Four Big Picture questions around airline IT and distribution
As in previous years there is a fair amount of a buzz at the SITA IT Summit around some new products and services for the airline and airport world.
But, often at these events it is about internal IT rather than external technology.
As a precursor to this year’s event, I am taking a look at some of the underlying questions that perhaps are not being answered – such as, is change coming to airline distribution?
I believe that despite the best efforts of GDSs and travel agents to retain the status quo, reformation – if not a slow revolution – is coming and it’s not pretty.
In my view, as a long time participant in distribution, I ask myself whether the proposed reforms are, frankly, enough to bring the industry to even the current state of the art required.
To this end, I have pulled together what I believe are four significant questions that need to be answered.
- Are the airlines serious about real reform?
- Is the anti-reform lobby just about protecting the status quo?
- Can the airline marketplace absorb change (in other words: are they capable of handling it and if so in what time frame?)?
- Will someone else bring change/reform to the marketplace?
This is relatively easy to answer. Yes, the airlines are serious about reform.
IATA’s efforts for NDC may not be going through the easiest of processes, let’s face it – but it is clear that there is a way for airlines to make money from operations in a manner and at a level that even a few years ago would not be seen to be possible.
The airlines have found a way to reach profitability. Despite much of the doom and gloom, recent statistics from the large airlines indicate a healthier future.
Airlines no longer speak of profit but Return On Capital invested. To achieve reform and to make the airline distribution system – well, modern – the archaic message standards and structures need to be swept away.
One the one hand the cash cow of the GDS business should be protected, however both these players stand to see considerable revenue increases from the PSS side of the business.
Amadeus’s cautious support of NDC in public belies their behind the scenes role in being heavily involved with NDC. At the recent working group sessions held last week in Montreal, every single unit had at least one Amadeus person involved.
Headquarters is taking no chances. However the anti-lobby does have some good points that need to be overcome for NDC. So much of the current infrastructure of travel distribution is built on the legacy messaging and workflow standards of the airlines. To change the core is a massive task.
That so much depends on the airline structure is why the GDSs and non-air marketplaces are so edgy about the reformation.
An issue that so far I have not heard anyone ask, let alone answer, yet I believe it needs debating.
Frankly, I think the airline distribution community both direct and indirect is hard pressed to absorb the level of change necessary to bring NDC into the world.
There is a clear divide in my opinion between the airlines who can lead this type of change (driven primarily by the North American mega carriers and by IAG and Lufthansa group) and the smaller, now dwindling group, of full service independent carriers.
With alliances now controlling the majority of airline travel worldwide, the role of the independent or niche carrier is threatened. LCCs of course continue to power ahead but they are becoming more and more like the network carriers.
The legacy carriers as represented by IATA have relied on the GDSs to do their bidding particularly in the creation of standards. This time around, airlines are attempting to go it alone without the full participation of the GDSs.
Striking out on their own and trying to reach consensus in the traditional manner is proving to be quite hard. Therefore, does IATA truly represent the whole industry? Indeed, is it equipped to handle this level of change and get the consensus necessary for buy in from the airlines?
I suspect this is not an answer that will come easily.
The classic elephant in the room-type dilemma. Will change be forced onto the formerly closed world of the airlines? I believe the answer is yes.
The disintegration of the open web into walled gardens has been a recent characteristic that has really taken hold. Are we really able to have a fully open web or must we go through the gatekeepers to these walled gardens.
That Google is all powerful and their might is a very scary concept. The nice face of Google has been replaced by a more sinister and controlling hand on the neck of the Industry.
The “tax” levied by Google through its advertising charges and many forms of revenue generation is really quite spectacular.
That the AGFA world is a different one than the airlines currently exist in will ultimately cause a clash. Some of that friction has already surfaced.
Two years ago at the 2011 SITA IT Summit, Lufthansa Group’s CIO openly questioned the wisdom of any airline giving its data for inclusion into Google Fare Search.
Today that door has already been blown open and many airlines are already participating. So much for the control!
The world of travel technology is one marked by constant change – this time reformation is fundamental and deep. And not a moment too soon.
The airlines have the opportunity to keep some manner of control over distribution, but I believe that that control is quite low. The power of the big four web players dwarfs the ability of the airline community to manage their own distribution.
The tax to be paid in advertising charges will be high and permanent.
NB: Blue sky aeroplane image via Shutterstock.
NB2: Disclosure – author is a guest of SITA which supplied accommodation/travel for the event.
Timothy O'Neil-Dunne is a contributing Node to Tnooz and managing partner at travel consultancy firm, T2Impact. He serves as the lead for the airline, aviation and airport practice. He is also a Co-founder of VaultPAD an accelerator devoted exclusively to travel and travel-related startup businesses.
Timothy was a founding management team member of the Expedia team where he headed the ground transportation and international portfolios, before founding T2Impact in 1998.
He has worked in aviation and travel distribution for more than 30 years, including time with Worldspan as head of technology where he managed international technology services from product to infrastructure.
He is also CTO and deputy CEO of Lute Technologies, a permanent advisor to the World Economic Forum and writes on the T2Impact Blog.