Changing Landscape Of Airline Distribution

Transcript

Craig Banks:Hi everyone, and thank you, Peter, for the introduction. My name is Craig Banks. I'm Senior Commercial Director for Travelport Air Commerce. My team is responsible for all of the commercial relationships with airlines based in the United States and Canada. For those of you that don't know about Travelport, we are the company formerly known as a GDS, or a global distribution system, now a fully functional travel commerce platform that is fully enabling the airline merchandising that you're seeing today in the third-party channel with travel agencies. We connect 60,000 travel agencies in 180 countries. to more than 400 airlines around the world and thousands of other travel suppliers. Our mission is really simple. That's to build industry-leading technology that makes the experience of buying and managing travel continually better. I'd like to thank CAPA for inviting me to, to say a few words. I'm going to talk a little bit about the landscape, some of the emerging products in the airspace we're seeing, the technology that, that drives, and I'll even say a few words about IATA in D.C., as some of you may have heard about. Okay, I wanted to start with just a quick recap of what you've heard over the last couple of days. It's all about low-cost carrier competition and the behavior that that's driving among traditional carriers. You— we've seen the ultra-low-cost carriers, as was mentioned earlier, provoking traditional airlines to adopt various price-matching strategies. We've also seen low-cost carrier activity in Canada, not ultra-low-cost carrier activity, But plenty of low-cost carrier activity with Air Canada and Rouge. WestJet now out with Swoop and some others. And of course we heard about Latin America, or I'm sorry, Mexico being 64% ULCC now. The Latin America's been a little bit slower as we've heard, but we are seeing some movement now into Chile, Colombia, and Argentina. So airline strategies. The traditional carriers are, one thing they have in common is they're focusing on the customer experience. They're trying to drive higher average ticket value through personalization, using data and analytics to understand the, the additional opportunity available there. Managing and tailoring content, very important to evolve their, their own websites and how they merchandise and package their products. Has to be a seamless experience across all the different devices that travelers are using today. And speed is crucial. That's paramount. And you'll continue to see to see penetration to the, to the cloud. Product and technology evolution, we, we've all seen it. We've seen fare families, we've seen branded fares, fares by cabin, ancillaries. Yesterday derived fares was mentioned, dynamic pricing we've heard about, and airlines again have built out their capabilities to sell their product in this fashion. And in the third-party channel, old legacy displays simply do not support that way of selling anymore. XML-based distribution, or API as some call it, is the way to get the graphical displays with the upsell capability where all of the information is in one place— product descriptions, imagery, brand comparisons that help pinpoint the value proposition for the traveler, tailored offers, and oh, oh, by the way, it has to be all in a single workflow that interfaces with the agency mid-office and back-office systems. So NDC, what is it? So it stands for New Distribution Capabilities. And it is a program that's being led by IATA, and its mission is to develop industry standards for XML messaging. We have decades of industry standards today related to artifact messaging, Type A messaging, Type B messaging, all those things that are synonymous with the old green screen or alphanumeric displays. But NDC now will set the standards for the more modern and more flexible and more capable XML messaging. You may have heard about NDC certification. This is where IATA confirms a company's ability to exchange messages in accordance with NDC standards. So an airline or an aggregator like Travelport or a travel agency can apply for one of 3 levels of certification. Level 1 certification is the ability to add an ancillary service like a bag or a seat. Level 2 certification is fare shopping, all things related to offer management. And then Level 3 certification is all of it— shop, book, view, and change— all of those things related to order management. All of the major aggregators, global aggregators, are certified on IATA Level 1, and Travelport is now certified IATA Level 3. We attained that at the end of last year. Well, so what does, what does this all mean? Um, does this mean that we're going to see agencies start building connections to 400 different airlines around the world? That's certainly one avenue that's at their disposal, just as it has been in the past. But we think agencies will continue to rely on aggregators like Travelport to to do that work for them, to build those connections. And we see it just as EDIFACT standards had required aggregators, so will XML standards. The existence of XML standards don't magically eliminate the need to, you know, for an individual agency to connect to hundreds of different airlines. The question becomes, How are airlines going to leverage NDC? Will their motives be purely based on driving the average ticket value up, or will those motives be focused on changing the travel agency economic model? Well, here's what we've seen so far. In the Americas, the airlines are mainly focused on leveraging NDC to drive revenue growth. Very few with cost motives. In Europe, we are seeing some disruption. Lufthansa and Aegean have come out with their programs, and then with British Airways, I think it's a hybrid of both. And it's too soon to tell with Air France and KLM. It's also too soon to tell about Asia-Pacific, but I can say that most of those discussions are focused on Improving the way the product is sold to drive higher average ticket value. We've seen only minimal experience, or I'm sorry, experimentation among travel agencies. HRG is out there with a Direct Connect initiative, so I think that's the exception. Maybe one or two others. I'm not sure if MXGBT views that initiative the same as HRG, but time will tell. So it's here, but it's going to take a lot of time to shift, multiple years in fact. Airlines have to go out and build individual connections to the aggregators. They have to test speed and scale, re-engineer human processes. Aggregators like Travelport, we also have to build those connections. To the airlines to accept that content, to get that content in. And then we also have to develop our points of sale to enable that type of merchandising through our points of sale. Travel agents have to adopt those selling solutions throughout their enterprise. So the volume shift from legacy to XML is going to be a number of years. It will be a journey. And I want to talk about why Travelport is leading. Experience. In 2013, we launched the Travelport merchandising platform and we have been busy adding new airline content to that. We now have 23 airlines providing content to us through XML messaging. 84 airlines are selling 200 different ancillary services, and we now have over 260 airlines participating in our rich content and branding, which I'll show you in just a moment. How it all works, very simple. Airlines can send content to us through XML, or they can continue to use the same old legacy means that have existed for years. Travelport aggregates that data, normalizes it, and we send it out through our universal APIs to all of the different selling solutions— SmartPoint, which is our travel agency desktop, mobile applications, and even online travel agencies and corporate booking tools. In terms of what we're doing The next phase that we're working on right now is the ability for an airline to send content to us through XML and through industry standards. And we think that for a lot of airlines, that's where the sweet spot is. Use industry standards that are working today. Use XML where you need it to enable that type of merchandising and to cut down on the investment work behind the scenes. Okay, this is our SmartPoint agency desktop solution. It looks awfully a lot— looks awful a lot like an alphanumeric display, and it is. This is, though, a special display. It has colors in it. You see that we have green lettering here, and that indicates that— That's the green screen. That particular airline is one of the 260+ carriers that provide their rich content and branding to us. That means the agency can click on the green and bridge into the new world of— or to the real world, I should say, of airline merchandising. On the left-hand side of the screen, you can see all of the different fare brands this airline offers. You can See the the brand and imagery on the screen. You can read in the product description below the imagery exactly what you do get, and over to the right you can see which ancillary services are included for free and which have an additional cost. Then you can click on the other brands. And see that for an extra $24, this is what you get. You can click on each of those individual brands there and the branding and the imagery, the product descriptions, all of the ancillary services change. And that's a good example of how we're enabling airline merchandising. Also just wanted to show its use. This is in a mobile application that's consuming our rich content and branding. And this is an example of an OTA that's consuming it. We now have over a dozen travel agencies consuming rich content and branding, and that includes Priceline, and it also includes Concur. Concur is now starting to consume our rich content and branding through our universal API. This is a look at some of the some of the carriers. And in terms of the last 2 slides here, it's all about the opportunity. I'd encourage everyone to embrace the opportunity. Use it, look at it as an opportunity to provide better service and recognition to our customers, gain more flexibility, add value to the different constituents in the industry. and gain efficiencies in an already profitable environment. The threat, as we all know, or the risk, would be to ignore it and, and do nothing. So collaboration is key. Be prepared, engage with your partners, embrace the change, be open to experimentation, never lose sight of the customer, and allow time To change and adjust as you go along. Most importantly though, enjoy the ride. Thank you all very much. Thank you, Craig.

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