Airline Retailing Transformation: IT Implications
The next decade for airlines will be marked by profound changes across the board as the industry transitions to offer and order management—and IT infrastructure will be chief among them. Zoom in on the massive implications across airline IT in this fireside chat session with PROS President of Travel Surain Adyanthaya, Turkish Airlines SVP Customer Solutions (Commercial Systems) and Analytics Serdar Gürbüz and Travel in Motion Managing Director Daniel Friedli.
Full Transcript
Surain Adyanthaya: Really happy to introduce Daniel Friedli and Serdar Gürbüz from Turkish to talk about the IT portion of what this means. Sure. So, I guess to start off, could you introduce yourselves and let the audience know a little bit about your response?
Serdar Gürbüz: Sure. My name is Serdar Gürbüz and I am leading commercial IT systems and data and AI at Turkish Airlines. And the role definition of my position is I'm responsible for the PSS, distribution systems, payments, CRM, and data, and AI part of the thing is data warehouse business intelligence systems and AI part of the project.
Surain Adyanthaya: Excellent, Daniel.
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Daniel Friedli: Yeah, I'm Daniel Friedli managing director of Travel in Motion. And Travel in Motion's, a consulting company that actually helps airlines and vendors allow you to get onto this journey of moving towards offers and orders. We've been lucky enough to do six different concepts already, sort of concept to design of this, those past couple of months.
Surain Adyanthaya: Great. Well, thank you, both of you. We spoke about the commercial portion of this IT transformation list, and we want to talk more about the IT implications of this. In the previous conversation, we spoke about challenges, and the benefits of this transition, but what do you view as the primary IT challenge in making this move to offers and orders, sir?
Serdar Gürbüz: To start with, actually everybody's talking the same thing, but it'll take about five to 10 years, and everybody says for this transition from the current legacy systems to modern retailing systems. So, it's something hard for airlines to sustain both systems at the same time. So, this hybrid period will need involvement from both business teams and IT teams and the third parties IT companies, and other partners that are solutions to airlines to align with the same goal of transition. Because currently, we are running legacy systems and the business model underlying within this legacy systems is maybe 40 or 50 years old. And this hasn't changed till today. We are still working with PNRs, we are still working with EMDs and these types of things are very different when you explain this to someone from the e-commerce sector.
Serdar Gürbüz: So now we are transitioning our systems into what is like to be an e-commerce system, an order management system. So this will be hard because all the business model needs to change. So we shouldn't talk about PNRs, EMDs and the common language with all the parties, not just airlines to airlines, but airlines to other providers as well will change. And this change is not something just for the airlines. This change is for the travel industry because why we are doing this transformation, it's not just decreasing the IT cost or modernizing the systems in a sustainable way, modernizing the technology, but we want to achieve a better customer experience because currently when you buy from Amazon or any other e-commerce site, so there's a single order and you attach everything into it.
Serdar Gürbüz: So whether it'll be another product or it'll be another service that you get from Amazon, but in our perspective, if you buy something from an airline, so it's a ticket, and there's a P&R record on it, but if you want additional things such as seats, and those are airline products as well and other services, so it's attached to it, but if you want to add a hotel booking or a rental car booking, now you can do it on the front page, but at the backend. So, it's a very complicated and complex processes in order to talk with the systems of airlines and other providers as well. So, this is going to be changed and within this change, and it takes about 10 years. So, IT teams should do the same thing on the legacy systems and the modern systems as well. And I’m thinking those systems will be hard not just for the technological terms, but for the business processes as well.
Surain Adyanthaya: Yeah, yeah, I hear that. I've heard that many times. How's that current state to future state, that in-between part where you have to run both in parallel, how is that going to work? I think that's a key part of the plan. Yes. Daniel, what do you think about the... if the complexity has to be dealt with, what's the value that comes out of this for the airlines?
Daniel Friedli: Yeah, I think, sorry. The value that may come out of this, and I'm very careful with saying that, is actually in potentially increased efficiency and automation, and those kinds of things. And I say, may come out of this, because what we are seeing a lot in our conversations is when the rubber hits the road, are the airlines really willing to be courageous enough to change their business processes? Are you ready to throw out... We don't need an exchange process anymore, right? We don't need a check-in process anymore, and convincing the whole organization that we need to simplify that. And we do some business process modeling and “Oh yeah... Oh, but what about that?” “No, no, we can't, no, we can't get rid of that.” Right? And if we just rebuild legacy with new technology, we're going to be back where we are now.
Surain Adyanthaya: Yeah. No, I hear you. One of the first meetings I was in with a customer, the legacy PSS head was there and he said, first of all, everything we have in our legacy PSS, we need to have in the new. That's the starting point.
Daniel Friedli: Exactly.
Surain Adyanthaya: So, it's changing that mindset that's going to be important.
Daniel Friedli: It is. And I always think, you need to, kind of, step back and say, “Okay, look, here's the... I don't know, the 300 things that PSS does well, which ones do you actually really still need? How are you going to do business tomorrow?”
Surain Adyanthaya: What about Serdar and Daniel combining diverse systems, modularity, we've had several decades of single vendor dominance, which has its challenges. What do you think about modularity, open systems, things like that?
Daniel Friedli: If I... because it goes to the challenges that, that Serdar was talking about before, I think on how do you break up what you have now? Because it's kind of easy, isn't it? On one hand, it does take away a lot of control, a lot of flexibility, like, to inject new technologies or new this, new that, you need to break it up. So again, it's somewhat about courage. Are you willing to take maybe a little bit more risk and move away from that monolith and say, well, let's pick a best of breed environment. Because I do think, going back to the benefit and the cost advantage, I think it'll be bigger in the end. While you might be paying more for the individual, some of the systems, I think the added value is going to be much bigger because you really get the best of what you need as an airline, which is, Turkish is going to be different than any other airline. Right? So, you can't just take the same system.
Surain Adyanthaya: That's right. Gürbüz, what's your thought on that?
Serdar Gürbüz: Yeah, we think, actually, we are the lucky ones among the airlines because we have our own.
Surain Adyanthaya: PSS.
Serdar Gürbüz: PSS systems for over two decades. And we know how to build the... actually, not how to build. We know how to modify our own PSS environment and we are currently having inventory in the PSS DCS and weight and balance. And these are the current modules of the PSS systems. And we think there's a paradigm shift. And in this shift, there will be so many new players and they will force the current big players in the PSS domain. And as Turkish Airlines we actually want to be one of the new players because we know how to build a PSS and we know how to make out of modules from the current PSS. And we have actually started and did some of the open system applications and solutions.
Serdar Gürbüz: So, it'll be not easy because we should decide which one to build in-house and which one to procure from the industry. And, maybe one of the most important things for some of the modules, we need to collaborate with the parties because building everything in-house is costly and it takes time, and getting everything from the market it's also more expensive and you are locked in t different vendors. But, collaborating on the modules with the industry, with the airlines, or with other IT providers will give us the opportunity to decrease the costs and make it more expandable to the other potential customers as well.
Surain Adyanthaya: Interesting. So, what would you suggest are steps... There are people in the audience I know who are probably just beginning this journey. What are the steps they should think about to kick it off and some pitfalls to avoid in the process?
Daniel Friedli: Yeah, I think you really need to have a good understanding of where you want to be. And I won't call it an end state because there's never an end state to this transition, but it's a target state and what's a reasonable target state. And I think what Jost said earlier about that management buy-in. I mean, if you don't have that, just stop right now because it's a waste of time. But when you know that target state, you have to do an assessment of where you are today and really look at, okay, how do we cut things out? How do we cut layers of complexity out? How do we peel that onion? But then it is, again, looking at more of the technological side than the commercial side is really what is the right level of modularity for me?
Daniel Friedli: How many vendors can I manage? And what are the right value add modules versus what I think for my airline is commodity, so I'll just buy something off the shelf as opposed to have something that's maybe highly configurable. So, it's really laying out that map. And the last thing I'd say is, kind of, what we like to do is create what we call the value roadmap. You can't wait for five years until you benefit from this.
Daniel Friedli: So, what am I going to get after year one? What can I show? What can I show after year two? We're working with one airline right now, doing a lot of POCs, saying, well, let's try this. We can show value and if it really works to our expectation, then we can build it out and expand on that. And I think that's really the way to go.
Surain Adyanthaya: Let every step fund the next step.
Daniel Friedli: Every step, almost funding the next step, or at least giving it enough justification to do the next step.
Surain Adyanthaya: Next step.
Daniel Friedli: Yeah.
Serdar Gürbüz: Yeah. For my opinion, actually, it may not be the best way, but it's our way. So, we believe this will not be an change. This will not be a technology change, it'll be a business change. And in that way, we need to align with the business teams as well, and in order to make something that they require and that they use to build their business upon it. So, this is the first step we believe. And the second step is, I think there will be a mindset shift as I explained from P&Rs to orders. And this mindset shift, actually requires teams to collaborate on the things that matter most to them. And we need outside thinkers into the teams. So, we are airliners, we know the travel business, but we are trying to become like e-commerce business. That's why we build our team off an older team, professionals from airlines, expert professionals, and e-commerce professionals. For example, we transferred product catalog specialists from e-commerce companies. So hat's the other thing we think is valuable for this journey. And it'll be a long journey. Change management will be very important, and sponsorship from the top management is very important, like most of the projects. So, managing this change will be one of the crucial things that will help to succeed on these projects.
Surain Adyanthaya: Well, I guess one final question. This could be viewed as a value generation, revenue generation move through simplification, new technology, or it could be cost saving. When airlines in the audience create their business case, how should they look at this?
Daniel Friedli: I genuinely think they need to look at both just the way that McKinsey study, that often quoted one from 2019 does. And we've actually... We've built a business case calculator to really take it apart. And we see airlines that have more of a revenue case than other airlines who have more of a cost savings base. But it depends where you are today. If you're already exploiting new offer management and have a large part of maybe NDC and dynamic pricing or other things, you've kind of milked that cow a little bit. And it's going to be hard to put that in your business case again. So, you need to, then, focus on, okay, well where are the cost savings, the efficiency, the automation? But there's so much potential in that. I mean, we were just talking to an airline, identifying things going wrong, like I said, with exchanges, refunds, wrong calculations around INVOLs. here's just so much cost saving that can be pulled out of this. So, I think it's both, but it depends where you are.
Serdar Gürbüz: As Daniel explained, it's a very complex business when you think... When you see within it. And there will be so many cost reductions in terms of both IT and the business operations teams. But to calculate the benefit... To calculate the feasibility of these projects, I'm not sure it's possible. But we believe it'll increase the customer experience because we can offer more than today to the customer. And we think it'll be the bigger impact of this project. And of course, the IT systems will be streamlined, so we will modernize the technology and within this new technology, there will be so many new opportunities as well. Today we are talking dynamic pricing, for example, continuous pricing, and many more. So, when you think of the beginnings of the revenue management within airlines. So, we have class-based fairs, and we came here today with the help of AI and other stuff. So, this platform, modern airline retailing platform will also give some new opportunities and new thinking within the industry.
Surain Adyanthaya: Great. It's a great way to wrap it up. Thank you so much for your thoughts and time.
Serdar Gürbüz: You are welcome.
Daniel Friedli: Thanks, Serdar.