Announcement: a new way forward in GDS distribution

by Chris Clarke, event blogger  

David Doctor, Director of Airline Distribution and Low Cost Carriers at Amadeus, has just launched the Amadeus Airline Retailing Platform. 

Developed in conjunction with airlines, the platform represents a new way forward in GDS distribution.  The conference heard how a complete redesign of the Amadeus distribution proposition means airlines will be able to target marketing and brand differentiation opportunities in the same way as they can through direct channels. 

A lot of focus at the conference has been on the need for airlines to act more like retailers if they are to build customer loyalty and differentiate.  By transforming the GDS, airlines can now do this in one of their most vital channels.
 
Shortly, I’ll be posting a video interview with David Doctor talking in more detail about the Airline Retailing Platform. 

Night-time in Bangkok

by Chris Clarke, event blogger

After a full first day,  over 600 of us headed to the river to catch two boats for the evening dinner cruise taking in the sights of the city.  Being the hottest month of the year in Thailand, the river breeze was welcome.  I’ve attached some photographs of the evening which capture the fantastic food, fireworks and views. 

Whilst some of us headed back to the hotel, others clambered in to traditional tuk-tuks to hit Pat Pong and other places downtown.  We are looking forward to hearing the stories….

Questions from today…

by Chris Clarke, event blogger

At the sessions today, questions were coming thick and fast by delegates using the conference SMS service.  Here is a selection of some of them:

• Many people are now talking about web 3.0, what is this?  (All contributions on answering this questions very welcome!)
• What is the development time anticipated to deliver true Airline 2.0 functionality? 
• Is it possible to combine the personal service and human touch, demanded by many travellers with self-service?
• How can airlines deal with the increasingly frustrating airport experience which has a real impact on the travellers experience of air travel?
• What innovations are being seen on mobile devices, SMS? 
• How do you balance a community-based platform approach with competitive advantage?

Be part of the discussion.  Let us have your thoughts on these questions as well as others.

A brave new world?

by Chris Clarke, event blogger

Today’s conference offered up many opportunities for discussion.  

Airlines 2.0, the theme of the conference, challenged delegates to think about the future.  A future which would fundamentally transform the relationship between airlines and customers.

Frederic Spagnou, Vice-President of the Airline Business Group at Amadeus, started the day by painting a picture of the future.  He spoke of the enormous opportunities available to travellers  to express their feelings on each travel experience.  Whether that is through their own blogs, ratings sites or social networking applications.

The airline sector isn’t immune to the global trend towards customer empowerment.  It is facilitated by new technologies but it is driven by a powerful need for individual self-expression.

The friendliness of airline staff, the quality of the in-flight food, the frequency of lost luggage and the cost of fares will all be subject to scrutiny and commentary.

This loss of control is something that airlines have to accept.  It is impossible for an airline, or any brand in any sector, to operate a control and command policy in such a fragmented world.  It simply won’t work.

The future won’t stop there.  The future opens up the possibility of complete transparency.  Travellers will be able to select their seats, their food, the movie they want to watch, whether or not they have lounge access, whether to go through fast-track. 

This is the emerging reality.  How can airlines respond?

Some suggestions include better segmentation.  Airlines will have to ditch the leisure-business-first segmentation in favour of a more sophisticated segmentation that really meets the needs of individuals and groups.

Airlines that cater to students, airlines that cater to the older travellers, airlines that cater to entrepreneurs are all possibilities that may emerge.  The Future Traveller Tribes 2020 report, launched by Amadeus last year, suggested a number of tribes that are expected to emerge in the next 20 years that airlines will need to take seriously. 

The questions posed by such a future are just as important as the answers:

• How can airlines build brand loyalty?
• Can airlines truly differentiate?
• What is the balance to be struck between following and leading customers?
• Is it really possible for airlines to develop the retailing capabilities provided by the likes of amazon.com?
• Is it possible for marketing, technology and revenue management people to develop a truly integrated approach to segmentation?

These are questions for all of us.  I look forward to your thoughts.

Welcome to Bangkok

by Chris Clarke, event blogger  

Good morning, afternoon, evening, depending on where you are reading this blog. 

It is hard to believe that in the last 24 hours I’ve had dinner in London, breakfast over Russia before yet another dinner (or was that lunch?) in Bangkok. 

After much preparation and planning Horizons 2008 is now upon us.  Over the next two days, I’ll be updating this blog with entries from the conference floor and video interviews with speakers and delegates.  With over 600 delegates and over 140 airlines represented, there will certainly be no shortage of content, only perhaps a shortage of sleep.  We have a blog cafe on site to capture the thoughts of delegates throughout the conference. 

Last night, we enjoyed a cocktail reception on the riverside of Chao Phraya.  The balmy evening buzzed with delegates meeting old friends and colleagues as well as getting to know new ones.  Over the last few years, Horizons has become a flagship industry event bringing together people across the airline and technology industries.  We hope that this blog extends the conversation beyond the event itself and beyond the delegates that attend. 

Like the conference itself, this blog only works when people share their ideas and views.  So I look forward to your contributions, both from those of you in Bangkok and those that are not.   

Ancillary revenues: the hunt for a better profit margin

by Blaise Fiedler, head of strategic commercial services, airline e-commerce, Amadeus

American Airlines’ Charlie Sultan, MD Sales Planning and Analysis, remarks during an interview in February 2008 with Eyefortravel that in the travel business everybody seems to be making money – except the airlines. Travel agencies and airports for instance all seem to be able to achieve higher profit margins than the airlines which are the foundation of the whole industry. The problem is that airlines – relatively speaking – are new to selling. The newest entrants – mostly low cost carriers – without the legacy of indirect sales have taken a lead when it comes to ancillary revenues. According to a report publised by Ideaworkscompany.com, in 2005 Europe’s top 4 low-cost carriers generated 470 million euros from non-ticket sources. Ryanair generated ancillary revenues of EUR 7.76 per passenger thanks to its à-la-carte pricing.

With your airlines’ visitor numbers and bookings increasing you’ll certainly be interested – or forced – to look into increasing the average basket value. Here are some ideas:

1. Your core product – the fare

This is what your customers have come to your website for – flying from A to B. In years to come it will still be the reason they will visit airline.com. For this reason you should make this process as simple and straightforward as possible. Any distraction here and you might be losing customers. But are you really delivering value to your customer through your product?

Let’s take a step back: your product is a combination of a price and attributes: flying times, stop-over times, seat comfort, lounge quality, food flavor and even flight attendant charm (more on that from Ryanair later). Some tough decisions need to be taken: if your marketing team has been promoting a specific attribute – let’s say the quality of the catering – can you afford to remove it from the core offering? And if you’re in a market that really only values price, do all the other attributes matter?

Air Canada has taken a novel approach to their product by unbundling the fare. They still have 4 fare families, but in each of these you can remove or add components, à-la-carte. Not interested in frequent flyer miles? No problem, Air Canada gives you 3 dollars back. Want advance seat selection in the cheapest fare? Yes it’s possible but it’ll cost you at least 15 dollars.

Now here’s a company earning ancillary revenues where you are simply earning sales revenues. Best of all – it’s maximizing the customer satisfaction who is only paying for what he values. Whether this also maximizes value for the airline is a hot topic of debate.

An interesting note is that ancillary revenue of your competitor might be base revenue for you and vice-versa. Whether you can sell lounge passes, frequent flyer upgrades, advance check-in or excess luggage vouchers depends on your strategy. In any case you’ll be looking at how to maximize sales while serving the brand.

There’s likely to be a lot of discussion between finance and marketing and then some technology challenges. We’ve implemented unbundling for Air Canada online, but have yet to see a very convincing usage of unbundling across distribution channels. After all – you want your customers to see the same products no matter where they book right?

2. Complementary travel products

This is actually what we all think about when we mention ancillary products. With profit margins that can exceed 30% most airlines dream of selling insurance, car rentals, hotels or for the more creative carriers parking rights or concert / sports tickets.

Insurance seems a no-brainer – it’s completely dematerialized, perfectly integrated in the booking process and adds value to your customer – and of course to you. And unlike hotel or car rental bookings it requires almost no intervention from you.
Hotel and car rental are another matter – are you staffed to claim commission? Who will the customer call if he arrives at the hotel to find it full or that his reservation has not been put through? Do you manage this yourself or trust a partner?

3. Frequent Flyer generated offers

Here – finally – traditional network carriers have a real advantage over the new entrants. Several times a year I receive from Air France an offer to subscribe to a joint American Express credit card. I think it’s free the first year and it allows me to accrue frequent flyer points on all my purchases.

Frontier’s co-branded credit card generated revenues for the airline of EUR 19.6 million in 2005.

United attributed revenues in excess of EUR 627 million (US$ 800 million) to its Mileage Plus frequent flyer program in 2005 – an ancillary revenue of EUR 9.40 per passenger. Alaska reported that its Mileage Plan program generated revenues of EUR 141 million in 2005 from the sales of miles to bonus partners (Stats : Ideaworkscompany.com report).

Because frequent flyer points are so attractive, the opportunity for the airline to sell them to third parties is immense: travel partners such as hotel chains and car rentals have been the traditional buyers of miles but more recently other partners such as shopping malls, communication services, insurance, supermarkets, energy or online retailers.

4. Far fetched ancillary revenues

Not inspired by the above? Well maybe Ryanair has the right idea for you. They have created quite a stir in the industry by asking some of their female flight attendants to pose in bikinis in their planes for their 2008 calendar. The calendar was sold in-flight and through the website. I should rather say sold-out as the 10,000 copies are all gone and ebay might be the only place to find it now. All charity money but high marks for the creativity.

So – tell me what you’re doing for ancillary revenues. Is your fare offering – your base package – as lean as possible or are you offering value that many people don’t want to pay for? What flexibility to you have to tailor your offer? Do you have deals with content providers such as hotels and cars? How does your company promote its frequent flyer value to partners?
 

So, let’s talk about massage

by Siew Hoon, Horizons´ master of ceremonies

From Thai and Balinese to Blackberry, massage is as part of the Asian lifestyle as bullfighting is to the Spaniards. Yeoh Siew Hoon gets down to the meat of the matter.

I am writing this right after having enjoyed a two-hour spa treatment at L’Apothiquaire, a French day spa in Ho Chi Minh City.

The Sports Care therapy and Soin Perfection facial have left me loose, relaxed and glowing – and inspired.

As someone who has a massage at least once a week when I am home in Singapore, and everyday (if I get the chance) in places like Bangkok, Bali, Phuket, Hanoi, Haikou or Colombo (everywhere, really), massage is as much a part of my life as bullfighting is to a Spaniard – as it is to most of my Asian friends.

Which is why when I was at the Amadeus office in Madrid and we were discussing the Horizons conference and the coffee break times, I blurted out, without thinking, “You should have a massage area.”

There was silence. Surprised looks were exchanged. And then a snigger. “But is that politically correct? Would it be seen to be sleazy?” asked someone. “Someone in our Bangkok office suggested that but we thought he was joking.”

That’s when I realised that just because we are so used to it in Asia doesn’t mean that everyone understands it. It’s clear there is still a sleazy connotation to the word “massage” in some parts of Europe.

Of course, there are still places you can go to for “special massage” – as in everywhere round the world – but in the last decade or so, with the boom in the spa industry, massage has become not only respectable but also compulsory to a holiday experience.

No five star hotel worth its marble would be caught dead without a spa, just as no holiday destination in Asia would be considered complete without spas round every corner.

Actually, massage may well be the second oldest profession in Asia. When I was growing up, every ailment – headache, ear-ache, back pain, joint pain – was treated with massage.

My grandmother had a technique for headaches where she would, with her knuckes, pull the skin between the eyes until the skin turned red. It was extremely painful but it worked.

“Painful?” she would ask as I winced. When I nodded, she would say, “Good,” and went back to pulling even harder.

To the Chinese, a massage’s got to hurt to do good.

Today, traditional massage therapies – Malay, Thai, Indonesian, Filipino – have been given modern, gentler interpretations to make them more acceptable to the foreign body which is obviously not used to being kneaded and pounded in the name of health.

To us, the massage you get in modern spas is a bit like watered-down Thai cuisine – “tom yum kung” without the bite.

Incidentally, there’s a spa in Singapore that offers what it calls the Blackberry massage – it’s, you guessed it, aimed at Crackberries who suffer from knuckle and finger joint pain.  

Anyway, my hope is that the meetings industry will embrace the idea of massage as passionately as travel and tourism has – and that a massage corner will become the norm at every coffee break time.

So catch you at the Amadeus massage corner, maybe. If not, make sure you experience a real Thai massage in one of the many spas in Bangkok.

You’ll then understand what I am talking about.

24 hours in Madrid

by Siew Hoon, Horizons´ master of ceremonies

I’ve always wanted to visit Madrid. I just never thought it’d be for 24 hours only.

How I ended up spending one night in the Spanish capital, headquarters of Amadeus and home of bullfighting – there’s got to be another story on that – is perhaps typical of the way we live, work and play these days.

So there I was, three days away from taking a flight to Rome on a trip which would take me to Berlin (to attend ITB) and then to Paris (to play) – three cities in 10 days – when I received an email from Tracey Land who is coordinating the Horizons conference asking, would I mind popping into Madrid whilst I was in Europe to be briefed on the event?

Having appointed me as MC of the event, they felt it was an opportune time for me to meet “everyone” and be given a briefing on the event, sessions and my role within the big Horizons picture and since I was on the continent, hey, why not pop into Madrid?

I didn’t hesitate. And so we arranged, by email, my one-day hop to Madrid – an early morning departure from Paris CDG on March 11 and out of Madrid on March 12 morning.

Whilst I was gallivanting round Europe – and getting first-hand experience of what it is to fly a real lowcost airline (Asia’s low cost airlines are premium affairs compared to the one I experienced on Easyjet) and crowded airports as well as frozen toes – my Blackberry was receiving emails from Tracey – my e-ticket, my hotel details, my day’s agenda.

It was all I needed to get there and back. I arrived in Madrid on a day when gale force winds were blowing throughout Europe and England was being battered by storms and big waves. The taxi takes me to Novotel Puerta dela Puente, a hotel located 5 minutes away from the Amadeus office.

Taxi drivers in Madrid do not speak English so my Blackberry comes in handy here. In fact, very few people in Madrid speak English. I think everyone who speaks English works with Amadeus.

I arrive at the office, identify myself to security (the global standard these days) and take the elevator to the 13th floor. From then on, everything is a blur because it happened so fast. Lunch was talk and tapas, I met “everyone”, was briefed on everything, we shared ideas, thoughts, opinions – I cannot disclose too much here on pain of being gored by a bull because of the NDA I signed – but suffice it to say, I now have a pretty good idea of what Horizons is all about and what I am supposed to do.

One thing shone through though – everyone at Amadeus is very passionate about their patch and everyone wants their patch to shine.

In the evening, John Gunby very kindly showed me a bit of Madrid – we walked through the old city, we bumped elbows with the crowds, we went into a bar (of course) and had tapas and sangria. I saw a pair of pig’s hooves on the bar. If my European friends ever give me grief again about fish head curry, I will show them the photo I took on my Nokia. In Madrid, pigs don’t fly, they hoof it.

 Nice pair of hooves

We then went for dinner in the rich area – Salamanca – to a very trendy restaurant where I had, don’t laugh, wok-fried noodles with pak choy. In a Singapore food court, this would cost US$2. I dread to think what it cost here.

The Spanish usually eat at 10pm, I am told. They then party till the wee hours of the morning. What I want to know is, don’t they sleep (a 2-hour siesta is not good enough, I do not think) and how do they work the next morning?

The answer I was given: Spanish do not need much sleep. As for work, well, I won’t go into it here.

In Thailand, where Horizons will be held, the Thais have a word that’s similar to “mañana” – mai bien rai. Never mind. It’s okay. Don’t worry. No problem.

See you in Bangkok. And I’d be happy to show you the real City of Angels but I’d need more than 24 hours.

Self service revolution at the airport

Self service is so present in our daily lives that we hardly think things could have been done in a different way. As a frequent business traveller, Malcolm Pride, who works at Amadeus´ airline marketing in London, looks forward to the day when airport self service is no longer an option.

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When I think about the Self Service Revolution at the airport my first thought is, why hasn’t it happened sooner?

We take for granted so many things in our everyday lives that are self service (and I’m sure a lot of younger members of our society believe always were self-service!) that thinking of the alternative is pretty much unimaginable.

My list of random things that have changed over the period of my life – some for good, some arguably for worse (to be fair, usually in the opinion of the ‘older’ generation) – include:

• Petrol stations – personally I now actively avoid anywhere that requires an attendant to fill up my car.
• Supermarkets – here I’m not talking about self-service at a supermarket (and actually I’m not a huge fan of that one), but the fact that a supermarket exists at all. When I was a lot younger we did all our shopping down the main street of my home town : butcher, baker, green grocer etc.
• ATM’s / Cash Machines – getting money these days is very easy (maybe too easy?) – I distinctly remember my parents having to make a special dash to the bank every Friday afternoon to get some money out over the counter before they closed for the entire weekend. (John Shepherd-Barron, the man who invented the cash machine… my hero!)

Obviously I could go on … I think we could all add our own items to this list.  For me as a traveller (which I probably do far too often), airport self service is already the same as my three random examples – unimaginable any other way.

If I now come across an airport or airline that doesn’t have self service, I become much grumpier than I am already. You know, why have I been deprived of the right to an extra hours sleep at stupid o’clock in the morning, when I should be able to go straight to the gate? Why should I need to find the right queue to stand in, behind people who don’t seem to have seen an airport before, families with screaming children and other travellers who are even grumpier than I am? Why should I need to know some obscure 6 character code to identify myself with? And, why is there only one person at the airport at midnight capable of dealing with a plane-load of passengers who have just been told that their flight is cancelled?

Ok, so a bit of a rant I’ll agree, but for me the move to full self service at the airport is inevitable. Just as I could never imagine existing in a world without ATM’s – so shall it be with airport self service!

Malcolm Pride

LCC r(e)volution : the new generation airlines

What are new generation airlines? and which will succeed? These are some questions addressed by Jesper Soderstrom. He is head of the low-cost carrier business unit at Amadeus and is responsible for developing technology solutions that meet the needs of this growing segment.

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A New Generation Airline to me, means an airline that does things differently. It’s still an airline, so it transports people, but the set-up is new and fresh.

Since the LCC is now an established business model, at present I can see, two different types of “New Generation Airlines”:
• the airlines who are mixing the Traditional model and the LCC model
• the airlines who are developing the LCC model even further

The former, “The New Gen Mixers” are trying to combine the two different models: a low cost base with an extended-reach-and-work-with-partners type of concept. So they interline, they code-share, they fly international routes, they build some kind of route structure etc. But they think as an LCC – a sales and marketing approach. You get the picture.

The latter, the “The New Gen Extremists” are looking to turn the business model totally up-side down: the passengers won’t pay a dime, so lets-make-money-elsewhere kind of concept. Not many carriers here, but they are interesting, because it’s so challenging. Can you really make it? Not by just marketing a zero fare and in reality moving it to self-defined “taxes”, I mean really offer a ticket for free.

Naturally, both models will be impacted by environmental discussions, de-regulation, the world economy in general and maybe the fuel price in particular.

However, reasonably, the New Gen Extremists are more vulnerable to environmental taxes and increase of the fuel prices, simply because their model rests on an extremely low cost base in order to sell for free.

The New Gen Mixers have another battle to fight: changing the established standards in the industry. Driving change is easier outside an established environment, so they are in for a hard fight. But if they manage, the reward is instant – they can extend the LCC model into new areas such as long-haul and the business passenger segment.

Which model has greater chance of success? I don’t know, the verdict is yours.

Jesper Soderstrom