Back to Air Transport IT Review - Issue 2, September 2010

The digital traveller

Technologies to woo the 'switched on' passenger

Driven by consumer trends, travellers are typically ahead of the rest of the population in their adoption of technology. As 'digital travellers,' they have growing expectations of the technology-based services that airlines should deliver to them. For their part, the airlines' focus on these travellers is keen, as the 2010 Airline IT Trends Survey found out.

The huge success of social networking and smartphones, fed by hundreds of thousands of applications, has created growing passenger expectations and massive challenges for air transport. The industry has to respond to passenger expectations with equal vigour.

To do that, airlines are paying close attention to developing their multiple channels to travellers, as well as to ancillary services and reductions in the cost of passenger operations. Focusing on new technologies for these channels means that they can enhance their relationships with passengers.

One route that has gained traction is to further increase in the proportion of airline sales achieved through direct channels, according to SITA's Senior Director of Portfolio Marketing Jürgen Kölle. Results from this year's Airline IT Trends Survey, for example, showed airlines continuing ambition to increase the portion of tickets sold directly to retain a higher proportion of revenue from sales.

Today more than 50% of tickets are still sold through GDSs and Online Travel Agents (OTAs); this will decline to just above 40% by 2013. Selling through call centres and interlining will remain stable, whereas the airlines' direct channel will grab the portion that GDSs and OTAs are forced to give up - matching GDSs and OTAs at around 40% in three years.

Direct relationships

But this is about more than distribution cost. It is also about owning the direct customer relationship - and the Web has become the key enabler of this relationship.
To retain this relationship, new functionality has been added: 61% providing online shopping tools; more than half (52%) enable passengers to change, cancel and rebook through their website; and a similar number (51%) allow frequent flyer redemption functions.

There are also early signs suggesting an understanding of the importance of social media: 21% of airlines have already completed some integration efforts. However, a greater proportion (45%) still have no plans to integrate social media before 2013. They may find this needs to change, according to Kölle.

Travel portals and mobiles

One area that airlines are addressing with enthusiasm is the use of travel portals for agencies and corporate customers. Initially established by the large carriers, there is a clear trend. More than 80% of airlines have either implemented travel portals or plan to do so - a continuous, significant increase in comparison to last year.

And, of course, mobile is maturing. As many as seven out of 10 airlines responding to the Airline IT Trends Survey plan to establish mobile devices as a direct sales channel. For low cost carriers and top tier airlines, this percentage is even higher. "This is an impressive indicator of change," says Kölle. "It's not simply about making the mobile channel available. It is about owning the direct customer relationship - which will make this channel even more attractive for airlines in the future".

Extra income from ancillary services

Meanwhile, airlines are increasingly developing sources of ancillary revenue, with 63% planning major IT investments to facilitate this over the next three years. Sources of ancillary revenue include unbundling current services such as baggage handling, priority boarding or meals, non-air services ( hotels, car, insurance) as well as up-selling through fare types.

"A lack of standards and ambivalence in the relationship between airlines and GDSs could be the reason for the airlines giving much more attention to earning ancillary revenues through direct sales rather than through GDSs," notes Kölle.

"This year's survey results clearly show the airlines' desire in this respect." This is not surprising: GDS account for more than 50% of ticket sales, but fewer than 17% of responding airlines are selling unbundled services via their GDS.

Check-in choices

IT is also increasingly playing a transformative role by offering end-to-end self-service in passenger management. This includes all associated business benefits, improved service levels and reduced costs to the industry.

Multi-channel check-in is, and remains, a key component of self-service. For example:

Agent check-in is set to reduce significantly from more than 50% to less than 30% by 2013.
Kiosk check-in will remain stable at around 20%, indicating a change in priorities.
The Web and, once again, mobile will account for significant shifts. Web check-ins will account for just above 20% today to 35% of all check-ins by 2013. Mobile is set to increase from 2.4% to 12.4%.

Self-service moves

Confirming the move towards end-to-end self-service, 63% of airlines intend to invest in projects to implement and/or extend self-service, such as IATA’s Fast Travel initiative.

However, there is a clear difference in ambition level and pace of the airlines. The Airline IT Trends Survey shows hesitancy in areas such as flight transfer kiosks, disruption management and lost baggage reporting, with less than 40% of airlines having implemented or planning to implement such services by 2013.

The rise of mobility

The survey shows some interesting trends emerging around disruptive technologies and the role they can play in supporting industry transformation. Once again, mobile is the exemplar.

For instance, 45% of airlines already have, and another 41% plan to have, notifications on flight status and delays available by 2013. That means that 9 out of 10 airlines plan to have mobile notification available soon. Currently 28% of airlines have online check-in available via mobile, with another 52% determining to offer it by 2013.

More than three quarters of airlines will invest in IT projects to broaden mobile services during the next three years, including the use of mobile as a sales channel. This means mobile services will expand into new areas.

Mobile as a sales channel is planned to be made available by 70% of airlines within the next three years. Enabling passenger to make ticket modifications/upgrades on their mobile phone is planned by almost 60% of respondents in the next three years (from only some 6% today).

“This clearly demonstrates the shift from using the mobile to ‘push information to the customer’ to viewing mobility as ‘the technology to perform business transactions and to generate revenue’,” says Kölle.

“This will include travel and retail products and services. But who pays for it? Is mobile itself a source for ancillary revenue?”

Many airlines still consider how to fund mobile services. According to the survey, while 39% plan to offer these services for free, 21% plan to charge for it and another 39% are undecided.