Skift Take

We may be further along than we were just a year ago, but there's still a long way to go.

Personalization is increasingly becoming the most essential tool for survival in a highly competitive airlines market but also in a constantly developing digitalised era. At the heart of personalization are three major components – the customer, the complete passenger journey and the vitally important customised service.

Personalization is evolving as airlines are increasing their learning curve about the profile of their customer base, as they move towards more open business structures and as they introduce more technological advances in their day-to-day operation. Behavioural targeting, emotional experience, one-to-one marketing, and real-time communication are all contributing to the next generation of personalization which in turn can help carriers cut costs, overcome the disconnect with their current customer base and diversify revenue streams.

Digitalization Propels Change

With an increasing number of disruptors on the market, airlines are looking to adapt and be fully prepared for a time of change. International Airlines Group (IAG), for example, established a “digital disruptive internal team.” The new group is tasked with identifying the very latest digital innovations across the world and putting forward ideas to the Board of Directors.

Emirates Airlines is also keen to jump on the bandwagon and recruited as Chief Transformation Officer (newly created role) – Christoph Mueller, who will be in charge of technology and digitalisation strategy for the carrier. Another market player, Ryanair, is also focusing on the development of digital strategy by launching the Ryanair Lab the major goal of which is to drive personalised services through its website.

Digitalisation is one of the major strategies adopted by airlines seeking to provide personalised and simplified service throughout the whole passenger journey, while being responsive to the individual requirements of travellers. Most of the carriers are therefore focusing on passenger-centric tactics which can help customers gain easy access to information which in turn can allow them to be in control. These strategies also can contribute to the good business health of the company by substantially lowering costs while providing custom-built product offerings for the client base.

Some of the big airline players such as Emirates and Lufthansa are reviewing the opportunity to build an open architecture platform that will introduce greater flexibility of internal functionalities to adapt to any new innovations or introduce new technologies.

“Gamification” via Wearables

Digital channels play a key role of the brand positioning and customer service in the airlines segment, in addition to being major sales channels. The rise of these channels in travel is leading to increasingly seamless and “smart” passenger journeys. Thanks to these technologies it is now possible for companies to follow travellers throughout their trips in order to help them with the issues they face and provide support to enhance the travel experience.

Digitalisation is also linked to the increasing popularity of wearable technologies among travellers. The growth potential for wearables is quite high given the factors of increasing smartphone penetration globally and the equally high percentage of subscribers with mobile internet access. Social media and the sharing economy also impact the sales and demand of such products. The success of smartphones supports growth of the category, as many wearable electronics are used in conjunction with a smartphone.

By 2021, smart wearables will be recording the strongest growth in Latin America with 114% growth in terms of number of units. In Mexico for example, this category will benefit from improving internet connectivity across the country, as 4G continues to be rolled out. This will in turn result in a surge in mobile internet subscriptions, with these rising from 68% share of overall mobile phone subscriptions in 2016 to over 99% share in 2021. The importance of wearable technologies and customer preferences towards this segment is recognised by airlines, which are adapting their strategies and services to implement wearable technologies.

Source: Euromonitor International

Online Takes Over Offline for Airlines

Online bookings for air travel globally are starting to mature. The total value of online sales for air travel worldwide is expected to reach $549 billion by 2020. A core component of many airlines’ online sales strategies has been the integration of rewards programmes, which several airlines revamped during 2015 to maximise profits. As the online bookings space becomes more competitive within the airlines industry in the lead for more advanced Personalization strategies, individual operators are expected to introduce creative rewards schemes that simultaneously maximise the number of passengers and the company’s profits.

In terms of regional performance, online sales in the Middle East and Africa are expected to record the strongest value compound annual growth rate (CAGR) of 13% overtaking offline sales even though the latter retains its importance in this part of the world, where personalised service from travel agents continues to be preferred by travellers.

Source: Euromonitor International

Major Takeaways for Airlines

Embrace innovation fully: Airlines must become more flexible in their approaches similar to retail players, where for example reconfiguration of aircraft space is adopted not only for the purpose of cutting costs but to actually facilitate new customer experiences and in return deliver more personalised services on board of the aircraft. Training and equipping staff to provide these new experiences is another area for improvement. Airlines can embrace predictive analytics to achieve strong customer profiling which in turn can enhance retailing capabilities.

Battle of the brands: Brand loyalty will become an increasingly important factor for differentiation and strong global equity, in line with customised services. Airlines can learn from luxury players how to tighten consumer relationships to the brand with a strongly interactive digital strategy.

The era of pay: Embrace the mobile wallet as the central hub for the digital consumers of tomorrow. Shopping and brand interactions must be easy across all devices and channels provided by airlines. Mobile transactions are much richer in terms of the data that can be analysed by airlines and, in turn, the subsequent services that can be provided to end-consumers, which can drive more sales.

Euromonitor International is a leading provider of global strategic intelligence on consumer markets, with offices in London, Chicago, Singapore, Shanghai, Vilnius, Santiago, Dubai, Cape Town, Sao Paulo, Tokyo, Sydney and Bangalore and a network of 800 in-country analysts worldwide. Euromonitor International’s analysis of the global travel industry covers a wide range of categories, including tourist flows and expenditure, lodging, transportation, car rental, cruise, tourist activities, travel intermediaries, online and mobile travel.

November 16, 2022
Dallas-Fort Worth, TX and Online
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Tags: euromonitor, iag, paxex, ryanair

Photo credit: A JetBlue boarding pass on the Apple Watch. Skift