Although, there is concern over current providers’ ability to deliver on the retailing needs of the future, including dynamic offers, servicing, and ONE Order. When it comes to ONE Order readiness, most airline professionals concede that it will be a priority when recovery is underway.

• What’s Holding us Back? 

Respondents cite unaligned goals between departments, followed by a lack of budget and inadequate software or systems as bottlenecks to progress in pre-COVID times. However, unsurprisingly, a lack of budget is the leading limiting factor over the next two years.

• Joining the Dots

Early survey results indicate two-thirds of respondents agree that collaboration between departments and teams is one of the most significant opportunities on the table. Greater cooperation will ultimately result in less friction, lower costs, and the ability to take a holistic view of opportunities and threats. This trend sets the stage for a new era of ‘joined-up thinking’ and end-to-end retailing.

Atmosphere Research Group will publish a detailed report for the Air Transformation Lab based on final survey results in the coming months. But it’s not too late to take part!