During a media day hosted recently by Farelogix in the US, Keith Wallis from Air Canada showed a few slides on his airline’s view of the future.
In his presentation, was a “Before” and “After”-type view of how the carrier views the Passenger Service System (PSS).
Wallis presented a different view from the conventional world that has been pursued in airline IT for some time, being that the PSS is at the heart of the airline’s customer operations.
While this will not fundamentally change – you need a PSS to operate any airline – the change from Air Canada represents a view that the one size fits everything model is not valid for every airline and decidedly not for carriers wanting to differentiate themselves from the herd.
The concept that the PSS needs to be one single homogenous solution using common technology with the GDS platform has long been espoused by both Sabre and Amadeus.
Yet the very nature of the dissatisfaction (from a technical perspective) that the airlines have with the GDS can apply to the core PSS systems. If one looks back at the investments made by the airlines over the past 17 years, much of it has been in web-based technologies and associated non-core inventory systems.
This new direction from Air Canada – as seen in part with its relationship with Travelport using the Agencia platform – represents a different approach and perhaps bears some consideration by other airlines who are evaluating their PSS strategies.
As airlines take a different approach to ancillaries and indeed to the marketing of their products, a one size fits all approach clearly causes many issues.
The scramble for competitive advantage between airlines will become more and more acute as they aim for de-commoditization of their product lines. Looking at the new architecture for Air Canada – you can see where it is headed.
First slide represents what it has in place today.
Airlines have been very frustrated with the narrow pipes they are forced to use for intermediary distribution. American Airline’s Cory Garner, speaking via a taped video interview, explained the need for “fibre optic” pipes to provide the best content to all its travel agency partners, particularly the corporates.
He continued:
“A travel agency, a corporate travel agency that uses a GDS on the back end is going to need a fibre optic pipe to get access to the best content that we have. And we want a corporate travel agency to have the best content we have.
“And that means we need to get the direct connect pipe, piped in behind the GDS so that the corporate customers can use that content.”
For the consumer more commonly used to a comparison shopping experience, this change in direction will also cause a certain degree of consternation.
The useful lowest fare shopping tools will become more complicated and very hard to decode for the causal shopper. This is not just a user experience issue either
Airlines will take different approaches to their PSS strategy – some will continue to build solutions which are unique, like American and Air Canada.
Others will segment the PSS into inventory and selling-based systems. Others unsure of how to handle it (typically smaller carriers) will be happier to let the experts of the PSS vendors handle it for them.
Which approach is right for which airline is as unique as the airlines themselves. In the case of Air Canada, we can see that it is pursuing a very clear and independent solution.
At the Farelogix meeting, the Florida-based company announced a new tool for managing all forms of distribution internal and external. Called Airline Commerce Gateway, it creates a different model for how distribution is managed.
Putting itself into that market squarely may change how the GDS replacement service is perceived by the airlines from a technology point of view. This potentially is a real harbinger of a change to the way that airlines want to connect to distribution channels as well as better managing their own internal systems.
I believe that we have to take the view that the days of a homogeneous air transport product and content system is over, as airlines want solutions that will be differentiated and numerous.
The challenge for intermediaries will be how to present AND manage customer based solutions from different suppliers when faced by a plethora of different commercial distribution models.
Travel agencies and airlines are going to have to equip themselves with better access to content/product as well as arming themselves with new tools to deliver value to their users – direct as well as indirect.
PSS, GDSs, as well as third party providers of these tools like Datalex and OpenJaw Technologies, are stepping up their game.
Welcome to the real world of retailing.
NB: Disclosure – LUTE Technologies is a partner of Farelogix.
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About Timothy O'Neil-Dunne
Thanks T for the illuminating thoughts. PSS is the holy grail of Travel Infrastructure in my mind.
Clearly ITA Software thought so as well, they spend a long time trying to build one for the market (and for Air Canada)…In the end the process seemed to weaken them so much they became an acquisition target.
Of course everyone is certain that a 800M acquisition was a SUCCESS for them, but there’s also the book shop example (Amazon) and they haven’t been acquired or taken over. So I think there’s 2 definitions of success.
DISCLAIMER: I don’t much, and I’m sure I’ll get corrected on my opinion.
The holy grail for Airlines is little possibility of comparison shopping so their offerings are incomparable and they can mostly charge what they want. But whether this view will ever come to be is a good question.
Obfuscation has always been a core credo for airlines.
The consumer wants choice – just like his coffee – but remembering the old joke of “If Airlines Sold Paint” – they (airlines) wouldn’t would they!!!
The game today in distribution and airline product management – driven by individual airlines and IATA’s NDC initiative has largely been dished by many conventional analysts up to this point. However in my view that there is a degree of inevitability in this form of change coming is patently obvious. And don’t just take my word for it. Look at the squillions of dollars being spent by many large network carriers such as American,Delta and United to enable this.
Let me be clear, developing PSS systems is EXTREMELY hard. That is also obvious and there are carcasses of companies littering the landscape who have tried and failed even those with a long pedigree of PSS provision. (I would name names but then I might get sued for slander).
What is most relevant about the AC approach is that they have recognized that a fully homogenized system is neither possible nor is it desirable. This approach presents a clear and present threat to both Amadeus and Sabre who have been singing the one size fits everything song for a long time. In my view it is inevitable IMHO – in just the same way that GDS systems can no longer offer a one size fits everything platform – neither can any PSS provider can make the same claim. Just ask any airline who has taken a homogenized platform only to get sticker shock on all the modifications and new development that is required just to maintain their status quo of functionality from the system they just junked.
This is probably frightening to many airlines who have relied on the PSS vendors to give them what they thought they wanted. Savvy airlines recognize that you must have various subsystems and the appropriate inhouse skills to truly manage this process of true distribution management control direct and indirect.
In my view ANY airline who takes the homogenized single platform approach condemns themselves to a similarly homogenized approach to the market. The logic for a homogenized platform just doesn’t seem to be born out After all isn’t DE-commoditization the mission of each airline?
From my experience and observation – almost every airline is unhappy with its PSS and distribution infrastructure. Yet so few are willing to take the proactive approach as represented by AC to addressing it.
In the future – winners will be those who differentiate and move to an internal controlled world. Rejecting the homogenized approach almost by definition must be the way forward. Otherwise a seat is a seat is a seat…
Cheers
Reason why its been dished is basically, because those that are dishing it are right. The GDS systems have pushing 30 years experience of distribution. Airlines do not. Agents had 30 years of retailing travel. Airlines do not. Yet suddenly, airlines know best. They do not.
What they want to do is de-commoditise their product. Very difficult when you consider that air travel is at best, a commodity. Worse, it is a necessary evil that many of us have to endure. As to differentiation, well many airlines are working very hard at un-differentiating themselves. They have managed to make coach class travel pretty much the same all round – cramped seats, passengers treated little better than self-loading freight and lots of really irritating extra charges. The only airlines who are differentiating themselves are people such as Swiss Air, Emirates, Etihad and the like who have done, well …. nothing. You pay a fare and what you get is what you could reasonably expect to get – further- you get treated like a human being. Not exactly rocket science. Funnily enough, most of them seem to make money at it.
Now, these (mainly) North American airlines have already had a pop at agents and taken away commission. That didn’t work. Oh! It must be the GDS systems … I wonder what will be next? If the world’s profitable airlines were in the vanguard of this attempt at change (though I use the word in it’s literal sense), then the whole issue may have some credence. As it stands, there is none.
Why (again, mainly North American based airlines) have problems is because they are simply incapable of looking at themselves and putting their own house in order. We have a problem, it must be someone else’s fault, is the mantra. So, we have this obsessive and inane pre-occupation with trying to convince everyone that a simple change of approach, tech-wise, will fix everything. If you believe that, you are deluded. Tech is purely a means to assist an objective, it is not an objective in itself not can it become an objective.
Revamp staffing levels, get rid of rafts of turgid bureaucratic management, streamline operations. If necessary, get rid of everything apart from the brand and control of operation of the brand. Franchise operations (including distribution). Look to new emerging markets for growth instead of fussing about in mature, stagnant domestic ones…. That’s how these airlines can move forward.
Murray, I know you are right about a lot but I’ve never been an Airline CEO. Selling paint in a Market isn’t too hard, there is elastic supply and elastic demand. Figuring out profit is a question of optimizing cost, managing market share via marketing and maintaining brand value.
Airlines have inelastic supply with Two classes of Demand, Elastic and Inelastic. Business Travellers must travel, vacationers might simply choose not to, or to go elsewhere . Price Discrimination is a fundamental and this is the root cause of the problem. Apart from Sales and Coupons or Volume Discounts no other industry has to address price discrimination as clearly as airlines must. It’s not a simple problem. But…
Technology could help. All of Air Sales today is based on a 30 year old paradigm of the technology available to achieve price discrimination. Dynamic real time market pricing could save us all. But to achieve this you would have to up end the concept of Fares (kill ATPCO), AVL (kill GDS), and consolidator distribution channels (kill Conglomerate Agencies). You’d have to replace this with Itinerary based demand based pricing that is aware of competitor pricing. directly connected and distributed transparently. channels could only receive commission the way Car Dealers do via upfront sales targets. That’s a different Universe than we know now
Not really! If you were to kill everything you suggest and go the way you suggest, then you would also kill business travel. At least, practical business travel. With respect, there is a lot of USA based thinking in all of this. In America we only go (say) from New York to Seattle and back. Given the nature of the USA market, there are more-often-than-not quite a few flight options and a number of airlines on the same route. Thing is , outside the USA, the world is a different place. Many places have a flight, possibly two, a week. There are many, varied airlines involved across alliances and even out of alliances. You have to fit connections across airlines and alliances and so on and so forth. Without the present structure of fares GDS and other systems in place which we have to day, then a lot of travel which I and many other agents, do simply could not be done.
Only last week, I was struggling with Tashkent., Ashgabat, Duschanbe and other ‘stans itineraries. It is not a question of choosing airline A over airline B, it is getting a flight from one place to the other at any price. Even in Europe, LJU to BUD is a bit of an issue. So, what works for the USA does not work for the rest of the world. If the US system wishes to operate differently, fine but do not assume that one size fits all.
All this fuss is focused on leisure point to point stuff. Has to be, by definition. As we are all talking about paint, lets choose another analogy. What we have , here is the supermarket worried about who sells the cheapest baked beans whilst not caring about who is buying the Chateau LaFite Rothschild. True, one will sell many more baked beans, but if I can sell one more bottle of the good stuff then, given my margin, I make more money. If I could only sell the good stuff, I could stop selling the baked beans!
Business travelers do have to travel – at the moment. If the rapid rise in business travel prices goes on (and by that I mean flexible or semi-flexible fares – about half way or more up the fare food chain) then they will look at alternatives – video conferencing, for example. They do not price discriminate that much. If the meeting is in New York at 1000am – then they need to be in New York at 1000 am at a desk ready to do business. You can offer as many free bags, free seats and meals as you like, but if the thing arrives at 1100 am, it is no good. If that person is coming from India and involves a change of planes and possibly alliances, then we have to have the systems we have today in place, in place, to make that travel event happen. If everything changes half way through the trip, then someone like me needs to be there to fix it.
Now if your New Distribution thingy can work the same way as a GDS – or better than a GDS, then fine stop talking about it, produce the system, give us to us coal-face agents to play with and we will see. Put up or shut up, is what we are saying. Just don’t give us all this flannel and GDS bashing when no-one has produced an inkling of what may be in the offing and what they are telling us, scares the hell out of us types who have to manage complex and difficult travel arrangements.
Murray – thanks for this. I will say that wanting and getting are two different things.
My point remains that it is the airlines choice to do determine what they sell, when they sell it, how they sell it and to whom. If we were in a demand side marketplace – your requirements would be more important. But we are not. Successive (IMHO poor) government decisions have allowed essentially an oligopoly marketplace to emerge and that means the suppliers hold the cards.
That the airlines believe that they want better pipes and more capability to deliver competitive products to their markets should not be in doubt. That you have an extreme set of requirements that demands tools is not in doubt. That the GDS is incomplete should also not be in doubt. That we have little or no technology to mix LCCs and Network carriers effectively means that the GDS tool is missing shall we say at least 4 of the top European airlines who are either not participating or have less than full participation.
There is no universal system for search of airline products. It is a compromise. I will grant that from the legacy stand point the GDS is pretty good but let’s not kid ourselves that the GDS is anything but old technology, poor in search and incomplete in content, despite their attempts at confusion (yes the GDSs and Airlines are both pretty good at F.U.D). You (Murray) as a good agent know that and you have a finely tuned and efficient way of getting the data that you need, processing it and synthesizing into a valuable decision set for your clients.
Your arguments are valid in theory. In practice they are likely to fall on deaf ears at the airlines and GDSs alike.
Cheers
Timothy
If airlines think its down to them what they sell and how they sell etc …. then that’s their first mistake. It’s called arrogance. In any event, to argue such would be totally illogical. Of course, my – or rather my client’s – requirements are more important – or should be. If anyone believes anything else, then they will not be around for very long. I am sure the likes of BA, EK etc are not enjoying their success by saying “That’s what you get, Mr. Big Business Traveler, if you don’t like it, tough”.
What one is putting forward is threefold: Firstly, that tinkering around with tech is not going to solve (certain, possibly many) airlines problems and secondly, that whatever is proposed (which may well be very good but all we hear is people talking the talk. I do not see anyone walking the walk… yet)) must be tried, tested and 110% reliable and thirdly that the thrust is to put the most effort into the least rewarding (from an airline perspective)
That there is no surrogate GDS for junk-fare airlines is a problem. I have mentioned that passim ad nauseam. Thing is, we do not need a GDS in the sense that we do for legacy stuff. Junk-fare boys are simple point to point flights, no interline, no MCT involvement. All one needs is a clue as to where to look. To a greater or lesser extent, the GDS do show these flights or you can see them on the likes of Skyscanner, which is a good a crib sheet as any.
I do agree that it is an issue with the GDS that one has to know how to ask the question…. and often read between the lines for the answer.