With passenger numbers set to double over the next 20 years, the aviation industry will need to keep up with the demands of an
increasingly connected and tech-savvy traveler.
The latest update to the International Air Transport Association
(IATA) 20-Year Air Passenger Forecast anticipates a 3.5% compound annual growth
rate (CAGR) for the air transport industry resulting in passenger numbers as
high as 8.2 billion in 2037.
IATA’s forecast also shows an increasing shift eastwards, with
the center of gravity moving to markets such as China, where most consumers are
mobile-first technology users and have already shown a preference for
alternative payments methods and quick, reliable, convenient transactions.
These consumers are eager to explore the world, but their digital habits mean
that technology, as a tool to simplify travel, has become even more critical.
A new generation of
We are witnessing a new generation of distribution that
offers fundamentally different ways to purchase. Concurrently, initiatives like
IATA’s New Distribution Capability (NDC) are enabling the industry to transform
the way air tickets are sold to travelers, by allowing for integrations with
more product differentiation and access to fuller, more dynamic air content,
independent of the traditional GDS.
Alongside this, many other platforms have
been built offering APIs which connect deeper into airline distribution data,
making transactions transparent and ticketing simpler.
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Adopting the NDC standard presents opportunities for
airlines to leverage their APIs and provide value to customers to sell more
than just essential travel components to their customers: transport,
accommodation and destinations.
For example, Finnair is now capitalizing on NDC
for advanced destination retailing, giving customers an opportunity to book
experiences in Lapland, both through travel agents and on mobile through an
Skyscanner continues to see the benefits of engaging with IATA on NDC adoption and being the first to achieve Level 3
certification in 2016. Skyscanner is also the first global search site to join
the new NDC Exchange, which allows API connectivity between airlines and travel
sellers and facilitates shopping, booking and servicing workflows, including
the cross-selling of ancillary services among airlines.
Through direct booking, airlines are effortlessly converting
browsing to booking with an average 20% conversion uplift (50% in mobile
conversions) in addition to a 100% uplift on ancillary revenue. Ultimately,
products and services that are packaged well, presented in the right context
and offered at the right time, are more likely to add value to the traveler –
and consequently airlines capable of achieving this are more likely to benefit.
We want to bring airline products on
Skyscanner’s site as close to the direct experience as possible, with carriers
controlling their products and brand while benefiting from our traffic, and
audience, across a range of devices. Skyscanner delivered revenue growth in
its direct booking program of approximately 600% year-over-year in the second
quarter of 2018.
Next year, the adoption of NDC by airlines will continue to
accelerate with the effective use of NDC standards to introduce new products
and offers to travelers gaining traction.
If we start with consumers, the global shift from desktop to
mobile is undeniable with travelers increasingly looking for seamless mobile
experiences, native payments and world-class customer service. With 43% of
bookings in China completed on a mobile device, this and other markets in Southeast Asia are well ahead of the curve, setting trends across the digital economy
that we see diffusing into global markets.
Alternative payments will only grow in the future, as we see a closer relationship between a person’s identity and their mobile device.
IATA predicts that there will be as many as 8.2 billion
air travelers by 2037, and the bulk of that growth will come from the Asia Pacific
region where consumers have mobile-first habits. This makes it critical for
airlines to embrace mobile platforms from travel search to bookings and
throughout the entire journey.
And markets around the world are showing a growing
preference for mobile platforms. As Deloitte reported in its 2017 mobile
consumer trends update, mobile devices have now become an intrinsic part of
life in economies around the world, with more than 90% penetration. Smartphones
serve in place of computers for many consumers in developing economies with an
average 82% penetration.
This year progress has been reported by many airlines. For
example, Pegasus reported a 90% compound annual growth rate in mobile booking
share (both through the app and the mobile website) over the past three years.
Airlines have to consider how these tools are rewiring consumers' transaction
habits - impacting UX design as well as workflows and back-end systems.
Faster transactions across multiple platforms
Consumer payment habits are evolving at a fast pace, with a
shift in favor of mobile payments in some markets, particularly China thanks to
rapid smartphone adoption. Airlines have already made the shift to accept
alternative payments like WeChat Pay, Alipay and Apple Pay and are reaping the
Finnair became the first airline to team up with Alipay for
in-flight shopping and payment in January of last year and reported a 200%
increase in onboard sales after adopting Alipay.
Alternative payments will only grow in the future, as we see
a closer relationship between a person’s identity and their mobile device.
Moreover, continuous demand for enhanced security and
identification systems has led to increasing adoption of biometric data
encryption devices such as Face ID. Research from Gartner predicted that by the
end of 2020, businesses that invest in new authentication methods, such as
biometrics, would experience 50% fewer identity-related security
breaches than those who didn’t.
Most digital wallets use better authentication
methods to confirm purchase intent and identity than credit cards, and
two-factor authentication adds a layer of security, which is not omnipresent
across all card issuers.
Finally, most alternative payment methods carry lower fees
for merchants, which certainly reduces the cost burden of non-cash
transactions. For airlines, there is much to gain beyond a boost in bookings,
including a cost reduction in credit card, transaction fees and fraud
How will voice and AI impact tomorrow’s travelers?
Accompanying a shift to mobile is a greater reliance on
voice assistants. According to U.S. analytics firm ComScore, 50% of searches
worldwide will be carried out via voice by 2020.
While the use case is still in
its infancy, some airlines see voice as an integral part of the consumer’s
digital ecosystem and want to be present. Air Canada’s Alexa skills offer
customers flight status information, fare quotes, mobile app tips and general
travel information on what documents are required as well as ticket polices,
TSA PreCheck availability and even baggage carousel information.
We may see a spike in voice travel search activity as more
voice-assist units are sold and more Gen Z consumers grow into the travel
market. Travel search has to be ready to adapt.
There are still a number of questions on whether voice
search might become a significant opportunity for search and booking or simply
a tool for travel management, but Air Canada’s use case hints at promising
Tomorrow’s travelers are impatient by nature. IATA’s latest
Global Passenger Survey shows that most millennials prefer the speed and
efficiency of mobile apps and self-service processes. They want greater
automation from the industry, with baggage drop processes that can be completed
in 30 seconds or less and wait times at baggage claim that don’t exceed five
These desires are not unreasonable, and the process of making travel
arrangements should not take longer than the journey itself. The technology to make travel search faster
and more relevant already exists, but it needs to be applied in a way that
Artificial intelligence may carry a big share of the burden of simplification, by
processing data on consumer habits that help narrow search. One key to search
simplification is designing for context and relevance. As Alitalia’s chief commercial officer, Fabio Lazzerini, said during IATA AIRS: “Information is
important, but relevance is more important. I need information at the moment or
at the interface that I need it."
While AI might accurately predict consumer preference, travelers
may not necessarily feel that they have been presented with the option most
suitable for their needs. Matching data
and historical preferences to search results is important, and Skyscanner has optimized
its product to help travelers with their choices while not compromising on
being a marketplace where travelers can see results presented in an unbiased
Removing choice is not necessarily good for consumers: For example,
true personalization would be giving a single result based on a search. For
this reason, we can apply smart techniques in helping the traveler make a more
informed decision, but still leave the decision with the traveler, rather than
take it away.
On Skyscanner, a widget can be found at the top of our
search results which, based on an understanding of travel trends, could serve
suggestions to the consumer. These range from showing all direct flights
options on a particular route, if we believe the traveler exhibits preference
for direct options, or suggesting alternative dates to travel to save money if
we think the traveler is more flexible with their dates.
That’s just scratching
the surface of what is possible, but again - AI is needed to help us refine and suggest,
but not impose and reduce or remove choice.
Over the next 20 years, delivering seamless travel to 8.2
billion travelers will rely increasingly on the open exchange of information,
simplified bookings, easier payments and smart applications that encourage
passengers to manage their own travel.
*The original version
of this article is available from Skyscanner here.
About the author...
Hugh Aitken is senior commercial director at Skyscanner