When you think about it, the first pan-Asian low cost airline alliance, Value Alliance, launched today in Singapore is a pretty big deal in the annals of airline distribution.
One, it’s a world first and shows Asian LCCs ahead of in their innovative thinking and two, it is primarily a technological sales and distribution play that will allow consumers to book in one single itinerary up to eight low cost airlines – Cebu Pacific, Jeju Air, Nok Air, NokScoot, Scoot, Tigerair Singapore, Tigerair Australia and Vanilla Air – from flights to ancillaries.
Campbell Wilson, CEO of Scoot, who spearheaded the project, called the technology developed by Air Black Box “groundbreaking”. Customers will be able to view, select and book the best available airfares on flights from any of the airlines in a single transaction, directly from each partner website.
The key is in the ancillary feature. Unlike typical interline technologies, ABB allows customers to book the full suite of ancillary choices, such as seat and meal selection, variable baggage allowances and other inflight features across all partner airline sectors in a single itinerary.
ABB’s Air Connection Engine (ACE) platform has filed for NDC Certification with IATA and is expected to complete full certification soon.
NokScoot, the joint venture airline between Scoot and NokAir, invested US$1m into Air Black Box to develop the technology. Asked why they hadn’t approached any of the GDSes to develop the platform, Wilson said, “GDS distribution is a necessity but not necessarily desirable. We wanted an Internet-based platform and ABB is built on NDC which gives us a clear advantage to avoic challenges that now exist on interline ticketing technology.
“The existing products do a poor job of ancillary sales and that’s 20% of our revenues and so it was critical for us to develop the technology to facilitate real time pricing without the opportunity cost.”
Patee Sarasin, CEO of Nok Air said, “The opportunity enabled by ABB and the Value Alliance to offer ancillary products through interline channels is a significant benefit over other partnerships, given LCCs typically earn 10-25% of their revenues from such items.”
Scoot, Nok Air and NokScoot are already offering each other’s flights and fares powered by the new ABB technology and other alliance members will follow in the coming months.
“The technology enables us to interface with other airlines within the Value Alliance, including those using different passenger service systems (PSS), to provide a solution to a guest’s travel query – even on routes Vanilla Air may not itself serve to connect Japan to the rest of Asia Pacific,”’ said Katsuya Goto, President of Vanilla Air (pictured left).
Mike Szucs, Cebu Pacific (right) and Ken Choi, Jeju Air – reach beyond home markets
For the airline partners, it gives them reach beyond their home markets. Mike Szucs, Chief Executive Advisor, of Cebu Pacific, said, “Cebupacific.com is our largest distribution channel at home and that will continue. As we go further afield, other distribution channels become more complex and costly and our partners can give us leverage in their home markets.”
Ken Choi, CEO of Jeju Air, said that while Jeju Air was known in its home market, its brand awareness was low in markets abroad and this would allow the airline to reach new customers.
The alliance, which covers 160 destinations, will also offer a collective pool of 47 million passengers (flown in 2015) which means the airlines don’t have to spend that much on meta-search or other customer acquisition channels. “We will still spend on customer acquisition of course but perhaps not as much,” said Wilson.
The scalability of the platform is also an advantage and as mobile adoption grows, it will also allow airlines to scale with changing customer behaviour, depending on each airline’s website and its degree of mobile optimisation.
“The web is our main channel but mobile is growing by the day in the Philippines,” said Sucz.
Nok Air’s Sarasin said that mobile now accounted for 20% of his airline’s business and web business, 40%, “but mobile is growing the fastest”.
You could also say the Value Alliance is a response to the competition posed by the Air Asia Group and its network of airlines but Wilson stresses it’s about the customer proposition – “we are giving customers more compelling reasons to visit our website and make it easy for them to book their flights.”
Of course there are questions to how far and deep the alliance can grow. There are obvious pieces of the puzzle missing – China, India, Vietnam being three key markets – but Wilson says eight partners at launch is a strong foundation for the future and membership remains open for like-minded partners.
There are also questions around what increases in interline business each partner could get, baggage check through, frequent flyer points and Wilson said all these will be explored if they made sense.
“The key thing is educating customers that this is not like the traditional alliance like Star Alliance, this is about sales and distribution,” said Wilson.
The tricky part is also to balance customer expectations and not to load the platform with complexity – for example, offering “Manage My Booking” might be a good feature but would add complexity to the technology.
At the end of the day, Szucs said, “This is about sales and distribution – seamless, one transaction, connecting a multi-leg journey. It’s about offering low cost fares for people who haven’t flown before. We should not load complexity into it.”
