NB: This is a viewpoint from Philippe Der Arslanian, head of Amadeus global ecommerce and mobile for airlines.
At the Amadeus Airline e-Commerce & Mobile Conference, held in June, we posed a number of key questions around digital strategy to carriers.
What are the ecommerce and mobile priorities for full-service, leading airlines worldwide? How important is it for them to attract customers directly? What are the biggest competitive challenges facing airlines? What are the digital strategies to win market share and increase loyalty, yield, and revenue?
The survey included more than fifty airline executives representing more than 30 airlines of all sizes and from all regions about their online strategies.
While not offering a complete view of the industry, the results still offer valuable insights into online trends in the global airline industry and carriers’ objectives.
The key findings shed light on how airlines can fulfill the considerable commercial potential of their digital channels.
LCCs pose the key competitive challenge
According to almost half of the full-service airlines surveyed, the most pressing external competitive challenge to their e-commerce activities is posed by online-driven low cost carriers. This figure rises to almost 60% when we also include the respondents who view LCCs as a ‘very important’ challenge.
While OLTAs are not seen as the most important challenge overall, over 70% of airlines view OLTAs as either their ‘most important’ or a ‘very important’ competitive challenge. In addition, meta-searchers are seen as significant competitive challenges by approximately 50% of respondents.
OLTAs and meta-searchers are valuable components of an airline’s distribution strategy, particularly in markets where the airline brand is not well established. However, while conversion rates are often good, airlines’ yields from these bookings may represent a challenge.
To both cooperate and compete effectively with the variety of options offered by these players, airlines need to position the right differentiators to attract, convert, retain travellers, and increasingly expose their digital brands.
Merchandise, mobilise and personalise
Recognizing this ever-increasing and dynamic competitive pressure, the conference’s digital theme articulated around ‘merchandise, mobilise, personalise’, reflects a growing, significant trend.
At the 2012 event, approximately half of the airlines surveyed (54%) viewed the combination of merchandising, mobilising and personalising as their key priority for their online business. That figure has now risen to more than two-thirds (68%).
The combined approach is undeniably challenging. For example, how can airlines deliver personalised merchandising opportunities to mobile users? The 'upsell, don’t upset' approach was already challenging on a website.
Overcoming the difficulties associated with mobile device recognition, small real-estate screens, and promoting merchandising opportunities throughout the journey, while maintaining a personalised experience becomes a critical objective.
Merchandising: Increasing direct traffic is a crucial objective
Almost all of the airlines surveyed (92%) want to increase their proportion of direct traffic, with the vast majority (73%) aiming to increase it ‘significantly’. As two thirds currently capture below 30% of their traffic directly, the potential to grow the direct acquisition channel seems considerable.
The optimal acquisition mix differs between airlines, depending on their acquisition strategy and markets. Airlines need to weigh the benefits of attracting customers directly (which include higher yields and increased brand recognition) against the cost of acquiring new visitors.
A key point here is that if the user experience is inconsistent when landing on an airline website, conversion rates will suffer. Ensuring that airlines’ prices are accurately displayed on promotional vehicles or from third-party sites, for example, contributes to a seamless experience.
Airlines also highlight the need to have scalable, robust shopping solutions as the primary driver to enable their online strategies, not only for domestic but also for rapidly expanding international business.
Personalisation: HTML5 and disruption are crucial
To deliver a seamless, personalised experience, HTML5 is ideal for creating cross-platform, cost-effective applications that are compatible with multiple devices in multiple markets.
Its adoption is increasingly seen as a smart strategic decision: 83% of airlines surveyed emphasise that HTML5 is either ‘mission critical’ or ‘very important’ to their online business.
By contrast, less than 1% of respondents believe that it is not significant.
More than two thirds of airlines also stated that it’s either critical or very important to handle disruption management, either end-user initiated change or involuntary change e.g. due to bad weather.
This is not only to ensure a best experience when things go well but also to take care of travellers when things do not go as expected.
What needs to happen now?
Airlines are clearly taking steps to embrace intertwined mobilising, merchandising and personalising objectives. When considering the evolution of their online business, the airlines surveyed identified enhancing the user experience, increasing yield through upsell and ancillaries, and growing their mobile/tablet business as the three most important priorities.
In order to achieve these aims, while competing effectively with other industry players and increasing direct traffic, some key elements need to be implemented: agility, focus, and strategic alignment both externally with IT suppliers and internally.
In this way, airlines can overcome the organisational inefficiencies and budget constraints described by approximately 70% of respondents as their two most significant internal challenges.
As the Amadeus 2013 Digital Survey highlights, airlines are embarking on more aggressive strategies with a natural combination of objectives related to merchandising and personalising via new rapidly emerging digital touchpoints such as mobile.
Airlines have the ingredients for success in the digital world with a more thorough understanding of their offers and customers’ needs than other retailing players but the pace of change is quickening - and expanding in scope - and travel leaders must respond accordingly.
NB: This is a viewpoint from Philippe Der Arslanian, head of Amadeus global e-commerce and mobile for airlines.