Q&A: Amadeus on the changing face of airline distribution

The airline distribution landscape is long overdue an overhaul.

Old technology has held the industry back and hampered it in its drive to sell to consumers in today's online world.

Cloud technologies are viewed as the way forward with the global distribution giants have all announced large-scale cloud migration in recent months. Sabre is working with Google while Travelport has announced its partnership with Amazon Web Services.

Amadeus, meanwhile, announced its tie-up with with Microsoft in February 2021 to migrate its services to the cloud - a process estimated to take from three to five years.

In a Q&A with PhocusWire during the Amadeus Altitude 22 event, Decius Valmorbida, president of the company's travel unit, discusses where the Microsoft partnership stands, as well as how Amadeus is ditching the old, transaction-based treatment of customers in favor of a new, traveler-based approach.

Amadeus is talking about strengthening the core and fully reengineering of the airline portfolio - what does that mean?

It all starts with two very simple requests from the traveler. They would like [flights] to be more sustainable and would like the customer experience to be better. When we analyze this a bit more ... we get into the foundations of how the airline industry has been built.

To make aviation more sustainable, it means looking at everything: engines, fuel routes, the whole infrastructure. And how do we design a customer experience that is better? Decades-old processes need to be brought to the 21st century by giving travelers power and control through their mobile phones and not through layers and layers of people and desks and collaborating entities. So that’s where we’re at, and it’s a journey.

To reengineer the airline portfolio, what do you have to do?

Up to this point, all processes, all systems were based on a transaction. The traveler is going to fly, comes to the counter and it’s as if it is their first time ever traveling with that airline. Every time you make a purchase, it is a different process.

Here we’re moving to: You are a customer, a long-life customer of an airline. What is the information I have about you, and how do I manage you through the entire journey? Whether they’re doing a connection or have come from a 40-minute taxi ride or have spent five hours in the lounge ... probably their mood is very different. How can you detect all that? Because the processes are not ready to recognize you first as a traveler and, second, what your journey has been up to that moment.

The processes are not ready to recognize you first as a traveler, and second, what your journey has been up to that moment.

Decius Valmorbida - Amadeus

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You’re moving from a PNR - which is the foundation of the industry, it’s a reservation, a transaction - to an order, which is something very similar to what you have at other retailing companies. It’s very different thinking, and it ends up being traveler-centric, not transaction-centric.

What do you have to do to your systems, your core tech, to make this a reality?

Many things. The number-one thing is, how do I make my core tech real-time? We’re moving from systems that talk to each other - some of the processes are real-time, some are batch. It has to be a world on-demand; it has to be on all the time; and those services need to react in milliseconds, because at any given moment someone is going to give me a request. So, that is a massive architectural change. That’s what we’re doing together with Microsoft, this move to the cloud and making our applications - which are software as a service, and our technical architecture - cloud-enabled.

Moving to the cloud is not only getting a box that was running in your own storage room and saying, “Let’s put that same box in someone else’s storage room.” Rearchitecting the application for systems to behave on-demand, real-time, open, with agility - that’s what is cloud enablement, and that’s the journey we’re on with Microsoft.

We as Amadeus also need to surrender some of the control over how our applications are built for our customers. For good reason and for stability reasons we have always kept tight control of those applications, meaning for any changes, we’re the ones doing them to guarantee they’re up and running and no one did something that created a problem on the neighbor’s systems.

So, how do we allow for every airline to make the changes they want on the system while providing the same security, stability and performance? It’s a brand-new way of operating that the cloud enables. It enables the virtualization of those environments and allows everyone to have their own sandbox to play in. This will as well create a lot more responsiveness from the airlines in stitching together their different systems.

A third change is around databases and processes. When you’re saying you need to change a process or a database from PNR to order, in systems you’re essentially changing the very foundation of what a system is. The moment you change the way the database is organized, the moment you changed the process - essentially, you’re rebuilding the system from scratch.

So, how profound is this for Amadeus? Essentially, we’re rewriting from scratch what is going to be the new airline retailing system of the future. We’re going to use the components and the experiences we have to make that as fast as possible, but the reality is it’s going to be a brand-new system.

Some of the same themes - retailing, agility, simplicity - continue to emerge. What has really changed? Why are we still talking about those same things?

Especially on the system landscape, you have had groups of airlines that did not share the same architecture. So you get a group where every website of every brand has a different provider, different customer experience, different approach to how the customer is going to be treated.

Just starting from this new point of design - where you need to convince different brands into converging into a single platform - is already a big challenge. So, what has changed? First, the convergence of systems and various heterogenous applications and everyone sharing the same is not enough. It’s not only saying we’re all going to share the same. Why didn’t they all have the same? Because they were afraid that it would create a problem of time to market.

Essentially, we’re rewriting from scratch what is going to be the new airline retailing system of the future.

Decius Valmorbida - Amadeus

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Now six, seven, eight, nine, 10 [airlines are] asking for the same system, and to do changes, we’re going to be queuing up our changes and losing flexibility. So, how can you provide both - change everyone to the same system platform with that system platform also allowing for rapid change individually? You can only do that if the vendors have redesigned their platforms in a way that allows the airlines to do that.

Are airlines now ready more than before?

I think they’re hungry for it. Not only because the customer wants it, but because now there’s tremendous internal pressure around people connecting with the mission of the airline. How do you attract employees back, or in some cases, employees that did not belong to the travel industry before? They need to be proud of the work they are doing.

Second, if there’s going to be another pandemic, am I going to be able to provide a future where people are going to be able to do that? And third, [you need to solve for labor issues with people doing more with less].

[Both internally and externally], everyone is expecting transformation to take place. We’re also looking at ourselves in the mirror and saying let’s solve some structural problems that somehow growth was masking us from.

Yet, we’re pretty much back to growth already, so how will that stand in the way of this?

Even though we’re in growth mode again, which for many is about going back to where we were in 2019, everyone is doing it with less resources. This idea that digitalization is not going to happen because the good old days are back is impossible because you don't have the same amount of resources.

And you have every board room, every management that went through this crisis saying, “What if there is another major disruption in the industry?” We need to be more resilient than we were. … Those interruptions of growth can happen, and we need to be able to cope better.

What else do you hear from airline leadership?

First of all, it’s how can you explain to investors that you require this major tech investment and overhaul and promise the returns. All of a sudden, you go into this program, which costs hundreds of millions of dollars - how do you make the case for that when you have so many other urgent needs for capital to be deployed? You need to renew your fleet and invest in sustainable aviation fuel; there are a lot of capital demands in a marketplace. And capital is becoming more expensive as interest rates rise, so projects have to have better returns.

We’re used to big programs with the money upfront where you see the benefit four or five years down the road. Those days are gone. People are saying, “Start delivering, and what can you show me in six months that produces some tangible results to show to my investors? So that once that’s done, they say here is a little bit more capital?”

In two years’ time what will the industry be talking about?

We will be talking, not about the impediments the industry has, but more about the concrete examples of the investments we have done and the exciting things we have done for clients. Today, an entire conference is still dedicated to all the impediments to us being able to do what customers want, but customers are saying, “What are you going to do for me?” Hopefully in two years we will be able to say, thanks to the investment we did two years ago, we can now deliver A, B, C kind of service.

*Reporter's attendance at the event was supported by Amadeus.