4 months ago
 

To innovate and survive, airlines need to stop flying buggy whips and beating dead horses

We get it. Airlines want to be cool. They want to be down with the kids. They want to be seen as innovative and revolutionary.

We’ve heard this six dozen times in the past three weeks alone.

The most recent example was at IATA’s Annual General Meeting in Cancun, during a panel discussion between the following:

  • Bryan Saltzburg, senior vice president and general manager for TripAdvisor‘s global flights business
  • Gillian Morris, founder and CEO of Hitlist
  • Christoph Mueller, chief digital and innovation officer of Emirates Group
  • Jeremy Wertheimer, vice president of engineering of Google

It’s a familiar song with the same refrain: the airline industry was once an innovative industry.

The dawn of jet age was a global revolution on the scale of steam engines replacing horses and automobiles marking the demise of the trusty buggy whip.

How did an industry which relies on navigation manage to go so far off course?

The latest theory is that the airline industry was simply too good at what it did for its own good. It’s plausible.

Google’s Jeremy Wertheimer put forth this notion, saying:

“I think the industry has been cursed by the greatness of the past generation.

“It was the first industry to put in electronic distribution systems to have a way that you could buy product around the world. That was tremendous.

“Yet, it then becomes hard to get away from that.

“Now, when the table stakes are raised, we are limited by the existing systems and the way we have been expressing information since the very clever way they were put together 50 or 60 years ago.”

We’ll call this the “information technology as buggy whips” theory of airline devolution. It leads to airlines apologizing for Mr Bean unplugging the main switch, etc.

At the end of the day, airlines made considerable investments in that HDCAII (horse-drawn carriage as interface infrastructure). Not just initial investments, but ongoing investments.

They have not enjoyed enough profitability over the past two generations to leave the carriage behind.

Now, even as they recover their finances, they cower to investors, stick to the familiar territory of cost-cutting, and find themselves on the outside of the digital revolution looking in.

They’ll hold meetings, wondering where they went wrong, and beat dead horses to reassure themselves that they can still catch up.

But can they? Or, more importantly, will they?

Emirates’ Christoph Mueller is skeptical.

“I believe in 15 years we’ll have two different kinds of airlines.

“There will be one breed who have turned the corner because they were able to drastically re-write their entire business model in a more customer-centric way, address certain elements of the value chain of today, maybe give them away to somebody else who can better deal with it, in-source other things which have been outsourced so far.

“That’s the first category of airlines: the lucky ones. The rest, they will all work for Jeremy.”

Mueller is trying to be controversial, but his point is academic.

While airlines debate digital at its most basic level, while they look at their growing wallets and still can’t find the budget for “carriage” upgrades (or back-up power units), the hip and hungry kids offer new sales and distribution channels which build consumer habits.

Airlines are alienating themselves from their customers.

By letting others develop smarter search, intuitive interactions, prediction algorithms and artificial intelligence – marveling at it all – airlines are not just passing the torch on innovation, they are handing over their treasure chests.

As Mueller says:

“The competitive element goes far beyond the borders our current industry. The airline industry is about to compete with Apple and Spotify. That is the truly disruptive element.

“The consumer is the transforming element. The user experience will be imported from other industries. That’s completely new to airlines and that’s the wake-up call that our industry is facing.”

Saying and doing are two very different things.

Lots of airlines recognize a threat from this rift in their personal relationship with the consumer, from the gap between their processes and consumers’ experience day-to-day.

Some have taken steps to close the gap, but few are organizationally agile enough to pivot or scale.

Wertheimer describes it as a form of stagnant reliability:

“Sometimes we’re limited by that intermediate level that has been there for a while doing a good job, being reliable—as things in the airline industry have to be—but being a bit limited.

“Perhaps even more than the technology, it’s just the way of thinking..because it’s always been the way things have been done.”

Of course, there’s another possibility: familiarity builds contempt for customers.

Airlines know that they are the only game in the sky. They’ve been happy to stick with the status quo. They focus their energies on virile urges to destroy each other so they can make that extra penny and rule the world.

Despite the talk, they see themselves as commodity transport services carrying cargo, both material and human.

Too many fail to understand that they are far more. They are lifestyle. They are aspirational. They are hospitality. They are tech.

At the same time, airlines are burdened by corporate cultures of over confidence, dragged by the same “rules and procedures” mindset which keeps the aviation industry safe.

They take for granted procedures will also keep their businesses secure. This fosters inflexible thinking throughout the organization.

As Hitlist fFounder and CEO Gillian Morris says:

“Airlines like to think they’re innovative, they like to say they’re innovative, but from a developer’s perspective, I can integrate a payment system in 30 minutes, but I can’t tap into an airline API without months of negotiation and custom development of code – that seems pretty crazy to me.”

It’s seems crazy to the others, too.

Trip Advisor’s Bryan Saltzburg adds.

“Airlines, in many ways, get in their own way at the pace that they’re able to make a decision and move.

“Whether it’s staff infrastructure, whether there are so many stakeholders it’s really hard to create alignment, but it doesn’t seem like the pace matches the technology and implementation pace that we really have.”

But while the outsiders smile and shake their heads at that backward crazy uncle the airline industry has become, one or more of them are licking their chops.

They will keep going to conferences and sounding alarms on themselves. They are glad to do that, sure that airlines will listen, even ask for a lift, but never act independently.

That’s the tech sector’s own overconfidence. It’s an Achilles heel that airlines may want to put an arrow through quickly, if they’re ever to show ‘the new kids’ their true worth.

Airlines need to leave the buggy whips and dead horses behind, and ponder the real nature of the business: value what they know and who they know. Don’t give it away.

They should stop placing all their bets on which mare will collapse first. They need to pivot their business models to earn loyalty, instead of selling miles.

They need to do the impossible and navigate these new skies with customer satisfaction as their compass.

Or airlines could become tech firms’ preferred transport services providers.

As the kids say, whatevs.

Share on FacebookTweet about this on TwitterShare on LinkedInEmail to someone
 
 
Marisa Garcia

About the Writer :: Marisa Garcia

Marisa Garcia is a guest editorial contributor. She has covered travel technology, design, branding, and strategy for leading publications, including Aircraft Interiors International Magazine, APEX Magazine, AirlineTrends, and Travel+Leisure. She also shares industry insights on her site Flight Chic. Fly with her on Twitter.

 

Comments

Your email address will not be published. Required fields are marked *

  1. Ron Verweij

    Was talking to Raymond from Airlinetrends and we both concluded that the winning Airline of the future is the best all in one Media, Hospitality, Retail, Restaurant and Transport company! I all these roles digital will drive and enable their transformation but the big challenge is their organisational DNA change!

     
  2. Maksim Izmaylov

    Marissa, check out my article on the state of affairs in the travel industry. I believe the free market will decide who’s going to win. https://www.linkedin.com/pulse/travel-industrys-invisible-battle-maksim-izmaylov

     
  3. Doug Hyslop

    I’ve read and reread this article several times and all I can get from it is whining about the current state of affairs with some ethereal verbiage about possible futures. There is not one solid solution being proposed.

     
  4. Ole Mortensen

    It goes back to the time when the Airlines were in the technology front and because of that had the RIGHT kind of people. Most of the people designed and programmed the existing GDS and knowing some of them I can vouch they were brilliant. However they “left” the airlines for the GDS and are now mostly retired. The airlines of today think they are know technology but do not have the gut to “go back” becoming at the front of technology. It is much easier to pay the 66$ or whatever and relive the dream having been the first and best decades ago. Good article.

     
  5. Martin Cowley

    Let me summarise the Professor’s response to the article. I hate the gds. I didn’t always- I actually made a decent living there for a while- but I do now. And I won’t waste any opportunity to have a go. I won’t let the facts get in the way of my story. I won’t proof read my response for typos ($66 booking fee?!) I’ll just have a rant at the ‘trolls’ and hope that some of it sticks. This particular rant looks like it was written after a ‘well oiled’ flight, a long lunch or just a long, tiring day. Whatever. There’s no value in any of this stuff. The Professor should ‘get real’ and use his considerable experience to suggest practical solutions that airlines could use to transform their incredibly complex and expensive wholesale operation model. Solutions that don’t include short term levies and gouging. Solutions that don’t include endless cost cutting and stripping benefit after benefit from loyal, disenchanted customers.
    Solutions that don’t include wishful thinking about ‘digital retail transformation’ (I have no idea what Mr Mueller was trying to say!) etc etc. Marisa’s very thoughtful and thought provoking article deserved a much more considered response.

     
  6. Timothy O'Neil-Dunne

    I love this business… it is full of half empty folks on the one hand – let’s call them the incumbents. And then there is the half-full folks – let’s call them the outsiders.
    Both are wrong!
    The “Empties” are operationally excellent and concerned about pack ’em in ship ’em out. Something airlines do REALLY well. The “Fullers” are starry eyed and cannot understand what was so blazingly obvious when they were in Thailand with their significant other – why the “Empties” cannot see that with just a few small changes they could regain their former glory. And then there are the nasty Trolls who live under the bridge and challenge any change with “whose that… ” you know the rest. Except the Trolls are very real and are companies who make a lot of money from the “Empties” and their desire for no change. Well boys and girls its time for a real change. It is time to break free of both the “Fullers” and the “Empties. It is time to recognize that Technology is both an enabler and a hindrance.
    So what could be done?
    FIRSTLY – lets stop with the stupid ways tech is priced and budgeted. (Not likely but bear with me). Charging $66 a sector as GDSs do is just bad for business. Both the model and the price of bad.
    SECONDLY – its time to stop assuming that the safe path comes from a company based in Dallas, Madrid or Langley (which is really a very nice town).
    THIRDLY – can we just be realistic and use the same technology that the rest of the world uses? I am so sick and tired of seeing really simple problems solved with bespoke software – and from companies who would not survive in the real world.
    My company really doesn’t want to develop new “stuff” but it has no option but to do so because all we have to work with is legacy technology built on top of stupid business decisions (most of which are decades old). If one more airline technology person talks to me about “agile”, I truly will just barf.
    GET REAL people. As Marisa notes – we just need to move on. In my personal opinion we are not flogging dead horses but dead Mastodons. And we really do have to stop that.
    Cheers
    Timothy

     
 
 

Newsletter Subscription

Please subscribe now to Tnooz’s FREE daily newsletter.

This lively package of news and information from Tnooz’s web site provides a convenient digest of what’s happening in technology that drives the global travel, tourism and hospitality market.

  • Cancel