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The Shifting Distribution Landscape

The distribution landscape continues to shift. Airlines are diving deeper into new, innovative strategies and partnership opportunities to drive profitable growth across all travel channels. Listen in to experts across airline and metasearch distribution on how they are working closer together to streamline selling and shopping, differentiate airline products, and drive customer loyalty and conversions.

About the Speakers

Boyan (Bobby) Manev serves as Principle, Travel Division at PROS. Prior this role, he served as VP, Strategic Consulting. His career has focused on the Travel industry where he has gained expertise in travel e-commerce, management, sales and overall strategy.

Daniel Friedli, Managing Director and Partner of Travel in Motion GmbH, is a solution-driven travel industry consultant with extensive knowledge of the passenger airline and air travel domain. Friedli works with airlines and other entities in the travel value chain, as well as the IT vendors serving them. He focuses on airline digital distribution, retailing and customer experience, IATA NDC, ONE Order and Dynamic Offers as well as passenger services-related business processes. Through workshops and close interaction with the customer, Friedli and Travel in Motion work with the customers in analyzing the challenges at hand, creating business strategies and translating those into viable business solutions.

Keith Wallis, Senior Director Distribution and Payments for Air Canada, is an experienced business leader with a demonstrated history of advancing the corporate brand globally through incremental, innovative changes within the airline distribution and payment space.​ He delivers industry-leading and margin positive solutions focused on presenting customers with a variety of solutions that remove friction and enhance the customer experience.​ ​He's skilled in Continuous Improvement, Travel Technology, Airline Distribution, Commercial Payments and IT Project Delivery, and has a strong track record of delivering on corporate priorities. Wallis earned an MBA focused in International Business from McGill University in Montreal, Quebec. "

Full Transcript

Boyan Manev: Morning, good afternoon, and good evening, my name is Boyan Manev, and I'm a Principal at PROS, today we'll be talking about shifting distribution, landscape topping resources across airlines and search engines. I have with me two, I would say colleagues, Keith Wallis and Daniel Friedli. Keith Daniel, can you please introduce yourself?...

Keith Wallis: Sure thanks, Boyan. So good morning, good afternoon, good evening, everyone. My name is Keith Wallis. I am the Senior Director of Distribution and Payments at Air Canada, and that encompasses all things distribution beyond the Air Canada digital ecosystem, but also responsibility for commercial payments and payment solutions that we put into the market for our customers.

Daniel Friedli: Yeah, hi, everybody, I'm Daniel Friedli. I'm a Partner at Travel and Motion. Travel and Motion is a small consultancy in the airline space, working with various airlines, vendors in IATA as well to help drive the transition of the distribution landscape in the industry.

Boyan Manev: Thank you, Keith and Daniel. So my first question today will be to you, Keith. Air Canada can be seen as a pioneer in taking a different approach when it comes to distributing your content through different channels. I think we all remember this all begin with the introduction of the fair families, business model like the tango fairs nearly 20 years ago. So what was the driver for Air Canada to make that decision in the early 2000s? And what is the difficulties that you face during the adoption of this concept back then and even now?

Keith Wallis: Yeah, thanks, Boyan, and I think it's pretty amazing in some ways, it seems so long ago. And in some ways it just seems like yesterday. But you know, the real driver at the time, and I think it remains true and relevant now behind Air Canada, kind of reinventing itself. And deploying what has come to be known as fair families. And that business model was really around a couple of key customer centric pillars. It was around providing choice for customers, providing some value in that choice for customers and being very, very transparent. You know, the traditional revenue model of airlines leading up to that point was every seat on the plane was essentially the same. You were going to get the same service and the same experience. And it really was about managing inventory and availability. So that you could sell some seats at a lower price. And then as the demand increased and the plane got more full, you charge the higher and higher price. But really, the customer wasn't paying for any increased experience when they were paying a higher price. And we decided that as an airline coming out of Canada's equivalent of chapter 11 bankruptcy protection, we essentially had to reinvent ourselves. And the premise here was we are going to create a set of choices, you know, four or five choices, and we are going to make them available to all of our customers right up to the last seat. So if you wanted to buy our least expensive brand that had the most or the least options and most restrictions that would be available right up to the last seat. And if you wanted something more of a better experience with more options that cost a little more, you could do that. And the premise here is the lowest price is not always the best price for the customer. We followed on with fare families with ancillary options, and we said, look, we're going to create these brands and customers will find an option that meets their travel desired travel experience as best they can. And then we're going to offer them an ability to customize that even further with options that they can add on for an extra price or even at the time, we offer the ability to reduce some options and save some money. And it proved to really resonate with our customers. We saw increased adoption of our fair families. We saw customers buying something other than the lowest fare when even the lowest fare was available. And we saw this really rapidly increasing attachment rate where customers would, after choosing a fare brand, would buy some kind of an added ancillary at an extra price. And the biggest challenge that we had at the time. And honestly continue to face and battle today is that although we are in control of our own digital ecosystem and we can really put the Air Canada product strategy to work on our websites and in our mobile app. And in our contact centers, there's a real challenge in maintaining the integrity of that experience as our product goes out beyond our own ecosystem. So the distribution of that product strategy is a real was a real challenge and is today. And this is not to fault the distribution ecosystem, you know, bringing together what is rapidly becoming diverging strategies from different airlines and putting it together on one screen for customers to understand and compare and make informed choices. The real challenge for our distribution partners. So the goal here is to work with them and find ways to maintain the integrity of the Air Canada product, but bring it together in a comparative way with other what other airlines have to offer. And that is a challenge that lives today as well.

Boyan Manev: I agree. I agree. And yes, we're putting the type of an experience across all other channels where the airlines have their own different brands et cetera, is a challenge. And I think the entire industry should be working in that direction. Daniel, in your experience helping many airlines to shape their direct distribution strategies. When do you think the airlines started to understand the need to look beyond their airline, dot-com, in order to increase the share of their direct bookings rather than just going via the gds? When do you think this started?

Daniel Friedli: We can look to Keith and Air Canada because they kind of started the trend years and years ago with their APIs that they had put on the market long before we talk about NDC as a term that the industry knows today, but you know, I think many airlines have thought about this and done things, you know, different types of direct connectivity even 15, 18 years ago. But if we look at perhaps the last 5 to seven years, it's much more representative because we've seen, we've seen much more of this movement to direct to, you know, having alternative ways to get the airline content out to retailers, then then the traditional GDS path. And I think a lot of that is, of course, came with NDC and the activities and the definitions that had been created around NDC and reforming in the past couple of years. The related commercial distribution agreements, I mean, I think the way that these commercial distribution agreements look today are considerably different than they were 10 years ago. That's, you know, thanks to some of the airlines that led the way through NDC and this change into where we're going and we've seen a steady increase of this now over the past years, even through the pandemic. And I don't know how Keith would see this within ASir Canada, but we've seen many airlines just chug on and say we still need to do this change. We can't stop now. It's not necessarily about moving everything away from a GDS. It's about having the options, having different options to distribute very directly through the website, sort of through the direct connect path and through the GDS. In those markets where it's correct. And I think what we've also seen is or why some of this has now accelerated in the past four or five years is because the solutions have also matured. There are more solutions in the market there. There are better solutions in the market today, and I think airlines have also found out what doesn't work. Of course, many airlines look to some of the leading airlines to see what worked well and what didn't work so well. But but I think the industry as a whole has kind of understood what works and how do we have to do this going forward? And so I think we have seen acceleration over the years, and I think we will continue to see acceleration in the next few years as well.

Boyan Manev: Yeah, Keith, I mean, as Daniel said, I assume that actually the pandemics and the COVID crisis may be pushed you even further to go and to implement some of the new distribution channels and staying on this topic. What is Air Canada's current strategy when it comes to distribution channels other than your dot com or your mobile app? With the rise of metasearch engines like skyscanner, Google flight and et cetera, how important those channels become to Air Canada.

Keith Wallis: Yeah, maybe I'll attack that question in two parts. So the current strategy when it comes to our distribution channels other than our own, look like most airlines, I think if you talk to distribution leaders at many airlines, they would tell you that if they could get more traffic to their dot com sites or to their mobile apps, they would be very happy. The challenge is that that's not 100% penetration of your own digital ecosystem is not realistic, and Air Canada would recognize that. So to Daniel's point, as challenging as the pandemic was, we all took advantage of the downtime to think about what was going to be key to the recovery and how could we accelerate ourselves out of the recovery to a long term position in where we want to be with distribution. So while, you know, dishearteningly, there was very few kind of Cap x dollars available for development over the last couple of years, airlines have had to make some really hard decisions about where they were going to spend a few dollars that were available. And like a lot of airlines, Air Canada chose the one or two things that were going to be incredibly important to build the foundation of the new airline coming out of COVID to recover. And one of the things that was chosen was NDC it was seen as this is going to be the place where we are going to drive the industry coming out of the pandemic. And it's a chance for us to say the old way of doing business really has to sunset. I think we can take advantage of a couple of things. Customers expectations have changed about how they shop and what they buy in an eCommerce world where everybody's been online for the last couple of years and agencies and the rest of the distribution ecosystem are expecting change, nothing can be the same as it was. So we are really looking in terms of our current distribution strategy to really accelerate change from the older technology that doesn't really support how airlines want to sell today to a new technology that is not disintermediation of any one player or other player. Honestly, the biggest distribution net that we can throw the better as long as we can be confident that as I spoke about earlier, the integrity of our product can be maintained and displayed and put in front of the customer and sort of pivot to the second half of your question. Metasearch engines are a really interesting channel for us that has grown in importance every year for the last couple of years because a couple of things. They have shown as partners to the airlines, a propensity to develop their user experiences to really support the innovation and the product strategies that airlines are deploying. And customers have come to trust them as kind of neutral parties where they can comparatively shop and be much more in control of their own travel experience, right? It allows customers to, it's almost like a really neat self-service tool where they can find what they want across airlines, comparatively shop and then make a choice and go and buy directly from the supplier. So for us at Air Canada, we think the Kayak, The Skyscanner, the Google Flights of the world are great partners that allow us to get our product out to market. For customers where they want to be in a way that we can still get all of the yield and upside and product benefit from our product strategy.

Boyan Manev: Yeah, interesting point about the different channels and now question to you, Daniel. We know that one of the unique selling points of the metasearch engine is that they aggregate content from different forces, airlines and OTAs. However, what we have seen in the past three or four years is that the airlines do offers that can be booked only through the airline dot com, which puts the OTAs in a difficult position as they won't have the same offers if they continue to use the GDS API as their source for generating those offers. So in your opinion, how are the airlines going to manage the relationship with these OTAs, given the airline's reliance on them for distribution on some of the markets?

Daniel Friedli: You know, Boyan thanks, I think. I think we're seeing that. The airlines, yes, they're offering things in the airline dot com, but they're often offering the same, let's say, good offers on their direct channels that we NDC or direct API connectivity that we said before. So so there is a path to get to those good offers as well. I think that's exactly where this whole challenge starts. I mean, many OTAs are already applying kind of a multi source strategy going to different sources to get what they need and put it together in the right way. But I agree there are still very many who rely on GDS content. And we know many airlines have already announced that they're not putting the same thing into the GDS channels, potentially as into other channels. Be that they're not offering all the same ancillaries or they're not offering the same prices or they're not offering the same bundles. So the OTAs who don't make the switch to get NDC content through a host of different channels, I mean, NDC content is available through some GDS today. Right but but those who don't really make that switch, they're going to be challenged, I guess, to get the airline content or that best airline content or that differentiated airline content, if we want to call it such. So I think, you know, they're either going to have to make the change or they're the commercial interest is not big enough for them to want to make the change and they'll stay where they are, perhaps hoping that the GDS will move to NDC quicker and offer all of those products, then through those channels as well. I think, though, also that, you know, we are seeing that airlines are connecting more and more OTAs directly via NDC. At the same time, I kind of wonder, I think Keith said before, you know, airlines are very interested in the meta search, and I fully agree. I think I mean, that's a huge funnel. The meta search, isn't it? But I'm not. I'm not sure if all of the airlines would think that the OTAs are the same interesting funnel and are the same, have the same attractiveness as the metasearch. Just because the OTA offers a lot of other different things which an airline might also want to take as an opportunity for upselling hotels cars. Now, of course, in many cases, for airlines, that's a very small part of their business. And in the end, the customer will book wherever he or she can book all of the content that they want or they'll piece it together. But but I'm not sure that the airline really, would want to force an OTA to move to an NDC or a direct channel. If they do great, if they don't and they still sell because it's the overall package that sold, well, that's I guess that's still good for the airline in some way, shape or form. So it's a bit of a difficult question. But but I think in essence, look in a few years, we're going to see more and more of the OTAs move into using NDC just because, yes, they want the content end because more and more airlines are going to offer the most attractive content through that channel. Because, as Keith well said, you know, that's where they can control what they're actually putting on their shelves.

Boyan Manev: Yes and, Keith, when I'm talking about metasearch engines today, yes, they are like big names sky, Skyscanner and Google fly, do they see them as a entry point to Air Canada dot com as they have started as such, right, they have started this like referral sites. And then you go and you make the booking on the website of the airline, or you actually see them as a distribution channel independent of Air Canada, where I mean, you give them the offers that are created, especially for them, and then they can convert those into orders.

Keith Wallis: I think the answer to that is yes and yes, so it's kind of both. I would say that we're just kind of learning how to work in new at innovative ways with our metasearch partners. For sure, how they started was a way to throw a wider marketing net and a wider marketing message, and to attract more customers to your dot com site that you might not be able to communicate to and market to effectively by yourself. And by and large, they still serve that function and they do it quite well. So we notice on a month over month basis, on a year over year basis that we are absolutely bringing more customers to Air Canada dot com because of metasearch. I think that they'll play that role in the future. They, as they embrace NDC and as they start to think, you know, there is an opportunity maybe for us to keep the customers on our site and finish the transaction here because the very nature of the original metasearch business model create some friction in the process. Customers are shopping on one site and then they get pushed to another site to finish the bookings. And you can measure quantitatively with data that there is a drop off in conversion. Some people are lost from the funnel because there's friction introduced, moving from one side to another. So you can definitely address that by implementing an NDC connection with the metasurface engine and saying, don't send them to me. We'll still have all the same benefits of creating offers and completing the booking directly with the supplier. Just it won't be on our site, it'll be on yours. And I think at least the big three have all embraced that strategy and are employing it today. And you can see an improvement in conversion, to be sure. But there is an inherent trust from the airlines with the metasurface partners that they will build out the user experience. We need to ensure that if the customer isn't coming to our website to complete the booking, that they can at least see all of the choice of the fare brands that we want and that they're also investing in the ability to sell ancillaries. And they're kind of replicating in a more neutral, unbiased way, the kind of experience that you get on our website. So there's lots of partnership discussion there where you're working with the metasearch to what we would call improve their display, but they are doing it in a way that kind of meets the overall need of their customer base. And I think the natural evolution of this going forward is that as we understand through many, many months and years of collecting data as we understand our metasearch customers somehow inherently different from customers who are directly on your dot com site, does that mean there should be a different product in some shape or form on a metasearch site than you have on your website? Is there an opportunity to understand that metasearch customer better, what they're sensitive to, what they value and do we create offers that are unique for them that maybe don't apply to kind of environment? I don't think we understand that well enough yet, but it's an intriguing opportunity that we're certainly trying to explore.

Daniel Friedli: I think, Keith, if you don't mind, Boyan, if I can just jump in quickly, I think that's one of the great opportunities that you know, the the philosophy of NDC or any direct API brings with it, right, because the airline knows or can do much better research into the data of who is trying to do what and through which channel which, which leads exactly to that you can optimize your offer for the channel. Metasearch you can even go as far as optimizing your offer for this metasearch because there might be a different segment using this metasearch engine than the other metasearch engine. And I think that's the beauty of having this data of who is asking for every single request that you actually do.

Keith Wallis: It means a significant investment from airlines because it's not just about NDC. NDC is the capability to do that. Doing it in an intelligent and productive way that actually promotes better revenue means you need really good data capture and data management and data science. Probably some AI to mine all that data effectively and then really great kind of RM and offer systems that can take the output of that data and data science and say this is the offer I'm going to put over NDC to that channel. So it's kind of a whole product ecosystem that you need to build as an airline.

Boyan Manev: Yeah, it's very, very interesting. And Daniel, we've talked about the metasearch engines with the book on capabilities. Do you think that the metasearch engines are becoming more and more of an OTA these days?

Daniel Friedli: Yes and no, I think. So, I think the book on whoever. I think that's a good thing because as Keith said, there there is a drop off between clicking on the airline or on the metasearch link and then going into another website of an airline or whatever. So I think that the ability to kind of integrate that initial booking flow that really helps, I think, in the sales process. I think, though, that becoming an OTA means a lot more than having the ability to stay on the site to do an initial booking. I think and especially if we look at sort of this whole servicing aspect, which really needs to be tackled, and I think that's probably the biggest area where if, if an OTA did want to make that step there, that servicing aspect that doesn't just mean you have to have a few more functions. It means you have to actually integrate a whole series of business processes, not just with one airline, but with all of the 100 airlines that you're serving. And then how do you do it if you do it with some airlines, because maybe you have a more direct connectivity than with other airlines where maybe you're just redirecting them to another site and it's very nonhomogeneous process, then potentially for the customer. But at the same time, I mean, there is an opportunity and there has been one or two smaller metasearch actually who have kind of officially positioned themselves there. You know, they're now selling more and servicing more. So so they will be the person that the customer goes to when they need, when they need things to follow up. I don't I'm not sure we could say it's a general trend that's happening right now. Or maybe at least not yet. It might be in a while, but but I think there is some, some things going in that direction. I think, though, to also to be an OTA, you know, right now if we. Now, if we look at the difference, metasearch and OTA on a metasearch can quite specifically say, I want to fly from a to b, at least if we go to Skyscanner or Google or these guys. I want to fly from a to b, and you get all kinds of options where if an OTA you say, I want to travel to x And then you get. The hotels, the cars, the flights, it's already much more packaged together there, so so I think that that's kind of the other big element that's missing is sort of the holistic view as the A to B view that we currently have. So it's a big step. Will it happen? Probably to an extent, yes. But I don't know how quickly. And if all of these metasearchers will do that. I mean, maybe metasurface could just stay metasearch because it's a very powerful tool as it is.

Keith Wallis: Yeah, I was going to say the first point Daniel made about servicing is so, so important when I speak to the metasearch engines. The biggest thing that gives them pause about going further down this road of servicing, and I think it's incumbent upon us as an industry and airlines, more so than anyone else to clean up and simplify that servicing aspect of our business, it can be so complicated. It can be so difficult and it doesn't, the way it exists today doesn't really lend itself to automation, which is what metasearch engines would need. So, you know, I think if we can make the whole process of making changes to or servicing your booking in any way a bit more simple and a bit more automated, it may cause the change that we're talking about. But until then, the manual difficult nature of servicing is really where OTAs kind of step up their game and provide that value added service to customers, and it would just require an investment in contact centers, right?

Boyan Manev: Correct yeah, you're correct. And Keith, we've been through this. Let's say we started 20 years ago. And we went through what today. But can you please share with us the Air Canada distribution vision for the next three to five years? And what changes do you believe will be needed to deliver on that strategy?

Keith Wallis: Sure. So I think the overall vision is that we have kind of a ubiquitous Air Canada experience wherever you go. We want to be on any shelf that a customer wants to shop on, and we want the customer to have a very seamless and consistent experience wherever they are choosing to buy the Air Canada product. And we want to have the ability for the customer to make changes across devices and across channels and to pick up where they left off. So if you want to make a very simple purchase directly from us on our mobile app, but then you want to, you need a difficult kind of complex change made you could go to see your travel agency of choice to make that change. And then if you day before travel, if you decided that you want to buy an event seat or a lounge pass for the day, you could come to dot come or through the check-in experience, you could buy that. So it doesn't matter where you buy that you see and can interact with the Air Canada product in a consistent way, and you can choose to do it on whatever channel you want, and you can do it across channels as your travel journey progresses. So that you can, you know, you can. It's kind of that experience that we all have with entertainment. You can start watching a show on one device and then pick it up later on another device. So I mean, that would be where we want to go. What changes need to happen? Well, there's certainly infrastructure changes and some work on the Air Canada side that we enable everything that a customer can want our own direct channels and we're not there yet. We also have to get more intelligent about how we do kind of access rates and user permissions. So that people who start in one channel can finish in another channel, which we don't do today. And I think honestly, and I don't know if I've said the acronym yet, but it wouldn't be a panel if I didn't get through saying NDC is going to be key to this once. But it really is because honestly, to me, the biggest thing I've seen are the biggest benefit I've seen from NBC is that it pushes the current distribution infrastructure to be better, but it also opens the door for new companies that have never been in travel before to come in and bring some innovation and new thinking. And it really expands where customers can shop for us and it puts us on new shelves that we haven't been on before. So, you know, if we can get to a point in a couple of years where it doesn't matter where you decide to interact with us, you see a consistent experience. And if you choose to change channels in mid journey, that's OK, too. I think we're going to be in a good place.

Boyan Manev: Great. So Daniel what I have heard from Keith, and probably it's valid for other airlines is that it's clearly the airlines would like to take control over the distribution, both in terms of how the offers are created and who has access to those offers. In your opinion, what are the biggest hurdles stopping the airlines from moving more quickly with those initiatives? Is it the lack of technology or the problem is more still with the full content agreements that are imposed by the GDS to maintain the distribution control of the offers?

Daniel Friedli: I honestly, I think the biggest hurdles are people and processes, and then followed probably by data and Keith touched on the data part before. But data is not just having data, but it's understanding it and then knowing what to do with it to make sure that it feeds back into whatever you're doing again correctly. Right? I think I wouldn't say technology is a hurdle. I mean, I think technology is largely there. Of course, we can improve things. And of course, there need to be some changes. Of course, we're moving more into AI and machine learning, but I think these are things that are there on the way they can be adapted quite quickly. I think our technology partners, the technology companies, they're ready to move forward and they have a lot of what's needed. Yes, there's a technology cost, but I don't think that that's really a major factor when we work with various airlines, what we actually see, it's more there's sometimes there's a lack of know how, how do we I mean, just because segmentation or bundling it sounds really easy, but it isn't. How how do you create segmentation? How do you understand it? And then if you do segmentation, how do you make sure that you're selling the right things to those segments or pricing correctly for those segments? Because yes, you can test and you can learn and but you have to do that. It's a continuous process. It's not just setting up a couple of customer segments quickly or a couple of bundles quickly and then selling them. And then and then you're happy, puppy. It's continuous learning and measuring. And so it goes to collecting data. You collect the data, you have to understand the data and then you have to keep making improvements into the solutions, be that into the segmentation, into the pricing algorithms. And so I think that's the biggest challenge. I think that's why we're seeing things move much more slowly than probably any of us would have wanted or expected, you know, five or six years ago. I think a lot of us thought that NDC, from an API perspective, would solve all kinds of things. And once those pipes are in place, that all kinds of things would start rolling and the bubbles burst and everything. But I think what we're seeing now is that there's much more complexity behind that, that actually has to be solved and and that takes brainpower and people power. And yes, it takes some cash as well. But I think it's the brainpower and the people power that's just lacking because everybody is, you know, everybody has their operational day to day stuff that they have to do projects and so on. And now especially kind of in or as we're getting to hopefully an end of COVID or to a different type of a new world that, you know, a lot of airlines have a lot less resources than they had before COVID. And so it's maybe even tougher to try to find the right people and have enough time to work on these type of solutions of how do I segment, how do I bundle, how do I define prices in those kind of things? I think that's where the biggest challenges lie.

Boyan Manev: OK, well, thank you very much, both of you, and if I can, just three words that I got out of this conversation or three sentences in a way it's, Airline, the most important thing is the airline would like to take control of the offer and being able to distribute this offer through any channel, whether it's, whether it's GDS, whether it's NDC API, metasearch engine, it doesn't matter as long as the airline controls the offer. This is the most important thing. And the offer management being in the hands of the airlines becomes a very, very important tool and solution for them to have and to be able to distribute that content through all those different channels. Daniel, Keith, thank you very much for your time. It's been a pleasure, as always, and I hope that our industry will be getting back to where we were before COVID and even go further up. Thank you very much. Been a pleasure.

Daniel Friedli: Thank you, Boyan.

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