Evolving LCC distribution strategies to adjust to new business models

Transcript

Siew Hoon Yeoh:Thank you for allowing me to moderate this difficult panel. So, Gong Xi Fa Cai. It is still Chinese New Year because tomorrow is the last day. And actually, on the first day of Chinese New Year, I made a resolution. What was it? I was gonna start an airline because it's the Year of the Dog and I'm a dog lover. I was gonna start an airline called Air Canine, and it will be a dog-only airline where owners could travel with their pets. And I had this idea that if I picked a huge domestic market like Japan, they love dogs, or China, they love dogs, it would be a really good business. But then I heard Michael O'Leary said, that if you were clever, you wouldn't be in the airline business. So today, I've decided to ditch that idea, and I'm just gonna focus on what I do best, I hope, which is to moderate a panel. And we have a panel on evolving LCC distribution strategies to adjust to new business models, a huge topic. And I hope that my panelists can help answer some really burning questions, which I think were raised throughout today. Rick Howell, for example, I mean, what stuck with me was he said that airlines should be e-commerce companies that fly. We had Adam Weiss of World Airways talking about starting a new low-cost long-haul airline out of the US that would digitize the entire customer journey. A lot of airlines have tried to do that, but none have really succeeded. So could he be the first, or will AirAsia be the first? So those are all questions that my panelists are going to help answer. Please welcome to the stage, we have Yanik Hoyles from IATA, we have Jonathan Newman from Caravelo, we have Ian Heywood from Travelport, and we have Hugh Aitken from Skyscanner. Thank you, Siew Hoon.

Hugh Aitken:Please.

Siew Hoon Yeoh:Now, I'm also going to try and take questions from you via WhatsApp. So can you write down my mobile number and then send me questions as they arise through the discussion? So my number is +65, of course, Singapore, 9692 4989. So send me your questions via WhatsApp. My phone awaits. Okay, so gentlemen, you're so quiet.

Hugh Aitken:No words.

Siew Hoon Yeoh:It's the end of the day. Okay, so now according to Chinese tradition, I have something for you before we start the discussion. Okay, it is customary to give away red packets. So here we go. Lots of money in there. Yes. Okay. So actually, you know, red packets are meant to be loaded with lots of money, but because this is a low-cost airline, it's really like I've got nothing in there. But there's a trick, right? One of these packets has more money than the others, right? At the end of this session, the one who has the most money will be asked the trick question at the end, okay? Are you looking forward to that? Okay.

Yanik Hoyles:Absolutely.

Hugh Aitken:Yanik, you've got a call, haven't you?

Siew Hoon Yeoh:All right, so now let's talk about you, how you can help LCCs build prosperity for their business in, in this Year of the Dog. Okay, so before we started, I actually asked them to share with me some of the top trends. So we're gonna focus our discussion on top trends. And then the top opportunities for LCCs in the current climate. And the top 3 trends that you've given me, let's start off with Hugh. Okay, so you said rise of new channels, especially voice, right? And it's interesting because Jeff Bezos, I think when he announced the Amazon 4th quarter sales, which were up 38% to $60.5 billion, Wow.

Yanik Hoyles:Yeah.

Siew Hoon Yeoh:I mean, he said that our 2017 projections for Alexa were very optimistic, and we far exceeded that. We don't see positive surprises of this magnitude very often. Expect us to double down. So your question was, how does airline.com stand out in a world of, hey Alexa, where can I go this weekend for less than $200? How can they stand out?

Hugh Aitken:So I think there's a— I think what's really interesting about Alexa, it is one, they've got the voice data interface, works really well. It understands you even with a Scottish accent. It understands me, which is quite a challenge with other ones. But you speak into it and it simplifies a process for you. And because Amazon knows so much about you, they can give you highly curated content. So they know the kind of music I like, they know the kind of things that I'm interested in. And they can tailor Alexa to all of that. So I don't know, not many airlines do personalization very well. So how do you really personalize that message? But I think more importantly, how does your brand stand out in a conversation? Now with the Alexa Show, at least you've got a screen to show your brand and potentially inspirational stuff. But effectively, I think the big, big challenge is how does a brand stand out in an environment where you say, hey Alexa, where can I go this weekend for less than $200? Yeah.

Siew Hoon Yeoh:And the consumer doesn't really care what brand is being surfaced, right? So can I ask Skyscanner, you have invested a lot in search. I know that you've got— so what percentage of your searches now come via voice?

Hugh Aitken:The number of searches is quite small, less than 10%, but mobile is plus 60%.

Siew Hoon Yeoh:And I think mobile just starts you on that journey because mobile is a different environment than desktop for how you search and interact with it, and people gravitate towards conversational Okay, so on that note, I think, Jonathan, you also actually raised the top trend as conversational commerce, and Comscore is saying that by 2020, 50% of all searches will be by voice. So how are you as a startup addressing this and getting airlines ready for a voice world?

Jonathan Newman:We've been pioneering conversational commerce as a white label solution for airlines for the last couple of years. Volaris and Finnair were the first 2 airlines around the world to enable a truly transactional experience within an open messenger platform. What we're doing is we're working with our partners to take them from chat to voice over the next couple of years. There's a lot of IVR technology which is already open source, which is available for most companies to use in order to turn that— to turn voice recognition into messages and into the experience. Now, of course, with smartphones and with everybody being connected, that's the platform that we can use today.

Siew Hoon Yeoh:You're talking about chatbot technology, right? So you're talking about chatbots, and I was listening to a neuroscientist in Singapore. She was talking about AI and society, and she said that the only time that a chatbot works is if it's So I think— And Facebook has killed its, you know, Facebook has killed its chatbot messaging service. So is there a lot of hype?

Jonathan Newman:So I think if you put that to the thousands and thousands of Finnair customers who are using it every single week, I think they might take issue with it. The reason why Facebook killed its M project is because it didn't set relevant boundaries. It tried to be everything to everyone. It billed itself as as a lifestyle assistant. The bots that we make for airlines are relevant to the airline experience. A chatbot for Scoot, as an example, doesn't need to know who won the 1996 gold medal at the Olympics. What they need to know is about the Scoot experience, about where they fly, about how they get the best deals, about how they can get relevant ancillaries and an improvement of their service for that airline.

Siew Hoon Yeoh:I want to ask a question. Yeah, sure.

Ian Heywood:I mean, one of the biggest criticisms that we face or have faced in the past is about this anonymous search, the airlines just being boiled down to a letter, and we've spent millions of dollars in bringing in our rich content that has just taken off as a product because The airlines want to get their brand across. The airlines spend hundreds of millions of dollars on their branding. So, you know, I'm looking at Skyscanner here. But bringing that back to the voice, you know, you're going backwards on that, or the airlines are. So how do we make that— how do we move that forward as an industry?

Hugh Aitken:I think there's a couple of things. I hope you've not wasted all that money, Ian. But I think more importantly, I think it's the difference between a marketplace versus the Amazon versus the Tmall marketplace. So in Tmall, you go into a modern-day mall of brands. The fact that it's Tmall is secondary to the fact that you go into the Nike store or the Amazon store. Now if you translate that into voice, you could be saying, hey Alexa, can I go into whatever store it is? The Amazon marketplace, whatever you buy on Amazon is Amazon.

Jonathan Newman:Right.

Hugh Aitken:It might be provided by a guy down the road or a big retailer, but you buy it through Amazon. So the moment that Amazon drops, hey Alexa, open the Skyscanner skill, and she says, hey Alexa, let me book a flight, I think that's a really interesting place. Where does an airline's brand stand out in that marketplace?

Ian Heywood:That's what I'm asking.

Siew Hoon Yeoh:Well, Skyscanner clearly— he's sort of leading up to the pitch that Skyscanner is a Tmall, right? And it's going to be a marketplace where the airlines are able to brand themselves, right? Yeah, absolutely.

Hugh Aitken:We see ourselves as a marketplace.

Jonathan Newman:But I don't think— sorry to interrupt. Sure, please interrupt. I think the concept of the Tmall is fantastic, and I think Skyscanner working towards that for an airline marketplace is great. But airlines still want to stand out. They still want to own more of the traveler journey themselves. They still want to control that direct experience, to be able to not just sell at the time of transaction relevant ancillaries, but to go beyond that. Why can't airlines actually own the entire end-to-end customer journey. Now, if you're going through a Tmall experience, that's unlikely to happen because you're not going to then pass back over to the airline to go and retail further.

Siew Hoon Yeoh:Yeah, but you know, it's very different from what the airlines want to own and then what the consumer wants to do, right? So there's a disparity. But let's go to— let's move the conversation on.

Yanik Hoyles:I just want to add to that actually, because one of the big debates right now is direct versus indirect. I think Hugh, you started off by saying the airline direct channel. And I think what we're going to see is these channels are going to blur, they're going to merge. There will no longer be direct versus indirect. Yet you'll have one single source of content and there are lots of different channels. And it'll be blurred because is metasearch direct, is it not? It doesn't matter. It's all about having control of how you're going to distribute, being able to assess the value of each channel through which you're going to distribute, and then you're going to make decisions. Just onto Alexa also. I think it will be a marketplace. It won't be an airline-dedicated Alexa. Because, you know, no one's going to have just one single airline on their Alexa. More and more you want— you're going to want to have choice. And I think part of the challenge for airlines here is that it's a bit like mobile. Alexa, when you ask for good deals or I want to go somewhere on holiday next weekend, you can't have, I don't know, 1 million responses in 1/10 of a second on Alexa. It just can't work. So that is going to force the airlines to target their responses So be it mobile or Alexa, that I think is going to be very good for the consumer because you're going to be a lot less overwhelmed with just lots of information that you don't need, but through potential personalization, you'll get something that's more tailored.

Siew Hoon Yeoh:So Yanik, there are now over 30,000 skills from outside developers on Alexa. Do you see a day when IATA will develop an airline skill, like what you've talked about, what you're talking about, an airline skill?

Yanik Hoyles:What do you mean by airline skill?

Siew Hoon Yeoh:Well, you were talking about, you know, people not going to a specific brand and voice, right? But, you know, going to an airline.

Yanik Hoyles:Do you mean, do you see IATA developing a solution to help? Yeah. No, I don't think that's what we do. You know, we help technology companies build solutions by bringing standards and bringing the industry together. That's what we do.

Siew Hoon Yeoh:All right.

Hugh Aitken:Okay.

Siew Hoon Yeoh:So now let's go to— you brought up the point of direct versus indirect. Actually, there was a trend that you picked out. And you said— the question was, what is differentiation? Where does it start and stop? So Cebu Pacific, 70% of sales brand.com. Allegiant, 100%. It seems that people clearly want to have that 100%. So what is differentiation? Where does it start and stop?

Hugh Aitken:So I think it's really interesting. It comes back to our point. We see ourselves as a mall of brands. So when somebody comes onto Skyscanner and searches, They are booking with the airline. Now they can either go to the airline site and book, or they can book on Skyscanner with direct booking. And it's just particularly mobile that reduces the tension. So I think there is a real blurring of lines. But I think for us it's about we want people to be— the merchant of record is the airline, and the booking confirmation number, all of that is with the airline. So I think the difference between us and an OTA is if you book with an OTA, you're the OTA's customer. The fact that you're flying with Icelandair, British Airways, or whoever is secondary to the fact that you've purchased through Expedia.

Siew Hoon Yeoh:Okay, sorry, my phone is kind of misbehaving. So we have a couple of questions. Which is more important, voice as sales or voice as service? Just a quick answer, guys. We have like, you know, 30 minutes left.

Hugh Aitken:At the moment, voice for service.

Siew Hoon Yeoh:Voice for service. Ian? Service, service, service, service. Okay, Yannick, service. Yes, all right. Then we have another one which is about voice as well, and it says, how would voice work on board a noisy aircraft or during times when the whole cabin is silent?

Ian Heywood:One would hope it doesn't.

Yanik Hoyles:Exactly.

Ian Heywood:Especially if I'm asleep.

Siew Hoon Yeoh:Okay.

Ian Heywood:Mobile on aircraft is an Absolute nightmare, and it should never be allowed.

Siew Hoon Yeoh:OK, so that's interesting, right? I mean, you say it should never be allowed. For us, it's like the last bastion. But then we heard Adam Wise talk about— and I think Peter said that the next big thing is that mobile Wi-Fi connectivity on aircraft is like the best it's ever been, right?

Ian Heywood:You don't have to use it for voice, though. You can use it for non-voice.

Siew Hoon Yeoh:To buy things, right? So Adam is basically saying, like, you know, there's going to be, like, ancillaries we never thought about that you could sell to people in an aircraft, right? And which other environments?

Ian Heywood:I would say my personal experience, Wi-Fi, and I do it a lot, you know, it isn't the best thing on aircraft at the moment. It is getting better, but it isn't reliable. It's still slow. There's lots of blackout zones, and you don't know when you're entering one or when you're But that's going to get better, right? Like the blackout sites?

Siew Hoon Yeoh:So do you agree that that's an opportunity for airlines to sell to such a captive audience? I mean, it is the most captive environment next to prisons, right?

Jonathan Newman:I would agree that it's a captive market. However, once you open and the customer can go onto whatever browser site they wish to, they're not necessarily going to go to theairline.com. site on board using their tablet or their laptop. I think the next generation of ancillaries is the further steps in the traveler journey. So what if when that customer lands in their destination—

Siew Hoon Yeoh:So you're talking about in-destination experiences.

Jonathan Newman:Exactly. So you can actually maintain that relationship with the customer to be able to make relevant and personal offers.

Ian Heywood:I think you've got to— what airlines have got to do, or the aviation industry Let's take it beyond airlines. It's not just airlines. But the aviation industry, you've got to learn how to merchandise, how to sell, how to do it relevant. Anyone that's traveled internally in America and the offers that you can buy on that brochure that's in the back of the seat pocket, and then you think, why the hell did I ever do that? It was just because I was so bored. But yes, there is a great opportunity there. But the airlines have got to learn to merchandise.

Jonathan Newman:Right.

Ian Heywood:new skill sets into their industry to actually, you know, do that. It isn't someone that's been in aviation or an airline person for 20 years and they get moved into, oh, now I'll, you know, start merchandising on board. You need to bring in experts and really tell what you can do. And I think when someone starts making a success of it, then others will follow. But I don't know who you'd put up there now.

Hugh Aitken:I think to be fair, a lot of airlines have. If you look at the LCCs, you Yeah, they have brought retailers into the business. Look at Kenny Jacobs in Ryanair. He's a retailer. And undoubtedly he has changed Ryanair with his actions. He talks about being the Amazon of travel. And that's about highly personalized messaging and all of that.

Ian Heywood:Yeah, but there's still— I still don't think— I mean, that video that Damian showed was 4 years old. Right? And Kenny's been there for at least 3 of those years, if not all 4. And Ryanair have not moved on much in those 4 years. And so there's opportunities, but I still don't think anyone is really delivering them.

Yanik Hoyles:I think if you take the 2 segments or 2 models, you've got low cost and full service. Actually, the low cost, yeah, they're doing really well, direct sales, 80%, 90% direct sales, which is cool. But it's essentially leisure business. So they've got, in today's environment, today's ecosystem, they've got a huge opportunity to go into the business travel market. And we'll talk more about that later.

Siew Hoon Yeoh:Mm-hmm.

Yanik Hoyles:For the full-service carriers, it's kind of they've got the business market, but they've got to do what Ian's describing. They've got to learn how to merchandise and to sell all these ancillaries. So they've each got to go into the other's territory. It'll kind of converge. And then as they— as a next step, I think there's certainly a lot more opportunity to sell more. But then when you say being the Amazons of travel, you know, it's a really sexy word. But Amazon, you're buying on Amazon and their own website, it's completely different. What you're buying is completely different. You know, Amazon, you buy a book, it costs $12. Or you go to— you're buying air travel, it's a complete different value in terms of a commitment. It's very, very different. So I think there will be some similarities between the Amazons of travel. I think there's 2 dimensions for airlines. One is all these touchpoints that we all talked about.

Siew Hoon Yeoh:Yeah.

Yanik Hoyles:about, which is absolutely true. There's a lot of touchpoints, for you referring to it, Jonathan, throughout the whole journey that are not being exploited today because we haven't got that immediacy, that mobility, that kind of permanent contact with all the customers through the journey. And then there's the other aspect, I think, which is special to the airlines, is just slipped my mind now because the jet lag's kicking in. So if you give me a few seconds, I'll come back to it later. But there's definitely 2 different dimensions here. You can't— there's something there, but you can't compare. Oh, so yes, the second thing is on their website, they will be able to sell more stuff, which is hotels, cars, etc.

Siew Hoon Yeoh:Right.

Yanik Hoyles:But it's not going to be a complete identical model.

Siew Hoon Yeoh:Who does it best right now? Who does it best right now? Name one airline that does it.

Yanik Hoyles:Amazon? Well, it's easy to say—

Siew Hoon Yeoh:No, I'm talking about an airline who, you know, who has done it best.

Yanik Hoyles:Well, I think if you take— generally speaking, the low-cost carriers are much better at retailing than the full-service carriers. But the full-service carriers are much better at penetrating the business travel market than the low-cost carriers.

Siew Hoon Yeoh:Right, but is that line going to blur? So is, you know, with the changing of the LCC— It's going to converge.

Yanik Hoyles:It's going to converge with all these things that are happening. As Damian explained it really well in his presentation, what's happening now, what the low-cost carriers should be concerned about, it's not a big issue because They're agile, they'll react, is that the full-service carriers are starting to move into this world of internet technology, taking control, being much more agile, and do things that they couldn't do before.

Siew Hoon Yeoh:So you think it's a— I mean, so what you're saying is that the NDC, with all the changes and all that, would actually allow the legacy airlines to leapfrog so that they can actually get ahead of low cost?

Yanik Hoyles:I wouldn't go that far. I would I wouldn't go that far, but I think there's certainly in the short term the first opportunity the legacy carriers are going to take is to compete head-to-head on the basics, which is price, flight with a price, which they can't do today because they haven't got that agility to be as tactical. And in the medium term, I think they will compete on some other areas in the whole area of merchandising.

Siew Hoon Yeoh:Okay, so Jonathan, do you want to add to that? Because, you know, the trend that you point—

Jonathan Newman:you brought up was seamless experience and personalization where you can put And just going back to NDC once again, so we're NDC Level 3, and we're big proponents of it across the industry because for full-service carriers using typically legacy PSS systems, in order for them to catch up with the delivery of the what-ifs, which is what a lot of the low-cost carriers have been able to do, they need to be able to do that.

Hugh Aitken:Yeah.

Jonathan Newman:They need to be able to be more agile when it comes to their inventory, with their product. And I think that that's what NDC is enabling. It's not for them to leapfrog low-cost carriers. It's to be able to get to a level playing field. In terms of merchandising, well, there's been a lot talked about today and at every other conference we go to about personalization and about the Amazon of travel. Now, that's brilliant, but most airlines aren't doing personalization that well. Secondly, personalization is great, but if all that means is that it's an EDM that says, Dear Jonathan, instead of, Dear traveler, well, okay, whatever. It's still going to go into my spam folder. Actually having the right channel, the right platform to be able to communicate on, to be able to reach out at the right time.

Siew Hoon Yeoh:Okay, so wait, wait. Let me go through my question. So very quickly, how can an airline.com be like Amazon when you go shopping to amazon.com? just to do a transaction, not shopping at airline.com.

Jonathan Newman:And you can't.

Siew Hoon Yeoh:And you can't, okay.

Jonathan Newman:And you can't. And the point is about retailing at the right time.

Siew Hoon Yeoh:So you can't be.

Jonathan Newman:Yeah, I mean, the airlines and low-cost carriers are kind of very typical at this, that they put, you know, 7 to 9 steps from inventory through to payment in order to get as many offers in as possible. Now, that's the wrong time to be actually talking to customers properly and efficiently about, about retailing and merchandising. It has to be further on the journey.

Siew Hoon Yeoh:So I want to bring back the discussion to LCC strategies, right? Because this panel is about LCC, and, and, you know, we talked about what other trends there were, and now let's go to opportunities because we have 15 minutes left, and I think opportunities are interesting right now.

Yanik Hoyles:So I'll give you one. I can give you an opportunity for low-cost carriers. I think the stuff Ian and Travelport are doing is a great opportunity for low-cost carriers. Back to my point earlier, as the GDSs become aggregators, so in other words develop that technical agility to connect to APIs, to consume APIs, helped by NDC of course, but as they get that agility it means that all of a sudden it offers the reach of a GDS becoming an aggregator to low-cost carriers. So I think it will make it a lot easier for low-cost carriers to penetrate the business travel market than it is today.

Siew Hoon Yeoh:So they can do business travel better, okay.

Yanik Hoyles:They'll be able to target the business travel market a lot better, yeah.

Siew Hoon Yeoh:Right. So what do you think of Singapore Airlines that has just launched their sort of digital wallet for the loyalty program using blockchain technology? I mean, will blockchain— I mean, that's the big word right now, right? And Webjet's doing it and TY is doing it. Could blockchain be the Internet 3.0 moment for traditional airlines? Hugh?

Hugh Aitken:It could be. I guess if you look at airlines, they're probably never that fast to adopt these sort of technologies. I think it's really exciting, blockchain, because it could remove a lot of intermediaries potentially. But the pace of ability and just the technical ability to put that into a lot of legacy systems, it's going to take a while.

Siew Hoon Yeoh:Okay, so it will help LCCs do business travel better. So the other opportunity I think, Hugh, you brought up was look to China, right? Mobile e-commerce platforms, payments.

Hugh Aitken:Yeah, so we do a lot on this. You know, 75% of e-commerce in China is on a mobile. It's opposite if you look at the rest of world. And 97% of people use Alibaba. So, and people shop a minute— 45% of people shop a minimum of one time a week on mobile. And it's only 11% in the rest of the world. So if you look at what, you know, you talk to a lot of airlines and they'll say, oh, we're spending time out in the Valley and we're learning from what Google and others are doing. You go, yeah, that's really important.

Ian Heywood:Yeah.

Hugh Aitken:But you should be spending 2 weeks in China. You know, we took a group of our senior around China last year, and they, including our CEO, and you know Gareth, he's incredibly technically savvy, but they spent a day with a Chinese consumer just following them around in their life.

Yanik Hoyles:It's cashless.

Hugh Aitken:Oh my gosh, they've missed out Internet 1.0, and you have to look at that as a market, as a lead indicator of how technology is going to be taken in the next 5 years.

Siew Hoon Yeoh:So the next opportunity for LCCs, I guess, is in the fintech area. I mean, you've got Grab now having GrabPay, for example. Alipay launching itself as a Chinese brand for Chinese consumers. Jonathan, what is your startup doing in the area of payments?

Jonathan Newman:What we're really trying to do with our airline partners is get them to catch up a little bit with the expected user experience elsewhere in e-commerce. Why shouldn't it be as easy to to pay for an airline as it is with Uber, especially when you're using that airline for multiple transactions over time. That's the expectation, so why can't you put that into practice? So what we've developed with a couple of our airline partners— we launched it with Volaris, the leading LCC of Mexico— is actually to allow customers to be able to make a booking in one sentence and one click.

Hugh Aitken:OK.

Jonathan Newman:And then to be able to repeat journeys in simply 2 clicks because they use aviation like buses. I mean, that's where it came from. So you need to be able to make an airline booking as quickly as you would—

Siew Hoon Yeoh:But what if you're an airline like Cebu Pacific where 70% of your passengers only fly once a year? There's no— so you can't leverage that opportunity, right?

Jonathan Newman:I think what you can do is you can use the technology in other ways. I mean, Rick from from Cebu Pacific said that, yes, those customers are very ambiguous. I mean, a 28-inch seat pitch doesn't really vary across most— the experience doesn't vary across most A320s. The difference is what technology can provide for that airline is firstly service recovery. So to be able to differentiate that product and get them to stick with that airline if something goes wrong. Whilst 70% of those CBB Safecard customers might only travel once a year, they'll come back the next year if they've been treated well, if something's gone wrong the year before.

Siew Hoon Yeoh:OK. Any other thoughts on payments and all the digital wallets that are coming up? Is that a disruption?

Yanik Hoyles:Payment, you know, there's— Damian was saying earlier that there's massive disruption taking place in the area of distribution, certainly greater than we have seen for the last few decades. decades. But we believe that in the area of payment, it's going to be even greater change. It's yet to come.

Jonathan Newman:Yeah.

Yanik Hoyles:What's going to trigger it now, and, you know, once again, airlines going to API connectivity means that they've got much better visibility and control potentially of payment. There are some changes taking place in the world of payment, the PSD2, etc., which will promote a lot more instant transfers, instant banking, etc. And that's really, really going to change. So I think watch this space, and in a couple of years from now, I think we'll be talking about a massive revolution in payment that's greater than what we're seeing in distribution today.

Ian Heywood:All right, so our role in that is being able to accept all of these payment methods, so allowing the airlines to accept payment in the form that they want. And so I think any platform needs to be able to have that versatility to allow the airline to accept what they want, with also You know, the authorization processes behind it.

Yanik Hoyles:You see, today for an airline, their payment cost could go from $0.12 for a ticket, $500 ticket, to $15, 3%. So from $0.12 to $15, that's 100 times the range of payment. And today they don't have that visibility, that control. So that, plus the fact that there'll be much more solutions out there, and the fact that the Alipay of the world are moving to the West as well, because you've got to follow the Chinese tourists. All this is going to converge into another massive revolution.

Siew Hoon Yeoh:Yeah, in consumer— the consumer behavior is going to drive this. The consumer is driving all this. So the other opportunity is change in model from loyalty into subscriptions. So that's interesting, because Amazon earned $9.7 billion last year in subscriptions, up 52%. Adobe now, more than 84% of its revenues come from subscriptions. So that's interesting. So how do you see that model working in the airline, in the travel world, from loyalty to subscriptions?

Jonathan Newman:And I think going back to, again, what Rick from Cebu Pacific said, that again, those customers are ambiguous. Giving a reason, giving a customer a reason to stick with an airline month after month is very, very hard, especially when the onboard experience is a 28-inch seat pitch with 186 seats on an A380. What we've done with a couple of our airline partners is to work on— we've delivered a model which allows customers to pay a certain amount of money each month in order to guarantee them a certain amount of inventory and simply then pay the taxes with one click. And that's the model that you're talking about? whenever they want to use it.

Siew Hoon Yeoh:Okay, can I ask each of you, like, what do you subscribe to?

Yanik Hoyles:Amazon.

Siew Hoon Yeoh:Amazon.

Yanik Hoyles:Netflix.

Siew Hoon Yeoh:Netflix and Spotify, right? Okay, so the next opportunity— sorry, you want to—

Yanik Hoyles:A subscription is nothing more than a deal. It's just between the airline and the, say, the corporate, and it's all about saying, well, if you're going to give me this voice travel, I'm going to give you this price based on a commitment. So I would say it exists today in a way in the form of corporate deals. Tomorrow they may be more sophisticated because you'll have much more flexibility in the types of offers that the airline will want to push out, and the airline will be able to track it much easier as well. So it exists today, it might intensify.

Hugh Aitken:I think India is really interesting at the moment. So what's going on in India, you know, all the airlines and all the OTAs are driving loyalty through subscription, but you know, you can give some money but we'll give you discounts off if you keep a certain balance and all of that. And it's really interesting. That's consumers, yeah, it's huge, that kind of subscription model in India. The challenge is it's costing everybody lots and lots of money at the moment, so it's not been proven to be profitable yet.

Siew Hoon Yeoh:They're buying customers.

Yanik Hoyles:But a subscription is a bit like rebundling, isn't it?

Ian Heywood:Yeah.

Siew Hoon Yeoh:What?

Yanik Hoyles:So it's a bit like rebundling because you're committing to something Whereas today everyone's going towards unbundling where you can pick and mix on the fly where the customer's in complete control. If you commit to a subscription, actually you've lost control as a customer to a certain extent. One way of seeing it. Sorry, Siew.

Siew Hoon Yeoh:Okay, so I have a very long question and it's definitely coming from Timothy O'Neill Dunn who always asks very long questions. So I'm going to read it very quickly.

Yanik Hoyles:I'm not going to understand it if it comes from Timothy.

Siew Hoon Yeoh:Okay, very quickly. Does the panel think the model of the airline interline is sustainable, or will NDC and other technologies like ABB, or will we have to accept an inconsistent experience and will everyone have to work harder? Is there a yes or no answer there?

Ian Heywood:There's not a yes or no. I think— I'm not sure that the traditional interline model will go away. That is there for the traditional carriers and particularly Particularly, you know, in the in the business field. What there is is there's new model, there's new connectivity models coming in. Now whether they're going to replace the old interline, I don't know. But what you will do is you will be getting a lot more connections from the low-cost carriers into the traditional carriers, perhaps more from the them fulfilling the short sectors and then the long haul being filled by the more traditional. players at the moment. And then who knows what— when, you know, low-cost long-haul carries on and continues to grow. I think where the problem is at the moment is the complexities around things like the airport product, your baggage, trying to transfer airside.

Jonathan Newman:Yeah.

Ian Heywood:What happens if you miss a connection? And then, you know, then you've got to say, well, who's going to pick up for that? Or is it just that the customer will waste— The customer will probably have to do that. But then if they're doing that, does that just negate the benefit that they're getting from this connection? So I think someone's got to come up with a new product. And really, the airports have, I think.

Siew Hoon Yeoh:The airports have to come up with a new product?

Ian Heywood:There needs to be an airport product that links the low-cost carrier Into the— that enables that transfer to happen. The selling part of it can be done anywhere. I mean, it can be done with ourselves, with Hugh, or anyone. But it's that physical product. You've got to make it work.

Hugh Aitken:Yeah, I think it's really interesting. Sorry, do you mind? Go, go.

Yanik Hoyles:I've got 4 minutes.

Hugh Aitken:If you look at— I'll take 3 and a half of those. Right. The, um, the, the tradition— the Star Alliances and the Oneworlds, they still haven't cracked that seamless customer experience yet. And they've been after it for quite a few years. So I think there's an inherent challenge, a lot of it technology-based, of just having a seamless experience across airlines. I think the challenge, particularly in the LCC sector, is its cost. So, you know, if you look at, you know, when I worked with Trevor, you know, we used to be constantly thinking, how could we interline EasyJet with other airlines? But it just drives cost and complexity.

Ian Heywood:Right.

Hugh Aitken:And I think if you add distribution on top of that, my God, it's going to get very difficult to work it through the low-cost segment. But actually, no, but when you've got 97% of seats full, you don't need to do it to draw in more passengers.

Ian Heywood:Only if you can get a higher yield for doing it. That's the only reason to do it.

Yanik Hoyles:But then you need euro and things. I think it's very complicated. You've got to optimize on that. But just one quick one on interline is that one—

Siew Hoon Yeoh:Because you have to leave, right?

Yanik Hoyles:Yeah, I've got to leave.

Siew Hoon Yeoh:Then we have more time.

Yanik Hoyles:But NDC interline, it's something that's to be tested. The use cases are there, but airlines are going to test it this year. Let's see if it works. If it works, it'll be great, but it ain't easy to do. The second thing is that if you've heard of a program called One Order that IATA is working on with the industry, it's all about getting rid of the notion of PNRs and tickets. So it's the legacy carriers going to ticketless in a certain way. And one of the benefits of that, it'll make it a lot easier for potential interlining between low-cost and full-service carriers in the future as well.

Siew Hoon Yeoh:Okay.

Yanik Hoyles:So I think there's some hope. It's not just all down to some proprietary solutions. There may be an industry solution somewhere out there, Timothy.

Siew Hoon Yeoh:Okay, so I'm going to move on to the next opportunity because we're talking about how, you know, the trends are driving LCC distribution strategies, and Hugh, you brought up value-based recommendations, learn from others, example Netflix. So one lesson we can take from Netflix or Spotify?

Hugh Aitken:So when Ian goes onto his Netflix account, it'll be showing— all he'll see is romance films and chick flicks because that's what he likes to watch.

Siew Hoon Yeoh:Okay.

Ian Heywood:Yeah.

Hugh Aitken:And so how can airlines build a real value around what they know about customers? And it is all about the data and insights they have into their users and then transfer it into the technology and how they service that to their users.

Siew Hoon Yeoh:Okay. And do you really think that in the future airlines will actually need to have their own in-flight entertainment system and their music system, which takes so long, when we can actually watch Netflix and And listen to Spotify in the aircraft?

Ian Heywood:No, I think you can— I was talking to someone that flew the other day and they just used their mobile connected to the aircraft Wi-Fi and watched the programmes there. One of the other things that Netflix does, of course, is they build their own programmes for their audience.

Siew Hoon Yeoh:Original.

Ian Heywood:And again, I think that again is something that the airlines can learn from.

Siew Hoon Yeoh:So airlines can become film producers?

Ian Heywood:No, they can understand who their market is. Who is their customer market? And then make sure that they're putting their products together for their market. Which is what Netflix does.

Siew Hoon Yeoh:Okay, so I'm gonna wrap up with rapid-fire, like just one-word answer. I'm gonna throw one word at you and you just give me one-word answer, right? So Airbnb going into hotels, launching loyalty, eventually going into flights. Airbnb.

Hugh Aitken:Wait and see.

Siew Hoon Yeoh:Wait and see?

Ian Heywood:My next holiday.

Siew Hoon Yeoh:Your next holiday?

Jonathan Newman:Can't wait.

Siew Hoon Yeoh:Can't wait.

Yanik Hoyles:Let's see.

Siew Hoon Yeoh:Okay, machine learning, AI.

Hugh Aitken:Massive opportunity.

Siew Hoon Yeoh:Massive opportunity.

Ian Heywood:It's, it's here today, it will only grow.

Jonathan Newman:Here today and will grow more tomorrow.

Yanik Hoyles:It'll definitely grow, but you've got to learn how to use it properly.

Siew Hoon Yeoh:Yeah, one word, guys, one word.

Yanik Hoyles:Blockchain.

Siew Hoon Yeoh:Blockchain.

Ian Heywood:Blockchain.

Siew Hoon Yeoh:One word. Blockchain.

Ian Heywood:Can't understand it Yeah, I need to talk to my son.

Jonathan Newman:The future.

Siew Hoon Yeoh:The future?

Yanik Hoyles:Sexy.

Siew Hoon Yeoh:Okay, so now open up your red packets and the one with the most money will have to answer this last trick question.

Ian Heywood:I've got $100 here, is that right?

Siew Hoon Yeoh:Okay, I think, Yanik, you got the— you got the one. The rest of you are in Malaysian ringgit. We call it the shringgit now.

Hugh Aitken:Singapore dog.

Siew Hoon Yeoh:So yeah, Yanik, Yanik, Yanik. So you are the dog. If you were a dog, what kind of dog would you be?

Yanik Hoyles:Oh my God.

Jonathan Newman:Oh God, that's all, bro.

Siew Hoon Yeoh:It's the end of the day.

Yanik Hoyles:I'd be an Alsatian.

Siew Hoon Yeoh:Alsatian.

Yanik Hoyles:Yes.

Siew Hoon Yeoh:That's really nice.

Jonathan Newman:Wow.

Yanik Hoyles:Did that impress you?

Siew Hoon Yeoh:Ah, yes, it did. Yes. Okay. Please join me in thanking my panelists, Yanik, Jonathan, Ian, and Hugh. Thank you so much.

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