NB: This is a guest article by Janet Titterton, a director at Collinson Latitude.
Despite the temporary truce between American Airlines and some of its GDS providers, the prospect of a breakaway remains a very real possibility.
If one airline succeeds in enticing customers to its own direct connect bookings facilities, other big-name brands will surely follow.
The result? A renewed focus on the customer value proposition.
The potential split between American Airlines and GDS provider Travelport can be seen as a test case for the industry – at least for the big-name legacy carriers.
Inevitably the result could make a radically different world for the airlines, the GDS providers and the customers alike – one which will continue to evolve long after the initial wrench of separation.
In reality it will only be the big-name legacy carriers who break away from the existing GDS operators – meaning a maximum of 20 airlines in an industry of hundreds.
Doubtless the GDSs will then focus on the majority who, while they may be smaller carriers, might be able to get customers to a given destination more cheaply or conveniently than a big-name legacy brand – thereby putting the wider customer value proposition at a premium for the legacy carriers.
From the perspective of a legacy carrier such as American Airlines, it makes sense to try and maximise revenues by cutting out the GDS providers in the short-term and no longer having to pay their fees, but only on the proviso that they can draw enough traffic to their own booking systems.
Success therefore depends upon each airline’s commitment to deliver an appetising package to the customer that will generate brand loyalty and sustainable revenues.
One beneficiary from airlines seeking to ‘go it alone’ is likely to be the traditional High Street travel agent.
Although the days when approximately 80% of bookings were made via travel agents are long gone, they still command a fair slice of the market and doubtless many airlines will target this sector as part of their plans to break away from GDS suppliers.
As a result, competition to generate travel agent sales is likely to be fierce, meaning that airlines will need to review their current customer offering.
So how can airlines achieve this goal of sustainable, maximised ancillary revenues whilst also ensuring that their customers feel a rising sense of value from, and therefore loyalty to, the carrier?
This year marks the 30th anniversary of the first frequent flyer programme and the first step towards airlines truly understanding who their customers are.
Today it is possible for airlines to offer customised third-party lifestyle benefits and offers beyond the travel service, either through complementary offers, such as insurance, or enhanced loyalty programmes, be they reward schemes or subscription-based membership packages.
The closer the relationship between the airline and the customer – through a direct connect bookings facility, for example, rather than a GDS – the greater the opportunity for airlines to market ancillary services to customers at the earliest possible stage in the booking process and also to customise those ancillary benefits being offered.
The airline knows, for example, through basic data analysis that certain customers regularly fly to ski resorts and could therefore offer those customers winter sports-themed loyalty rewards and membership packages.
Even when out on the slopes, the customer is enjoying a sense of engagement with, and benefit from, the airline. With that sense of value comes loyalty: everybody wins.
NB: This is a guest article by Janet Titterton, a director at Collinson Latitude.