Datalex recently sponsored the CAPA Airlines in Transition Conference in Istanbul. An airline CEO event, it covered a broad spectrum of ills and remedies affecting the industry. One of the more interesting insights was the general opinion, echoed by a number of CEOs, that membership of a global alliance did little to fuel innovation and growth, or improve services for the small to medium sized airline. By far the most effective strategy for such airlines was to follow more bilateral agreements with partner airlines that could extend network reach, provide more substantial feeder numbers from markets which matter. In addition there needs to be a like-minded management culture in order to make it work, and not appear as purely a CEO-CEO quest.

Carriers that contributed single digit percentages to the alliance had very little say, or room, at the alliance decision table. At the same time these smaller airlines have to pour significant funds into maintaining complicated integration standards which do not produce the ROI. The cost of maintaining such integration is not proportionate between the biggest and smallest alliance member, and therefore it becomes a more critical and difficult justification.

Peter O’Kelly

Commercial Director, Datalex

There’s no question that data security is a significant risk in online retail. Given the threat posed to payment card users by these attacks, it is no surprise that the payment card industry has responded with the stringent data processing and storage requirements spelled out in the Payment Card Industry Data Security Standards (PCI DSS).

The Datalex Travel Distribution Platform (TDP) is an e-commerce retail platform for leading airlines and travel distributors around the world. This highly available, PCI compliant, hosted infrastructure delivers shopping, reservations and reward offerings to approximately 95 million travelers worldwide each year.

As such, we continue to look at new innovative and effective approaches to provide the level of security our customers and travelers expect while making sure the solution was flexible enough to meet the demand of travel retailers in a cost-effective manner. On review of our process with our PCI Qualified Security Assessor (QSA), we found that wrapping our TDP services with a PCI-compliant tokenization service allowed us to focus compliance efforts providing a more flexible framework for the introduction of new functionality and integration of third party services.

TOKENIZATION

We created the Datalex Tokenization System, a storage and transmission system that wraps around TDP and handles and stores all payment card data, isolating that data from other TDP services. By making the Datalex Tokenization service fully PCI-compliant we are able to maximize security for traveler information. The Tokenization service intercepts payment card data at the point it is entered by a traveler and then passes a token to other TDP services to represent the stored data. For enhanced security, the token is simply a randomized value that replaces the payment information but does not contain any sensitive data itself. Any TDP service can use the token to confirm that the data has been entered and approved.

When the sensitive information is needed by a third-party system, TDP sends the token which is intercepted en-route by the tokenization service and replaced with the appropriate information. TDP retail services can easily use the tokenization service to integrate securely with third-party systems. This new approach was validated in August 2011 when the PCI Standards Counsel issued this report formally endorsing our approach to Tokenization as an effective compliance tool.

Will Gordon, Datalex Information Security Manager and Ken Labach, Datalex Counsel.

ATW Air Transport World

By Michele McDonald, 4 April 2012

For several years, airlines have yearned to adopt “merchandising,” a term that is applied indiscriminately to everything from fare families to checked-bag fees. Depending on who is doing the talking, they are held back by their own systems, which don’t easily accommodate innovations in how products are sold, or by the global distribution systems, which some airlines accuse of dragging their feet on investment in new technology.

But Montie Brewer, former chief executive officer of Air Canada, adds another reason that airlines are held back: When it comes to merchandising, they haven’t got a clue. “Airlines are terrible merchandisers,” he said. “They don’t even know what the word means.”

Brewer, who participated in a panel discussion of merchandising at the UATP Airline Distribution Conference in Madrid, said airlines “are so far into the Dark Ages about what we are really selling.” The key factor, he said, is that “they see it as a revenue stream instead of differentiation.”

… Aidan Brogan, senior vice president global sales at Datalex, said airlines are missing out on untold numbers of opportunities to give customers what they really want. They could, for example, work with other companies to package the real essentials of a trip.

“Yesterday, I parked my car at the airport,” he said. “Then I went to Starbucks. But the airline only got the air fare.”

Read the full article.

I attended the China Airline Ancillary Revenue Summit in Shanghai last week. There was a continued focus by all airlines on growing revenues, with the likes of Spring Airlines reshaping traditional full service offerings. Their unbundled set of products is supporting their aggressive seat pricing (where government controls don’t interject). External international routes provide good opportunity to product innovate, unbridled.

Peter O’Kelly

Commercial Director, Datalex

Great panel debate at the UATP Airline Distribution 2012 Conference in Madrid today. The topic was airline revenue strategies. Joining me on the panel were Montie Brewer, Jim Davidson (Farelogix), Matt Arthur (ENett) and Richard Cushing (Guestlogix).

Some key takeaways:

• Ancillary does not equal merchandising.
• The opportunity is the entire travel experience and all touch points.
• The opportunity is to close the loop, own the retail opportunity and maximise the value.
• The airline brand as valuable retail real estate coupled with captive customer segments is a retailer’s dream.

The challenge will be to regain trust from the traveller to treat you as a retail brand, rather than the grim reaper of hidden fees and punitive charges. Airlines are struggling to break down 30 year old commodity approaches to systems and distribution, but they are breaking them down. Many struggle with the concept of true merchandising. But change is coming fast; first movers will transform the whole.

Some first movers such as WestJet and Air New Zealand were cited as examples of reengineering the business to serve the Guest experience rather the PAX! Think about the profit opportunity when airlines start using the data.

And a warning from Montie Brewer: to protect your data and continue a disciplined fight for ownership of your customer.

Aidan Brogan
SVP Sales, Datalex

Airline Business, February 2012

Read the full article here.

Within five months of the ITA Software deal closing in April 2011, Google launched Google Flight Search (GFS) in the USA. GFS, which despite being live is officially still in testing, searches inventory and fares from airline websites, giving users a direct link to the airline’s booking page. At the moment GFS is limited to major airlines and key domestic routes, but it includes filters so users can search by budget, departure times and location-specific tools.

Datalex CEO Cormac Whelan sees little impact so far, citing its low-key launch, its promotion of commoditisation and that airlines – the owners of the product – have not yet decided how to adopt it. “I think airlines will be a lot smarter and wiser this time around and will be less likely to let somebody else control their distribution. Longer term we think it will be a good feeder channel into the airlines direct distribution strategies…”

Airlines International, IATA, February-March 2012

“The consumer’s expectations change at an ever-increasing pace, driven by the internet, mobile, social media, and the choice available across always connected channels,” says Cormac Whelan, CEO of Datalex. “This means that if an airline wants to effectively retail, merchandise, and differentiate their product to their customers, they must do so at the same pace. They must surprise and delight if they want to connect and add value to the traveler. It’s retailing 101. There are millions of retailers outside of travel who do this every day. The key here is having the right tools and platforms to support your retailing needs.”

Read the full article here.

Airline pricing is an oft discussed and little understood thing. The goal of airline pricing is, for most, to drive the maximum yield for any given seat based on current market conditions. This of course is a highly complex process that necessitates down to the wire inventory knowledge, demand forecasts and hutzpah on the part of revenue managers across the industry. It’s a real shame that this dedication and focus to driving a notional percentage point increase in yield here and there does nothing to drive customer loyalty and can only incentivize the majority of travelers to purchase the cheapest competitive fare.

A friend of mine who is an engineer, working in an industry that on a day to day basis lives and dies by the yield they make from their component sales, had spent a couple of weeks researching flight prices for a family trip to Europe. He was exasperated. He could not decipher the ‘crazy’ pricing schemes he was seeing. All the airlines consistently priced the same, regardless of comparative brand offerings, no matter what range of days he looked at. For the life of him he could not understand how the cost component of the price was expressed to the consumer.

• Why does BA price the same as United; the service on BA is better, so that must be a premium?
• The Delta flights on a 757 which are a squeeze for international are priced the same at their 767 and 777 products?
• I understand it’s cheaper if I stay a Saturday night, but as I am flying on weekdays, why should that matter?

I think we all have had similar discussions with non industry people and faced a similar barrage of questions. The focus is always the same: what’s the secret sauce and how do I get the right product for the right price?

As I am prone to, I made a mistake here and started to explain how airlines, for the most part, controlled prices based on a number of factors…

Uh-oh.

“Oh really, what factors?” he said. Oh dear.

Err, point of sale, you know, this expresses who is shopping for the booking. Oh, so the airline knows who I am when I shop? No, the airline treats the site you are shopping at as the differentiator. This was set up when there used to be travel agencies, so a better performing agency may get better prices. There used to be thousands of these, but now there are only really 5-6 main ones: the online agencies, mega brick and mortar agencies and airline.com. So that’s no differentiation at all.

Well, then there is variability by relative demand. This peaked some interest. Yes airlines monitor what prices are selling and bubble inventory dynamically to the prices that are selling at a higher yield. So therefore if an airline is selling more of a higher fare they will preference said fare! That’s great, but how come all the fares look the same? Are all the airlines selling at the same relative pace, regardless of how many seats they have available for sale? Well no. OK, try this one.

Airlines also price by how far out you’re travelling and based on how many seats are left. So the earlier I buy, the better the deal I get? No, the earlier you buy, the worse the deal you get. In practice the best fares can be sold really close to departure. So you’re saying that when inventory risk is at its highest you sell at the highest price, and when you have covered the majority of your costs, and are down to the last couple of items you then lower prices? Err, yes. That makes no sense.

Having totally confused and upset my friend, I was asked the million dollar question: how do I get the best value fares? Having just explained the entire pricing process I was stumped.

My friend’s closing words on the matter: how does the airline industry ever plan on making money again?  Their pricing is insane. If I can’t understand how something is priced, how can I assign a relative value to it to make a purchase decision?  And that’s just the seat… what about other products and services?

Ahem…airlines call them ancillaries… Just keep shopping…

Gianni Cataldo

GM Americas, Datalex

Guest Post: Al Lenza, CEO of Lenza Group LLC.

Despite critics’ best efforts to demonize the travel industry’s continued expanded offerings of optional services, their sustainability not only seems assured, but we are in fact only in the embryonic phase.

This is based on 2 important, fairly basic factors. First, airlines, car rental companies, cruise lines and other sectors all seek and need new sources of revenue outside the core transaction price. Secondly, (with bag fees the exception) an overwhelming number of customers want the option to enhance their particular travel experience and will pay to do so. Some examples:

• Some customers want and are willing to pay for premium cabin or just for plain better seats.
• Some want to guarantee a private table in the packed cruise line dining room.
• Many customers are willing to pay extra so their hotel room is not by the elevators.

The list is endless. And certainly travel is not unique – it just seems to get the scrutiny that few other sectors do, and often accused of nickeling and dimeing and of “hidden fees”. But consider what other industries routinely do – the iPad is not really $499, Dell laptops are not $399, the Kindle eBook is not $79, and smartphone plans are not $29.99. Those are basic advertised price points but effective rates paid by most customers are significantly higher, determined by each individual customer based on preferences. All of these “add-ons” are sold with the initial purchase.

These examples point out where travel companies are mostly missing out – successful up-selling and cross-selling at point of sale. For various limitations in distribution (mostly done in supplier websites) and technology (limited capability to sell in corporations, for example), most travel-related merchandising is done near the check-in window. So outside of checking in, there is a huge market that remains largely untapped. And outside respective supplier home markets, few optional services are sold today as few are even enabled outside the check in environments.

Unlike unbundled products like airline bag fees (collected on day of departure) there is a large untapped market for value-add products and services offered and sold in connection with the initial travel purchase. Products like premium cabin, seats and wifi in hotels, airlines, and cruises are just some examples of services tailor-made for selling with the initial purchase. Suppliers with the right technology and content partners are figuring it out.

It is only a matter of time and potentially worth billions.

About Al: Al has been involved in all aspects of distribution for airlines, online travel sites, Global Distribution Systems (GDS) and various industry joint ventures. As Vice-President, Distribution and E-Commerce at Northwest Airlines, Al was responsible for developing and implementing all of Northwest’s distribution and e-commerce strategies. He negotiated all GDS and OTA agreements and was a leading player in the creation of airline joint ventures Orbitz and Hotwire. Prior to Northwest, Al held various management roles including Vice President at Continental Airlines and its GDS, System One Corp.

The recent launch of RoomKey (Choice Hotels International, Hilton Worldwide, Hyatt Hotels Corp., InterContinental Hotels Group, Marriott International and Wyndham Hotel Group), set me thinking that this would be a great idea for airlines; like-minded businesses coming together to control distribution costs and direct traffic through to their existing branded websites.

Hold on a minute! They do – the alliances! Of the three alliances, SkyTeam offers the best look to booking experience, but what a great opportunity to use these distribution channels to engage travellers directly. As well as standard fares, show promotions and dynamic and personalised adverts deep linked into an airline’s results flow. This will have the benefit of reducing the number of steps and clicks a traveller has to go through to get to what they really want: the best deal for them. Travellers keen to accrue loyalty points or stay within travel policy have another transparent point of access to not only build their itinerary, but to develop deeper relationships with the brands they trust.

Mike Naylor

Business Development Director, Datalex