Airline industry chiefs on Uber, Google and distribution generally
Recently, IATA chief Tony Tyler and Travelport chief Gordon Wilson attended CAPA event and discussed what the industry would look like in four to five years. They believed that the “Uber-type effect” could be learned by the industry when selling its services, in the next few years 80% of all engagement between airlines and customers would be on mobile and the back-end Passenger Service Systems needs to be changed.
Anyone in the room at a recent CAPA event would be forgiven for thinking they were in a time machine that had projected them back three years in airline distribution.
The future of travel might have been the topic but the Google threat was raised, Uber got air time, customer focus was discussed and of course, mobile.
This was a session with relative industry heavyweights - IATA chief Tony Tyler and Travelport chief Gordon Wilson – on what the industry would look like in four to five years.
Tyler summed it up quickly with a famous quote from Bill Gates about overestimating what will change in the next two years, and underestimating what might change over the course of the following ten.
So, on that basis, it’s hard to make predictions so it was really up to the participants to try and make a bit of sense of what’s currently going on.
For example, take Uber and how the on demand trend might disrupt air travel. Tyler says the aviation industry is different to taxis.
The sector’s safety regulation alone is “so deep, so complex and so carefully and deeply ingrained in the whole ecosystem that it’s at a different scale to what happens at Uber.”
But, where he would like to see the “Uber-type effect” is in how the industry sells its services. Conspicuous by its absence here was any mention of the NDC, the technology standard being developed by IATA.
Wilson chose to comment on wider distribution trends saying that in the next few years 80% of all engagement between airlines and customers would be on mobile – not just the booking but the whole experience.
“A lot of CEOs are realising that the main way customers are engaging is through a mobile app. We’re not going to talk to passengers until they are actually on the plane and even then, they’re going to order a drink or other services using the app.”
Another distribution trend related to mobile is payments – cash out, electronic wallets in. Wilson says $170 billion of payments today are made in cash but “that’s going to be a thing of the past relatively rapidly.”
Who knows your customer better than you?
Inevitably, the Google (and Facebook) question reared its head – does it keep you awake at night, the executives were asked?
Wilson pretty much dismissed it saying the customer owns the customer and will choose to go to whoever provides the best experience, content and relevancy. But, where the data becomes powerful is as companies really begin to mine it effectively and show the customer they recognise them, know what they like and can offer something contextually relevant.
And, as to whether Google wants to disintermediate everyone in the travel ecosystem? Wilson says airline chiefs are concerned about creating a monster in Google or Facebook and becoming dependent on them for traffic.
“Airlines understand this which is why omni-channel and omni-source content is a key part of any airline strategy. It is not all going to go direct, indirect or via Google.
“You’re going to balance those things off continually, or what you are describing has the potential to happen and then Google will decide what price the airline will pay to get its core traffic.
He adds that Google is not interested in running the kind of infrastructure that a GDS does but wants to focus its effort on the user experience.
“Even a company like Google struggles to get all the technology resources it wants. It is not as omnipotent as it sometimes appears. It’s not without fault or the only game in town. It’s a super bright company but has no desire to back into the business.”
Moving forward, gradual progression or dramatic change in the airline-customer relationship?
It will be “fast evolution”, says Tyler, with customers making far more of the decisions themselves based on the information they have access to. That means airline systems need to be able to cope with the demands of today’s customers.
“We’re still operating with legacy IT systems that are ill-suited to cope with the Google-age demands of our customers.
“We’re a long way from the kind of integration, of both the systems and sales practices, that you need if everything is going to work the way we all dream it will.”
Wilson points out that it’s the back-end Passenger Service Systems that are the biggest issue and where change needs to take place.
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