The Key Trends In Airline Distribution in Asia

Transcript

James Marshall:This topic that we're going to be covering is extremely interesting. I believe there was some discussions in the corporate room, in the corporate travel room, so hopefully it will be as interesting as what you heard there. I'm keen to hear the views that all our panelists will have. I think, you know, Peter this morning was talking about more of a revolution than an evolution, but definitely something is long-term changes that are happening. And I wonder how we're going to be looking back in 5 years' time and to understand the opportunities that we all have in this, in these changes, but also all the challenges. And it's not just challenges with the airlines, but it's also challenges on how our customers are going to be all the different stakeholders who participate in the value chain, and also how the customers are impacted. And is it all about growing the revenue, growing the top line, or is it also looking at how we, how we're managing all our costs? So the panelists, I will start with the end of, on the other side here. So we have Yanik Hoyles from IATA. And Yanik, For some of you who are involved in NDC will know that he's leading the NDC program for the last few years. So I think it's going to be very interesting to have your views, you know, representing the airline association. Then we have Jonathan— obviously different order than I have on my page— Jonathan from RouteHappy.

Dieter Vranckx:Hi.

James Marshall:So Jonathan Savitch is the Chief Commercial Officer of RouteHappy. helping airlines differentiating themselves and better monetize their product. Then we have Hugh Aitken from Skyscanner. So Skyscanner, obviously very present in the metasearch, but also very— we've heard a lot of, you know, seen a lot of headlines on the work that you've been doing with some of the airlines. Then we have Dieter Vranckx from Lufthansa Group Airlines.

Yanik Hoyles:Hi, everyone.

James Marshall:from the Lufthansa Group. You're the Vice President Asia Pacific based here in Singapore for the last year and a half or 2 years, overlooking all the airlines from the group. And finally, Damian Hickey from Travelport. And Damian is the Vice President Asia Pacific and Global Sales Strategy e-commerce. So welcome to the panelists.

Dieter Vranckx:Thank you.

James Marshall:So we have about, I think, 45 minutes, and hopefully, you know, we'll be able to touch on quite a few topics that I think will interest you. First, I'm going to start with Yanik because, you know, we've been hearing a lot. I mean, we— I love this topic because it's not one of these things, you know, what's going to happen in the future only, but it's really, we're in the moment. There's a lot of things happening these days, these last few weeks, actually.

Jonathan Savitch:Yeah.

James Marshall:So as representative of, you know, the largest group of airlines and driving a lot of these changes that are happening in the airline distribution and digital retailing, what is happening with NDC? You know, what is IATA working on and what does it mean for direct and indirect distribution?

Yanik Hoyles:Well, I could spend 2 hours, 2 days answering that question. I'll give you the short version, rest assured, James. First of all, For those who don't know what NDC is about, I'll just give you the very, very 1-minute version of NDC. It's a standard for communication of data between airlines and travel agents. And if the two agree, of course, it can cater for an intermediary. And it's based on modern technology. It's about moving away from EDIFACT to XML or JSON. So modern internet-based technology. And that is about enabling airlines to have more than just one distribution strategy, which is to shift online to airline.com. is to enable airlines to replicate what they can do on their websites today, which is differentiation, speed to market of new products, and personalization, and making some good profitable revenue that they can't do through the indirect pipe.

Damian Hickey:Yep.

Yanik Hoyles:Because it's old technology and for lots of other reasons. So NDC is a standard, not a system, not a database, to help close that gap between the 2 channels. In other words, to help the airlines replicate what they can do on their websites through travel agents, and from another angle, To help travel agents have access to the kind of cool stuff airlines can do on their websites that they can't get today. That's what it's about, closing that gap, and it's a standard. So where are we on that? I think as you say, James, it's exciting times. Things are happening, especially the last 2 months. So I'll give you a couple of bullet points and then we can take it from there. First of all, from a technical point of view, the standard that IATA doesn't do— the standard, the actual standard is done by 80 or 100 people from the whole industry. GDSs, IT providers, and airlines work together to get the best standard. We're at the 5th iteration. We have 2 a year. And the current version, 17.2, 2 weeks ago in our big IATA conference, GDSs and IT providers all acknowledged that we're now at a point where the standard is robust enough for what Amadeus quoted as industrialization, which is fantastic news for everybody, for the IT providers, for the whole value chain. That's great. On the engagement side, Where we are. There's really good news there as well. We talk for the last 2 or 3 years now, we're talking across the value chain with GDSs, with travel agents, and with corporate buyers. And there's definitely an interest across the value chain. And what we've heard very recently, which for me is a real tipping point, 10 days ago, it all started with the CEO of Sabre, Shawn Menker, saying that Sabre wanted to lead the way in 2018 deploying the NDC standard and they were going to be certified at the highest level as an aggregator. And it's critical for NDC to succeed, for airlines to be able to benefit from all this and share their value across the value chain, for the 3 GDSs to play ball, to be aggregators. So Sabre made a first announcement, then Amadeus made a similar announcement, live in 2018, the highest level certification, and finally Travelport as well. who may even be live by the end of this year as an aggregator, which is fantastic news for everybody. On top of that, we've heard the biggest TMCs are following some commercial agreements that are not linked to the technical standard, but what we're reading in these commercial agreements is we're committing to accessing NDC content during 2018. So for the whole value chain, it's very important. And the one group I've not talked about is the corporate buyer community, because they're at the end of this. They're really valuable players. And we have 2 advisory boards with corporate buyers where we're kind of bouncing with them and making sure they understand NDC, see what they're worried about, what they like, and overall they like it. They've got some concerns, but they see opportunities. So things are really moving across the value chain. We're all working together pretty well, and it's going to be a good journey.

James Marshall:Good, thank you, Yanik. So let's hear it from one of the airlines that has actually— one group of airlines that has actually been Quite active. I mean, some people would call it assertive or quite aggressive in terms of pushing, you know, the whole travel community. So Dieter, Lufthansa Group, you know, 2 years ago you introduced a surcharge trying to push and make some changes. 2 years on, what have you achieved? You know, what are the elements in the change that you have introduced and how are you guys Managing it with your stakeholders, with your partners.

Dieter Vranckx:Yeah, thank you, James. I think I'm surprised to hear that after 2 years introducing the DCC charge, we are still talking about the fact that we introduced a charge. It's amazing, especially because introducing the charge was just one element of the change of strategy we had. The whole goal of changing our distribution strategy was to get more freedom in how we can distribute our products from an airline perspective to the market. And so we came out of an environment where we were locked in into certain conditions and certain restrictions due to certain contractual situations. And you, can you imagine being, for example, the head of Coca-Cola, but you're not able to position the bottle or Coca-Cola in the shop you want at the price you want. So there was a little bit, to make it very simplistic, there was a bit the situation we were in. And we said we want to be in charge of the position, the shop, the price, the offer we make to the customers. And so at the end of the day, the charge which we then implemented was just one element of the total change in strategy. So we got our freedom back, and that freedom allows us to basically position our products, and our products are not just the flight product, because we always try to think about the airline as selling a seat, but there is much more currently on its way and already being implemented, a lot of auxiliary products, auxiliary services which are built around the seat.

Hugh Aitken:Yeah.

Dieter Vranckx:of an aircraft are being implemented, and now we have this freedom to basically distribute this product and all the auxiliaries in the channels and at the pricing which we, we want. Now you asked, what have you achieved so far? It's difficult to name all the achievements, but I think important is maybe to name 2 very important achievements. The first one is in Germany. In Germany, we have signed a direct connect with Siemens and Volkswagen. Those are 2 major corporates with high volumes for the Lufthansa Group in Germany, but also outside Germany. And we have an NDC API connection with those 2 corporates, which means that we have the ability to, to offer not only our flight products to the corporate directly, but also to have auxiliary products and services being tailor-made and personalized to that corporate. That's one major achievement. The second one is that we have just signed last week the 3rd API Direct Connect in China with major online players. I'm sure that it's not unknown to all of you which are the main players in China, but we have signed with Ctrip.

Yanik Hoyles:Ctrip.

Dieter Vranckx:with Thunar and with Fliggy.com Direct Connect NDC APIs. And so that allows us to use these platforms either through their OTA platform or through our flagship store to offer our products and to tailor-make the products and the auxiliaries to the target segment which is behind these online players. And those, I think, are 2 major—

Hugh Aitken:Thank you.

James Marshall:Okay, quite interesting because we can see that as the corporate traveler aspect that Yanik and yourself have mentioned, but you're also looking now a little bit on the leisure side in China, and I think that's an interesting point. But let me move to Damian and Travelport. Obviously, you are an intermediary. You're very much affected by all the changes that have been introduced by Lufthansa, and then obviously there's a few other airlines. You know, we had IAG and then Air France-KLM announced last week also that they're going in a similar route. The question that I would say is, you know, there's the technology, but also there's the cost. Is it a, you know, are all the channel costs the same? What is the big difference? Are all the channels, you know, different channels yielding in a different way for the airlines? And obviously you're intermediary and you work on all these different channels. How—

Hugh Aitken:Yeah.

James Marshall:Why are some airlines caring so much on which channels they bring their business? And also, how does NDC affect the travel agency world? I mean, you're really in the middle of it, and how does it affect the customer experience?

Damian Hickey:Thanks for that, James. I think, okay, so about 10 questions in there, I think. It'll probably take an hour to answer alone. But I guess just to kind of set things initially, kind of on the back of Dieter and— can you hear me okay?

Yanik Hoyles:Yeah.

Damian Hickey:And Yanik, I mean, as an intermediary, as an aggregator in the industry, you know, we are, you know, totally supportive of the NDC initiative. You know, I think it's not just, you know, announcement made last week. I think we've been working very closely, you know, with IATA and our airline partners in terms of going through that journey. It was a bit of a bumpy start, but I think that's history. In terms of how we got there, but I think we firmly believe that, you know, the capability NDC brings is something that we've been advocating, and in fact we've been developing a number of products in that same direction. And, you know, we love standards. They make our life easier. They keep our costs down. And so we're, you know, we're very supportive of that. I think there's a— we have— there's definitely a concern in our view that there's a lot of mixed messaging going on around the NDC and the economic model and the NDC technology get intertwined. And, you know, in the end of the day, any airline's commercial strategy is up to that airline to implement. It's not up to us to dictate to airlines what commercial strategy, no more than it's up to IATA to do the same. We've been quite, you know, publicly vocal about the fact that we don't agree with the approach that a number of the airline groups have taken, including Lufthansa. IAG, Air France-KLM, in terms of the surcharge approach. We believe that, you know, if we're to get the kind of traction that we need in this industry across all the stakeholders, we need to do this collaboratively, and a punitive approach or a penalty approach in dictating which channel, you know, the agent or the corporate wants to use, we think isn't the right strategy, but again, we don't determine the airline strategy. So we are fully engaged with all of the groups, including Lufthansa, in helping move the NDC technology and capability agenda forward. To come back to your original question, there's a huge debate as to the cost of different channels. I think on the other side, I think there's no debate that different channels have different value. And I think any supplier of content into channels such as an airline will want the flexibility to be able to decide which channels they want to use in which market, what content, and I agree with Dieter that airlines need to have that flexibility and we as an intermediary need to give them that capability to be able to choose which channels they want. I mean, there is always a debate and it was interesting, I think a report came out, I think only about 2 weeks ago from the European Travel and Technology Supplier Association who actually commissioned a very detailed analytical study into the cost of indirect travel agency distribution versus direct to try and, you know, dispel this rumor that, you know, direct distribution is free and indirect distribution is very expensive. I think, you know, you should look at the report. It's very detailed, I think 60-odd pages, but I think the bottom line from that report was net for net, the costs when you take everything into account in terms of technology and marketing and so on, Actually, the cost of the channels on average is about the same. But it's really how do you choose what value you want? So again, you know, we work with different types of customers. We have corporate customers, TMCs, we have OTAs, we have offline and online, and all of them bring a different value to the airline. And what we want to do is make sure, you know, through capability like NDC, that those offers can be directed to those channels so that the airline can choose.

Hugh Aitken:Yeah.

Damian Hickey:You know, at what price point, at what type of product they can deliver to that.

James Marshall:So it seems that there's 2 kind of conversations. One is the commercial, the cost, and, you know, how do you make sure you control the different channels? And then there's the technologies. How do you enhance, you know, the capabilities of the airlines to reach the customers? So on that one, I'd like to ask, you know, Jonathan from RouteHappy. What you guys do is really helping companies get away from the— airlines getting away from the commoditization of, you know, the typical customer who goes and only has a choice of what is the, you know, the schedule and what is the price. So what are you guys doing? How do you think you can help working with the airlines to break from that kind of spiral, you know, on price comparison only?

Jonathan Savitch:Yeah, I think where the industry has made a lot of progress is just connecting pipes so that inventory and transactional information makes its way to where it needs to go. The next phase for airlines is to really merchandise their offers. And right now they haven't been very, very good at that. To the extent that they do merchandise, they do so kind of on a brand level. But when we all shop for things in our daily lives, Everything we buy has rich photos and media and reviews. There's nothing that we buy without that kind of information. To use Dieter's Coca-Cola analogy, imagine if when you were buying Coke, instead of seeing the bottle and the commercial, you saw an ingredient list. No one would buy Coca-Cola in that situation. And airlines need both the tools to do that, to target at a flight-by-flight level. I'm going to care more about sleep, a recliner seat on an overnight flight than I would a 2-hour flight. I'm going to care more about Wi-Fi on a business trip than on a leisure one. And they need both the tools to do that and of course the reach, which NDC of course helps provide, to get that not just in their own channels but in all the channels where they compete.

James Marshall:So, but why do you think it's been so difficult to make changes in there? Is it technology or is it the will of the intermediaries?

Hugh Aitken:What is the—

Jonathan Savitch:I think, I think for a while it was technology. I think that's now settled. The tools are there. But that's relatively recent. I'd say the last couple of years. I think too what was missing was the mindset to merchandise on a flight-by-flight level.

Damian Hickey:Number 2.

Jonathan Savitch:And I think 3, knowing our industry, everyone wants proof points and metrics. And those are just now coming in. And we can see, we've done these studies, that passengers will pay more per ticket when presented with rich content. We know they will shift from non-Wi-Fi airlines to Wi-Fi airlines in certain markets and on certain routes. And we know, of course, that you can increase conversion when presented a full merchandise offer. And those metrics are all, you know, again, about a year or so old. So it has unlocked some momentum now.

James Marshall:So it's really about merchandising and how you retail it and show it to the customers. So let me move to Hugh in Skyscanner. As a metasearch, you could be accused of being, you know, steering the whole movement towards price comparison only. But on the other hand, you know, with, with your parent company Ctrip, or with, you know, there's a lot of headlines that I mentioned earlier on where you've been doing a lot of active work directly with airlines. How do you, you know, where do you stand? Are you playing the 2 cards, the price comparison on one hand and then trying to go direct? Or what is Skyscanner's role into that change, digitalization of merchandising and retailing? I think we're Yeah, okay.

Hugh Aitken:So I think just to start that off, how do we see ourselves? We see ourselves as a 2-sided marketplace. So on one side we've got 65 million plus unique monthly visitors. We've got 40 markets with over a million UMVs. We're the largest online search travel brand globally, bigger than Expedia and TripAdvisor. So we've got that. On the other side we've got 400 airlines, 600 OTAs, and our job is to bring those together And provide a marketplace where it's easy for our users and our partners to connect. And our principle is very clear. We're a user-first organization, partner second, and Skyscanner third. So we do things that would probably make, you know, things that an airline CCO's eyes would water. We do, we take revenue out of our business in the short term because it's not right for our users and it's not right for our partners. So marketplace in the middle, And we have a very clear principle in what's important for us. If we do what's right for our users, that's right for our partners. And that's how we work in the middle. I think, yeah, commoditization is often a word that's used for us. And I think historically there's probably an element in that. We came from a price comparison because price is easy. Travel is complex. And price at least is something that you would agree. I agree how much Lufthansa are charging. I agree how much KLM are charging. charging for a price, a flight, so why don't we compare that? That's where we came from. But we're moving very much away, we're very much moving towards being a product comparison rather than price. So some great data points from RouteHappy, we're integrating RouteHappy into Skyscanner. So I think it was Monty Brewer from Air Canada gave us a challenge a couple of years ago. He said, how are you guys showing that I'm spending $90 billion or however much it is on aircraft?

James Marshall:Right.

Hugh Aitken:How is it that I've got an amazing business class product, Skyscanner, And Lufthansa that's better than somebody else's. And that's a challenge for us. How do we show the product our partners are supplying rather than just being a commodity price? If users want to order by price, they can, but equally they can use the rich content from RouteHappy and others. The second thing is we see ourselves as a marketplace. So Dieter, a lot of what you said resonates because we see ourselves as somewhere that people can come and they can shop in the Lufthansa store on Skyscanner.

Jonathan Savitch:Right.

Hugh Aitken:They can see what Lufthansa merchandised, how they merchandise it, and then using NDC we can actually offer the ability for Lufthansa to transact in Skyscanner. You forgot to mention we were the first Level 4 accredited on NDC, were we not, Yanik?

Yanik Hoyles:First it was Level 3, Hugh, and second, given you're on the panel, I did not want to steal the thunder from you.

Hugh Aitken:I'm glad about that admission was to let me do that instead. We are investing a huge amount in building out what we call direct booking, but more importantly what is a shopfront for our airlines on it. And very much partner with our airlines to build that shop experience rather than it being something that we'll do. We want to build it with our airlines and actually offer them a proper merchandising platform in Skyscanner.

James Marshall:That's great.

Jonathan Savitch:The other thing, James, to keep in mind is these aren't mutually exclusive propositions. Of course people want to Be able to compare price and convenience and schedule. The question, though, is, you know, the airlines have gotten really good at pricing within a few bucks of each other. That science is now sort of as baked as it could possibly get. So the question then becomes, how do you improve the shopping experience with product information, with merchandising capability? And again, just like everything we do in our lives, if you buy a hammer at Home Depot, you're going to see a picture of the hammer. Whether that means, you know, you definitely want to buy the one with the red hammer, the red handle, or the blue handle is a bit of a secondary question to just having a broad, complete shopping experience, which just improves confidence in what's being delivered, net promoter score for the channel that's doing it, conversion increase that it's actually going to be delivered.

Yanik Hoyles:If I just may pick up on that. Is the conversion— I was going to do you a favor here, Hugh. One, Finnair, at our conference a couple of weeks ago, gave some concrete evidence of the benefits of a partner, and that was Skyscanner, using the NDC standard to integrate. And I think their conversion rate went from 8% to 12%. It was a significant increase.

Hugh Aitken:50%, I like. 50% increase in conversion.

Yanik Hoyles:Exactly, 50% increase. But that is— I mean, and back to Jonathan's point, it's Conversion rate is the currency of tomorrow.

Dieter Vranckx:Yeah.

Yanik Hoyles:In this world, it's going to be online, mobile, scalability of the hits, the speed of response. Conversion is going to be the answer. And if you combine that with personalization or some kind of tailor-made, give people the access to upsells, that's when you have a win-win. Because if the customer ends up buying in a situation where they're in control, right, because they're picking and mixing, you know, they're doing their own kind of personalization, Then whether the yield goes up or down, no one's been ripped off here because it's completely transparent and it's based on what you value as a customer. So once you have that agility in the pipes, then you can aim for these kinds of returns on investment.

Dieter Vranckx:Maybe one thing to add to support that is because we have seen that if you cut an all-in product into different pieces and you merchandise it separately, that you get more As a sum than compared to the all-in price. So individualization, personalization, artificial intelligence in order to support that in combination with a clear visual way to promote your products and your investments is the key for the future.

Yanik Hoyles:And you've potentially got another aspect which is that really applies to leisure because if you say that to a corporate buyer, I'm sure they're going to say, wait a minute, I don't want my travelers starting to pick Pick and mix to add stuff. But I think you get the balance of the two. Whereas for the leisure guy, you can have the complete unbundle so they can rebundle themselves. And for the corporate client, you can really build a relationship where you're actually bundling things, but in the way the corporate buyer will see value for their travelers as well.

James Marshall:So it seems it's very much around the technology. It seems that you need to be able to break up all the services, be able to show the products. Obviously price will still be an important piece, but how do you make sure that you allow your end customer to compare? Because at the end of the day, that's also one of the complexities, and a lot of it is going to be around technology. So technology is expensive, and, you know, so it's all the work, you know, whether you work— a lot of the airlines are, you know, will be working with different parties, but also all the different intermediaries like the GDS, like Skyscanner, like RouteHappy. Yanik, you know, you have a very good perspective on what the airlines that are really investing in NDC and in those technologies, what they're doing, and they, you know, investing in digital retailing. How— what does it mean for the organization? How are the airlines ensuring that they have the capabilities, that they have the right investment, the right people, not just to build the technology but also to provide, you know, the right sales, you know, support, but also the servicing post-booking and operations. I mean, it's a big transformation, not just on technology.

Yanik Hoyles:Yeah, your questions are really heavily loaded here.

Dieter Vranckx:Sorry.

Yanik Hoyles:But I think the first thing is another way of describing NDC, it's simply to enable the full-service carriers to move to a world of API distribution. That's what it's about.

Jonathan Savitch:about.

Yanik Hoyles:And often people say, God, Yanik, this is a revolution, you know, who's going to pay for all this? But what happened when the GDSs, which they've been doing for more than 10 years now, started to consume low-cost carrier APIs and enable TMCs or other travel agents to resell these products connecting to APIs? There was no revolution. You know, the world didn't stop. We didn't have a meeting, a panel to discuss who should pay. What happened is that the different players got together, worked out the total value, and agreed together how best to share that value. So I think that has to be the starting point. Albeit you could argue that when all of a sudden you've got a lot of IATA carriers and non-IATA carriers who all of a sudden are moving into this world of API connectivity, yeah, it does create a little bit more than a few low-cost carriers. But once again, it's not completely brand new. It has happened. There's no number. Some airlines come to us and say, Yanik, how much is it going to cost? Tell me. And it depends on each airline because as I said, one I said in the panel earlier today, each airline has their own strategy. You've already seen it. There's— we've looked at the commercial models. There's the surcharge model, the incentive model, American Airlines. That just shows that you can look at it many different ways. Airlines have different choices when they want to obtain that NDC capability, API capability. I mean, You can actually build your API within your PSS, your passenger service system. You can build your API with a partner who'll bolt it on top, or you can build it yourself. So once again, these 3 strategies will have their different costs, different approaches depending on the airline. And then I think the rest is commercial agreements with the different players. Now one other point you mentioned is internal organization, and I think this is more than— One of the biggest challenges for airlines is the organization design. Airlines are not organized today to retail, to merchandise. Airlines are organized with revenue management people who determine the price based on optimal stuff and push it out. The sales guys sell. To be able to properly do retailing, an airline needs to— you can't have direct, indirect distribution, e-commerce, There's a guy in one airline a few weeks ago at a conference. His business card said Vice President Alliances and Ancillaries. I said, wow. Yeah, and he said, well, they both begin with the letter A. And that for me, that really illustrates the challenges airlines have got to face now as they move into this world of retailing. They've got to really look at their organization. And finally, success for us when we engage with airlines is when you have a commercial guy Like you, Dieter, today, who's on stage. Not the distribution guy, not the IT guy, but the commercial guy who's able to articulate to travel agents, corporates, to partners what this NDC thing that everyone's talking about— because it is, you know, people need to talk about it— but what this will mean for them in terms of the value proposition, in this case Lufthansa Group will offer to its clients in this new environment. And that is success.

Dieter Vranckx:Yeah, yeah, yeah. Maybe just to add from an airline perspective, We are— we have redesigned our organization, and so projects of NDC API implementation is always a joint effort of our distribution people under Xavier in Zurich and in Frankfurt, together with the salespeople in the market. Yeah, it's a joint effort, and we even have now within the sales organization, we have colleagues which are focusing on NDC, on APIs from a customer perspective. So we don't want to make the mistake that you implement a technological solution, but the customer doesn't really see any benefit. And from a sales side, I don't want something which is great for the customer, but I cannot make it technologically work.

James Marshall:Yeah.

Dieter Vranckx:So it needs to come from both sides. And to give a number, for the next couple of years up to 2020, we as an airline group, we will be investing €500 million in innovation, digitalization, and a lot of projects. And that goes from the fact that we cannot— you cannot tell an organization now you have to innovate, and so you put it as a new rule in the rulebook and then you expect everybody to come with 1,000 ideas. We have a team set up in Berlin which is completely separate from the organization, which is not touched and not linked to our big Lufthansa Group organization. They are free. A lot of young people, a lot of entrepreneurs which are there active. And basically they're really thinking completely out of the box. And then you need the investment in the technology and IT in order to get these creative ideas implemented because that's now The great thing about the new world is that you can build a new product which might be called 10+1 and you bundle it as a package and you are able in the new technology to commercialize that. So that's something which is interesting.

James Marshall:So that would be an example of a very large group like Lufthansa Group and all that, but for example, Hugh, you've been working with quite a few airlines on I mean, we had a case of Finnair that was mentioned earlier on. What do you think the airlines need to do to be able to be winning in this digitalization of retailing?

Jonathan Savitch:Sure.

James Marshall:All the changes.

Hugh Aitken:So yeah, Yanik, thanks for mentioning Finnair. We've got Scoot in the room today. They're another one of our partners who are on direct booking, as are British Airways. So I think I'd ask a couple of questions of an airline. I think the world is moving to channels. How does an airline distinguish itself in a world that is brand agnostic in channels? So I'll give you an example. If you've— some of the people who've been on panels I've been on before, I've given this example before. But my 14-year-old daughter on her iPhone, because I'm far too nice for her, I give her an iPhone rather than a Samsung. Anyway, and she has one or two apps that she uses. She doesn't want to download—

Yanik Hoyles:sorry.

Hugh Aitken:She's 14. She won't download the Lufthansa apps unless she flies Lufthansa all the time. But she'll probably want to do it all on— not WeChat in her case, but on stuff that she uses all the time. So if she's at home, we have an Alexa. If she speaks into Alexa and says, hey Alexa, where can I go this weekend for 3 nights for less than €200 from Edinburgh? Here's your options. Great, book me option 3. Where does the airline's brand fit So I think when you look at, you know, our view is we're putting branded stores onto Skyscanner. But I think there's an openness that airlines need to say, right, how do I work with different channels, be that a branded storefront on Skyscanner or be that on Alexa or be that on Facebook or wherever it is, and the user might not touch my website. And I think that's a real challenge. Yeah, it's a real challenge for airlines about wanting to drive conversion. consumers to their website or their app versus actually what's most important is I'm winning those consumers and I'm giving them a rich booking experience wherever they are. And Peter Elbers from KLM, one of the— he talks about his digital strategy and he says the first principle of it is to be where the customer is.

James Marshall:Mm-hmm.

Hugh Aitken:And I think that's something that really resonates with us, that airlines have to be where the customer is and that probably will not be on their app or their website. in every market globally. It might be in their home market, but how do we work with other brands like Skyscanner? And that's where someone like Finnair or Scoot will say, how do we work with brands like Skyscanner to help us give us that global reach to our distribution?

Damian Hickey:Yeah, and if I can pick up on that one in terms and come back to the— I think one of the earlier comments was, you know, in today's environment, you know, airlines are looking to have access to all of the channels as consistently as possible. To consistently as possible to make, to have that capability. So whether you come direct, you come indirect, you come direct to a website or an API, you've got the same experience, you've got the same control. And, you know, when we talk about investments as an aggregator, you know, we have to continually invest in, you know, in supporting industry standards and new evolving standards. And, you know, I think we spent $1 billion over the last 5 years in being able to access content, whether it comes from an API or comes from ATPCO to be able to merchandise, to be able to give rich content. But a big part of what we invest in is being able to deliver that content out to our agents, because the other side of the equation that, you know, doesn't get talked about a lot is how do you actually deal with the agent that wants to consume that content that's working on behalf of a big part of our, of our industry. Now whether that's 10% for one airline or 80% for another, the reality is that is a very critical, high-value part of the market. And we— it's not just about getting the content, but how is that going to be consumed? Because the world of industry standards today has a particular workflow. It has a way the agents work. They have multiplicity of mid-office systems, back-office systems, reporting requirements, duty of care requirements, and they vary. And that's going to change with NDC. That's going to change dramatically with the new world of merchandising, and we have to, you know, help our, you know, our agents, whether they're online agents or offline agents, go through that journey of being able to adapt and to change and to be able to serve their customers, because at the end of the day, the customer has chosen to go through that channel for a particular reason, to get that service, to get that quality, to get that control, or whatever that may be. So I think we need to, and again it comes back to that point of collaboration, When we're looking at taking advantage of things like new distribution capability, we've got to look end-to-end. We've got to say, okay, how do we make it work for direct? How do we make it direct on a portal, direct on an API? But how do we actually deliver it out to TMCs, corporates directs, on the mobile, right, directly to Expedia or whoever it is, and make sure that we're not doing it just for one part of the equation? And I agree with Yanik, that's one of the biggest challenges we have in engaging with airlines, and I'll give you an example. You know, we launched our rich content and branding product I think 2 and a half years ago now. It's got a lot of traction. I think we have over 240 customers, airline customers using it to get that rich experience out to the airlines, and it's almost, I would almost say it's a product that kind of sells itself. It's pent-up demand. The biggest challenge is there's no rich content and branding department in an airline because it isn't the way that products were distributed before.

Jonathan Savitch:Right.

Damian Hickey:You go to the distribution people, they say, oh, that's not me. You go to revenue management, no, no, that's nothing to do with that. You know, so it's a combination of revenue management, distribution, sales and marketing, branding, and, you know, the problem, big problem is how do you get those people together? You know, and I compliment Lufthansa Group for not just saying our distribution strategy has changed, but actually we've had to re-architect our organization to actually be able to move forward. And I think that's a big step.

Jonathan Savitch:Yeah.

Damian Hickey:I think that's a great point.

Jonathan Savitch:I think that the time where airlines could say the technology isn't there for me to communicate effectively is gone. What we've seen once the connections are there is airlines neither have the organizational approach nor even the mindset to discuss, to really put the technology in place. I think that's a great point. the right things in front of shoppers beyond the transactional things.

Hugh Aitken:Yeah.

Jonathan Savitch:Initial tests we would get back, for example, most airlines would say, here are check-in kiosks, here are beverage carts. Those are not things that differentiate one carrier from another. So working through, going through department by department, getting the onboard products people, the food manager, the lounge people to a point where they can actually come up With the merchandising strategy, we found ourselves spending far more time on that training, awareness, marketing, e-commerce mindset than we did connecting the pipes themselves.

James Marshall:That's good. We're running a bit out of time, so I mean, there's so much more we could discuss, but I have a few rapid-fire questions, and I'd like, you know, all of you to answer in 1 or 2 sentences. The first one is we've been talking kind of in general and some examples in Europe, but how is Asia different? Let's start here. How is Asia, the Asian airlines or the Asia-Pacific airlines compared to what's happening in Europe?

Damian Hickey:Well, I think Peter said it and I think Yanik said it in the session earlier. I think Asia is different because it's come slower to the merchandising arena. I think part of that because the unbundling of products, particularly for full-service carriers, is something that You know, has taken time because they've seen themselves as premium service and unbundling is kind of alien to that. But I think that changed quite dramatically with the introduction of low cost. So I think, I think it may be a little bit behind, but I don't think that's— I think it's, it's, it's not far.

James Marshall:That was more than 2 sentences, but that's okay.

Hugh Aitken:Dieter?

Dieter Vranckx:I see Asia as the development of what started in the US coming to Europe and now ending up in Asia. Number 2, second sentence, is that I see the development much faster and stronger in Asia and countries like China picking up and even surpassing the US with mobile payment solutions.

James Marshall:Hugh?

Hugh Aitken:3 ways I'll answer this one. One, I think most of Asia, although there's huge— one thing about Asia is there's huge variation across Asia. But most of Asia has missed internet version 1.0, which was I go to my desktop and I do a search and that's it. Asia relies on smartphones to a degree that we don't see in Europe and particularly the US. So that's one bit we've missed out there, internet version 1.0. We've actually started a huge piece with airlines about you need to look east for product inspiration. So it's all well and good looking at Silicon Valley as being cool and all that, but airlines, you need to look at what's going on in Asia as what's going to be happening in 5 years or whatever. And you guys do some great work to just replicate what you're doing in Asia and Europe. And I think airlines typically are behind the curve in terms of how mobile is being adopted, how payments are innovating, all of those sort of things that are happening in Asia.

Jonathan Savitch:Great. Yeah, Hugh stole mine. It was mobile first and only. So there's no like cramming desktop into mobile. They started with mobile. That's a big one. Second one is new curious travelers. So really discovering flight and flight shopping Many cases for the very first time.

Yanik Hoyles:I think they're going to start to move fast. You'll have a few carriers coming up in the next few months having this kind of capability, but also I think they're going to need to move fast to catch up. So they're going to benefit from the fact that speed of deployment is going to be faster because the value chain is going to have much more experience, but the challenge is if they're too slow, the people like Lufthansa Group, the BA-IAG, the Air France-KLMs are going to come into these markets much more agile, much more flexible, being able to target the customers in a much more subtle manner, they'll start losing market share. So I think there's a sense of urgency as well.

Dieter Vranckx:All right.

James Marshall:Unfortunately, the time is up. I mean, we could be talking about this for hours. I think there'll be chances during the coffee breaks and later on at drinks to discuss with some of the panelists. So thank you very much for being here, and thank you very much, all of you, for listening. Thank you.

Damian Hickey:Thank you.

Yanik Hoyles:Thank you.

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