Analysis: Where do agents fit in airlines' strategy

Analysis: Where do agents fit in airlines' strategy

Airlines believe mobile technology will transform their relations with passengers, but the implications for agents could be profound. Ian Taylor reports from the Sita Air Transport IT Summit

Airlines looking to drive bookings direct and online is nothing new. The low-cost carriers managed it, although easyJet and Ryanair now recognise the value of GDSs. But traditional carriers remain dependent on agents and travel management companies for most bookings.

Now many carriers hope to change that. One avenue is Iata’s New Distribution Capability (NDC), currently in development, which they expect to open new third-party booking channels alongside GDSs. Lufthansa has gone further, announcing it will impose a hefty GDS booking fee from September.

Airlines argue they need to cut the cost of GDS distribution, while at the same time updating their technology to the level of a retailer such as Amazon, so they can personalise customer offers and sell ancillaries through agents.

The GDSs insist they can provide everything airlines want. But the carriers also regard changing the technology as a way to sell more direct, more ancillaries and more non-airline product. They foresee a future when they connect to passengers via mobile devices, not just at the time of booking and at pre-departure check-in, but at the airport, inflight and on arrival.

Personalising information and offers to passengers will be key.

This was made plain at the Sita Air Transport IT Summit. Sita is a technology supplier to airlines and airports, providing the reservations systems used by many carriers.

The latest Sita Airline IT Trends Survey, based on responses from 200 technology officers, found 80% of airlines were investing in personalisation and 52% planned ‘major programmes’ before 2018, with 53% running programmes to expand ancillary sales.

Nigel Pickford, Sita director of market insight, said: “Omni-channel shopping is maturing fast.” Since personalisation depends on passenger data, 74% of airlines plan major business intelligence programmes by 2018 and 44% programmes on predictive analytics.

Digital focus

Peter Hammer, United Airlines’ business operations managing director, told the summit: “Digital is at the forefront of our strategy. We want to ensure offers become more informed and targeted.

“Retail will enable a new level of financial performance.”

He also spoke of “the growing role of partners” and listed nine key providers to United including Sita, Hertz and Uber.

When asked why he had not mentioned GDSs, Hammer said: “We view the GDS as an important part of distribution. We have a lot of conversations about how we distribute parts of our operation through GDS and we continue that negotiation. We continue to evaluate all distribution channels.”

Fear losing business

Mark Schwab, chief executive of Star Alliance, which counts Lufthansa and United among its members, said: “We need to reach the passenger on the road through every channel. Customers are embracing changing processes. [But] I sense providers fear losing business.”

Schwab said: “I commend Iata for its NDC. We fully support the initiative. I’m hopeful but not convinced that GDSs will allow this technology.” He added: “This is an area in which we will be promoting rapid implementation of industry standards.”

Describing the latest Sita Horizon airline reservations system, vice-president for passenger services Allison O’Neill said: “Passengers expect a tailored and personalised buying experience similar to their experience with major retailers.”

She argued that the Sita system allowed airlines to provide that “across all touchpoints”, adding: “Passengers can get tailored and personalised services via an agent, website or mobile device.”

O’Neill said: “There will always be a need for the GDS.”

But she added: “The proportion of [sales] going non-direct – is that a business decision or is there an opportunity to shift that model?

“Some airlines sell 80% direct. A full-service carrier should be aiming at a minimum 40%-50%. I don’t see why that isn’t possible.”

Referring to Iata’s NDC, O’Neill said: “The standard will be completed in one or two years. Then it’s a question of what you do with it. NDC has the ability to transform [things] for years to come.”


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