Airline Digital Transformation is something in which every airline in the world must engage. From flag carriers thru LCCs and the new breed of regional airlines and low-cost long-haul airlines, airline digital transformation defines every aspect of how airlines will function in this transforming aviation marketplace.
But what is digital transformation? And what are the implications for airline managers and the C-Suite?
As it touches on every area of the airline, digital transformation means different things to different people. Here are ten critical, actionable outcomes that the airline board and management team can expect from embracing the digital transformation of their airline:
In this article, Conztanz will outline how digital transformation enables all of the above outcomes.
We’ll also highlight some of the key challenges to implementing a digital transformation program… and how to overcome them by overlaying an agile IT solution onto your current IT assets.
Implementing agile platforms for airlines is Conztanz’s speciality.
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Ten key digital transformation benefits for airlines.
Digital transformation has been described as the Holy Grail for airlines. With this multi-faceted initiative, airlines can increase revenue per customer, improve services and reduce costs.
As a specialist in data management for airlines, we’re constantly talking with managers and board members for flag carrying, low cost and regional airlines.
Here are the ten areas of digital transformation that we are most frequently asked about.
#1. Passenger personalization and customization.
7.5% of recipients booked a flight within a month of receiving a personalized marketing campaign.
Our own blog post on using data to improve airline personalization reported on a survey by Sabre and Forbes. Covering 100 airline executives, the results showed that:
61% say customer experience is the primary brand promise.
72% say operations have a significant impact on the customer experience.
52% say lack of technology stops them improving the customer experience.
41% say building customer loyalty is a top priority.
A digital transformation underpins the ability to create effective personalization strategies. According to experts, the three critical stages of airline personalization are to:
Use multi-channel analytics to analyze behavioural data and provide personalized experiences for travellers.
Identify meaningful personalization touchpoints.
However, bear in mind that too much personalization can seem intrusive.
Make sure personalization extends to channels like check-in at an airport kiosk, so the passenger enjoys an integrated experience.
As an example of the potential benefits, one UK low-cost airline created a personalized marketing campaign which was a resounding success.
Through its personalized approach, the airline made its customers feel ‘valued’ by bringing their past travels to life. And the customers loved it.
It generated 1.1 million impressions and 78 percent positive sentiments on social media. Moreover, nearly 7.5 percent customers made bookings within a month of the campaign’s launch. This is the power of personalization.
#2. Increase ancillary sales
Airlines who ‘get’ ancillary marketing earn over $1 billion a year each in extra revenue.
We recently wrote about how airlines can use data to increase ancillary sales – turning their islands of data into a continent of instantly available market intelligence. As part of the digital transformation and using behavioural insights and personalization, airlines will be able to get their share of a market estimated at $67.4 billion in 2016.
Cross-selling and upselling are integral components of any robust commercial strategy and airlines are no different. Passenger loyalty is arguably limited, and nowadays carriers are reduced to quasi-commodity status. Therefore, the need to grow average passenger revenues is imperative.
Ancillary sales will be a key outcome of digital transformation. Giving passengers the power of choice is also a differentiator.
Beyond the low hanging fruit of checked bags and pre-ordered seats, airlines are becoming increasingly creative in generating revenues beyond ticket sales. Just look at the annual statistics from IdeaWorks, to get a sense of the relentless rise of ancillary sales by key major airlines that totalled $67.4 billion in 2016, a 9% increase on the previous year.
Indeed, several airlines make over a billion dollars in ancillaries. Irish carrier Ryanair made £1.3 billion in ancillary revenue, followed by United (£4.8bn), American (£3.6bn), Delta (£2.9bn), Air France/KLM (£1.66bn) and Southwest (£1.63bn).
#3. Customer lifetime value.
Global air travel passenger numbers are set to double to 7.2 billion by 2035
Airlines who are in for the long haul with their customer relationships can use the insights from digital transformation to generate new ways of segmenting customers and of interacting with them.
Treating passengers as individuals is an increasingly tough and data-centric challenge. IATA reckons that the 3.8 billion airline passengers in 2016 will double to around 7.2 billion flyers by 2035.
The investment that airlines make in digital transformation today will be the foundation of the huge amount of data insights required in tomorrow’s market. By analysing the lifetime value of passengers, airlines will be able to make more strategic marketing and customised support plans.
We are talking about customer centricity, we are talking about revenue enhancement and we are talking about cost reduction. And more often than not, these three objectives are conflicting as opposed to collaborating. So instead of just looking at things like volume and overall revenue and market share, we’re going to be looking at metrics such as customer lifetime value.
Digital transformation will create $305bn value for airlines.
The behavioural insights from digitizing the airline will enable marketers to create truly one-to-one conversations with customers.
In the past airlines might have had three customer personas: VIPs, frequent flyers and everyone else. But with real-time processing of customer data from a number of silos, the airline can have smarter, more meaningful segmentations and communications.
Automated processes will also give passengers notifications and updates which are relevant to their context, current flight and flight history.
For example, the business class flyer will receive an SMS update before the flight asking if she wants a vegetarian meal again… and the family travelling with a baby will receive tips on keeping the infant happy.
The scale of this potential improvement is vast. A report by Accenture estimates that digitalization in aviation will create an additional $305bn of value for the industry over the next decade. Benefits to customers are valued at $700bn, as well as reducing the environmental impact of travel and improving safety, security and cost.
#5. Crisis / disruption management.
SMS is the most popular notifications channel for flyers.
Automated communications can also improve customer service and, importantly, take the strain off the airline’s human frontline staff when there is a disruption.
In our blog post on how Real-time Event Detection & SMS Automation Eases The Pain For Airline Passengers, we highlight how the ConztanzONE agile platform can power an automated response to flight delays or cancellations.
These programmable rule-based responses can range from offering a mobile hotel booking – thanks to our partner solution Switchfly – through to automatically booking an alternative flight, simply by replying to an SMS or any other relevant actions.
Airlines will always find themselves reacting to situations like bad weather or industrial action, but automated responses can be an opportunity for airlines to differentiate themselves by reducing the impact on passengers. Whilst other airlines have angry passengers rioting at their information desks, passengers on the digitized airline will at least have a swift resolution to their problems.
In IATA’s 2016 Global Passenger Survey, the three top areas that passengers would like to receive notifications on their flight status and changes (cited by 85 percent); baggage status and waiting times for delivery (60 percent) and waiting times at security/border control (58 percent). They clearly want to receive that information via their mobile devices – 53 percent by SMS text messages; 22 percent via a mobile app; and 21 percent by email..
#6. Partner / channel integration
APIs enable airlines to leverage their flight portfolio.
Thanks to data driven startups, passengers increasingly expect to be able to book their entire journey from within a single transaction. Flights, car hire, excursions, accommodation … the goal is to enable the whole journey to be arranged by visiting a single website on a smartphone.
Airlines can also leverage other companies’ APIs in order to extend their offer. In our blog post ‘Airlines. Monetize Your Relationships With APIs’, we highlighted how Saudia has fast-tracked the launch of an entire holiday package by using Expedia’s affiliate API. This enabled Saudia to offer their customers a database of some 11.5 million property photos and 6.5 room photos from within Saudia’s branded environment.
Once again, taking full advantage of the API revolution requires the digitized airline to have real-time access to multiple customer and flight databases. The ConztanzONE agility platform is an elegant way to overlay those capabilities onto an airline’s’ current IT infrastructure.
With virtual interlining, the aim is to present travellers with simple and accessible flight options across different airlines when booking multiple flights to get to their destination – without the need for a formal partnership between those carriers. What we’re seeing here is increased ‘virtual’ collaboration, enabled by technology…
#7. Insightful business analytics.
59% of airlines plan to invest in advanced analytics.
Digitized airlines can use sophisticated analytics in a number of ways to improve service and cut costs.
- Predictive analytics. Customer insights enable the airline to predict sales propensity at an individual level, and likely income at a corporate level.
- Multichannel analytics track customers through its entire experience through multiple touch points, including call centre, in-app, partners and website.
- Advanced customer analytics identify patterns in individual or group behaviour to add rich insight and sophisticated segmentation to your customer database.
- Big data analytics (as offered by Milanamos) enable airlines to instantly predict potential traffic and revenue from new routes.
- Weather analytics enable airlines to proactively re-route aircraft to, for example, avoid flight turbulence.
The reason that digitized airlines can leverage more out of analytics is that they can enjoy actionable insights because all parts of the business are running integrated data systems with real-time data. At the end of this article you’ll see how the ConztanzONE agile platform is the enabler for ubiquitous, real-time data management.
A recent report by Unisys that surveyed 29 senior airport executives at an Airports Council International Conference revealed that as much as 59% of those surveyed were looking to invest in advanced analytics solutions in the short-term, while 31% percent were already using them. Most wanted to make use of analytics in passenger flow (27 %); airport operations and asset tracking (22%); geolocation and wayfinding (22%); passenger shopping and retail habits (15%).
#8. Protecting brand value.
Digital innovations like NDC enable airlines to control their brand.
A major worry for airlines is that risk becoming commoditized. With third-party apps offering instant price-comparisons or bundling the flight into a ‘total travel experience’, passengers can pay little attention to an airline’s brand.
However, a digital transformation can give airlines the means to recapture control of their brand. A prime example of this is IATA’s NDC initiative. In our blog post ‘How Airlines Can Implement NDC Quickly’ we show how airlines can promote their brand, even in re-seller channels.
The digitized airline can also use integrated data to promote their brand more effectively to customers and encourage repeat business. Many airlines also view ‘social amplification’ as a significant brand opportunity. The next section covers this in more detail.
Airlines want to embrace digital retailing and take back ownership of their customer relations from beginning to end, but to do this they need to transform how they sell to their customers, especially via the agency channel. This means overhauling their current merchandising and ticket-distribution strategies and systems to meet the needs of the various channels available for connecting with their customers.
#9. The path to innovation
Digitized airlines will experience non-stop innovation.
Imagine that your customers became ambassadors for your airline, sharing their experience with hundreds of friends and family on Facebook and Twitter. That’s just one of the countless innovations that digitized airlines can enable.
In fact, in our blog post about airline innovation, we cover how Iceland’s WOW airline has suggested that people with a large social following could travel free in exchange for social reviews. That’s how valuable ‘influencer marketing’ is.
By joining up all the touch points around the business, airlines can introduce exciting innovations such as the AirBand tracker for unaccompanied minors. See story panel below.
And with the Internet of Things (think copy machines through to light bulbs) and Bluetooth beacons in airports, airlines can gather more insights about customer behaviour and deliver increasingly personalized services. Combine those insights with sophisticated analytics and digitized airlines can put their marketing into overdrive.
The AirBand wearable, which is offered at check-in on domestic and international routes, contains a chip that is scanned “at key stages of the journey to trigger text notifications to up to five nominated contacts”. The wearable is compulsory for children travelling alone aged between 5 and 11, but optional for those up to 16 years of age.
#10. Protection against market disruption and profit erosion.
Agile data enables the C-Suite to change direction fast.
Apart from regulatory changes, the competitive environment can change rapidly. In the first half of 2017, no less than 21 airlines commenced operations whilst 12 carriers ceased operations permanently. New competitors or resellers can force airlines to come up with a rapid response in order to either protect their business or leverage new opportunities.
And there’s the changing nature of data itself. Who would have thought even two years ago that Artificial Intelligence chatbots would be answering consumer questions and booking their flights? Our blog post ‘Tomorrow’s Travelers Aren’t Interested In Your Website’ gives an insight into how airlines are going to have to re-think their marketing platform in the near future.
Of course, the basis of meeting these challenges is having real-time access to agile data. It’s the enabler of digital transformation for airlines.
“Quite often, the human brain produces unstructured questions, such as ‘I’ve got a break some time between June and July, and I can spend £1000, where should I fly to?’” says Professor Dimitrios Buhalis, Director of the eTourism Lab at the School of Tourism at Bournemouth University. “But most of our current technology systems don’t deal with unstructured questions; they deal with very structured, data-driven enquiries like, ‘I need to book a flight to Miami next Friday’”.
FAQ. What are the barriers for carriers to achieving airline digital transformation?
Digital transformation is the strategically correct route for airlines to evolve, and unlock their full commercial potential, but it is highly complex and presents enormous challenges to airline management teams.
Here are the answers to some of the most frequently asked questions about implementing a digital transformation.
What are the risks of doing nothing?
The big risk is becoming irrelevant and uncompetitive. Airlines who want to be in business in ten years have to start planning for digital transformation now. Conztanz provides a digital transformation consulting service, so airlines can create a custom roadmap.
Will this threaten our current IT investment?
Airlines are large and complex operations, and their systems are normally entrenched in an IT architecture that is significantly outdated. Data sits in silos across the organisation and therefore severely limits an airline’s ability to adopt a best-of-breed commercial strategy. On the other hand, upgrading the IT infrastructure represents an enormous and prohibitive investment. The good news is that carriers don’t have to throw out the baby with the bathwater. It doesn’t have to. The ConztanzONE agile data platform plugs into your existing IT resources, joining data silos together to enable real-time insights. ConztanzONE also has a growing portfolio of ready-made features, such as disruption management solution or customer analytics.
Read on to find out about our software and consulting services for your digital transformation.
Which airlines are doing digital transformation best?
That’s a tough question to answer. As this article has highlighted, there are at least ten areas where digital transformation can change the airline. In the area of chatbots, KLM is ahead of the curve. When it comes to the Internet of Things, Air New Zealand has made an impression with their AirBand technology. In terms of social leverage, Iceland’s WOW is a trendsetter.
How can Conztanz help airlines plan and implement their digital transformation?
By definition, data and IT resources are at the foundation of an digital transformation. Around that foundation are business processes, employee programs and marketing programs. Conztanz is the engine that powers the implementation of an agile, robust IT platform for an airline’s digital transformation journey.
Airline Digital Transformation: consulting services for carriers.
Airline industry publication Tnooz (see panel below) wrote about our airline survey to see how available airline data is, and in how many silos it is stored. Of the 20+ airlines we interviewed, 46% had their customer data held in between 5 and 10 separate databases.
Enabling real-time access to data from multiple silos to have a consolidated view of each passenger experience is a core skill for Conztanz, and a fundamental requirement for airlines who are embarking on a digital transformation.
Before spending a cent on solutions or new processes, Conztanz can fast-track your digital transformation initiative with four key consulting skills:
- Provide support to succeed in your CRM and digital initiatives around data, from scoping to implementation.
- Define & implement your strategy CRM, Ancillaries, Personalization, e-services, IBE.
- Understand your stakes and launch a pilot for your NDC project.
- Audit your E-commerce architecture.
We have also a strong experience and offer consulting services and other data-related topics for PSS Migration and PNR security projects.
The Conztanz survey confirms this point for airlines, as it uncovers that 46% of respondents maintain between five and 10 traveller data repositories – a key issue as multiple data sources often prevent airline executives from relying on consistent, real-time, end-to-end data with a single, actionable view.
The data is there somewhere, but pulling it out at the right place and the right time is still a major issue – not to mention a constant synchronization challenge across all repositories.
More importantly, this survey revealed which areas have the starkest contrast between what is business-critical for an airline – and – their perceived current state of data access.
On the above chart, the biggest disconnect discovered is ‘End-to-end data’, with a whopping 71 percent. (Note: 96% saw end-to-end data as business critical, but only 25% of airlines interviewed said they achieved it, thus a 71 point gap.
Airline Digital transformation: software services for airlines.
Put simply, the ConztanzONE agility platform connects all your existing data silos into a single framework. The benefits are:
- No need to change your current IT.
- Real-time access to consolidated data
- Enable orchestration of back-end systems, new applications and partnerships to be developed.
- Feed your front-end applications with meaningful, personalised information
- The fast and stable foundation for a digital transformation.
“Designed specifically for the airline industry, ConztanzONE allows a carrier to unchain itself from the shackles of its legacy IT systems and adopt the modern digital way of taking care of their customers. Whether your IT has grown organically or been inherited as a result of mergers, ConztanzONE is the solution.”
Chief Commercial Officer