A make-believe airline boardroom was the setting for discussion of issues for legacy airlines, in competition with low-cost carriers, at the recent CAPA Airlines in Transition conference.
Distribution technology was high on the agenda for the fictitious full-service carrier's board, which included Aer Lingus chief Stephen Kavanagh, Amadeus vice president of distribution marketing Decius Valmorbida and Comair chief Erik Venter.
As a starting point the following slide was flashed up to show how far airlines are in their ecommerce journey. Many, such as Ryanair which launched its new website six months ago, will, a year on, be further down the road.
[Click on image for larger version].
But despite the varying digital maturity, what's interesting is how the various executives view distribution technology. For example, what's more important price or state of the art ecommerce tech when competing with low-cost rivals, should you outsource or develop in-house and what of changing consumer behaviour?
Kavanagh was quick to point out it is all about price for the short haul routes where the fictitious airline is competing with low-cost carriers.
"I'm coming from the premise that the competitiveness is driven by price. Even using a digital platform or search engine or merchandising, the consumer is likely to be looking for best prices between A and B. So, unless you're actually relevant in that space, you have a competitive digital product but for a niche segment of the market.
It's avoiding the obvious, unless you are price competitive, meeting demands from a consumer in terms of a value proposition then ecommerce is not going to resolve that problem."
And he added a word on how complex and costly it is for legacy carriers to implement efficient digital platforms when hampered by back-end systems.
Comair's Venter also picked up on this theme saying that the consumer presentation is not the difficult part.
"It's the middleware between your inventory and your consumer face that becomes the really challenging component, where you are going to bring in multiple other products into the same transaction as your flight ticket."
Venter was addressing the issue of whether to keep technology development in-house or to outsource with many seeing it as inefficient in today's fast moving world to keep it in-house.
Unsurprisingly, Valmorbida was a proponent of outsourcing pointing out, from an Amadeus perspective, the annual cost of investing in back-end systems of about Euro 300 million on a community basis.
Outsourcing on the other hand, he said, would be more variable and based on passengers boarded.
Venter was also critical of how inward looking airlines are when it comes to customer behaviour and how the aviation community can't expect consumers to buy air tickets one way and everything else - cars, household appliances, in another.
"The ticket purchase is a small percentage of what consumers buy and that’s the behaviour that is going to determine how they want to buy their airline ticket not the other way round.
"We can’t determine and expect the consumer to say this is how I do it for airlines but behave differently the other 95% of the time. Whether it’s determining the product itself or the distribution strategy, one has to step out of the airline role and see what is consumer psychology and what the retail behaviour is in this market you are operating in. Is their good brand loyalty, is there lifestyle product desirability, or do they simply buy single products, is there multiple price shopping?"
The boardroom discussion was brought to a close with an audience poll on what the airline's distribution strategy should focus on. About half of those gathered felt it should be improving digital properties and performance, 28% said it should be greater use of online agencies and service providers and the remainder split between improving online customer service and selling through our own website and mobile app.
Related reading:
Airline industry chiefs on Uber, Google and distribution generally
NB: Digital airline image via Shutterstock
NB2: Disclosure – author’s travel and accommodation costs were supported by CAPA event sponsor Travelport.