Faical Allou – Business Development

faical.allou@Skyscanner.net

February 2017

How technology influences airline planning

Executive Summary

• The way people purchase tickets drives how managers run airlines• In the GDS-only world, airlines built hubs and reduced connecting time to appear on the first page• Since the mid 90s, in a “sorted by price” world, airlines have cut on the service level to offer the

lowest price possible• The next iteration will be messaging and voice which are fundamentally different ways to

purchase:o A very limited number of options can be presentedo The sorting will be based on an aggregation of Schedule, Price and Service

• Airline managers still rely on decades old methodologies, data and tools that will not be relevant in the new world of distribution which raises the question:

How to win the next round?

The Best Place to Hide a Dead Body is on Page 2 of Google…unknown author

… or any other search/comparison engine

“WYSIATI” What you see is all there isDaniel Kahneman, Think Fast and Think Slow, 2011

Airlines need to plan their schedule, services and prices to stand out in the next generation of distribution because people can’t buy what they can’t see

The GDS display has driven airline network planning for decades pushing airlines to reduce connecting times at their hubs

GDS “Neutral Availability Display”

Up to 8 results Airport to Airport ranked by duration- Moving to the next page 2 involved typing code for the

agent- For the user, it involved asking the agent to type code- Duration is easy to calculate and “seems” natural but

certainly not “neutral”

- Create hubs to offer as many Airport to Airport combinations as possible

- Influence agencies to bias the results

- Code share to “hog” the first page

- Reduce connecting time to the (unsustainable?) “limit” (e.g. 45min in CDG)

... and “adjust” the block times

What should we do to be on the

first page? !

Search can be made from everywhere to everywhere, include “nearby” airports, can be started from a map etc etc Result page can display up 10 results above the fold (depending on screen size) ranked by price by default- Seeing hundreds more results involves only scrolling, or clicking on a link- Many portals are now able to search by budget / from airport to

everywhere etc …

- Reduce prices ideally to be 1€/£/$ cheaper than competitors

- Cut costs to sustain low fares- Fly to alternate airports - Code shares still work

The subsequent web-based distribution channels were price-driven and provided the option to show hundreds of results on desktops

What should we do to be on the

first page? !

How many airline planners know what users filter for?

Nb of stops Departure time Airline Duration

2,100,000 1,200,

000 510,000

490,000

Number of interaction with filters over a period that generated ~4m click-through

Whilst airlines have been focusing on cutting costs and reducing trip times, they have lost track of what travellers want and optimized on the wrong KPIs

While non-stop vs stops is an actual user preference, duration is a lot less important which means that 90 min connection is not a lot worse than 45Since the early 2000s, many airlines have rolled back the tight connecting times and unpeaked their hubs to avoid misconnections and better use infrastructures (e.g AA “rolling hub” in DFW) – and now introduce bare bone seats to be the cheapest

Unconverted searches are barely

looked at

Users are willing to pay more to get more, even for something as trivial as a better booking experience; they only need to be “nudged”… WYSIATI

Users not chosing the cheapest

5%

20%

old layout new layout

Old layout

New layout

What will happen when we show more of the relevant product attributes?

The new layout forces users to make a conscious decision

Flight attributes are currently displayed after the choice is made

• NDC will provide a more accurate representation of the amenities available which will enable fair product comparisons

• Only a matter of time before they become filters

- Offer what users look for- Price (or discount) based on the

features users are willing to pay for… but what is it? How much?

Note: source for amenities is Routehappy APIWhat should we do to be on the

first page? ?

… so the next iteration of comparison engine will take into account more product attributes …

3 options ranked by score = how “good” the option is (currently only duration and price)• Users don’t want to be shown hundreds of options to chose from (they just

need to know the tool compares hundreds, afraid to miss out)• New web technology enables faster iterations and the ranking will reflect actual

user preferences so that optimizing the rank will truly improve travellers satisfaction

- Would code shares still work? Need to keep only relevant options

- Improve “itinerary score” => How is it calculated? How does it influence choice?

What should we do to be on the

first page?

?

… but the world is now mobile with small screens, limited information and cumbersome interactions; travellers increasingly rely on recommendations

Only 3 choices available, and need to swipe between them

The new messaging platforms are where users are today; these show even less options and travellers will rely even more on recommended options

How can airlines stand out in the messaging world?

3bn+ installs

How many choices are too many? (2?)

What option is going to be delivered?

What are differentiation factors?

Apple Siri1Bn+ devices

Google Assistant1Bn + devices

Cortana (Windows)1Bn + devices

Facebook M1Bn+ user accounts

Amazon Alexa275M+ amazon user

accounts (with cc info)

The next major wave is AI powered voice interfaces, where users can probably only listen to one option; what airline will it be?

What should we do to be on the first

(only) “page”? ?

What do we do with what we know?

“If you can't measure it, you can't improve it” - Peter Drucker

“Without data you’re just another person with an opinion” - W. Edwards Deming

Airlines need to adjust their product (network, pricing and services) to stand out but they now need to understand the coming generation

GDS-only era Website/apps Messaging AI & Voice

How to stand out

We are here

1960 2017

- Create hubs to offer as many Airport to Airport combinations as possible

- Influence agencies to bias the results

- Code share to “hog” the first page

- Reduce connecting time to the (unsustainable?) “limit” (e.g. 45min in CDG)

... and “adjust” the block times

- Code shares still work- Reduce prices ideally to be

1€/£/$ cheaper than competitors

- Cut costs to sustain low fares

- Fly to alternate airports

- Would code shares still work? Need to keep only relevant options

- Improve “itinerary score” => How is it calculated? How does it influence users?

- Offer what users look for- Price (or discount) based

on the features users are willing to pay for

… but what is it? How much?

What should we do to be on the first (only)

“page”?

?Mid-1990s

People purchase differently and designing the right offer for them requires access to the relevant information

GDS-only era

Marketing Information Data Tapes (MIDT) for PNRs

Website/apps

Structured user interactions from search to ticket

Messaging

Loosely structured flight requests in text

AI & Voice

Loosely structured flight requests as soundData type

Information Travel booked from airport to airport

Search, location, filters (preferences for flights)

User info & preferences (access to all requests across verticals) Intonation (mood?) …

We are hereWe still plan based on this

1960 Mid-1990s 2017

What are we going to do with this?

For 20 years we have barely used this rich data

Airlines delivering what users wants (and what they are willing or able to pay for) will win, as long as people can find them “WYSIATI”

GDS-only era Website/apps Messaging AI & Voice

1960 2017

Large Hub and Spoke carriers won

Low Cost Carriers are

winingWho will win this and how?

Mid-1990s