Over the last years, many efforts have been made by travel players to digitize and improve the search and book experience for customers, also known as Offer Management. However, the after-booking or Order Management, still remains a pain point, while it is critical, both for revenue upsell and customer experience.
To understand why, and what can be further improved, we take a step back on 50 years of history of the airlines IT systems. What goes for airlines also goes for many other travel players, such as ground carriers, hotels, cruises, etc.
So take a seat, fasten your seat belt, and let’s go for a booking and after-booking journey.
A pioneer of its time
The airline industry was among the first industries to computerize back in the 1960s and 1970s, like the banking industry for example. At the time, answering to the simple questions of:
- what flights can I take from A to B?
- what is the price?
- book me a seat!
synchronously from anywhere in the world was a true technical challenge. It was met by the creation of the Global Distribution Systems (GDSs) like Amadeus, Sabre and Travelport. They worked with an international data communication standard established at the time, called EDIFACT. In this traditional flight distribution model, the GDSs are the ones in charge of the Offer creation, based on:
- the Schedule, published by airlines through a third party, OAG
- the Fares, published by airlines, also through a third party, ATPCO
- the Availability that the GDSs get from the airlines themselves
This model prevents airlines from being in full control of what they offer to customers – apart from their own direct channels like their website. What used to work when fares were all included was not enough anymore once airlines started to un-bundle their fares with optional add-ons called ancillaries (bags, seats, meals…), making their offers more complex. And in the 2000s, this situation came as a call for change in the industry.
NDC, a path to airline retailing
Starting from 2012, a new exchanged standard called NDC for New Distribution Capability, based on XML language, was spearheaded by the International Air Transport Association (IATA), the airlines’ trade association. NDC is not only about a more modern data exchange standard, it also enables a new distribution model in which airlines are themselves in charge of the Offer creation, instead of the GDSs. Doing so, airlines can become retailers, meaning they directly interact with customers, showing their offers with richer content, a wider range of product offerings like ancillaries, and dynamic offers. A report published by McKinsey & Company in November 2019 explains how the airline industry can create $40 billion value through retailing by 2030, equivalent to 4% of the industry revenue before Covid-19.
The transition to NDC is on its way. It is not only a matter of systems updating but also a restructuring of whole organizations. One can discuss whether it will be accelerated or delayed by the current pandemic crisis, and even if a full NDC world will ever exist. But still, a full ecosystem is being reshaped with:
- the airlines building Offer Management systems and NDC APIs to provide their content – either internally or through third parties like Accelya Farelogix
- travel agents connecting to these NDC APIs, either directly or through aggregators like Duffel
- existing GDSs moving themselves to aggregators, like the Amadeus Travel Platform
Many of the biggest airlines in the world are NDC certified by IATA throughout different levels and are already selling a growing percentage of their tickets through NDC. For example, the Lufthansa Group recently announced that over 30% of their agencies sales are now done through NDC.
This story of GDSs and NDC goes for IATA so-called legacy airlines. Let’s not forget the Low Cost Carriers (LCCs) that have grown so rapidly since the 2000s. They have innovated by fully un-bundling fares, creating ancillary products which account for a large share of their revenue stream. They could easily distribute them as they have primarily gone with direct (web) sales, benefitting from the boom of the internet as well as cheaper distribution costs. Besides, a growing number of them have provided APIs for external parties to search and book their flights. A player like Travel Fusion has pioneered in aggregating their content, further joined by others.
What happens after the booking? The world of Order Management
If the industry has put a strong focus on the shopping & booking experience for many years, the after-booking remains a step backward. By after-booking, we mean the ability for airlines and their customers to engage after the sale of the ticket until the completion of product delivery (the flight arrival at final destination). This includes such things as
- the ability for customers to change their bookings: change to a new flight, a new date, why not a new destination… or simply get refunded, in cash or credit to be redeemed for further usage
- the ability for airlines to push dynamic offers for customers to upsell their bookings with an upgrade or other seating options, a flexibility option, a special meal, a new itinerary…
- an improved handling of product delivery issues, proactively providing customers with a choice of their preferred solutions in case of flight operational disruption.
In the retailing vision embraced by airlines, the after-booking is the world of Order Management, as opposed to the Offer Management mentioned above. The Order Management starts once a customer has accepted and paid one of the Offers proposed by the airlines, which is followed by the creation of an Order – also known as a Booking in the airline’s space. Best-in-class retailers like Amazon display a “Your Orders” section always visible to the customers from which they can in one-click modify their order or ask for a return.
In the days of all included fares, the airline’s Order would sum-up to one product – the flight itself. But with the rise of ancillaries and multiple levels of flexibility conditions, Order Management has become much more complex. It has become even more critical, both for customer experience and revenue generation, through upsell and repurchase – considering the critical impact of operational disruption recovery on customer perception.
And while Order Management used to come as a second thought to airlines’ executives when compared to the Offer Management, Covid-19 first wave in Spring 2020 has put a new light on its importance. With the issue of massive flight cancellations, the necessity to streamline and automate the refund and voucher issuance processes has become obvious, as millions of customers waited for months before receiving their refund or voucher.
Now we have understood the importance of after-booking and Order Management, the second part of our journey will go through involved airline’s systems and the industry roadmap to upgrade them.