3 challenges for North American airlines that the cloud can solve

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Last month, my wife started looking for inspiration on multiple websites to select a destination for our next vacation. She used Google Flights and other metasearch engines to get an idea of the price range, airlines and airports. After a couple of weeks and several searches she was ready to book our flights.

She went to Google Flights and selected an offer based on the price. She was redirected to the airline’s website to proceed with the booking. Unfortunately, the price shown on the airline’s website was very different from what she saw on Google Flights, and there were no seats available for the dates she had chosen. Needless to say, she was annoyed. She went back to Google Flights and selected an offer from a European airline. This time she had positive results: the seats were available at the price shown on Google Flights. So, she booked our flights with no issues.

This is a typical situation illustrating on one hand, what customers go through regularly, and on the other hand, some of the issues that airlines must resolve in order to provide better service and ensure conversion. After this experience, my wife asked me why Google Flights can provide accurate results for one airline, but not for another. Continue reading and I will describe the three primary challenges facing airlines that I explained to her. In addition, I will share how the cloud can help airlines overcome those challenges.

Challenge #1: The exponential growth of “looking before buying” on online channels

Not so long ago, only the most adventurous travelers would shop online, and look at approximately ten options to book one flight – think of it as a 10:1 Look-to-Book ratio. With the expansion of the digital world, infinite information can be accessed from anywhere at any time. This has changed the shopping habits of travelers that now consider many options before buying a ticket, in fact, the Look-to-Book ratio has grown to 1,000:1.

Because flights’ offers are displayed on multiple channels such as Google Flights, meta search engines, online travel agencies, airline websites, etc., each airline’s central system can no longer cope with the high volume of availability requests yet still provide accurate real-time results. The external websites are displaying cached information, which shows an airline’s prices and availability at a specific moment in time and allows them to quickly process large volumes of requests, but sacrifices the accuracy of the results.

Cloud technology can solve this issue by deploying instances of airline data remotely in the cloud, in all continents, to serve local demand. Availability data is synchronized with an airline’s central system in real time, letting travelers search and shop for offers more efficiently and receive 100 percent accurate results. In the case that I just shared, the airline with different pricing between Google Flights and its website, is using cache to provide availability information, whereas the European airline is relying on cloud technology to provide accurate results.

Challenge #2: Complex maintenance of availability calculators for the O&D business model

As part of the business evolution, North American airlines moved from Segment to the “Origin & Destination” (O&D) business model, and learned that real-time polling is necessary in order to provide availability. As previously discussed, the central system cannot cope with the increasing traffic, even if it could scale up, due to bottlenecks in the infrastructure.

Availability Calculators developed by the GDSs help solve this issue by using real-time inventory data and an algorithm that mimics an airline’s central system. However, a different calculator with a different system is developed, maintained, and operated for each GDS, making the maintenance highly complex and slow. Every time an airline wants to update their availability calculation algorithm, the changes need to be replicated in all the existing calculators at the same time. Because of the different algorithms, versioning, and latency in inventory data feed, it is common to find discrepancies between the calculators and the central system.

A Single Source of Availability (SSA) is what North American airlines actually need. It will eliminate the need for multiple calculators and the discrepancies generated by them. By implementing the SSA in the cloud, the same availability calculation software will be implemented and updated in any cloud availability instance. Live inventory data will be replicated on all the instances in real time, resulting in perfect accuracy, faster response time, and reduced maintenance and hosting cost for airlines, thus, profitability will be positively impacted.

Challenge #3: The differentiation of airlines’ offers from their competition

Just as my wife did, thousands of travelers use Google Flights as a starting point for shopping, which makes price the most relevant differentiator. This hits a pain point for airlines as they struggle to convey all their value and quality to the end consumers. To de-commoditize their offers, airlines need to differentiate, personalize and expand their product portfolio with improved time to market.

In response to this need, IATA with the NDC (New Distribution Capability), and IT providers with merchandising platforms, promise to enhance the user experience. First, by helping the airlines visually explain the quality of their offer, allowing customers to understand what they are buying and what each ticket class offers. And second, by offering the right product and “à la carte services” to the right customer at the right time for the right price.

Creating a wide product offer in cache-based systems is not the best option, because it doesn’t accurately reflect an airline’s sophisticated revenue management policies, and it hinders merchandising and personalization capabilities. The cloud allows the application of dynamic revenue management strategies in real time, and it’s the most viable enabler for merchandising platforms as more intelligent algorithms are needed to answer shopping requests.

The cloud gives NORAM carriers the ability to respond to a large number of shopping requests, enjoy the same availability across channels, and create differentiated product offers while applying revenue management strategies within a competitive market.

How can your airline select the best IT partner for moving to the cloud?

I’ve discussed how the cloud helps airlines address three key challenges they face in improving conversion and creating greater customer satisfaction. But what criteria should an airline use to select the best IT partner for making the transition to the cloud?

  • Look for an IT provider that offers the flexibility to deploy their solution in any cloud platform, either public or private.
  • Choose an IT company that can fully manage, operate, and implement cloud solutions.
  • Partner with an IT company that has proven expertise in the field, along with the financial and human resources to support you.

The cloud powered by Amadeus

Amadeus has proven results from its first cloud solution: Amadeus Airline Cloud Availability. The solution was released in production on July 2016 for a top European airline. So far, they have increased bookability from 76 percent to over 96 percent, their availability accuracy to 99.9 percent, and it takes only 150 milliseconds to synchronize changes from the inventory database. Furthermore, if the demand requires it, Amadeus can set up an additional box in an average of only one hour.

 

Let the cloud help you take your airlines’ revenue to the sky!

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