Finally airline retail will leave its infancy!
“One Order” initiative to revolutionize shopping & ordering
Today a typical traveller holds at least three reservation codes, many order numbers and several customer ID’s during one travel including flights, car rentals, trains and hotels. In October 2016 IATA created an earthquake bringing the ‘One Order’ initiative forward on its yearly passenger service meeting. This IATA concept now is in early testing, with British Airways and the German leisure carrier Condor. It could bring the biggest change ever to the airline industry’s service purchasing and order management. Compared the launch of eTIX two decades ago that would seem to be a very small shaking.
However ‘One Order’ is not just another digitalisation initiative. It has the power to fully disrupt existing service purchasing and order management processes. In today’s world a travel is organized in up to four different identifiers. Travel information is consolidated in the passenger name record (PNR) which holds the customer ID, the reservation code, the ticket number, details for fares, additional services and payment information. The ‘One Order’ concept will bring all these elements under one superior ID. The low-cost airlines are already using such concepts, which is more or less a copy of how online retailers are organizing their service purchasing and order processes.
Just imagine soon to use only one central ID across travel (or the whole trip). Or imagine being able to buy your travel at platforms like Amazon, iTunes or Zalando. The concept might sound too obvious, but it is a huge change from the practice currently used by legacy airlines, which are largely still saddled with processes established well before the 70s, when paper tickets were the gold standard.
From an order centric to a customer centric world!
From 2019 technical elements of airlines order management like fare filing via ATPCO, RBD, PNR or EMD will have become obsolete and be replaced by simple commercial structures. This could lead to an elimination of up to 50% of todays process steps and cost.
‘One Order’ would push for greater product flexibility, higher speed to market, real self service and a higher retail readiness for the whole industry. ‘One Order’ in combination with NDC (new distribution capability) will replace tickets and reservation steps and could lead into the world of a “free” combination of prices, services and conditions. In a long term view the ‘One Order’ standard is also seen as the dawn for blockchain technology use in passenger airlines since it would support the payment process throughout the travel chain.
Airlines would benefit through increased capability and agility in offering ancillary bundles and personalized travel. At the same time the result from a simplified order management will enable significant cost reductions in many areas including core processes in Pricing & Revenue Management, Sales and Accounting.
Travel agent communities would profit from increased selling opportunities, as an entire trip could be captured on ‘One Order’ record – not just the flight (and ancillaries) but incorporating hotel, ground transportation and a broadth of service we cannot yet even imagine. ’One Order’ also creates a financial system allowing tracking all these functions.
Tony Tyler IATA*: „One part of the business has remained largely immune to the relentless tide of technological and process innovations: That is the IT infrastructure powering the GDS (…) Today’s travel agent terminals has not evolved much since the 1970s“
*published in ATW March 2012
GDS and PSS providers would be one of the driving forces to rebuild the new process chain without the complexities existing today. This will create a new business opportunity as they now sit on their outdated and cumbersome passenger service systems. This would guide them to a new generation of e-commerce retail business models.
Customers will love the simplification when opening their travel wallet to manage the whole travel plan under one identification number and the opportunity to add travel related services in a self-service mode.
Massive investments will pay off fast.
As the initiative is in the early stages and details, standards, technologies, IT providers are being defined no single party could exactly forecast the full magnitude of investments nor the timeline when the full delivery will be available. First movers are testing single process elements and working heavily on the proof of concept, however during a period of high returns, industry consolidation in Europe and strong results, no CEO is pushing for such massive transformation without a cause.
Hence during the next industry down turn the need for lower cost and enriched revenue streams will push for implementation as the business cases will be strongly positive.
First expectations are forecasting a massive 30% FTE reduction in commercial mid/backoffice organisation, rich 20% in IT systems and only hours instead of weeks for product delivery to the market. Additionally, the revenue side will deliver its contribution as more product features and service bundles could be sold. Topline expectations are at a lofty 15-20%.
Preparation is key!
‘One Order’ is nothing short of an earthquake in the existing world of airline service purchasing and ordering. That means such a big transformation takes a) time, b) investment and c) accurate and disciplined implementation.
Due to the necessary adaptions across the organisation we see three major levels of readiness for a step by step implementation:
Be retail ready! The first step in preparation is a cultural change within the organisation. One major precondition to work successfully with the ‘One Order’ revolution is to create a retail mindset. Airlines could prepare their teams with implementing concepts for product based pricing, offering unbundled service features and investment into the direct sales channels.
Modernize the IT! The second phase would consist of activities to modernize the infrastructure. This contains the use of new IT standards, e.g. NDC standard, and latest distribution technology, e.g. implementing and extended use of API interfaces. The core competence in the commercial team would need to be developed towards a revenue effective usage of CRM capabilities to upsell and cross sell along the travel chain and all channels. The finance team must organize payment possibilities at each customer touchpoint to enable additional revenues with an endless potential range of ancillary services offered.
Push for the change! The third level of preparation would be the kick off for a fully reshaped organisational setup. Key to this phase is a refocused commercial strategy, e.g. selling unbundled products and optimizing the total revenue, not only ticketed fares, but also ancillary revenues. All processes in pricing, revenue management, sales and accounting need to be redesigned towards their full contribution in an unbundled services world. This results in new IT systems, refocused and resized organisation supported by digital core competencies across all management levels.
One Order is the biggest commercial change in airline industry!
This transformation is seen as a major step to modernize the airline commercial capabilities and to turn into a retail sparked industry.
Roll out of the standard is expected from 2019, full availability throughout the industry from 2022.
Strategic leadership from senior management and board members will be necessary to prepare the ground work to fully exploit the opportunities of that new standard.
UNEX makes your airline business profitable and future proof!
For more than 15 years UNEX consults airlines in strategic and operational challenges. Various domestic and international projects e.g. in process adaptions, strategic business development, sales optimization as well as pricing and revenue management give proof to our industry specific expertise.
We are happy to support your business to get retail ready and are happy to have a first discussion with you on the level of one order readiness in your organisation.