7 Key Airline Report Tech Take Aways from 2016

7 Key Airline Report Tech Take Aways from 2016

The last days of the year is usually a time to stop and look behind at the main developments and achievements of the past 12 months.

In our case, it has been an intense year, completing projects across several continents, from Russia to Mexico, while riding some of the hottest trends in the airline industry.

Full service carriers are adopting some of the product features and cost-cutting approaches of low cost carriers, while low cost carriers are introducing an increasing range of premium services.

From this vantage point we have compiled a list of topics that are becoming central to the industry we operate in, airline technology, and are expected to also affect the way people travel and interact with their airlines of choice.

Evolving Business Models

Although, strictly speaking, not a technology trend, it is important to mention the increasing complexity airlines face when it comes to their business models.

From a black-or-white situation of sorts, with full service carriers on one side and low cost carriers on the other, we have moved onto a scenario dominated by many shades of grey. Full service carriers are adopting some of the product features and cost-cutting approaches of low cost carriers, while low cost carriers are introducing an increasing range of premium services.

In addition to this, the industry is also at risk of disruption from ever more innovative business models, such as airlines offering flat-fee subscriptions to business travelers or executive jet operators broadening their customer base by mimicking the distribution channels and regular schedules of commercial airlines.

The advent of NDC

One of the big themes of the year has been the implementation of the New Distribution Capability (NDC), IATA’s new standard aiming to bring indirect distribution channels on equal footing, revenue-wise, with direct ones. The key here is to enable travel agents and other intermediaries access to the same wealth of ancillary options that are available directly through airlines’ own websites.

The jury seems to be still out when it comes to the status of this initiative, however, given the, still very large share of indirect distribution in the industry’s total turnover, NDC has been a central topic at any industry forum this year and it has even spawn a whole service provider ecosystem.

Inter-LCC connectivity

A by-product of low cost carriers (LCCs) flexibilizing their business model is the establishment of alliances or inter-lining agreements. Wherever this type of initiative comes up, be it Ryanair’s rumored partnerships talks with Norwegian or the Value Alliance in Asia, one of the main issues to be solved is system connectivity, as more often than not, low cost and full service airlines use different Passenger Service Systems.

These type of partnerships, though, will further contribute to blurring the line between low cost and full service airlines, making of hybridisation the “de facto” industry norm. No wonder that new generation PSS such as Radixx are focusing on this middle segment.

The example of Amazon and its success in expanding well beyond its original book-selling business is very present in the minds of airline executives.

Chatbots and Messaging Apps

The chatbot revolution is not limited to the airline industry, but airlines have been among the pioneering industries.

This goes hand in hand with an exploration of new channels and platforms for distribution and customer service. Major platforms such as Facebook have released APIS that facilitate the development of chatbots. Airlines such as KLM and Icelandair have pioneered their use this year, even allowing the completion of bookings through them.

The emergence of chatbots is a logical step in a ladder that has seen airlines exploring enthusiastically new channels of communication with their clients. As an airline executive recently explained to us: “we need to be where our passengers are” and this means being present on the messaging apps that are increasingly replacing voice calls as a communication channel.

When it comes to implementing a strategy in this field, there are different approaches. Some opt to develop branded messaging apps for multiple platforms, some even develop their own in-app channel (although it may be challenging to get people to use it!), others choose to focus on just one platform and allocate all resources to it, for example KLM chose to focus on Facebook messenger after toying with Whatsapp for a while.

Quite a few customer service tasks are still being supervised or maintained by humans, but full automation is just around the corner. An airline executive we recently interviewed estimated that over one third of all customer communications could be easily automated.

And once we are there the next step would then be getting the bot to book your flights through voice commands...

E-commerce & customer intelligence

The example of Amazon and its success in expanding well beyond its original book-selling business is very present in the minds of airline executives.

The % of non-ticket revenue is increasing for the whole airline industry, but perhaps the tipping point has been the announcement this year that Ryanair was fully committed to become first and foremost an online retailer (that happens to fly planes too, of course!).

We are seeing commercial partnerships with partners from outside the airline industry to keep growing, both in diversity and quantity.

Airlines are realizing, though, that they need to know their passengers better in order to become proper e-commerce players. The demand for “smart” solutions that makes it possible to anticipate and match the customer’s needs becomes apparent. No surprise that companies that provide customer intelligence solutions such as Boxever or OpenJaw have been getting plenty of attention from the investors this 2016.

Airlines invest in tech

In fact, quite a few airlines are not just limiting themselves to source innovative tech solutions, but want a piece of the action themselves.

Easyjet, El-Al, JetBlue and IAG are just a few of the big names from the airline world that have launched their own startup incubators or invested in some promising startups this past year.

While, startup investing is always a risky, unpredictable business, some remarkable technologies are coming out of these incubators. At the very least, these programmes give airlines a front row seat to monitor what some of the most innovative minds in the industry are working on.

IATA itself has published some guidelines about the upcoming digitalisation of baggage, something that will have an impact on quite a few airline processes.

Smart baggage and airports

While most of the booking and check in experience has been technified, airport transit and luggage remain a point of friction in the whole passenger experience.

But this may be about to change.

IATA itself has published some guidelines about the upcoming digitalisation of baggage, something that will have an impact on quite a few airline processes. Baggage companies like Rimowa have launched innovative digital tags for bags, that can be activated via mobile. These are still far from widespread, for example, Rimowa’s solution only works with Lufthansa at certain airports, but the industry (and passengers!) will eventually catch up.

Airports are experimenting with technologies that can beam information and offerings to passengers, you do not even need to be online. Airport beacons can provide push notifications with service or commercial information with pinpoint accuracy. For example to help people better manage waiting times, but also to tempt them to splurge on a nice lounge experience before their flight.

The key here is mobile and how everyone involved in the management of the passenger’s journey can leverage personal mobile devices to generate more revenue while providing also value to the traveler.