Industry transformation and securing competitive differentiation top of agenda for airlines.
- May 12th, 2006
Over 300 senior airline executives and industry figures met on 26 and 27 April at the fifth Amadeus global forum for airlines, Horizons 2006, to discuss the transformation of the industry.
Speakers at the two-day forum provided insights into major challenges and trends in the airline industry, such as the evolution of low-cost carriers, the impact of Internet and the best practices required by this media to get the best out of it, the growing importance of the Middle East and the rise in co-operation and alliances. The speakers, drawn from across the airline sector and different geographic regions, included Abdul Wahab Teffaha, Secretary General, Arab Air Carriers Organisation, Terry Jones, founder and former CEO, Travelocity, Marc Cavaliere, Vice President, Sales and Distribution, Spirit Airlines, Gregory Taylor, Senior Vice President, Planning, United Airlines, Dave Gregori, Director, Information Technology, Star Alliance and Stefan Pichler, Chief Commercial Officer, Virgin Blue among others.
Frédéric Spagnou, Vice President, Airline Business Group, Amadeus said: “This forum has been a real success in terms of bringing together airlines and industry figures to think about how to do things differently and for the longer term, share ideas and learn from each other about what is possible in what is one of the world’s most competitive sectors. Today, it is more important than ever for airlines to clearly differentiate themselves if they are to succeed in delivering profitability and increasing revenues.”
The Horizons airline global forum raised key issues in airline IT, e-commerce, distribution and content.
Airline IT: traditional segmentation replaced by convergence to a new model? The challenges for low-cost and full service carriers?
Several speakers challenged the future of the traditional segmentation between low-cost and full service carriers. This is placing pressure on airlines to urgently find new ways to differentiate in the market. Rapidly changing business models and commercial strategies have brought the role of airlines’ IT systems under increased scrutiny. The consensus from the forum was that legacy passenger service systems1 may not be flexible and scalable enough to support the new marketing strategies of airlines today.
Marc Cavaliere, Spirit Airlines’ Vice President, Sales and Distribution, talked about how today’s travellers are expecting services offered by the full-service carriers at low-cost prices which is changing the dynamics of the market. He referred to this as morphing to the middle. The focus at Spirit Airlines is on technology that keeps costs down and is flexible whilst at the same time delivers on both today’s needs and those of the future. Following indepth analysis of the drivers of traditional low cost carriers, Cavaliere came to the conclusion that there were no “sacred cows” for them.
Stefan Pichler, Chief Commercial Officer at Virgin Blue reinforced this approach. He referred to Virgin Blue as a new world airline focused on minimising complexity but open to increasing costs where it has a direct impact on generating significant new revenues. He suggested that carriers in this segment can have the best of both worlds. According to Pichler, the market will increasingly see airlines becoming part of domestic and regional alliances and becoming more customer-focused as opposed to route-centric. He argued, future strategies must hold true to the vision of cost leadership but delivering commercial sustainability now requires greater agility and a willingness to do things differently from the past.
From the perspective of full service carriers and alliances, Dave Gregori, Director of Information Technology at Star Alliance suggested that alliances need to embark on even greater collaboration and integration if they are to maximise benefits in terms of increased reach, revenues and cost efficiency. He reinforced the point that the adoption of the common IT platform by Star Alliance, often referred to as the deal of the century, represents the realisation of a long term strategic goal, driven by the effort to better serve the customer, significantly lower IT costs and dramatically increase the speed of delivering new products to market.
E-commerce: can airlines inspire the customer?
Terry Jones, founder and former CEO, Travelocity, inspired delegates to think differently about online channels. He called on them to look to other sectors such as the retailing industry to better understand how to create a user experience which delivers loyal customers and increased revenues. The priority for airlines must be to simplify their online presence, give customers choice, measure and evaluate customer habits and fully integrate marketing, IT and retail functions to maximise benefit. He called on airlines to try repeatedly, test and not be afraid of failure.
Jérôme Destors, Commercial Director, Amadeus e-Travel, explored some of the tangible business benefits seen by airlines embracing e-commerce. The airlines using Amadeus’ new online solutions have seen an increase of 8% in their yield - which is the average ticket price - and their online revenues jump by 30%. Their end-users are attracted by the increased flight options and keep returning to the convenience of an improved user experience.
Distribution and content: revolution or evolution?
The second day of the conference was almost wholly focused on distribution and content. A panel session was held with representatives from GOL Linhas Aéreas Inteligentes, United Airlines, KLM and Cathay Pacific.
Continuing to align distribution strategy so that it continues to deliver enhanced profitability and provide the capability to upsell and generate brand awareness is still one of the industry’s biggest challenges despite significant progress. The speakers had a no-holds barred discussion about the need to transform distribution strategy. The strategic imperative for distribution through the GDS was not contested, just the way it is delivered and priced.
Amadeus recognises that the distribution needs of airlines have significantly changed: “We are committed to getting this right,” David Doctor, Director, Airline Marketing and Sales, Amadeus said. “We need to provide airlines with distribution solutions that deliver the value Airlines expect at a price that reflects the value they receive. It is imperative we are both distribution and technology agnostic, allowing airlines to choose a distribution strategy that is right for them.” He also explained the Amadeus roadmap that focuses on enabling the airlines to differentiate their offer through the GDS in a more efficient way, and to find the same marketing reactivity through the GDS channel as they have today via the Internet.
1. Including inventory, sales and reservation and departure control systems.
Notes to the editors:
A world-leading technology and distribution solutions provider, Amadeus delivers unparalleled expertise to the travel and tourism industry, including leading-edge solutions that cover airlines' unique business needs, independent of their size, business model or market reach.
Amadeus' pioneering new-generation Customer Management Solution (CMS) portfolio, Amadeus Altéa CMS, serves both network and regional carriers. The Altéa portfolio, based on a pioneering community platform concept, enables improved operational efficiency and increases revenue. The portfolio consists of the Altéa Reservation (Sell), Altéa Inventory (Plan) and Altéa Departure Control (Fly) solutions.
Low Cost Carriers have alternative Customer Management Solutions - Pioneer CMS and Results CMS by Amadeus - based on adaptive technology that provides robust options that easily adjust to their evolving operational requirements.
Further complementing these integrated IT solutions is the Amadeus e-Travel Airline Suite that includes the Amadeus e-Retail engine, which powers more than 120 websites of over 60 airlines.
Amadeus also offers a range of standalone IT solutions, including: revenue integrity and automatic ticket reissue tools, in addition to full e-ticket interlining and ground-handling management technology services.
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