In this webinar, created in partnership with the World Aviation Festival, PROS experts explore the critical role of AI in transforming airline retailing, focusing on strategies to increase revenue, improve customer experiences, and create more value for both airlines and their passengers.
Speakers:
Moderator: Stanislava Yordanova, Sr. Product Marketing Manager, PROS
Justin Jander, Sr. Director, Product Management, PROS
Chris Allison, Director Product Management, PROS
Dimitar Kamenov, Group Product Manager, PROS
Video Highlights:
Meet the Speekers (00:00-04:12)
Offer & Order Transformation (04:12-11:17)
Where to Start (11:35-19:02)
PROS 5-Step Value Path to Revenue Growth (19:07-43:17)
Q&A (47:00-59:20)
Full Transcript
Hi, everyone, and welcome to today’s webinar hosted by the World Aviation Festival and PROS. My name is Jess Brownlow, and I’m the editor of of Aviation News at Terrapin UK. Firstly, I’d just like to thank you all for joining today. We have a really exciting group of panelists covering some great topics, and it’s set to be a fantastic afternoon.
…
So today’s session is gonna be exploring how airlines can own the next generation of offer management to drive meaningful revenue growth.
We really wanna hear from you this session, so please do submit questions, and we’ll try to get through as many as we can with the panelists later. I just ask that if you do send in a question, please could you leave your name and your company name with it.
Please also be aware that this session is being recorded, and I’ll explain more on how to access this at the end of the webinar if you wanna rewatch it or share with anyone.
So for now, I’m gonna hand it over to the pros team who will take it from here.
Hello, everyone, and welcome to our webinar.
The topic today is the value path to offers and orders, as Jess mentioned. I’m Stanislavio Rodinovo. I’m travel marketing at PROS, and I’ll be moderating this session for the next hour or so.
Today, we have the pros team of airline notating experts with us, and we’ll be discussing how airlines can navigate their complex IT ecosystem and really own that next generation of offers and orders in order to drive value and revenue growth for their airline.
So, Justin, why don’t you start us off by introducing yourself and telling our audience your area of expertise in this field?
Good. Thanks, Lassie. And good morning, everyone. Good afternoon evening.
Yep. My name is Justin Jander. I, lead our product management team for our, offer optimization, offer creation, and, our, digital retail solutions at Pro. Sorry.
And, I’m excited to be here today to talk to you about this great topic. There’s a lot going on in the industry around this. I’ve been at Pro’s for fifteen years now and really watched how, the industry has evolved over the years of, really understanding what going from revenue management into this offer optimization concept, and we watched how that continues to evolve. And and really excited to give you a a glimpse into that today.
So looking forward to the discussion.
Thanks, Justin. Chris, tell us a bit about yourself next, please.
Yeah. Hi, everyone. I’m Chris Allison, director of product management here at PROS, and I look after the overall offer and order management platform strategy.
I’m also the, IATA shop order pay standards board advisory forum vice chair. It’s a little bit of a mouthful.
And, yeah, over the last kind of ten or so years, I’ve held various kind of industry positions and have been involved in the standard setting discussions both before my life of the pros and, like I say, over the the last ten years or so. So, yeah, I’m also excited to see all of this now coming to fruition, all of the kind of theoretical work we’ve been doing all over all these years in preparing.
Yeah, the industry for all this change, I’m, yeah, excited to be at the forefront now. And, hopefully, yeah, we’ll discuss some of of that today, what’s what’s coming next in in the delivery phase.
Great. Thank you, Chris. Now Midco, off to you. Can you please tell us who you are?
Sure. My name is Dimitar Kamalov. Short name Midco as you’re going to hear things while calling me.
I’m also part of the product management team at Pross. My responsibilities are in the offer creation and retailing and distribution areas.
I have, like, I don’t know, fifteen, sixteen, seventeen years of experience in in that. So, originally, I’ve been working on traditional ATPCO pricing, and and shopping one. So I’ve seen how, this now has to be transformed into a new modern retailing shopping solution.
So kind of challenges that goes towards that and and and also opportunities. So we’ll be share we’ll be sharing, some thoughts on on on these items today.
Great. Some great experts, on this session today. Thank you, guys.
Now
Meet the Speakers
we’re just coming back from a row of several industry events. We have the TTRO Engage. We have the World Aviation Festival, also IATA’s World Passenger Symposium, where the topic was offers and orders and that transformation and where we are collectively as an industry on that journey to modern retating.
We did a recent paper with Travel in Motion, and you can see that we’re past that concept phase. We’re already into the design one. So really, the question that we’re currently asking ourselves is not if we should be on that journey, but when and how to really embark on that transformation.
And that’s the focus of our discussion today, to really try and paint that picture of what a value driven path can look like for an airline.
But before diving into that value topic, let’s talk about the risk of staying in the status quo and why if you’re an airline that’s not on this journey yet, why should you start now?
Chris, why don’t you start us off by answering, what is the risk of sticking to the status quo?
Yeah. Absolutely. So when you think about this, there are really three key things to consider. Yeah. First, the missed revenue upside. Second, the business case around costs, and finally, the impact on customer experience.
We’ll likely dive deeper into the revenue piece over the next hour. So for now, I’ll touch on the cost and the and the customer aspects.
There’ve been a number of studies, including some from IATA and other industry consultants that show how moving to an offer and order based stack based on modern technology can lead to significant savings. We’re talking double digit percentages, which can lead to tens of millions of dollars per airline over a five to ten year migration period. In fact, these savings can mold and cover the cost of migrating overall to the the offer and order model. So if an airline doesn’t make the transformation, they’re not just missing out on potential revenue, but they’re also stuck in an older, less flexible technology setup, and they’ll miss out on those long term cost savings as well.
There’s also the need then to shift to a travel centric and a customer centric approach. Because right now, yeah, a lot of our MDC processes are centered around legacy systems and records, yeah, not the ideal customer journey. It makes improving the customer experience, today a lot harder. It’s costly. It takes time. When things go wrong, it’s a lot more difficult to recover from this, and it all just ends up negatively impacting, yeah, a traveler’s experience.
So if airlines don’t start embracing this transformation, there is falling behind in terms of meeting customer expectations.
Those that do adopt, an offer and order approach are gonna be in a better position to meet those rising expectations.
But in the end, this becomes a question of survival. So airlines that move forward with these changes will reap the benefits both in terms of the revenue and the cost savings and, yeah, obviously, from the customer loyalty side. Meanwhile, airlines that don’t make the move will find themselves increasingly out of touch with the market and out of step. And, of course, that’s a a risky place to be.
Yeah. A lot of risk, I’d say from business perspective. Mitko, what would you add from your perspective?
Well, the risk of doing nothing like IATA are referring to in one of their white papers. Well, sure. There are a few things, we can mention here. So it’s they’re all related to the inability to prepare the commercial systems and tech stack for for the digital reality. Like, for example, I mean, offers are expected to become more and more dynamic to meet traveler needs.
And that that’s a fact.
Also, with the trend for distribution fragmentation, shopping volumes are only expected to increase.
And we see this every day working with our customers where more and more transactions are required by, the different distribution partners they that they have. Another point is that is AI. I mean, we can’t go without mentioning AI. So it will become an integral part of the end to end customer journey.
So if we think about those points and look at the current systems or the legacy systems, it’s clear that, those commercial systems are they were not built to support digital reality. So there are challenges with, real time. There are challenges with volumes. There are challenges with the ethnicity.
So if you keep your tech stack outdated, this definitely is going to impact your competitiveness in the future.
And as a final result, I mean, again, there will be revenue generation that will be that will be lost and, the brunt of the airline will go down slowly.
But yeah. So because the customer expectations are increasing.
Yeah. I see there is a big impact from technical standpoint.
Justin, over to you. Why do you think airlines shouldn’t wait?
Yeah. I think I think if you think about it from the customer perspective, the the way that passengers are buying is changing. And so, the technology stack has to adapt to that as well. And so we really have to start thinking about, you know, the way that the the modern passenger is going to book and interact with the airline and really start to think about what that is.
And I think one of the biggest things from that that’s from the customer’s perspective. From the airline’s perspective, I think one of the biggest challenges is this is a daunting task. There’s a lot to consider when you have to go through all of this, and you hear people talking about a ten year journey to get to this point. And that can be, just to some airlines, a scary place to think about, like, why I don’t you know, I’m I’m working on the things that are necessary to keep my airline afloat right now.
How can I think about what ten years from now looks like? And, of course, the answer is you have to. We know that. But, I think what what the the key part of this is don’t wait.
Right? Don’t think about the things that that are coming way down the road. Understand what those are, but figure out what points on the journey you can do in the intermediate steps that really help you drive revenue, reduce costs, and and really think about the passenger experience.
So cut bite off the pieces that you can chew right now rather than getting too overwhelmed by the in state. And so I think what we see is that you can get the the sticking with the status quo might be an appealing idea to just wait and see what how this all kinda shakes out as as airlines continue to figure it out and as IATA continues to figure it out and different vendors are playing in the in the space. It’s it’s attempting to just kinda say, well, I’ll just kinda keep where I am. But I think the key is is that there are things you can do right now that work within the legacy infrastructure that drive modern retailing and modern approaches to to solving this problem.
And I think that’s a key component that you have to think about as an airline is what are those steps that I can take right now that help me march towards that journey? Because a ten year vision is a is a long time from now. And, I mean, think about in, twenty fourteen, if you thought about the ten year vision, nobody would have expected a global pandemic in the middle of that. Right?
So that that ten year vision was would would have been a bit silly to look. Looking back, that ten year vision looks a little silly. And that’s why, again, we have to have that vision so we achieve the goals that we want and don’t stick with what we have today as an industry. But for airlines, you have to come up with what are the right steps in the process.
Yeah. Airlines need to because the market is shaking. We’re all seeing it. And our audience will have the opportunity to access that white paper.
It’s free and they will have that opportunity later in this webinar.
Now I want to kind of summarize your points. So
The Risk of the Status Quo: Analysis Paralysis
there is a lot of considerations that airlines need to take into account from business, from technological, from customer perspective even. But, Chris, how can airlines get that internal buy in across departments and across different functions and start with a value driven path? Obviously, a big bank transformation is an approach that only a few, if any, airlines can embark on.
Yeah. That’s it. Totally. So, yeah, getting buy in for a big transition a big bank transition can be really tough, especially when we’re talking about a five to ten year migration, and we keep kind of saying those those numbers.
But, yeah, it’s it’s a long time, like and just to just kinda point it out why. I mean, it’s a huge ask for airlines and their internal stakeholders to commit to. It’s a lot easier and less risky to break things down into these small, manageable steps. The approach can start with some initial learning phases, things like proofs of concepts, some of which maybe even can kind of considered throwaway work, but the key being that you’re learning as part of this as as part of these initial steps in these pros and and this initial part of the process.
And these early steps help to educate and align the different business units within the airline as well. And that’s crucial for getting everyone on the same page. It’s also a good idea to prototype, and to the classic try, learn, fail, iterate approach.
Yeah. That brings benefits too. Some will continue on as into production, and some may just be, yeah, learning learning tools.
But, yeah, certainly, along the way, lots of tangible steps that can add value on their own. Some will have direct business cases and payoffs right away. Others may be more about unlocking future benefits, or the dependency for other larger, more impactful steps. But the important thing is that there’s real value to be captured at every stage even before we reach the full lock and auto world away from the the legacy PSS.
And another benefit of this approach is also it reduces the risk. Instead of committing all your resources upfront to one big plan, you’re you’re able to adjust and adapt as you go. And as new innovations come up, you can tweak the transition path and take advantage of these and, yeah, stay on top of industry trends.
Okay. So there are different approaches that an airline can take, really, depending on their situation, business case, markets even. Justin, how about you? Where can airlines start?
Well, I was trained in revenue management. So I’m gonna suggest that the idea that where the airline should start is on revenue generating opportunities.
There’s there’s obviously a lot that has to happen. We’ve we’ve talked about that already, and we’re gonna talk about it more. But from a revenue generation’s perspective, this is where the I think the opportunity really lies because the the there’s a lot that has to change. You know, if you think about an order management system, you have to have the the settlement piece, the delivery piece, all the stuff that happens at the airport.
There’s a lot that has to change in that in that part of the the equation here when we talk about offers and orders. However, on the offer side, there is a lot more that you can do right up front. And there’s revenue driving things that can happen really quickly, like like, things like ancillary pricing, whether it’s with science based or AI based solutions or even just varying the price at all. I mean, in a lot of cases, ancillary pricing is very static today.
There’s your brand determination. How do you determine the contents of your brand? There’s there’s continuous pricing. That’s a hot topic right now for the right to fly piece.
So, there’s a lot that you can do. We’re gonna talk a little bit more about that coming up. But I think it those just show you the revenue generating pieces are where it’s at. The other thing that I would add is is just tagging on to what Chris pointed out is really aligning the the teams at the airline.
You know, today’s world has a very clear distinction of, like, revenue management and pricing, a distribution component, and an e commerce digital component. And and those really work nicely in today’s architecture and infrastructure. And and that’s good. However, as you start shifting from, you know, the the revenue management department only being responsible for Right to Fly and thinking about it as an offer, now you have to start thinking about what does that mean for the future of the organization?
Because right now, if you asked, an airline, who’s responsible for the offer? You probably would get several answers. You probably hear the revenue management department say they own the offer because they have to decide what the right price is for the components that make up the offer. You hear the distribution team that say says they own the offer because they have to take that offer and distribute it to wherever it needs to go in all these different possible channels.
And then you hear the ecommerce or digital team say they own the offer because they have to present it to the passenger, and they have to decide the the the user experience that comes with that. So you’re all of a sudden, when you start thinking about offers, it’s no longer just this nice revenue management problem that we’re solving or just this nice distribution problem or this nice, ecommerce problem. We’re solving this as a joint problem, and it really requires the airline to step back and think about who do I want to own these different parts and make sure that there’s not conflicting priorities.
And and I I give this anecdote occasionally, but you already hear some of this happening today where the revenue management department comes up with a great price based off of demand, based off of willingness to pay all of these components. But then the the the ecommerce team says, well, I don’t wanna show expensive prices on the website, so I’m gonna filter out the really expensive prices or move them down in the in the results. Well, the expensive flights were expensive because they were high demand. So now that high demand, itinerary just got pushed to the bottom.
And those are where you see conversion as an objective for the ecommerce team being in conflict with maximizing revenue from the revenue management team. And those are things that are already we’re seeing today, and and we have experience in this today. So just think as we continue to evolve the offer concept, there’s gonna be a lot more hand holding that has to happen and and partnership between the different, groups at the airline to make sure that this strategy makes sense. And I I think if you really look at the offer optimization concept now, you’re really starting to think about offering and a full package of products to a passenger, and you really have to understand how do you wanna present those to the passenger.
It’s not just a a pricing problem. It’s not just a distribution problem, and it’s not just a ecommerce conversion problem. It really is an offer optimization problem that has to be considered.
So, Mitko, I I I covered a bit on on a few different components there. What would you add, for for, what what what steps to take first?
Oh, I can only echo what what you both said.
So we know that offers and orders, no legacy PSS are long play long way from, today. And, but there is value in the journey from the various retail initiatives that can be deployed in the transition legacy setup.
And the point is that you should not be waiting for the end state. You should try to start getting those opportunities, today with the legacy setup.
And some of those are, like, NDC, dynamic pricing, consumerist, things that you both mentioned. There are much more.
So four percent orders is not going to happen tomorrow. Change must be broken down into smaller projects and translated into various initiatives across the entire airline commercial organization.
And today, we are seeing customers getting value of different retail improving initiatives in a legacy setup. For example, growing share of the direct bookings via NDC distribution.
So you don’t necessarily need a full order management that will replace the PSS to do that today.
Another example is enabling dynamic pricing for the right flight or optimizing the and serial prices.
I mean, there are numerous approaches and directions to start getting value today.
Yeah. So to summarize from everything you mentioned, guys, the most important
5-Step Value Path to Revenue Growth
reason to take any of this transformation on is to drive value, to drive value for airlines, to drive value for the customer.
Based on conversations with customers and the industry events that we all attend, Prote has put together those five steps that you see on the screen of how an airline can take that value path to offers and orders and generate, revenue and value.
Justin, can you give us a quick overview of what those five steps, are and how they fit together, please?
Yeah. Absolutely. And and we’re gonna cover each of these in more detail coming up. But, just to kinda give you a quick summary, the first thing that that that you’ve heard us say over and over already in the first twenty minutes of this discussion is they’re taking incremental steps.
So we’re really emphasizing that point of there are things you can do right now in your current architecture that allow you to take those steps. So, the first is dynamic pricing. This has been a buzzword in the industry for ten years, and we’re seeing way more traction on this right now. So this is the opportunity to maximize revenue without the constraints of the filed fares.
And it’s important here. You may still have filed fares as a as a means to distribution, but it doesn’t mean that the the revenue management and pricing system have to be stuck to those those filed fares. And that’s really, the first step there. The second piece is ancillary revenues.
We’re hearing way, way more, more and more and more about how much the ancillary components matter to, to to to the industry. The the car trawler, IdealWorks, ancillary report came out, and you can just see the numbers that just continue to grow year over year, and this becomes just a really important part. And so now look at the numbers that the airlines are bringing in for that revenue today, and that’s that’s with very little science and thought put towards the I I shouldn’t say thought. There’s a lot of thought put towards the the ancillary pieces, but without a lot of science in determining the prices and so forth.
So there’s just huge opportunity to do more with the ancillary components. And then the next piece is, how are you distributing this? Really taking the the next step in the distribution side so that you can bring the cost savings, and really own the distribution piece of the puzzle, within the current architecture that we have in place. The next piece that Chris is gonna cover at length is the portfolio side.
And this really talks about, great, you you wanna create these offers, but what things can I actually sell? And how do I really understand that and bring those to the market? So we’re gonna get in a lot more detail there. And then a big piece for us is really presenting all of this in a modular way.
And we’ll talk more about what modularity means to us at pros, but also just what we believe the industry needs to be doing as we move forward with that. So we’re gonna kinda dive into those next steps here, in in each one of these in more detail now.
Yeah. Let’s do that, Justin. Let’s dive into each of those steps. And I wanna encourage the audience, if you have any questions, feel free to use the q and a tab and start adding those in there so that the team can answer them later.
So, Justin, off to you. Let’s talk about the offer optimization piece and those first two steps that you talked about. Can you do a deep dive and talk to other our audience about the value of that?
Yeah. For sure. And I think we’ll just start with the concept of offer optimization. This is something that that, the the the phrase has been coined since two thousand eleven or so when we first started hearing that that terminology used.
And now, we’re we’re really reaching the point of saturation in the market with, like, the term is thrown around all the time, but there’s there’s a lot of different meanings behind it. Really, the the first part of this is the offer. And I’ve talked to we’ve we’ve already said it, probably a hundred times on this call about the offer piece. But when we think about offer, we’re really now saying the airline is moving away from just selling the passenger the right to fly component, and then whatever else they can get with it is extra credit.
Now we’re thinking about what does the passenger actually need, what are the components that they’re likely to buy, and bringing that all together. Now there’s this in state that has this optimal piece that says the passenger puts in the search, Houston to, to London, and that’s all they put in. They’re presented with one perfect offer. It has all the ancillaries.
We know exactly they’re gonna buy these things. We present them this exact package of stuff for exactly three hundred and forty eight dollars. They click buy, and everybody’s happy, and it’s perfect. And that’s that’s the the this perfect world of offer optimization.
What we know is is that’s a long ways off because there’s a whole lot that has to happen. What just simple things like, what if the passenger doesn’t want those things that you put in the offer right now? What if they say, well, I only want the right to fly right now. But you know, as the airline with your advanced science, that they’re gonna come back around.
So now it’s not just about presenting them the offer. You have to come back and present them the offer fifty days before departure, twenty five days before departure at check-in to actually achieve the offer optimization component that you had. So there’s a lot of nuance to that, and that’s why the journey has to start with, let’s first and if we go to the next slide, let’s first just think about how we can improve on the pricing side of Right to Fly.
Historically, we’ve been tagged pegged to these these, fair classes that we have in the market since this nineteen sixties. Right? That’s when we came up with this idea. And, of course, the industry has evolved with those fair classes, and those you know, we know that the reasons for that are are are actually pretty good.
It’s been a mechanism that’s helped us, but where it hasn’t helped is in terms of economics. If we were wanting to be an economist approaching this problem, there’s no way we would have solved this with saying, Okay. I’m going to peg my my prices to these letters of the alphabet, and those are going to be the prices I have. And I’m going to model all of my demand behavior according to these letter of letters of the alphabet.
There’s no way that anybody would have chosen that path from an economics perspective. Instead, what you would do is say, I have a product to sell. I wanna understand what’s the relationship between price and demand for that product. And that’s the price elasticity component that I have here.
And all of that unlocks the idea of creating a demand curve that can be paired with your supply curve, which is effectively a bid price, determining the optimal price. That’s where dynamic pricing really comes in. Everything else we’re doing is improving the estimation of that elasticity, improving the bid price, improving the estimation pieces so that I can get the optimal price. And that’s really where we’re starting to unlock the revenue here from from dynamic pricing is not being stuck between the filed fares.
And again, I mentioned this earlier, you may still need the file fares to execute the strategy. But with dynamic pricing or continuous pricing, now we’re saying with the estimation of elasticity and the bid price component of the supply side, we can determine a revenue optimal price, regardless of the fair class, and then peg it back to a fair class for to to take a a percentage off or add a percentage on to a a a particular fair class that allows us to execute the dynamic price we had without being saying it has to be three hundred and forty eight dollars or five hundred dollars? What if there’s revenue opportunity in between those?
So that’s really where continuous pricing opens the door for us. And then the next step in the process, on the next slide is the the ancillary side. And this is this is really where you see a huge opportunity for, for growth. Because as I said, the ancillary components at the airlines are really an opportunity for explosion.
Even full service carriers who kinda say, well, I don’t really offer ancillaries. You do offer ancillaries. They could be in terms of the buy up between your brands. That’s effectively an ancillary.
So there’s a lot of opportunities that you have to determine the ancillary, revenue piece and choose the pricing that goes with that. And one of the the really interesting parts about this strategy is, because you historically don’t have a lot of variability in your data, your kind of standard models of of forecasting and and optimization don’t work. Because if you’ve only ever seen a bag offered for twenty five dollars, then you’re gonna predict that the bag should be offered for twenty five dollars. There’s nothing really unique about that.
What we have to do is intentionally introduce this variability into the market so that we learn from that, adjust the the strategy, and continue learning as we go. So So sort of like throwing darts at the dartboard, we have to start throwing towards the bull’s eye, learning how where where the bull’s eye is and making sure that we’re getting closer to that. And once we hit the bull’s eye, now we’ve converged on the right price, and now we’ve learned how to throw that dart each time, and now we can continue to update that if perhaps the dartboard moves around a little bit. And that that’s really the component here, and and it’s it’s such a critical part.
We did this, a partnership with AirBaltic where we saw on advanced seat selection, we saw a six percent revenue uplift on their, ancillary revenue for advanced seat selection. So a great study that we did with them, and it’s it’s live and in production now and and really providing a lot of value for, airBaltic. And we’re seeing the growth of this and the opportunity really expand as we move forward with this. And and, of course, the opportunities grow really considerably.
You know, in this case, it’s it’s, just the advanced seat selection during the booking flow. You can bring this in through, email campaigns to say, have you booked your seat yet? And show a dynamic price for that. It can be a check-in.
There’s a lot of different channels and opportunities that you have to present this to the passengers. So it’s a huge opportunity for the airline, to take advantage of these, additional things that we’re bringing to the market that grow revenue. And you can do them all within the architecture that that’s in place today as the rest of the offers and orders pieces continue to evolve.
Thank you, Justin. From revenue optimization standpoint, this makes a lot of sense, and it’s a great opportunity.
Now, Mitko, over to you because it’s clear that when you have determined that optimal offer, you need to get that in front of passengers through all the many different distribution and sales channels.
Can you please expand on the offer creation and distribution piece a little bit more?
Sure. Yeah. I will try. So, yeah, maximizing direct and indirect distribution by also optimizing cost. So easy task. So, well, basically, we identified two value streams for airlines.
One is grow your direct distribution.
Increase the sales through the direct digital channel, being your dot com, your mobile app, or any other direct channel digital channel that you have. But, also, in the in the meantime, look at, how we can increase your, selling through NDC.
Because all these direct impacts revenue from higher direct bookings that tops in bring bringing higher revenue.
How do you do that?
Well, effective digital offer marketing is a way to impact direct bookings and acquire more direct traffic to increase conversion from it.
For that, airlines need to be able to place accurate offers across any digital marketing channel, be it destination landing pages or social media channels.
We know that OTAs usually have a major marketing expense, and this is of a critical importance to stay top of mind for travelers and direct shoppers to the dot com. So if you compare the the marketing expense of an airline compared to the OTAs, there is a big difference. So great. So we’re going to do all this great digital offer marketing stuff. However, one key piece and component is that you are going to drive more traffic towards your direct channels, but you need to be to be aware and you need to be careful what is the offer that you are marketing. And is it going to be the same offer that the user will see when they lend to your to your, digital channel. Because that’s a key piece.
Driving acquisition and moving people to your digital channel is one thing, but making those convert is another thing. And there, the accuracy of the offer is quite important, which is even more complicated in the world where you have a lot of dynamicity, a lot of dynamic pricing happening, and a lot of moving components.
So making sure that, your digital, of marketing tools are have access to the to the right and the correct offers is, is a key piece here.
And we can move to the next, slide to talk about the, the second value stream for the airlines, which we believe is the liberation of the of the distribution and utilization of the cost of sale, which can be achieved with an airline let off creation engine.
While reducing dependency on GDS, airlines can optimize the expensive cost of, intermediate selling through through these systems. Lower GDS volumes, translates into reduced distribution bills.
In addition, with such technology in place, they can effectively shield the PSS from the transaction volumes of high look to book channels and, handle shopping volumes more effectively.
So in an offer and order world, an offer engine is also the prerequisite for introduction of the offer optimization techniques that Justin is talking about, like continuous pricing, dynamic pricing, coupon series, all the dynamic bundling bundling, personalization, and all of that.
And, so we have examples of customers that do this today.
Like, we have a large Middle East carrier that has a shingle shopping system engine, which they are in full control of. They know what offers they want to create and distribute to the different, channels and partners.
And if we another example is, Louvainse Group with their Metasearch engine distribution, for which they, again, own the own the offer creation engine, and they’re gaining full control of, of that engine. Again, what offers they wanna distribute to the different metasearch engines, and they can control their cost by allowing certain throughputs through the through the certain metsearch engines, and it’s all in in their control. So it’s quite important for the airlines to own the offer creation engine, be the ones that define what should be put out there as an offer.
And in the meantime, they they they must look into how they can increase and maximize, the bookings going on to their direct channels either on the on their own digital, channels or via NDC selling.
Thank you, Mitko. So it seems there is a lot of opportunity with, direct distribution and just changing legacy distribution models.
Now I wanna switch over to step number four, which is about the importance of portfolio management, which is a new concept for airlines. Chris, can you give us a little bit, more details around why portfolio is valuable for airlines?
Yeah. For sure. Yeah. Of course, offers are only good as as good as the products they contain. So airlines need a system that gives them full control over their products and of their inventory, so no matter which sales or distribution channel they’re using.
That’s where a solution like Pro’s portfolio management comes in. It includes three key components, a product catalog, a stock keeper, and a supply automation module, with the latter being the enabler of scale for third party relationships between airlines and their suppliers, be they other airlines or supplies of other pro products, air or mon air.
Now if we look at the bigger picture, IATA’s reference architecture gives the airline industry an illustrative framework for planning and developing, their modern airline retailing architecture.
Bro’s portfolio management fits into this framework. It addresses key areas like product management, stock keeping, and contract management.
These are all critical components for NER and looking to transform its its commercial operations.
I mean, we’ve seen our portfolio management already used successfully in other industries. Some of the world’s largest retailers already use this technology to sell complex configurable products more quickly, more efficiently.
That agility translates directly into, a much stronger selling experience.
So as we married decades of expertise on our side, in the airline space with this production proven product management capability outside of the the travel and the and the air segment, yeah, we see huge potential for airlines to move, to, to more clearly define their products, communicate their value to distribution partners, and ultimately drive, better commercial outcomes.
Yeah. So moving to this new concept of managing not just inventory but an an entire portfolio.
Let’s change the lens now from that commercial aspect to IT and look at the last fifth step in that journey that we presented, which is about modularity.
What does a value path to offers and orders look like from that technological modular perspective?
Obviously, investing in that right IT stack is essential for achieving that maximum return on investment for this massive transformation that airlines are embarking on. Chris, why is modularity critical?
Yeah. I mean, modularity is key. It’s absolutely key. Like, when it comes to making sure the airline tech stack stays flexible and future proof, it prevents airlines from becoming dependent on any one monolithic system, which has been, maybe a mistake of the the past. By having a modular setup, airlines could switch vendors or adopt new solutions that needs to evolve without being locked into to one approach.
This flexibility encourages a more dynamic and competitive tech environment as well, full of innovation, collaboration among vendors. Yeah. When airlines have the ability to pick the best tools for the job without worrying about complex migrations or integrations, it really does open the door to to new possibilities.
Yeah. One important aspect of modularity is, and I think Mikko touched on this earlier as well, is is channel independence.
And that means distribution channels like NDC, or an airline’s own internet booking engine, can be powered by solutions from any vendor that fits the airline strategy. If these airline and sorry, if these, channels, are trapped within a closed ecosystem tied to the the PSS, it limits the airline’s ability to choose the best technology for their commercial needs, and also reduces the incentive for for those vendors to innovate and improve their offerings.
But too much of that goes beyond just plugging in different solutions. It’s about seamless integration, having solid governance models, maybe setting unified SLAs, and many comprehensive visibility across the entire tech ecosystem.
This level of control and observability removes the headache of of managing this patchwork of vendor relationships or or disconnected systems.
So in short, modularity enables airlines to build a flexible, scalable, future proof technology stack that can keep pace with the market changes and the the new demands.
And Midco, from shopping and distribution perspective, what can modularity do for an airline?
So the move to offers and orders will mean that the shopping system of your creation components in the offer management box in the IATA reference architecture needs to be scalable, very scalable. Because, I mean, if we look at the current landscape, we have still the GDSs, which do offer creation for many airlines, for many agencies.
And this is today. If we look like, I don’t know, five, ten years in the future, the GBSs most probably will be becoming will be taking the role of an aggregator where they no longer create the offer, but they are rather asking the airline for the offers. This means that now the airline will have to be doing that top of creation on their side. And, I mean, just, like, an example of what we are hearing and then seeing from the airlines. Whatever they are estimating is, is volumes when they decide to start their NDC journey.
Usually, in, let’s say, one to two years, they see these volumes, that need to be multiplied at least by a hundred. So the IT departments within the airlines, they need to have this in mind, and they need to when they select what should be the operation engine, it has to be scalable and it has to allow them to answer to all of the all of the questions that all the different aggregators, servers, OTAs, will be will be sending towards the the airline system.
Also, if we look at the of a creation box, there are multiple components inside, and it makes sense this to be modular by itself in order to be able to take, let’s say, the best science piece that will do your best dynamic pricing of the of the n series, for example, or, the best science piece that will do the the best dynamic pricing for your right to flight product.
And on the other hand, you may have, a different vendor and comp and and a company providing you with the product catalog component, which is something that your creation engine in the future will need to connect to in order to get the products, in order to see what, what the stock is of those products and and all that. So it’s as Chris mentioned, this absolutely crucial piece to be to be modular. And, when an airline is selecting a solution and a product, they they they need to make sure that it’s modular.
Thank you, Mitko.
Justin, what is your view? Can you wrap up on that modularity conversation, and explain what the pros approach is in that direction?
Yeah. I mean, what what Chris and Mitko have said really hits the nail on the head. I mean, the the it really boils down to choice.
As an airline, you have choice that you want to have choices. Right? You don’t buy an airplane and have a you you’re not required to have a certain interior. Right?
You may choose the interior that comes with, from a particular vendor that happens to come with it, but you also have the flexibility to decide if you wanna go with a different vendor for your interior of the airplane. It shouldn’t be any different when you’re making decisions about the commercial strategy for the airline. And so, really, what we’re thinking about here is you having the choice to make that. From the pro side, the way we’re approaching this is, our platform has always been open, and very flexible.
Historically, we we’ve taken in data from any different provider, worked with it, and then created the data back into the providers, in into a PSS format as needed. That’s not gonna stop. We continue being open to partnerships. And what we’re our goal is is to make sure that, we’re able to provide the value that we, that we know we can provide for our customers, but also be able to work within the infrastructure that the airline needs within within their own infrastructure.
So bringing the certain the the particular components that are necessary and and desired by the airline, bringing those to market for them, inside of the architecture that exists. And the best thing about what what’s happening right now is that we’re we’re working together as an industry to establish these standards, so that then the modularity piece is better for everybody. It’s not, you know, each individual vendor, each individual airline determining those standards. Now we can have because, I guess, if each one determines a standard, it’s not really a standard, I suppose.
But, so now we’re working together to actually create that standard. And that’s really what what’s necessary here to to work together as an industry where it gives you, the airline, the choice to make those decisions.
Thank you, Justin. Some important considerations from commercial but also from technical standpoint for airlines on this journey.
I want to thank our speakers for this insightful conversation, and Terrapin and everyone who joined us today. We hope that you found this webinar insightful and valuable for your as you’re building your own roadmaps towards offers and orders.
We encourage you to check out this white paper from Travel in Motion with PROLS, for some expert insights on that transformation journey and also some insights from Air Europa and Lufthansa Group.
If you have any further questions or would like to learn more about what PROS is doing in the offers and orders space, you can visit pros dot com slash travel and see all the information that we have there available to you.
Now I would like to move over to some of the questions from our audience that kept coming in as we were talking.
Maybe the first one, Chris, is around you because it talks about portfolio management. And is that going to be replacing some of the current PSS capabilities?
Yeah. Good question. And, actually, some of that boils down to the fact that in the product catalog, we expect, yeah, all of the airlines products, and, yeah, products from the airline’s partners as well, whether they be other airlines or whether they be from from other third parties. But, I mean, one of the critical or or key examples is, for example, the concept of a kind of a file fare today.
That is, very much today a a definition of the product attached to a price and obviously typically filed externally.
So that’s something that actually a portion of that or a subset of that will live, in or the product aspects of that will live inside, yeah, the portfolio management system and the the product catalog its itself. So, obviously, price won’t necessarily live there, but the product definition, the rules, the combinability aspects, all of that should sit in the catalog. Obviously, combined also, from a with with schedules as well, that forms the the product, which obviously lives outside today.
And, yeah, the price is attached, obviously, at the typically at the the offer phase. So that’s, yeah, one clear example. And then, the inventory side. So, of course, today, imagery is typically hosted in the PSS.
It isn’t always as easy to get access to the accurate imagery data as maybe we’d always like. So, you know, having an independent stock even module as part of the overall portfolio management. Yeah, that’s another clear piece that, yeah, certainly should move away from the PSS into the the the portfolio piece and into the stock even. Actually, one of the reasons why it’s really important that that that happens is that, I mean, the PSS and the future of the order management system, like, the job of these systems is to be there, to be robust, to really be able to execute on whatever commercial strategy the airline wants to put in place.
All of the the smart stuff and all of the stuff that’s revenue generating and making a real difference to the airline needs to be obviously on the more offer management side and the portfolio management side. The portfolio management piece is really a key kind of commercial, piece of the or piece of the commercial architecture.
So it’s important that, yeah, those are, that obviously have a lot of investment, have a lot of, weight in terms of when planning the transformation. And in the end, you just need to be able to, especially in the auto management system, execute, and have a good, like, kind of operational system, to make good of the the products that are coming out of portfolio management where the inventory is based there as well, and yet being offered ultimately, yeah, ordered.
Thank you. There is one question that is kind of related to what you just described. So in that world, of airline led offer creation, would there be a need to file fares in ATB call?
Or is there a need to have all these rules in the airline system?
Okay. Yeah. So, yeah, in in a related manner. Yeah. Absolutely. The product catalog is there.
I mean, today, the file fair does include some product data. I mean, yep, refundability, combinability, yeah, basic definitions of what that kind of today right to fly product, entails. A lot of that is, part of the the file fair. The price aspect is what is kind of decoupled from that
Q&A
in future.
But, yeah, the the product aspect should live for sure in the in the future product catalog. It’s not to say that there isn’t necessarily a need in future for, fair filing from a regulatory aspect. That’s another discussion.
And there are some other things that I mean, ATPCO is a a vendor in themselves, and they also have some solutions in the in this space. So, obviously, I can’t speak for for ATPCO. But, certainly, the concept of kind of a file there being a combination of product and price, yeah, that gets decoupled as as part of this. And, yeah, the product part should live in in the product catalog for sure.
Thank you. There is one question that is around the complexity when an airline is part of a group or alliances.
I don’t know. Justin, do you wanna take this one? Of how can you bring those innovations to life across airlines that are part of groups and alliances?
Yeah. The the question, you know, says how much complexity is added when there’s a part of a group or an alliance? I mean, it it can be significant. And I think that that’s, it’s it’s something that has to be considered.
It’s probably one of the areas where when we’re talking about the architecture, you go through all this stuff, you come up with all this modern, you know, approach to all these things, and then they say, well, I still need to get that to my partner, or I still need to get my partner’s availability even though I’m doing dynamic pricing. It creates challenges for sure, especially when the the partners are not in line, in on the same level with with what you as the airline are doing. And so I do think it adds a lot of complexity, but it’s something that, again, as an industry, we should be focused on.
And what we look at is, kind of practical ways of of handling these situations. So, you know, like the example I just gave, we have ways to still do dynamic pricing even if you have a partner component inside of that.
You may it may be the case that your partner’s piece is fixed, but you’re able to kind of, offer a price out there from a price adjustment standpoint. And that’s why one of the reasons we use price adjustments rather than just saying your price is three hundred and twenty two dollars, we’re able to offer the the price adjustments on top of that, which can then be used and applied across, you know, partner situations, etcetera. So, yeah, it definitely adds complexity, but it it’s something that, we’re working to handle with the airline.
Thank you, Justin.
Mitko, maybe this one is for you. How are you dealing to support year over year increment of shopping transactions on digital channels? I think you touched a little bit about that when we were talking throughout the conversation.
Yeah.
I mean, the key word here is scalability.
We need to be we need the solution that is being deployed, need to be scalable to make sure that it can handle, increased volumes without jeopardizing, any of the SOA’s, of course.
However, on the other side, we now more and more hit the issue or we talk to airlines that have faced an issue where their need of more transactions, appear because they have onboarded certain partners that are not necessarily contributing to their revenue side that much. However, they’re a huge contributor to the cost side in terms of, like, consuming their, shopping transactions.
So there are solutions to that, And usually airlines are willing to offer, like, a low quality type of offers or offers that are more generic and not that personalized towards the specific channel and user, which mean allows the airlines to address that specific need. So it’s a it’s an option that can be deployed, and depending and then if you have a good orchestration layer and a good general management and you know that, request coming from such partner of the airline where this partner is entitled only to offer to these generic offers being generate being produced and and and created for for the larger group of of such, partners, then, yeah, this, the shopping system will know how to respond. So it’s a way, and it’s actually quite quite a good way to addressing that. But, on the other side, there will be good partners that do, create revenue for the airline, that will have the need of, more transactions.
And that for that for these use cases, the airline must have a solution in place that is scalable.
Yeah. So they must understand their partners and their distribution needs in order to really decide how to handle those volumes.
Okay. A question around ancillaries. Are there additional services customers will pay for, such as premium meal options, lounge access, travel insurance bundles, or maybe totally new ideas?
Justin, maybe, yeah, if you want to Yeah.
I can jump in and then, Chris, I think, can add on, a bit more. I mean, this is from from our perspective, you know, the airline starts, for doing ancillary pricing, bundling, etcetera, is going to start with first party ancillaries, the things that you already have in your control, because those are the things that are relatively straightforward in terms of what you have and what you know about those ancillaries. But but what Chris can add to this is this is the value of the portfolio management piece that comes in. Whatever the airline can think of can be included in there.
The the one we joke about internally all the time is you’re going to a beach destination. Would you like to add sunglasses to that? And now we can sell sunglasses as an ancillary component. And and perhaps it’s you know, that’s not something that will necessarily happen in the next year or two years, but that’s where the airline can start getting into being truly a retailer there.
So, yeah, Chris, I don’t know if you wanna add anything from your side on the portfolio piece there. Yeah.
Yeah. Well, I was I was about to say, yeah, well, actually, the sky’s the limit in terms of what we can think of, but, actually, it’s not. The whole point is it’s the non s stuff we’re supposed to also be able to help with. So, yeah, from that perspective, I mean, everything you just said is is absolutely correct.
But it’s also about, yeah, having a flexible product catalog that can support these things, about being able to bring these things in thanks to the likes of a supply automation and kind of contract management module so that these kind of partnerships with new ancillary providers that maybe it’s difficult to deal with today, that they can be managed in a scalable way within the airline. And then, obviously, you need the offer creation engines to be able to, yeah, handle ready for the distribution. You need distribution channel, independence to be able to expose those products that way and then, ultimately, also the auto management system in place to be able to, yeah, orchestrate the order, of PSS because, obviously, today’s, limitations technology limitations make it difficult to to sell those things today.
So, yeah, all of what we’ve talked about enables that. I mean, there are already some, some steps you can take initially. There are ways to sell some of that today. But, certainly, in future with everything we’ve been talking about, yeah, there’s a lot of value to be gained.
And, of course, as well, when you when you start trying to sell these things, you need to also understand, like, when to sell them, how to sell them, at what price as well, and what to sell them with. So all of that, helps them more visible. You have, for example, the offer flow, the order flow, attachment rates, all of this great data that’s gonna be available across the platform. This can feedback in also to, offer optimization and, yeah, and help make sure that we’re attaching those products at the right time to the right offer at the right price as well.
Well. And and I’ll just add.
There there were two other questions. One about insurance travel insurance positioning and another about, transfers.
And I just I think that that tags along on on this piece is what we’re looking at is, first, allowing the airline to put those into the market through the portfolio management piece so that you can actually sell those things. But then the modeling that we’re doing really helps understand we’re treating this as a retail problem. So no different than how, you know, you price things at a grocery store or on Amazon dot com or whatever else it may be. We’re thinking about this as selling this as a retail solution or a retail problem.
And that means that we can model the demand behavior, the response to different prices on things like insurance or transfers. So, the the science that we have really allows us to to price check, if you will, or price explore pricing, as you present new prices to the passenger. And so, yeah, you can look at what is the conversion that you get, what is the willingness to pay for those products, and then even have some, you know, boundaries on that so you don’t have a minimum price, a maximum price, those kinds of things. So the opportunity is there to really look at regardless of what the ancillary is, we can do that.
And, of course, it starts with what’s inside, you know, the the first party ancillaries, but then quickly can expand to the third party components as well.
Thank you, Justin.
We have an interesting question I I can I can take the first step, and and Very well, Justin?
The other guys, have have I’m sure we’ll have something to add to.
I think the first piece of it is is kind of sitting down and deciding what strategy you wanna take. And I I think it goes back to what we said before at the beginning that there’s just it it can be very overwhelming with the number of things that you have in front of us. So start small. Think about, like, what what do I wanna do from a revenue management perspective, distribution perspective?
What do I want my core strategy to be? And then, you know, understand what your market is. So, you know, where do you primarily plan to sell? That can drive what your strategy is.
If you’re primarily gonna sell on your IBE, then you wanna make sure that you have the right pricing strategy for the IVE, but also, how are you gonna display the ancillaries? How are you gonna come up with those components and distribute, to the IVE in, you know, in getting real time information, dynamic pricing? You know, tying it back to the earlier question of, are you gonna have partners? If you have partners, what does that look like from a distribution strategy and and integration strategy with your partners?
So I I think my my opinion is start small, think about what your strategy is, and then pick off incremental components, that make the most sense for and and really driving revenue, especially if you’re a small airline. The expense of an airplane is very is very high. The expense of a lot of what your, you know, costs are very high. The a lot of these things are considerably lower cost with with very high return on your investment.
So thinking about things that can be low cost, high high return would be where where I think makes the most sense to start.
Yeah. And just very quickly, two cents. So, yeah, having independent channels such as an IVE and NDC off PSS, not coupled to other technology.
Even if you don’t plan to implement other stuff behind initially, at least having that freedom to do so in in future when you’re ready, yeah, that’s a critical first step on on the path as well.
Thank you. And one last question because we’re out of time. From Microsoft in the chat, how is AI impacting the development of your products and how can airlines benefit from the advancements of AI?
Justin, maybe you start us off.
I can I can start on that one too? I mean, AI is prevalent across the board. I mean, from from our engineering team leveraging the technology to help with test cases, to help with, you know, understanding, code writing, that kind of thing. That’s that’s every software company right now is leveraging that, and and we we’re doing the same.
So that ultimately benefits the the our customers, because you’re able to, get faster time to market, you know, less less bugs in the code. Those kind of things are are critical with that. From a, you know, from from the benefit to the airline, I mean, our whole approach is really leveraging AI from the science that we have in the solution. So forecasting, optimization, etcetera, those are really critical to the solution.
And so, AI is a foundational point for pros to ensure that we’re using it both from our core science, where we’ve always leveraged data science as a as a foundational point for the systems. But on top of that, now we’re looking at how can it be more interactive with the user. So things like alerts in the system is a is a great example of what we’re exploring right now. Rather than having, the user predefined when this condition is met, I wanna be alerted.
Instead, we’re focused on, you know, telling the user when something is happening because the tools are able to explore the data on its own.
Thank you, Justin. Thank you again to our speakers for the great insights to Terrapin and to our audience today for staying with us. Wherever you’re watching from, have a great day, afternoon, or evening. And over to you, Jessica, for any final words today.
Thank you. And, sadly, that’s all we have time for today. But I’d just like to say a massive thank you to our amazing moderator and panelists and a huge thank you to our audience for joining us and sending in those questions.
If you didn’t catch the entire webinar or you just wanna go back and rewatch any sections, we have recorded this, and it’ll be available on our website and through various other channels in the coming days. So please just keep an eye on your inbox for more information around this. Finally, we’re also gonna be exploring the topics discussed in today’s webinar and much more in person at this year’s Aviation Festival Asia. In Singapore, this runs from the eighteenth to the nineteenth of February. If you’re interested in joining us, there’ll be a discount code sent out to all the webinar attendees, and this expires in the next forty eight hours. Hopefully, I’ll see quite a few of you there. So So thank you again to our moderator, panelists, and audience for such a great session, and have a lovely day.