Airline in-house
corporate venture capital teams (CVCs) tend to invest in pure aviation-related
plays—new forms of aircraft like eVTOLs and blended wings, alternative fuels
and power sources like battery and hydrogen, interiors, seat design and other hardware.
But there’s a change in
the air (and on the ground); airlines are starting to see innovation through
the business model lens. They are becoming interested in how they can be more
relevant throughout the entire customer journey, and increasingly it’s their
CVCs who are tasked with coming up with the answers.
As an airline venture
team I spoke to recently framed it, “Everybody on our plane is going somewhere
to do something, so why shouldn’t we have some stake in what these folks are
doing when they get off the plane?”
So, airline CVCs are taking
a fresh look at startups that can help them improve the holistic customer
journey experience. They’re asking, “How can we reinvent ourselves in a way
that makes customers think of airlines across the entire journey, and not just the
flight experience?”
The commercial reality of
aviation is driving this rethink. Airline execs we talk to have long been
challenged by their meager profit margins. When you think about a trip,
airlines represent a big chunk of the spend but they make a pittance from that
spend compared to the hotels, the Ubers, the destination experiences providers,
etc.
Airlines are like the mules of travel, doing the hardest work, fed only scraps.
What can airlines learn from the hospitality industry?
CVCs don’t need help to
figure out operational investments, but for commercial and experiential
innovations they are beginning to take their cues from outside the airline
sector and, in particular, from hotels. This is where Thayer comes in: we look
across travel technology and relevant adjacent spaces, with deep expertise in
hospitality.
We can be helpful partners
in this endeavor, because we're watching these trends and emerging technologies
all day, every day. The hospitality world is also thinking about the guest from
booking to pre-trip to in-trip to post-trip. With Canary and Mews in our
portfolio, we understand how tech platforms can help manage the whole lifecycle,
on- and off-property, pre- and in-stay. This expertise can be repurposed for
airlines as they think about pursuing similar strategies around their guest
experience.
Generative artificial
intelligence (gen AI) is of course a top-of-mind example. Hotels are making
terrific use of multi-modal conversational AI tools to handle guest engagement,
touching everything from pre-stay questions to upsells and ancillary offers to
in-stay service needs. They are also taking advantage of the contextual clues
that LLMs capture to better align their marketing efforts to the right
customers, enabling them to capture a growing share of direct transactions.
Airlines could take a
page from these hospitality-forward gen AI applications to help travelers
identify the best fare product for their trip, more easily navigate airports
and make better use of their loyalty benefits.
Airlines and their CVCs
have a good idea of where they want to end up, how to navigate their internal
organization when it comes to spinning up proof of concepts and understanding
where a given startup could add value to the mothership. But they are less
familiar with what’s happening on the innovation frontline outside of aviation and
can benefit from an innovation partner to guide them through the rapidly
evolving travel technology landscape.
The value of cross-journey data
interoperability
Airlines sit on lots of
internal data, but for airlines to fully engage with customers they also need
access to work with data which falls outside of their systems.
A foundational technology
for inter-operability is a digital identity infrastructure. Airlines and
airports are already collaborating in this area, surfacing significant benefits
from using biometrics and digital identity infrastructure for streamlined
check-in, security, border control and the flight boarding process.
But the end-game goes well
beyond the paperless airport experience and crosses over into the “connected trip,”
putting the traveler in control of the connectivity and enabling them to share
their trip details and profile seamlessly with other providers across their
journey—hotels, transportation, loyalty credentials and more.
Our hospitality and
mobility partners are evaluating this same digital identity technology, so we
have a front-row seat in helping airline CVCs navigate the startups building in
this area. We can connect the dots between the hospitality, mobility and
aviation sectors to identify common use cases and intersecting innovation
opportunities.
Cross-journey data
interoperability can drive a trifecta of wins: increased revenue opportunities,
cost savings from operational gains and a superior traveler experience
throughout their journey.
Final thoughts
Airlines are already
savvy to some aspects of these themes, given their long-standing focus on their
loyalty programs and credit card relationships. As it’s been noted, airlines
are more like “flying banks,” earning more money from their frequent flier
programs than their actual air operations. Leveraging these behavioral and
transactional insights across other aspects of the traveler’s journey can
unlock richer intent signals and uncover valuable collaboration opportunities
that are currently siloed off among the various stakeholders in the value
chain.
Earlier this year Phocuswire reported that only 7% of airlines
had ever invested in a startup,
based on research from TMNT, and that in 2024 more than half the spend
went into sustainability/climate tech. Machine learning and AI got 22% of the
investment, with the focus very much on operational rather than commercial, customer-facing
use cases.
But things are changing.
United Airlines Ventures (UAV), as an example, recently invested in Dfinitiv, a loyalty commerce platform with proprietary
tech that United sees as a way to get more out of its Mileage Plus program and
its Kinective media network. IAG recently announced a relaunch of its startup
accelerator program, backed by a €200 million fund for investment. Alaska
Airlines operates a CVC called Alaska Star Ventures, which invests in both
startups and a venture studio.
Airline CVCs in general are
adopting a different line of sight when looking at investment and innovation.
Pure aviation plays will always be of interest, but there are new ways for their
customers to discover, search, plan and experience travel and airlines want to
get deeper into this new paradigm. Forward-thinking airlines are accomplishing
this by engaging outside their traditional aviation footprint and tapping into
partners with the knowledge required to expand their horizons.