The Commercial Imperative for Airline CCOs
This article is part of the Airline Retail Transformation Series, covering key topics on airline Offer and Order Management. Learn why airline executives should embrace commercial autonomy, how AI is transforming revenue management and airline retailing, and how to reap the benefits of airline-led offer creation, optimization, and distribution outside of the GDS.
As more and more airlines progress on their retail transformation journey by disentangling themselves from legacy technology, the ability to know each potential passenger and create the right, but also revenue-optimal, offer is critical. This is the commercial imperative, and airline CCOs must take steps today to prepare and seize revenue opportunities tomorrow.
Accelerating airline commercial autonomy
It’s THE recurring theme at industry events and one that keeps many commercial executives up at night. How do we move away from the constraints of legacy technology? What are the building blocks of an offer and order management system? What should the end-state look like? How do we transform our organization and break down internal siloes? Where do we start building a future proof airline-led retail ecosystem?
Out with the old, in with the new
Moving to an e-commerce-like retail model where passengers get served through offers and orders is not an overnight organizational change—something that airline CCOs know all too well. As airlines and technology providers work together to untangle decades of increasingly complex systems built around orders, they are simultaneously architecting the future of their commercial business.
Delaying this transition is where the missed revenue opportunities lay: hanging on to legacy pricing, rigid offer creation, outsourcing distribution and lack of commercial control over offers and bundles, making it virtually impossible to drive the flexibility and personalization required to engender brand loyalty.
So, what does the future of airline retail look like?
Offer optimization: prioritizing offer creation
The airline retail transformation promises significant incremental revenue - $40 billion or $7 per passenger1. However, unlocking this additional value is impossible with a legacy tech stack. It requires a changed approach to retail and the adoption of new technology – prioritizing “the development of new offers (the largest source of value, at an estimated $22 billion), enhanced revenue management, an optimized distribution mix, better targeting of and engagement with consumers, and optimized payment and fulfillment”2. To transition to this new retail state, you need a futureproof engine that can deliver on your strategic commercial goals. Offer optimization is the performance-driven engine for airline-led retailing, arming you with the freedom to own your product and pricing, as well as where and how you distribute.
It allows for airlines to capitalize on identifying passenger buying patterns and characteristics by creating an offer that is most likely to convert while also being revenue-optimal for the airline. This translates to a higher likelihood for purchase and no revenue leaks from under- or overpricing.
PROS is the first provider to deliver on the offer optimization vision, building critical technology that makes total offer optimization possible for all airlines, regardless of business model. From willingness-to-pay to dynamic ancillary pricing science and context-specific pricing; from dynamic offer creation for individuals and groups to direct NDC distribution—PROS is delivering on the vision for airlines to present optimal offers to each passenger at any digital storefront.
Prioritizing offer creation is the first step is building your new offer and order management structure. Once those priorities are aligned, you then must ensure your order fulfil technology places emphasis on your commercial autonomy—placing the control of what and how you sell back into your hands.
Modular and partner-open: The new order management
Decades of rigid, static order capabilities have blocked you from introducing dynamic price points and new products and innovations because of existing PSS dependencies. Finding workarounds has led to spaghetti architectures that hinder progress for retail-like IT ecosystems and further entangle systems.
But for passengers, airline complexity is a black box—they seek simplicity and expect airlines to handle their travel purchase with the same ease as digital retailers do. This is why PROS vision for order management is built around empowering airlines to decouple order capabilities and create an ecosystem of their desired retail partners.
Built on a modular, open design and powered by proven AI with extreme automation, the PROS Platform for Travel gives carriers the freedom and flexibility they need to serve travelers in a digital-first retail manner.
With full control of your inventory, product catalogue and customer records, an open platform would allow you to work the partners of your choosing, enabling greater automation and personalization for more meaningful customer interactions.
The impact of commercial autonomy
For any airline chief commercial executive, it is clear – airline commercial autonomy through offer and order management benefits the entire travel value chain. It liberates not only carriers who are able to own their retail experiences and integrate the technology they need but also distribution partners who gain access to richer product offerings for travelers. And as for travelers—they finally have more relevant choices and meaningful digital interactions with airlines.
Learn more about how you can embrace commercial autonomy and drive a forward-thinking vision with PROS today. Contact us.
Watch this webinar with PROS experts to learn about the roadmap to AI-fueled airline offer and order management.
1,2 – McKinsey & Company, Airline retailing: The value at stake