2017 predictions: Airline technology’s transformational year

What we have witnessed in 2016 was a clearing of some of the fog around the world of airlines and the technology …

What we have witnessed in 2016 was a clearing of some of the fog around the world of airlines and the technology that powers them. The airline industry has just come off of a four-year winning streak of profits powered by controlled expenses and lower fuel prices.

Some airlines have taken the opportunity to re-make themselves. Others have been quite happy to take the profits and store them up for the rainy day when the inevitable happens that the good times end.

2017 will be a challenging year. Fuel costs are on the rise. Labour costs are on the rise, technology platforms have not come down in price. Surprisingly the airline industry still spends less as a category of their revenues in technology that other industries.

So here are my thoughts on 2017.

For technology that now must come to the fore, we are seeing some clear trends emerge. For the near-term, the New Distribution Capability (NDC) is finally gaining traction. Despite all the challenges – its utility is now spreading beyond the use as a distribution tool.

Ancillaries are starting to move mainstream. But challenges remain. The core passenger service system (PSSes) and global distribution systems (GDSes) have not changed and their abilities to provide modern digital selling platforms. This fact still haunts the whole industry with legacy challenges.

Airlines — particularly the full service network carriers — are still stuck in their mode of protecting their complex (and fragile!) technology platforms. Low-cost carriers (LCCs) often have better and more flexible platforms, albeit at mostly a lower scale.

Admittedly, the lines between the definitions of each model have become blurred. The majority of network carriers either have paid ancillaries or are planning to introduce them. Many LCCs are now looking to participate in the global distribution networks. Against this backdrop, how can technology provide winning answers?

Artificial intelligence, machine learning and deep learning will start to find their way into technology platforms. Previously there were some minor uses of these technologies in analyzing massive data sets that the airlines have.

What’s new is the emergence of lower-cost services and the ability to integrate these into real-time solutions. Expect chat bots (both speech and text) to emerge in many areas of airlines for customer service and offer interaction. We can expect consumers to be able to see relevant offers in a far more friendlier (conversational) fashion.

Expect the importance of the consumer platforms and the cost of interacting with them to become more of an issue that’s front-and-centre for the airlines.

This change of mindset will be technology-driven. Airlines are going to become unhappy with their technology platforms when those platforms are proven to NOT be agile enough to engage with the likes of Facebook, Google and other gatekeepers.

One challenge that will emerge for airlines will be the realization that there has been a concentration of power in the intermediary marketplace. This will cause them to consider how much value the GDSs will provide when ~80% or more of their indirect business is going via four or five global travel management companies and just two leisure channels.

But the cost of interacting with the leading metasearch companies now loosely inside the same family is going to be a big worry.

The airlines have struggled and failed to establish viable alternative channels of distribution. Just because the GDS channel can look to be cheaper than say Google or Kayak doesn’t make it any the less palatable for the supply chain. Just because the GDSs keep repeating that “Google is bad so therefore we are good in comparison” doesn’t make it so. (See “Are GDSs fit for purpose? A checklist“)

Another trend I foresee is the escalating cost of maintaining interfaces to the traditional platforms. The challenges come from several directions: The cost for the airlines of being able to maintain concurrency and control via the GDSs which need pre-filed fares. The increasing cost of the user community to maintain the interfaces to legacy technology forms PLUS the cost of migrating to newer forms of interface is perplexing.

The lack of simplistic ways to distribute any product to any channel in real-time is going to weigh heavier on the airlines next year. In the past the focus was on the commercial constraints. Increasingly it will be on the operational and technology costs and the attendant constraints. Look for alternative solutions to emerge that solve in whole or in part this challenge.

The challenge of mobile is that, while apps can do more, the market is well and truly saturated with them. Getting an app onto a customer’s mobile device is now, in general, prohibitively expensive and almost useless as the lack of frequency of use makes it redundant.

Consumers typically have between 27-30 apps they use on a regular basis and they spend a lot of time on them each month – nearly 40 hours. However travel-based apps hardly figure in any of the usage figures.

One way is to engage with a frequently-used service. This is how ClearTrip in India has increased its “brandshare” of app usage.

Expect other platforms to follow this lead, with Expedia and Google jumping in already. Airbnb and Uber are already there and this is going to put further pressure on the traditional brands. Rome2Rio is making real money. TripAdvisor is experimenting with activities and restaurants to boost usage. Priceline will likely bring OpenTable into their other brands, boosting repeat and local resident usage. The industry will watch if Hopper fulfills its 2017 promises.

Mobile is also powering a move into non-traditional outlets. Several Chinese airlines participated in Singles Day (11/11) and some have privately reported record sales through non-traditional outlets. We can expect to see more of this type of activity in the coming years as Singles Day-type events such as Black Friday spread throughout the world.

From a pure technical perspective the use of responsive and adaptive web technologies has not made the interaction work well. To this end I am predicting that the next generation of PWA – Progressive Web Apps to make a big mark and be able to merge the environments between mobile and large-format systems.

The very high cost of maintaining apps and websites separately and the dearth of reasonable tools has made this proposition very attractive. Google is making this very easy. I also see that the use of component applets (often called widgets) will also make the re-use of code and its management a lot easier.

Application programming interfaces (APIs) will continue to come into view. For a selection of good APIs, go to Mashery and search for big name airlines like British Airways, Lufthansa, and IATA. (Startups are using free APIs from Skyscanner for Business and others.) Integrating APIs into a variety of applications will be a trend that emerges,  but it will take time.

Airlines will still struggle with the concept of open access to their precious products. There are a lot of lessons to be learned from different industries.

Sometimes I think the industry players such as airlines and GDSs just need to get over themselves!

One area I am tracking very closely is financial fulfillment and settlement. The current systems are both expensive and also difficult to use. Newer systems are enabling lower costs (for airlines the cost of credit-card processing is within the top three expense items). We are seeing a number of next-generation payment systems emerge which can challenge the traditional players. Some are even creating their own vehicles.

Allied with this is the whole area of security. I still maintain that payment card industry (PCI) compliance is a giant joke inflicted on all industries. I believe that blockchain will be the technology to watch that can improve security of the transactions. Bitcoin as a form of payment is still too scary but the technology behind it is well worthy of further looks as a way to secure the sensitive and complex transactions in travel.

Finally the area of consumer data and privacy will become a hotter topic in 2017. Within Vaultpad we have created solutions that let us store customer data in “places” commensurate with the users country of origin regulations. This will become an increasingly complex challenge to deal with.

So there you have it. I hope you have a safe and prosperous 2017. Look out for some of these trends and let me know if you think I am right or if I get it wrong.

NB: Image by Lavrenteva/BigStock