Airline Digital Transformation is revolutionizing the aviation industry. In recent years we have seen an impressive wave of digital innovations across the sector. From flag carriers to LCCs, from the new breed of regional airlines to long-haul specialists, the airline digital transformation opportunity is being grabbed with both hands.
While the most innovative digital airlines are charging ahead, there’s still time for other industry players to catch up.
So, what is an airline’s digital transformation? And, what are the outcomes for companies that implement digital transformation programs?
In this guide, we look at the top 10 critical, actionable outcomes that the airline board and management team can expect from embracing airline digital transformation:
Customer-facing outcomes from the digital transformation of airlines
In this article, we’ll explore what an airline digital transformation involves, and see how it enables all of the above outcomes.
We also highlight some of the key challenges involved in implementing digital transformation programs, as well as seeing how to overcome them by overlaying an agile solution to your current IT assets.
What is digital transformation in airlines?
Let’s start with a definition. According to CIO.com, a digital transformation “marks a radical rethinking of how an organization uses technology, people, and processes to fundamentally change business performance”.
An airline digital transformation is not just about modernizing your software or migrating back end systems to the cloud. Instead, it’s about taking a new look at how your airline could incorporate the latest hardware and software into its processes to better serve its customers, generate more value and become more efficient.
There is no single ‘route’ along which airlines must transform digitally. Every actor in the aviation sector will find different tools and technologies which match their needs and goals. ‘Digital transformation’ has sometimes been criticized as being a nebulous and vague term. And in a way it is; because there’s no blueprint for digital transformation, every company can decide how it applies the concept to its business.
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10 outcomes from an airline digital transformation
According to a McKinsey survey, 8 in 10 businesses have implemented at least some kind of digital transformation project in the past 5 years. Whether your airline is relatively advanced in terms of digital transformation, is just starting out or has made no changes at all, the playing field is still relatively level. Indeed, airlines that are relatively ‘behind the curve’ can benefit from the experience of more advanced airlines.
Nevertheless, the longer you leave it to instigate airline digital transformation, the harder it will be to catch up with the leaders.
To begin understanding the process of digital transformation in airlines, we have compiled 10 benefits and outcomes that we see arise in airlines which make the move.
#1. Better Passenger experience thanks to personalization and customization
15% - increase in revenue for airlines that offer personalized offers
A digital transformation underpins the ability to create compelling personalization strategies. The three key markers of airline personalization are:
Making sure customization extends to the appropriate channels and is managed in all channels - like check-in at an airport kiosk - so the passenger enjoys an integrated experience.
Take Emirates Airlines, for example, whose personalization project involved a detailed analysis of customer experience enhancements, feedback, and segmented personalization.
After studying some 2 billion user journeys on its website over four years, Emirates was able to continually fine-tune its customer offerings. This helped deliver a 6% uplift in revenue and a 1% increase in revenue per customer.
#2. Aviation’s digital transformation is helping boost ancillary sales
Airline ancillary revenue is expected to leap to $109.5 billion in 2019.
Ancillary sales are a crucial outcome of an airline digital transformation and a differentiator for the brand, giving passengers the power of choice. By using the most powerful and cutting-edge tools for sales and marketing, airlines can enhance their ancillary sales enormously. And, the benefits are huge.
Inflight shopping, upgrades, additional luggage, and pre/post-flight services are just some of the opportunities for airlines to generate ancillary sales. According to the analysts at IdeaWorks, this market reached $109.5 billion worldwide in 2019, an 18% increase on the year before.
Offers such as additional checked bags and pre-ordered seats are just the ‘low hanging fruit’ here. Airlines are becoming increasingly creative in generating revenues beyond ticket sales – with everything from in-flight VR, to online shopping which means purchases are delivered to the passenger’s hotel or even meal delivery services in airports.
And it’s worth the effort. In 2018 ancillary sales accounted for almost 11% of all airline revenue and several airlines made much more than that – the most successful airlines here include ViavAeroBus (48% of revenues), Spirit (45%), Frontier (43%), Allegiant (41%), Volaris (32%), Ryanair (32%) and Jet2.com (31%).
#3. Customer lifetime value.
Global air travel passenger numbers are set to reach 19.7 billion by 2040, more than double today’s number
Airlines who are in for the long haul with their customer relationships can use the insights introduced by airline digital transformation – including data sciences, machine learning, and analytics techniques - to generate new ways of segmenting customers and of interacting with them.
And all this data can be very powerful when it comes to understanding and enhancing customer lifetime value (learn more about CLV here). By analyzing the lifetime value of passengers, airlines will be able to make more strategic marketing and customized support plans.
#4. Improved customer support with digital airlines
Airlines with a better customer experience grow 5x faster than the average
The behavioral insights from digitizing your airline will enable marketers to create truly one-to-one conversations with customers and amazing travel experiences. In the past carriers might have had three customer personas: VIPs, frequent flyers and everyone else. However, with real-time processing and correlation of customer data from a number of siloed and legacy systems, the airline can have smarter, more meaningful segmentation. And that means more relevant, personalized communications.
Learn more about this topic: Airline digital transformation in customer relationship management
Automated processes can give passengers notifications and updates which are correlated to their travel context, current flight and flight history.
For example, in the past whenever a customer would call an airline contact center they would have to keep repeating their reason for calling to different people – and become very frustrated in the process. However, an airline digital transformation could revolutionize the way that customer relationship management works by bringing all data about the customer into one screen. That would help customer service staff resolve issues faster and make customers happier too.
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 are another differentiator for digital airlines. The most cutting-edge carriers who use automated communications 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 specific travel data platforms such as ConztanzONE can power an automated response to flight delays or cancellations.
Programmable rule-based responses trigger:
Airlines will always face uncontrollable situations like bad weather or industrial action, and automated responses can be an opportunity for airlines to differentiate themselves by reducing the impact on passengers.
While 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 2019 Global Passenger Survey, the three top areas that passengers would like to receive notifications about include:
They want to receive that information via their mobile devices:
#6. Partner / channel integration
APIs could help unlock $1 trillion in value for the travel industry.
Thanks to data-driven startups, passengers increasingly expect to be able to book their entire journey within a single transaction. Flights, car hire, excursions, accommodation - the goal is to enable the whole trip to be arranged by visiting a single website on a smartphone.
Airlines can also leverage other companies’ APIs to extend their offer. In our blog post ‘Airlines: Monetize Your Relationships with APIs’, we highlighted how Saudia had fast-tracked the launch of an entire holiday package by using Expedia’s affiliate API. This enabled Saudia to offer its 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 easy way to overlay those capabilities onto an airline’s’ current IT infrastructure.
Learn more: read our introductory blog on airline API’s
#7. Insightful business analytics
Advanced analytics led to a 15% annual revenue boost at one airline
Digitized airlines can use sophisticated analytics in a number of ways to improve service and cut costs.
For example, as part of United Airlines’ digital transformation, the company shifted from a ‘connect and analyze’ approach to a ‘collect, detect, act’ system. The airline used big data analysis to factor in 150 variables on each customer profile to generate personalized offers – which led to a 15% increase in revenue.
Digital airlines should leverage more from analytics so that they can enjoy actionable insights. This means that all parts of the business are running integrated systems with real-time data.
#8. Protecting brand value.
Digital innovations like NDC enable airlines to control their brand.
A major worry for airlines is that their service risks becoming commoditized. With third-party apps offering instant price-comparisons or bundling the flight into a ‘total travel experience’, passengers may 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. By using the new digital technologies available through the NDC protocol, airlines can promote their brand, even in re-seller channels. The NDC allows airlines to enhance their marketing, branding and create unique customer experience on travel agency partner websites and booking platforms while also learning more about potential customers. This allows them to enhance their offering and improve the customer experience.
Learn how it works: read our blog introducing the NDC
#9. Airline digital transformation creates a virtuous cycle of innovation
Digital airlines 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 benefits that digitized carriers can expect to experience from airline digital transformation.
In our blog post about airline innovation, we look at the ways that Iceland’s WOW airline invited people with a broad social media following to travel free in exchange for social reviews. That’s how valuable ‘influencer marketing’ is.
And with the Internet of Things, tools like Amazon’s Alex or Bluetooth beacons in airports, airlines can gather more insights about customer behavior and deliver increasingly personalized services. Combine those insights with sophisticated analytics, and digitized carriers 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 traveling alone aged between 5 and 11, but optional for those up to 16 years of age.
#10. Digital transformation for airlines protections against market disruption
Agile data enables the C-Suite to change direction fast.
In a market as competitive as the airline industry, digital disruption is a serious threat to any business. In 2019 alone, no less than 23 airlines closed operations down permanently, while at least 10 new airlines were launched. 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. Ultimately, those airlines which fail to digitally transform can only expect to become victims of disruption.
And there’s the changing nature of data itself. Who would have thought even five years ago that Artificial Intelligence chatbots would be answering consumer questions and booking their flights? Of course, the key to becoming more agile is to have real-time access to data. It’s the enabler of digital transformation for airlines.
These are just 10 of the most direct outcomes of implementing an airline digital transformation. In the next section, we look at some of the practical issues around doing this.
What barriers are preventing airline digital transformation?
Digital transformation for airlines is, strategically speaking, the best route for airlines to evolve. Digital transformation programs will help the aviation industry unlock their full commercial potential. However, 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 significant risk is becoming irrelevant and uncompetitive. Airlines who want to be in business in ten years must start planning for digital transformation now. Conztanz provides a digital transformation consulting service so that carriers 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 organization and therefore severely limits an airline’s ability to adopt a best-of-breed commercial strategy.
On the other hand, upgrading IT infrastructure represents an enormous and prohibitive investment. The good news is that carriers don’t have to throw the baby out with the bathwater.
Instead, by using data platforms designed for the airline industry, like ConztanzONE, a bridge between legacy systems and new systems easily plugs into your existing IT resources. This helps join data silos together to enable real-time insights.
ConztanzONE also has a growing portfolio of ready-made features, such as disruption management solutions or customer analytics.
Read on to find out about our software and consulting services for aviation digital transformation.
Which airlines are doing digital transformation best?
As this article has highlighted, there are at least ten areas where digital transformation programs can change the airline.
For example, Lufthansa is recognized as being a leader in the use of AI, Air New Zealand is at the cutting edge of using augmented reality, while AirAsia has made big leaps in the use of facial recognition to improve the customer experience.
For more inspiration: Read our blog on examples of airline digital transformation
How does Conztanz help airlines plan and implement digital transformation?
Data and IT resources are at the foundation of a 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 data platform for an airline’s digital transformation journey.
Aviation digital transformation: consulting services for airlines.
In 2017 we conducted a survey with airlines about the availability of airline data and the silos they keep their information in. Of the 20+ airlines we interviewed, 46% had their customer data held in between 5 and 10 separate databases.
Things have progressed since then but it is still not so easy to get real-time access to data from multiple silos and have a consolidated view of each passenger experience for most airlines. Nevertheless, this remains a fundamental requirement for airlines that are embarking on a digital transformation.
Mastering data airline data is Conztanz’s core offering to the industry. Before spending a cent on solutions or new processes, Conztanz can fast-track your digital transformation initiatives with its travel data platform and/or consulting. The followings are an example of fields where we can help your airline’s digital transformation:
We also have strong experience in consulting services for PSS Migration and PNR security projects.
The Conztanz survey confirms this point for airlines, as it reveals that 46% of respondents maintain between five and 10 traveler 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.
Aviation’s digital transformation: software services for airlines.
When we created the ConztanzONE travel data agility platform, our ambition was to create tools that connect all your existing data silos into a single framework and provides a 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 and running its business. Whether your IT has grown organically or been inherited as a result of mergers, ConztanzONE is the solution.”
Chief Commercial Officer