Airlines face difficult PSS decisions

The world of airline passenger service systems (PSS) is changing fast. Airlines of all shapes and sizes now face a much more …

The world of airline passenger service systems (PSS) is changing fast. Airlines of all shapes and sizes now face a much more complicated set of options than before.

The decision to switch from one PSS or another is becoming more difficult. As each PSS has become so embedded into the body of the airline, a PSS change (akin to a heart/lung transplant) becomes pretty hard.

Working on the sharp end of this with airlines, I can assure you this can be thoroughly unpleasant. Contemplating two- to three-years’ worth of disruption is often likely, depending on the airline’s size.

What’s more, the choice in PSS tools raises business strategy questions, not just technical concerns. The proper use of a PSS affects how well airlines can implement their brand visions through their IT platforms.

So, it takes high-level decision-makers to bridge the gap between the IT sides and the business-strategy sides.

Fortunately, decision-makers are weighing in. With the pressure off on the cost per available seat kilometer/mile (CASK/CASM) due to low oil prices, airlines have a chance to focus on how to optimize revenue streams.

Airlines across the spectrum carriers, such as Delta, Emirates, Easyjet, and Scoot and others are forging a newest of directions for their business models, and the changes are showing in their financial numbers.

Product differentiation is now critical to the airline C-suites, who see that it’s no longer just window dressing.

Many airlines are breaking convention in thinking about brand and products. A typical goal is to achieve true representations of any particular airline’s value proposition to its customers. Being me too is not longer good enough.

The battlefield for the delivery of airline ancillary products is one that is being quietly fought away from the headlines but is no less that a full-on war. And it’s a pretty complicated war. For the customer airlines, the issue is not an easy one to determine. Traditionally you placed your eggs into the PSS basket and then dealt with that single moving part no matter how good/bad it was. All your decisions cascaded from that first one.

In recent years, the rise of the web front-end and for direct sales made it a little more complicated. The airlines are now playing a multi-dimensional game of chess.

There are essentially four pathways open to a carrier.

1. Build it yourself or rebuild. Example: Emirates new effort that is going on in Dubai and what Delta is doing for itself and several of its vassal carriers.

2. Rely on the traditional solution. Example: you have the legacy hosted PSS providers who are struggling to bring their offerings up to the state of the art. This one-size-fits-everything model used to be pretty good. But along with vanilla comes – well, one flavor. As smaller airlines in the large hosted systems have come to appreciate – their ability to differentiate their product is now challenging.

3. Bring in an external system. Example: Farelogix is probably the most visible but there are many others who address some of this required capability. (Disclaimer, two of our VC startups provide these solutions.)

4. Hybrid solution. Example: A combination of some of the above and a large amount of patching, fixing, and custom work.

For airline information technology (IT) vendors, there is a significant amount of catch-up necessary to deliver the right tools to meet airline needs.

The traditional/legacy solutions for airlines from the traditional/legacy (and very high priced) airline IT providers are not solving the problems and they need to come up a notch (or a whole belt) in their behavior, product line offerings and solutions.

The lines of demarkation around product, distribution, management and revenue are no longer simply defined in the product marketing departments of Madrid or Dallas. Airlines may – and now are – challenging the status quo in how they are treated as customers.

For example, Amadeus is right to assure the Navitaire users of their future intentions with regard to this product line.

Will they treat their new customer base as they have treated the traditional legacy Altea base? Suffice it to say, there is palpable fear in the scrappy newcomer Navitaire community.

Will large hosted systems continue to try and drive change in the PSS via extolling the virtues/attributes of one system over another? If so, that will perhaps prove to be the wrong approach because of a mis-gauging of where airlines’ heads are at.

But these players merely represent the attitudes that apply across the traditional Airline IT Solutions marketplace. The IT providers have a traditional way of listening that isn’t picking up and tuning in to many rising customer worries and priorities, something so called “experts” in this field tend to gloss over.

Listening and responding to your airline customer is as critical as it has ever been.

To maintain their share, airline IT providers will have to update their very traditional way of listening to their customers — through their community models and the rest of it.

One would do well to remember that there is a host of credible software solution providers out there and that airlines are not as special as they think they are.

NB: Frankfurt Airport image courtesy Sean O’Neill.