Risk Aversion in the Airline Industry

Risk Aversion in the Airline Industry

It goes without saying that the airline industry had come to a grinding halt and is only now gradually recovering from the impact of the COVID-19 pandemic. The International Air Transport Association (IATA) states that global passenger volumes will not return to pre-pandemic levels until 2024 at the earliest.

Over the last couple of years, the airline industry has accepted that a retail revolution is needed to transform from a 'seller of seats' to a provider for the end-to-end needs of a customer. Airline retailing is all about making sure the right product and/or service is available at the right time to customers via the right channel. By transforming into world class retailers in an increasingly risk-averse environment, airlines will be able to unlock new revenue streams, reduce costs, foster customer loyalty and improve customer engagement.

Several of the world's largest airlines have already embraced retailing and have developed systems that will help them preserve capital and gain a competitive edge over their competitors by offering a more personalized experience for their customers.

Challenges of airline retailing

  1. Constantly evolving and maturing industry standards and guidelines
  2. Complex set of processes and systems that can act as a barrier to change
  3. Multiple partner integration, from airlines and suppliers to travel agencies
  4. Understanding the customer expectations, even those that are outside of the world of the airline industry

Think like a retailer 

Airlines need to look through the customers' lens to understand how they no longer want to just about get from point A to point B.

For customers, the travel to and from a destination plays a huge role in their overall experience. Whether they are traveling for work or pleasure, the time spent at 30,000 feet in the air is not their primary concern during their entire journey. So what else is the customer looking for?

With a retailing mindset, airlines can cater to all stages of their customers' journey and provide a seamless experience across the entire trip – the flight is only one component in the entire customer journey. From travel arrangements to and from the airport to hotel bookings, airlines can put together a complete package that is tailored to each traveler's needs. Some of the products and services airlines can package with flight tickets to create a full-service proposition are -

  • Door to door, intermodal transportation
  • Lounge access
  • Priority boarding
  • Baggage allowance
  • Hotels
  • Car rentals
  • Airport transfers
  • Holiday packages
  •  Attractions
  • Travel insurance

There are several approaches that airlines can take to select and implement solutions that will enable them to become outstanding retailers. By analyzing consumer behavior to understand their preferences and purchase history, airlines can make sure that they are ready to offer everything that a customer could need for their next trip.

Upgrade your PSS 

By upgrading their existing Passenger Service System and complementing it with software that streamlines other critical operations, airlines can create a one-stop shop for travelers. If the existing PSS is a low fit with the new requirements, the airlines could replace it with an updated and upgraded system that meets all their requirements. This is a high-risk and high-cost implementation, but one that completely transforms your processes. Airlines can also integrate their existing PSS with a best-of-breed solution that does not require a complete replacement and also provides a greater deal of architectural flexibility. One thing to keep in mind with this low-risk implementation is that multi-vendor management can get complex and inconsistent.

Revenue management systems, retailing platforms, and order management platforms are 3 commonly used solutions that airlines can integrate with their core PSS. This helps airlines collect and analyze booking and sales data to identify buying patterns and trends, forecast demand, develop an effective pricing strategy, offer complementary products and services like those listed above, create personalized offers and loyalty programs, and more. With offer and order management, airlines can get an overall control over not just ticketing and booking but also retail.

Embark on your aviation retail transformation

With a plethora of travel agents and aggregators in the market today, customers no longer see the need to buy just from an airline's direct channel. This adds a whole new layer of challenge for the airlines in their already complex transformation towards retailing. The New Distribution Capability (NDC) plays an important role in addressing these limitations by putting airlines in control of their own product. This gives them the autonomy to decide which products are sold, in which channels and by which sellers. To realize the full potential of NDC which allows airlines to become retailers, airlines need to have first defined a rock-solid retailing strategy.

With full control over their content distribution and offers across various channels, the airlines can now create a one-stop shopping solution for flights, hotels, etc. and provide personalized offers for their customers based on the customer's history with the airline.

Customer experience is now a major differentiating factor between competitors, so airlines need to focus on understanding customer expectations and consistently deliver an excellent and seamless experience across all touchpoints in the consumer journey. To adopt a retailer mindset and create a retailing strategy, airlines also need to collect and analyze even more customer data to get better insights. From understanding their social media behavior, to storing their shopping and travel history, integrating these data-driven insights is what will help airlines generate personalized offers across all channels.

Once airlines start thinking beyond selling seats and actually understanding a travelers' desires, they can create a risk averse strategy and succeed at becoming a full travel retailer.

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