Shift is critical to scrap outdated and clunky legacy systems that create headaches for staff and passengers alike, says OAG.
Travel data specialist OAG has released its comprehensive Travel Tech Report 2023, titled ‘From Old to New, the System Transition in the Airline Industry’, in which it calls on airlines to look beyond their ageing legacy systems and seek out innovative solutions being provided by a range of new tech companies.
“This shift is critical in order to scrap outdated and clunky legacy systems that create headaches for staff and passengers alike,” OAG says.
OAG notes in its report that while it’s evident that there’s a growing momentum in the airline industry to accelerate transformation, recent IT outages suggest that the perceived stability of legacy systems might be a misconception.
“Given this, the timing is ripe for airlines to embrace a new system with a more robust technology stack,” OAG says.
Old versus New: Airline Systems
OLD: An airline legacy system that was created for an older generation of technology users has outdated user interfaces and limited flexibility. Some legacy components in use today date back to the 1970s, making them less functional in today’s industry and presenting a possible risk for data security and IT outages.
The legacy systems currently running will continue to be stress-tested in unprecedented ways, especially with rising numbers of air travellers in the future.
OAG says, “External shocks, such as extreme weather events and labour strikes, will likely lead to more unexpected disruptions of airline operations on a more frequent basis. In turn, these disruptions will demand more agile systems.”
NEW: The digital traveller of today expects immediate digital self-service. A rapidly growing ecosystem of travel tech companies, many of which are startups, aims to own the end consumer via customer-facing mobile apps. Most of these players are leveraging digital technologies, such as machine learning and AI, to serve customers in ways the legacy system simply won’t allow.
Old versus New: Revenue management
OLD: Airlines’ revenue management role is to analyse and forecast the demand for each flight and set prices accordingly. This job involves using complex statistical models and historical data to forecast the demand for each flight and then setting optimal prices for each seating class.
OAG says, “Critics argue that airline revenue management has stagnated and is still stuck in the late 1990s. However, the truth is that it is less about the complacency of airlines and more about legacy systems, data silos, and other challenges making it increasingly difficult for these airlines to stay ahead of the curve.”
NEW: Travel booking app Hopper analyses billions of historical price points associated with flights to accurately predict future air travel ticket prices, often outperforming the forecasting abilities of many airlines, which continue to use classical ways of modeling passenger demand. Lufthansa, in 2019, partnered with Hopper to leverage their AI and machine learning capabilities for more accurate predictions about flight prices.
Other examples: AirAsia reconfigured its tech stack to operate more efficiently by heralding more forward-looking data analysis via its collaboration with Kambr, while JetBlue’s partnership with FLYR Labs has brought a host of revenue optimisation opportunities for the airline.
Also, Azul Airlines has partnered with Fetcherr, another emerging travel tech provider, to pilot demand prediction via Fetcherr’s Algo pricing platform.
OAG says, “Collaboration with such companies can provide airlines with access to innovative solutions and fresh perspectives on revenue management. Startups, especially, are often more agile and able to adapt more quickly to changes in the market, which can be an advantage for the fast-moving airline industry.”
Old versus New: New Distribution Capability (NDC)
OLD: The airline industry relies heavily on complex, deeply entrenched legacy systems, making it difficult for companies to switch to a new protocol like NDC. These complex and long-established systems often form the backbone of airlines’ operations, making it challenging for companies to transition to an innovative protocol like NDC.
The shift necessitates not only a significant investment of time and resources but also demands technical expertise to navigate the complexities of integrating NDC with existing systems.
OAG says, “As a whole, the aviation industry has a natural risk aversion. Given this, airlines remain hesitant to fully move away from the legacy system. This is mainly due to the misconception that said system provides greater stability since it has existed for a long time.”
NEW: The NDC is a standardised data exchange protocol that enables airlines to provide more personalised and dynamic offers to customers. By leveraging NDC, airlines can offer tailored products and services to individual customers based on their preferences and behaviour. In turn, airlines can adjust prices in real-time to maximise revenues.
The introduction of NDC has unlocked massive innovation among GDSs. They have rethought their roles in the distribution process and explored new opportunities for collaboration and innovation.
Flight aggregators such as AirGateway, Duffel, and Verteil have emerged as significant NDC enablers due to their ability to offer multiple integrations simultaneously. These aggregators are relatively new players in the airline distribution landscape, establishing direct connections with both full-service and low-cost carriers (LCCs) as well as GDSs to source NDC, GDS, and LCC offers.
Travel vendors can access this content through a unified API or a prebuilt booking tool.
OAG says, “As the industry navigates this transformative journey, it is essential for all stakeholders to work together to overcome the obstacles that come with change and to fully realise the potential benefits of NDC for the entire travel ecosystem.”
Old versus New: Ancillary Revenue
A new breed of startups is making significant strides in the ancillary land- scape. These firms are focused on perfecting the ‘how’ and ‘when of presenting ancillary products, such as airline seat selection, to customers. They are leveraging technology and innovative approaches to redefine the way these additional services are conceptualised, presented, and sold.
Examples include, Renacen, which has developed an innovative 3D Seat Map. This tool provides a 360-degree immersive view from the specific position of the chosen seat during the booking process. It also offers travellers an enhanced visual understanding of the different cabin classes.
Omnevo, meanwhile, is paving the way for next-level digital ancillary revenue and operations empowerment. Their product suite enables airlines (and airports) to regain full control of their omnichannel retail customer engagement, leveraging the strength of e-commerce marketplaces.
OAG says, “This is a prime illustration of rethinking the ‘when’ and ‘where’ of offering ancillary options, tailoring the delivery to the customer’s journey for maximum convenience and revenue generation.”
