IT can shape airline distribution

Here’s my first article in Airline Business, written for their recent Distribution and Innovation Conference, from which the quotes in the other article come.

There is no part of the travel industry which has been more impacted by technology-enabled change than distribution. Equally, there is no part of our industry where passions – and sometimes tempers and litigation – run so hot. But my aim here is not to reflect on where we are, how we got here or, indeed, who did what to whom on the way. There are many better qualified then me to do that and I want to remain on good terms with all sides of the industry.

Clearly business people from other industries are impressed by the achievements of airline distribution – arguably an airline worldwide web 20 years before the internet – but amazed that, when everyone is so mutually inter-dependent, relationships between providers and distributors are so challenging.

Airline IT lies at the intersection of two of the most interesting industries on our planet – IT and air transport. Both have revolutionised the way we live our lives, so let’s look to their futures. What do airlines need? A clear route to market plus a way to present their fares and products to their customers across all channels, geographies and segments. Pretty simple, really?

However, the onward march of technology has layered different methods of distribution, one on top of another, starting with travel agents and ticket desks, through call-centres, the web and now mobile. Each generates new opportunities and threats for airlines, distribution companies and travel agencies and each generates new players, eager for a share of the action. Some of these channels are in the hands of airlines, others have been sold on and some never were.

Add to that multiplicity of fares, selling classes and revenue management algorithms – which you would need the maths skills of a Cambridge senior wrangler to understand – and you get unimaginable complexity. Try asking a simple question as newcomers to the airline industry do (and I once did): what is the cost of distribution in each channel? You get a bewildering set of answers – or questions back about exactly what assumptions you want to make.

Freely adapting the words of 19th century British statesman Palmerston: “Airline distribution is so complicated, only three men in the world have ever understood it. One is dead. The second is a mathematics professor, who became mad. I am the third, and I have forgotten all about it.”

To see what technology is likely to do for future airline distribution and predict what great leaps forward we might make, we need to consider current IT trends. On the supply side, cloud computing is making massive computational power and storage capacity affordable for any company.

Meanwhile, the growth of e-commerce and now mobile “m-commerce” has given customers far greater transparency with the ability to compare prices. Amazon and web start-ups are forging the way, tailoring products not only to geographies and groups of consumers, but also to individuals: “Customers who bought what you just bought also bought this and this”

Social networks such as Facebook and Twitter allow customers to instantly share experiences with friends and family. They expect companies to keep them informed in real time and to respond instantly to both actual and perceived problems. What’s more, they expect to be recognised as an individual, whether in First or Economy.

Put all this together and you get another massive change in distribution, again driven by IT. This is using all the cheap, massive, computational power now available to give customers the choice, flexibility, recognition and feedback they desire. The really tricky part is to do this across all channels, geographies and segments.

No player in airline distribution, airlines, GDS, traditional agents, search engines or online travel has the ability to do it all. Surely the need to work constructively together, then, becomes even greater?

Here’s the link to the Airline Business/Flight Global site

article:http://www.flightglobal.com/articles/2011/03/04/353953/column-paul-coby-on-how-it-developments-couldl-shape-airline-distribution.html

About paulcoby
I am CIO at the John Lewis Partnership in the UK. I was Chair of SITA - the airline solutions company owned by the Air Transport Community - for 11 years. I am also on the Boards of Clydesdale and Yorkshire Bank and Pets at Home. Previously I was Head of BA Services and for 10 years CIO at British Airways. I am interested in Roman and Military History. The views expressed are entirely my own not my employers.

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