Mercator Blog

2017 Airline Distribution Outlook: A Break in Tradition with Disruptive Technologies

By Jörg Troester on 30 January 2017

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An American futurologist, Alvin Toffler, once said that technology is “the great growling engine of change”. For the airline industry this “great growling” could in fact be ear-deafening. As businesses now depend on new and cutting-edge technologies to keep up with the ever adaptable consumer market behavior, dated industries are about to be confronted with a world of change stampeding their way. Beginning in 2017, we will witness these technological developments and their respective changes in consumer behavior “rattle” the traditional airline distribution platforms in place today.

Great Growling Engine – Or Just an Old Rattling Machine

As of recent years, the airline industry has made many efforts to continue to grow and make their businesses more economically and environmentally efficient. Airlines have been developing ways to make their aircraft more fuel efficient, create LCC subsidiaries, develop their ancillary revenues and redesign airline networks. However, with this new age of technological advances, airlines’ traditional methods of industry development are being disrupted by new systems and platforms for distribution.

Airlines are slowly realizing that the current airline distribution networks are being described by industry experts as long outdated. For example, GDSs are based on a system created 50 years ago, before the creation of the smartphone, tablet, mobile phone, and even the internet. All of these devices are using the latest communication interfaces such as XML. As uses for these technologies and more developed ones have come into development and business, consumers became used to an in control and choice-filled way of life.

My New Year’s Resolutions: Payment, Retail, and Personalization

My suggestion for a 2017 New Year’s resolution for the airline industry: listen to your customers. Make them happy by fulfilling their wishes about how they can look for, book, and pay for travel in the future. Don’t just think about it, do it. In order for airlines to keep up with the changes in consumers’ behavior, the industry will experience, first and foremost, a change from its own current fixed status, to a more dynamic and versatile business.

The Smartphone Payment Revolution

Let’s face it: banks held off for much too long on new payment developments, missing new ways of payment for online retail. Because of this, it is not banks or other established payment providers that are about to define the future of payment, but instead Apple, Google. and so on. One of the clearest characteristics of consumers today is their constant online and connected status, especially on smartphones. With the rise of payment services on smartphones like Apple Pay, Google Wallet and the like, consumers are now enjoying the ease of payment ability that these technologies provide for them. The resulting growth in the use of these services is putting pressure on the airline industry to implement this new technology. This in turn means that airlines will need to upgrade their existing financial systems and protocols in place in order to accept these new types of payment methods.  

Introducing a Retail Environment

Retail changed 20 years ago when online shopping platforms began to revolutionize the way all of us shop today. And now these platforms have hopped over to the airline industry. As the ages of the common traveler are widening along with the geographic regions that they originate from, the airline market can no longer function in the static, pre-packaged way it has been ever so used to. The new demographics represent a craving for flexibility and choices when it comes to booking flights, which today’s commonplace booking packages, including a seat, checked bag, meals, etc., are simply not applicable to. For this reason, the industry will need to give customers more control over the types of services and flying experience they would prefer.  

The technologies required to provide this retail flexibility are much easier for certain areas of the airline industry to adopt than others, though. IATA predicts that airlines will see 45% of reservations being made through their direct channels by 2021 as they work to implement full retailing platform services in order to sell seats and individualized services directly to their customers.

Artificial Intelligence Will Be the Key to Efficiency

This new customized retail environment is expected to go even further than to offer products on an individualized basis. Now even prices will soon be offered on a customizable basis. Dynamic and personalized offers are one way in which artificial intelligence is expected to be implemented and developed in 2017 and beyond. 

IATA’s well-known NDC initiative is one way this new type of intelligence is expected to enable individualized offers to travel agents booking in future GDS portals. Other start-ups, for example Fairfly and Yapta, are implementing artificial intelligence by using technologies that rebook flights and hotels as soon as prices change before the travelers departure date, giving passengers the best deals possible.

Artificial intelligence is also coming into play in the physical way travel is booked. Now speech and voice recognition technology or ‘chatbots’ are expected to be a major player in the future of bookings. Consumers will no longer speak to humans to book travel, but instead speak to these ‘chatbots’ to convey their booking details. This will all be done as a means to bring airlines or booking portals more human efficiency. 

Can Disruption Be a Good Thing? Let’s Wait and See

It’ll be an interesting year. While 2017 is expected to fly airlines into technologically unknown territory, the possible outcomes of said technological upgrade could potentially be massive. There is no doubt that the industry will be disrupted as a direct result of these upgrades. So what do you think about these changes heading our way? I believe that the disruptions to traditional airline structures will lead to a positive, inevitable and - yes - manageable transition into the modern era of technology. Are you ready for it?

Topics: Aviation, Revenue Management, Distribution


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