Airline Workshop: Distribution and retailing at the heart of digital transformation

Transcript

Michael Bell:Thank you for joining this important panel. You know, whenever I hear airlines complain about their costs, it's usually airport costs or distribution. So an important topic. We're gonna get into a healthy discussion around how distribution can be turned into a weapon of competitive advantage and source of revenue, not just a cost to be managed. I commend CAPA for putting together a terrific panel for me to work with today. So on your far right, Abhi Shah, Chief Revenue Officer at Azul. Abhi, thanks for coming, coming in from Brazil and just arriving.

Abhi Shah:Thanks, Michael. Good to be here.

Michael Bell:Abhi began at JetBlue, worked through a variety of different roles on the commercial side in JetBlue and then Azul, and has risen to a very senior level, a big part of the success there.

Abhi Shah:We're trying.

Michael Bell:At the organization. Next to him, Brad Beakley. Brad is the CEO of Current Aviation and also Hospideo, important providers of very interesting services, which you'll talk about a little bit hopefully in the course of our discussion, to the industry, particularly around serving as a front end commercially of airline entities that maybe have a certificate, have operations, but need some real commercial expertise. He's got a lengthy background in the aviation and travel business on the hotel side with Sabre, various airlines as well. So Brad, thank you for joining us today.

Brad Beakley:Thank you. It's good to be here.

Michael Bell:And his son just got married this weekend, so congratulations to him.

Brad Beakley:My pricing analyst at JetBlue's son.

Michael Bell:Aha, okay. We'll have to patch him into the discussion somewhere. Ana Maria Escobar, who is the Vice President and General Manager of Latin America for everything Related to airline relations for Sabre in the region. Ana Maria's got also an extensive background in the industry, both with Sabre in a previous incarnation, but also with various airlines, ASAS and then Avianca through the merger, and even as head of revenue management at Alitalia. Had the rough job of spending 3 years in Rome handling that position. So let's get into this.

Brad Beakley:Mm-hmm.

Michael Bell:I'm gonna ask you guys each to answer each of 2 questions with only one word.

Brad Beakley:Yeah.

Michael Bell:Or one phrase, I'll let you in one of them. So the first one is, what's the biggest opportunity for airlines in moving to enhanced distribution and retailing? Is it cost reduction or revenue enhancement? Ana Maria.

Ana Maria Escobar:One more. It's going to be revenue.

Michael Bell:Revenue. All right.

Brad Beakley:Revenue.

Michael Bell:Revenue. Okay.

Abhi Shah:I wanted to say cost, but I think revenue is bigger.

Michael Bell:Oh, you guys don't— you got to make it controversial here. Okay, well, I'll be interested to hear why. Obviously, it's elements of both, but I think maybe your answers are reflecting a little bit the evolution of distribution as a As a function in airlines, right? And where the opportunity sits. All right. And then the second one, again, in one word only, and here I'm gonna hold it to one word. What is the single biggest hurdle to achieving Amazon-style retailing and distribution for airlines? If there was one thing that will get— is getting in the way, we'll start with you, Abhi, this time.

Abhi Shah:Complexity.

Michael Bell:Okay.

Brad Beakley:Stole mine. I was gonna say complexity. I'll say infrastructure.

Michael Bell:Infrastructure. Okay, very good. Ana Maria?

Abhi Shah:Is it really?

Michael Bell:Legacy. Okay, very good. All right, well, it all seemed to be related, so I'm interested to see how and why you guys feel that way. So let's get into the why. Why are airlines going down this path? I mean, I think we see it every day. Whenever we make a booking or have follow-on emails about this or that, airlines are trying to engage more with their customers, trying to grab a bigger share of wallet. Obviously want to build that direct relationship with their customers as well. You all mentioned revenue, and let's hear from you as to why. So let's start with the Chief Revenue Officer of, of Azul. And how are you guys looking at this new domain about NDC and Direct Connect, et cetera, and as a revenue source, if you will?

Abhi Shah:Yeah, absolutely. I mean, obviously it's my job to get as much revenue as I possibly can for Azul. And in Brazil, for those of you that don't know, we've kind of been blessed a little bit in that Brazil has been a direct connect country for a long time, like 20 years, even before Azul started. And so all of our distribution inside of Brazil is all direct connect. So all of the travel agencies, all of the consolidators directly connect to our inventory, our fares. Everything real-time all the time, and so that makes life a little bit easier. Brazil, of course, flies to the U.S. and to Portugal as well, and we have our partners United, JetBlue, and TAP, and that that demand is very important to our long-haul network. And so outside of Brazil, we use GDSs like Sabre, right, and the other ones, and we also use a GDS-style interface. To connect with our partners because we use Navitaire. Those that may know, Navitaire is not a very natural partnership-type platform, and so we have other different layers. But at the end of the day, it's all about bringing demand to your network. It's all about bringing demand to your network. And so every additional layer of demand you can bring is worth it, right? And so when we fly to Lisbon and we want to take someone to Rome or Paris, or wherever, or we want to sell tickets in Rome or Paris to fly to Brazil, it's not viable for us to do marketing and have everyone come to our website, right? It's not going to work. And so therefore you have GDSs, you have Expedia UK, you have Expedia US, all these kinds of things. But in the end of the day, it's all about bringing additional demand. And as many layers of demand that you can bring—

Michael Bell:What do you mean by layers, Abhi? Define for us what you're talking about.

Abhi Shah:Let's take our flight from São Paulo to Fort Lauderdale.

Ana Maria Escobar:Right.

Abhi Shah:Miami, Fort Lauderdale, South Florida is like a borough of São Paulo, basically. Right. Brazilians go much more to South Florida than they go to Iguazu Falls in Brazil. Right. But so I have that demand already. But okay, maybe that's good for one daily flight or 2 daily flights. What if I want 5 gateways in Brazil all go to Fort Lauderdale or Orlando? Then I've got to sell tickets to New York and Boston and Las Vegas and all those kinds of things. I need a partner. I have JetBlue. I have United. What is that experience for the customer? If they cannot book that ticket on my app or my website, but only through an online travel agency or only in the GDS, that's not a great experience. Over time, and it's taken us a long time to do this, It's taken us 7 years, actually, believe it or not. This is actually an actual fact. 7 years after we started flying long-haul, you can now finally buy a ticket São Paulo-Fort Lauderdale-New York on the Azul app. It took us 7 years to do that because it's a complicated itinerary. You don't have seat map, for example, you know, all those kinds of things. So, but that's a layer of demand that we now have. That we didn't have last year, right?

Michael Bell:So it's about enabling you to capture that by enhancing your technology.

Abhi Shah:Enhancing retailing, enhancing distribution, enhancing the customer experience adds layers of demand. We're capturing that demand today. You know, hopefully next week we'll start selling connections over to Cancun over Fort Lauderdale, which is a huge destination for Brazilians also. That's another level of demand. All of those things help to make your flights work.

Michael Bell:Yeah, super. Brad, let's pivot to you and get your perspective on this. And you have seen this question, if you will, from multiple standpoints— from the airline standpoint where you began your career, from the hotel standpoint with Carlson and others, and now in the provision of services to help airlines with their front end, if you will, with the commercial side. So you've You said revenue as well. Why and what are you seeing airlines doing this way, if you will?

Brad Beakley:You know, I think it depends on the airline and the model. So generally speaking, I'd say look at how a low-cost carrier, low-fare carrier generates revenue, and an outsized portion of the basic revenue that they produce comes from ancillaries and the ability to unbundle and then sell and merchandise that properly. Even if you're a legacy carrier and you've got a very traditional structure, you know, if I compare it to, say, the benefit of a revenue management system, 3, 4, 5% revenue improvement, if that's the level of ancillaries that you sell, even then you're talking about something that's the difference between a margin that you're gonna hit or you're not. So whatever your perspective, The ability to manage that ancillary and different types of ancillaries is really the key, and it's literally the difference between profitability and not.

Michael Bell:So you've seen hotels and how they go at this. What's the difference between the two, and what can airlines learn from hotels about distribution and retailing?

Brad Beakley:You know, one of the most interesting things that I learned when I joined Carlson with the Radisson Hotel Group was how good hotels are at content. And they live in a little, a little easier world than the airline world with operational constraints and everything else that's going on. But, but hotels are really good at content. So pictures and video and when to display those things through the selling process on direct channels and actually third parties too— Booking.com, Expedia, you see.

Michael Bell:So let me actually build on that and ask any of you to comment, and then I'll come to you. Ana Maria, your thoughts on the revenue cost question. How much of that has got to do with the fact that hotel is the destination versus a means? Like, if I gave you all a choice to zap yourself to your destination or fly, presumably you zap, you don't want to fly. But the hotel is sort of like where you're headed, especially if it's a leisure trip. So this sort of content is stuff you're sort of putting out there for people to consume, right?

Abhi Shah:Yeah.

Michael Bell:So do airlines face a dilemma because people don't really want to buy the ticket, and it's like, okay, I have to, and this other stuff's on the side. I don't know, you jump in here, Ana Maria, with your thoughts around that.

Ana Maria Escobar:I'm not so the expert in the hotel, so I'll let this to Brad, you know, just to chime in on the hotel.

Brad Beakley:Yeah, I think for sure it's really important for a hotel to be able to deliver the content because you do make your decision on your week and your vacation spot based on what you can glean from the content you, you get through your distribution channel. Airlines, it's a little more of a challenge. One, because as you mentioned, we can't zap ourselves there, but you want that to be the fastest possible way from here to there. And that's really kind of your primary decision maker, and maybe price. And So I think it's just been a different focus. And then layer on top of that a little bit that the products are not as differentiated as a hospitality product would be. Even if you're talking high-end hotels, there's a big difference between a Ritz-Carlton and a Four Seasons.

Michael Bell:Yeah.

Brad Beakley:Both very nice properties. But is there that much difference between airline A or airline B within the same category?

Michael Bell:Again, you know, low cost, I want to come back in a few minutes to what I was trying to get at with that, but maybe just before that, Ana Maria, Sabre, you guys have been working for some time to position yourselves as partners to the airlines to allow them to sell more, right? And so what is the Sabre view? How do you guys see this as a revenue play, if you will?

Ana Maria Escobar:So let's, let's try to understand what is happening right now in the industry. Because everyone is talking about a transformation, everyone is talking about NDC. Why? Why are we doing this? So NDC is this industry mandate, you know, that the IATA is pushing. And the reality is that is just a piece of technology that is going to allow the airlines to be able to create the content, the offer that they want to put, you know, to the passenger. Now let's understand What that means. Today there are many, many hurdles that the airlines have to go— booking classes, pricing, agency contracts, a lot of standards that are happening, and all the information is disseminated in different areas. NDC is going to allow the airlines to be able to create by themselves that offer and being able to put it in the consumer, where they want, how they want to sell it. And this is a big change that is not only in the airline, but it's a big change that is bringing every single key player in the travel industry to do it. This is a play that the airlines are taking as an opportunity to improve revenue because they are going to be able to add more content, like what Brad was saying, but it's also going to be able to improve how the product is displayed, bring the commercial relationships with agencies to a different place. So it's going to be a big change in technology that is going to allow the airlines to be also more digital compared to what they were before.

Michael Bell:So help me with NDC because I've heard the term for a decade now and it doesn't sound like we're there yet. And I think back to, you E-ticketing, when Giovanni Bisignani came in as the CEO of IATA, he goes like, that's it. Like, he gave— they gave a deadline, whatever it was, 3 years, and we got to 100% e-ticketing. So why is it taking so long? Is this such a complicated equation? I mean, we're sending vehicles to Mars, right? So help me.

Ana Maria Escobar:It is a super complex equation. So think about NDC and think about the travel ecosystem. Like, Each of the players, it's one dial in a lock, okay? Everyone has to be in the correct position to be able to unlock the bolt. What do you mean by that? The commercial needs to be in place, the technology needs to be in place, the government approvals need to be in place. This is something that the aviation and the industry is very regulated. And it has a lot of standards across the world. So this is the complexity that is adding. One player can be ready, other players are not ready. So to really unlock this, we need to find the correct moment. To get there, we will need a hybrid model. We're not going to get there as a knife-edge cutover. It's not going to happen. So we need to live in a hybrid mode. What I believe is taking right now is the momentum. It's been slow right now. We are speeding up that momentum.

Michael Bell:You feel the speeding up?

Ana Maria Escobar:I feel that we are speeding after COVID.

Michael Bell:Jump in here, guys. What, what do you see? Why is it taking so long? And this gets to the one-word hurdle issue, right? So—

Brad Beakley:I, I kind of think, you know, you mentioned e-ticketing is one example. Another one I like to think about is, um, is MCOs versus EMDs. Same concept, but the process didn't change. And those, those types of automation really just digitized a paper process and no business process or no other process change. When you talk about retailing and merchandising, now you add to that potentially third-party service providers, communications between all of them, a moving operational environment that's in real time and changing, whether it's shopping or flying or—

Abhi Shah:Yeah.

Brad Beakley:Before, after loyalty data. So you've got all these disparate systems all trying to communicate with each other in an environment that's, you know, that's devolving constantly because the plan is the perfect version of what an airline wants to do and what happens on day of departure is never the plan.

Michael Bell:Abhi?

Abhi Shah:Yeah, I think honestly NDC is one of those terms That's overcomplicated unnecessarily. I actually think so. Like, you don't have to go. For me, it's not like NDC or nothing. Just start connecting.

Michael Bell:It's a journey.

Abhi Shah:It's like just start connecting with your partners. That's okay. Like, you know, there is a cost aspect to this, right? GDS distribution costs are insanely high. Like, that's just true, right?

Michael Bell:Oh gosh, no.

Abhi Shah:So, and At least they are for Azul. Either we have a bad contract or what. Basically, Expedia sells with Azul now directly. There's no NDC. I don't even know what the acronym is. It doesn't matter. It's a direct connection with Azul. I get the revenue, actually even more revenue because as Ana Maria said, the content is now real-time inventory pricing flights. The rate at which fares change these days, the rate at which schedules change these days, you're not going to keep up. It has to be real-time. Expedia today with Azul is real-time and it's wonderful. We pay less and we get more revenue. For me, it's like, oh, are you going to do NDC or not? I'm like, I don't even know what that means. I'm just going to direct connect with as many people as I can. If the pipe is called NDC, fine. If it's called web services, fine. It doesn't matter, you know? There actually are many players in the market that provide these services as well because someone like Expedia has technology, but like a mom-and-pop Brazilian ethnic travel agency doesn't have that in-house. They can use an existing pipeline provider basically to help them connect.

Michael Bell:You said complexity was the one where you use as sort of the hurdle to getting there. Amazon-style retailing. Why? What is the complexity that you're referring to here? It sounds like you're not thinking of it as a conflict.

Abhi Shah:No, the complexity I'm referring to is the complexity in the customer journey.

Michael Bell:Like the trip you were talking about.

Abhi Shah:The trip I was talking about. When Azul was 15 years old, 15 years ago, we just had a website. If you're just B2C and that's all you're buying, You can have an amazing journey, right? We have all the information. We can reach out to you if anything happens. Perfect. Okay, now you start selling in travel agencies. You've broken the journey. You start selling at the OTAs. You've broken the journey. You start selling your partners, or your partners start selling you. There's no seat map. Like, the other day I bought a ticket from London to Houston on British on American Airlines website. They've been partners for 30 years, let's say. No seat map. If you keep your business model simple, I think airline retailing is good.

Michael Bell:It's not the complexity of the channels or the— it's just the inherent complexity of travel.

Abhi Shah:There's just so many different possible customer flows and the way they interact with you, forms of payment, loyalty programs, so you can have points More points plus money. We change your flight. Now you have a credit. How do you use that credit? You use it everywhere. It's just millions and millions of different customer journeys, and if that, that complicates the experience.

Michael Bell:You said infrastructure, Brad. What did you mean by that?

Brad Beakley:I would build right on that. So you're in that environment with all of that complexity, and you've got an infrastructure that consists of technologies designed and developed 30 years ago or 40 years ago, and other pieces that have been added to the mix over 40 years up to, you know, current technology, the latest thing, cloud-hosted, and it— but it all has to hook together and connect. And, you know, there's 10 suppliers of any particular scale across that entire ecosystem of all Is that what you were referring to when you said legacy, Ana Maria, or what were you referring to?

Ana Maria Escobar:I think that what Abhi and Brad are referring to is exactly that. I think that we have a technology debt, and the technology debt is what is adding a lot of complexity trying to put all the pieces that Abhi was mentioning together. Those layers right now are very complex to get. Now, don't take me wrong when I said legacy. I don't see this as a negative alone. The systems that we have today, good or bad, have taken the travel marketplace that we know to this stage today, you know, and we are where we are because of that technology. So what we need to think is how we're going to evolve that technology, how we're going to make that transition. It might be NDC, might be APIs, because right now we need to think about is How can we create a modern platform, you know, that we can bring all these functionalities seamless and digitally to the airlines? That's what I mean by legacy when I responded to you.

Michael Bell:So I'm going to give you guys another one-word one. I didn't tell you about this one, but that's okay. I, in the prep notes, referred to airlines maybe being bad retailers. So the question for you guys is, are airlines good retailers? Yes or no? Abhi?

Ana Maria Escobar:Yes.

Brad Beakley:Depends on the airline.

Michael Bell:Yes or no?

Brad Beakley:Generally, yes.

Ana Maria Escobar:No.

Michael Bell:No. Okay. Well, let's have a discussion about it. And you think— you said in our prep discussion that you think airlines are pretty good retailers. Why do you think so?

Abhi Shah:Well, first of all, I mean, you know, I think that again, it depends on your journey, right, within the airline and how you're interacting. You know, 90% of journeys, let's say, For an airline like Azul, you know, which is not that international, are are amazing. Right? If you if you bought directly with us, you have all the tools at your disposal. You can buy, change, cancel, buy ancillaries, change your seat. You know, we actually will even check you in automatically. You don't have to do anything, and we send you a WhatsApp with your with your with your boarding pass. Right? So I think airlines have done a good job. I think you know. If I think about the experience of a car rental, like why does it take so long to get my car? Or even hotel check-in, right? I mean, I have all the hotel apps, but it's not the same. An airline check-in literally works all the time, every time, and it's super fast. Yeah, I think so. Now, where customers get frustrated is when the journey is complicated, but they don't know the journey is complicated. They're like, well, why can't I see the seat map? Why is that so hard? It's incredible. Seat maps are amazingly complicated because aircraft change all the time, and so you don't know.

Michael Bell:Or they get a message that says, call the airline to do this.

Ana Maria Escobar:Basically.

Abhi Shah:You're not going to call. It's a 3-hour wait if you call anybody right now. That's the problem. I think that the vast majority of customer journeys within an airline are smooth and very modern. But when the, when the journey gets a little bit complicated is when I think we run into a lot of problems.

Michael Bell:Back to the complexity issue, right? Brad, you said usually yes.

Brad Beakley:So maybe I'll clarify a bit. So if you look at the revenue contribution that retailing brings to airlines today, you can't argue that they're not generating a lot of revenue and doing a good job of that. I think the problem comes into the customer experience in generating that revenue. So, you know, yes, you can't look at the numbers and say they're not doing a good job, but from a customer—

Michael Bell:You're talking about like ancillary revenues per passenger?

Brad Beakley:Ancillaries and, you know, bag fees and all of those are tremendous contributions to any airline's bottom line.

Michael Bell:Yeah, often equal to the ticket price, right?

Brad Beakley:Yeah, but whether or not it builds loyalty and makes the customer feel good about what So they're getting there, but it might be a little painful along the way. Yeah.

Ana Maria Escobar:Okay.

Michael Bell:Ana Maria, you said no.

Ana Maria Escobar:I believe that if you see right now in average what is the ancillary revenue that airlines are getting per passenger, still very disparate. So in general, I think that, you know, there is a lot of opportunity, but it's not only to get the ancillary, it's that what really means to be a retailer. To be retailer means that you know your customer. Many airlines right now don't have the data. They don't understand who the customer they are transporting. They only rely on loyalty information. They are not able to understand if that passenger, for example, that today the world relies on a ticket, but if the passenger show up with the name, they don't know who that passenger is. So I do believe that to be retailer is about the passenger. It's not about the transaction. that you are doing. Today, in the old technology that we have, that we are transitioning, we need to change that because if we continue with this, I don't believe that the airlines will be able to be retailers. That also depends a lot of, you know, airlines that are ticketless or airlines, you know, that are thinking about just having an offer and an order. As long as we continue evolving to that world, we are going to be able to become much better retailers.

Michael Bell:Let's talk about what it means to be a good retailer, okay? Because maybe we have different aspiration levels here as well, right? So I think about the fact that, I don't know, in good old days you walk through an IKEA store and you probably walk out with 5 things you never planned to buy. Why? Because they make you weave through the store. Oh, that looks cool. What's this? What's this interesting name this product has? And you end up buying it, right? You shop on Amazon, you want something in particular, You find it, boom! All these other suggestions come up. You know, people who bought this also bought that. Yeah, that could be nice, and I'm going to take that. And it's so easy. Click, click, click. It's in the basket, and it's done. Right? So this is what I mean about good retailing. So let me rephrase the question. Given that, are airlines good retailers?

Ana Maria Escobar:I think they are not.

Michael Bell:Okay.

Abhi Shah:How do they become?

Ana Maria Escobar:But why?

Michael Bell:How do airlines become good retailers?

Ana Maria Escobar:Right. So. When you think about Amazon and many airlines and people compare, and we were discussing that this morning, what do you like about Amazon? It's not only the easiness that we have to buy. It's also that you know they're reliable if something happens. You know that if you don't like the product, you're going to get, you know, your money. You know that you have an issue, they're going to call and they're going to resolve your issue. With airlines, this is a different story. We have a story about retailing. We have a story about putting an offer, but the fulfillment is something that for airlines it becomes— and for the passenger becomes difficult. What happens when there is a disruption? Does passengers have— are passengers happy when those things happen? They feel that they're well, well managed. In other cases, they don't. And that is when I really believe that how can airlines improve improve the servicing to become better retailers as an overall, to be like the Amazon of the future. So that's how I believe that we still have long, you know, room for improvement.

Michael Bell:How much of this has to do with being brands that people trust? So I mean, I'll speak for myself. I trust Amazon and I trust it not to sell me just books as it was when it started, but a lot of other things, right? And I bet you if they sold air tickets, I'd probably buy tickets on Amazon. So how do airlines get to a point where the brand is trusted to sell other things, if you will? Or are we already there with the ancillaries? And maybe why don't you take that one? You guys have developed a pretty good brand for yourselves, right?

Abhi Shah:We try for sure. I mean, my, my take on retailing and being a good retailer, you know, I follow the daily bookings curve at Azul in real time, right? I look at the line like every minute. And what gets me paranoid is when the line starts to go in the wrong direction, right? And so when I think about retailing in our channels, I want the customer to buy their ticket as quickly as possible with as little hassle as possible. So am I really going to risk a purchase for a hotel offer or a car rental offer that I know less than one or two 2% is going to buy? Probably not. Maybe I'll do it afterwards. I'll use CRM. I'll use display. I'll use other types of techniques. But in the actual moment, in the booking flow, I don't want that customer distracted. I want their credit card saved. I want seats, baggage, ticket, and just go. The risk— you have millions of people coming to your website and your app every single day or every single month, whatever it is. You're not going to risk that revenue, at least I'm not, for something that's like Amazon has other things you might like. I'm not going to risk that because I want them to buy and be done with it. I have to close that sale.

Michael Bell:Is this the Azul approach then?

Brad Beakley:Is it really?

Abhi Shah:I think so. Again, I can't speak for other airlines, But I'm seeing other airlines at least simplify their booking flows in a sense that like cross-selling comes after payment, for example, so you don't distract the customer. And then you can do all those kinds of other CRM kind of stuff to kind of help. So in my view, retailing and being a good retailer as an airline, maybe this is limited, maybe it's somewhat naive, is get the customer in, Get them out safely, securely, quickly, right? And then the next one, the next one, the next one, the next one. So I think that to me is the definition of success. Once they've paid and they've got their confirmation email—

Michael Bell:Then go for it.

Abhi Shah:Sell them whatever the hell you want.

Michael Bell:All right, Brad, so you're bringing the front end, the commercial side to many of, you know, smaller airlines that don't have that. What do you think they're asking for? Are they asking for this broad offering and You know, cross-sell all these other services? Are they looking for something simplified?

Brad Beakley:I'd say in general there's a lot of airlines that are looking for that. However, I would say I would agree completely that step one is get the ticket, get the first transaction completed, and get— you know, it's kind of like you set the hook. I think once you've developed a process through your channels that makes it easy to get the sell, then I guess the world's your oyster on how you merchandise and sell after that. And it, it's a combination of understanding your customer and customer segmentation and building paths and communication channels to make the right additional offer to that basic ticket at the right point in time. And it's— it has to match your brand and your brand persona. You know, a lot of people would tell you they don't love the experience of flying a low-cost carrier, but a low-cost carrier, most of them do a really good job of making it clear you're getting here at a really low price. And, you know, you expect you're gonna pay for extras.

Michael Bell:Isn't that part of the hook? I mean, I don't know if it's still the case, but I remember reading once that Ryanair was the biggest Hertz distributor in Europe. Why? Because they pull people to their websites at insanely low fares, and while they're there, they do the rest. And they're making a lot of money on selling hotels, car rentals. I mean, I think Allegiant has that model, being a travel company, not an airline, et cetera. So—

Brad Beakley:I would say the thing there is they would be also really careful before you have paid for your ticket to say, oh, before you give me your credit card, Can I offer you a few dozen more things? I, I think that's not in the booking path.

Michael Bell:That's not in the booking path. Ana Maria, how does Sabre look at this sort of equation about helping airlines expand their offer? What is your guys' philosophy around that?

Ana Maria Escobar:So we have been working really hard trying to do 2 things. One, working with different, you know, teams, stakeholders in the industry Thinking, redesigning, you know, how the industry is going to be working. What does it really mean? You know, how are we going to do it? Do we need to change the standards? How are we going to display? There is a lot of standardization in the industry that we really need to work together if we want to move forward to that. So we have been working on that, and we are also working in technology transformation. You know, everything that we are doing and we are talking right now, it can be performed only if we have the correct technology. So So we have several systems, technologies, transformations that we are doing to enable not only the airlines but also the agencies to be able to bring this to life. Those are the 2 big things that we are doing right now, transforming technology and also working with the industry to get that transformation to a level that is acceptable and fast to all of us.

Michael Bell:To what degree do airlines need to undergo a cultural evolution to become better retailers? And where I'm going with that is on a previous panel I moderated on this topic, someone said like whenever airlines bring real retailers in, they struggle inside the airline organization. They sort of don't fit and understand what's going on and they're ejected. Is that true? How are airlines going to be able to bring in some of this fresh thinking about how to be better retailers?

Brad Beakley:I think the reality is the airline environment is unique versus online retailing of, you know, your daily goods, food, or toiletries, or whatever you buy online, even clothing to some extent. Because you've got that operational component in there, and the number one thing that you have to do for brand, for your brand as an airline, is be on time. And if you're not on time and you can't recover and you can't create a fairly seamless, just get from point A to point B, the rest sort of all falls apart. And I don't think that an Amazon, for example, has to think about that problem too much. You know, they just aren't exposed to that.

Michael Bell:So that's sort of That's what's making it difficult for people coming from the outside to deal with the complexity of the airline delivery.

Brad Beakley:And you know what I saw in the hotel industry is, particularly at the upscale and above hotels where you have a lot of opportunity for retailing, it's— there's a lot of that that's delivered by humans and training and the ability to subtly sell you things and you don't realize that that's just happened because they know you, they know what you like, they know that, you know, the best time to sell you the Argentinian Malbec is when you're sitting at the dinner table in the restaurant in their hotel. And so the hotels do a really good job, but they have an environment where, you know, check-in time always starts at 10 and you all are at 2 and you always have to check out at 10.

Michael Bell:Right.

Brad Beakley:And yet you can trickle in. You never have a couple of hundred people standing right in front of you demanding, you know, all these different things.

Michael Bell:It's a less stressful environment than—

Brad Beakley:It's just the operational part of it is totally different.

Michael Bell:With that, I'm gonna say thank you, Abhi, Brad, Ana Maria. You guys did a terrific job of bringing this discussion to life. Thank you. And let's revisit this in a year's time and see how the airlines have evolved in their journey in this space. In this regard. So please join me in thanking our wonderful panel.

Brad Beakley:Thank you.

Copyright policy: All transcripts on this site are the copyright of CAPA - Centre for Aviation. Our reproduction policy is as follows: you may quote up to 400 words of any transcript on the condition that you attribute the transcript to CAPA - Centre for Aviation and link to the original video page. All other use is prohibited. While we aim for 100% accuracy in the transcript, there may be some minor transcribing errors.