Travel Megatrends 2018: Airlines Become Storefronts Beyond the Seat

Skift Megatrends 2018

In January 2018 released our annual travel industry trends forecast, Skift Megatrends 2018. You can read about each of the trends on Skift, or download a copy of our magazine here.

Peter Glade, commercial director of Sun Express, a leisure airline owned by Lufthansa and Turkish Airlines, likes to say that airlines must decide whether to be Uber or the Uber driver.

“Our decision as an airline shall be, ‘Am I the one that is transporting the passenger from A to B, or am I the one that is managing the problem that the customer has to an extent that the customer is happy and wants to fly with me again,”‘ he said in an interview. “Do I want to be a transportation organization or a problem solver?”

Put that way, it’s an easy decision. An airline doesn’t want to be reduced to being a transportation provider, while another company — perhaps Google or Amazon, or an online travel agency, or maybe a firm that doesn’t exist yet — provides an ultra-sophisticated platform to sell everything from seat assignments and baggage fees to related hotel and car rental bookings. A healthy modern airline wants to know its passengers better than anyone so it can offer them the right products and services at the most opportune time.

It’s trickier than it sounds. Yes, airlines have always sold tickets, but they were not built for modern retailing. They are transportation providers, and so many resources go into the core business — providing safe, reliable operations — that many have not invested in e-commerce.

“It is simply not that easy to catch up in a breath based on legacy IT and an online distribution mindset that is still developing,” said Christian Langer, Lufthansa Group’s chief digital officer. “The good news is, more and more players are gearing up fast.” In 2018, many airlines will try to regain customers from online travel agencies and other companies that serve travelers.

Most obviously, carriers seek to sell directly to customers, but there’s more. Lufthansa Group is emphasizing sales of upgrades, seat reservations, and baggage.

It’s important stuff, because if airlines can’t perfect merchandising, Glade said, they could lose access to customers. “There could even be a world where passengers say, ‘I don’t care who I am flying with,”’ he said. “The most important thing is that I booked on platform ABCD, because that’s where I get the best service.”

Serving Customers Everywhere

Before September, when a pilot shortage forced Ryanair to cancel thousands of flights, executives from the low-cost carrier repeatedly said they wanted to create the “Amazon of Travel.”

Ryanair gets more web traffic than any other airline and wants to leverage it to create new revenue, while giving other travel providers a low-cost way to distribute their product, said Kenny Jacobs, the airline’s chief marketing officer.

It already experiments with selling tickets for quasi-competitors. Since May 2016, Ryanair has sold some long-haul routes for Air Europa, a low-cost Spanish airline.

“Just like Amazon is what you think of when you think of buying general merchandise, Ryanair is who Europeans think of when they think of low fares,” Jacobs said. “But it doesn’t mean they’ll always fly with us.”

Ryanair plans to expand the initiative. First, it expects most itineraries will include a Ryanair segment, but eventually it might allow customers to buy tickets without one. Perhaps it might sell for Lufthansa or British Airways, turning Ryanair into “almost a competitor” to Skyscanner and Google Flights, Jacobs said.

At Sun Express, a leisure carrier with relatively few flights, Glade said he would consider something similar. Sun Express might not always fly when a customer wants. Sometimes, he said, his best option might be selling a ticket on a competitor, losing one sale but retaining a customer.

Still, Glade said he might not make defecting easy. “If someone wants to buy a ticket on my competitor on my website, he can be sure that at least 50 percent of the screen will convince him that it’s better to buy on me,” he said.

Lufthansa Group’s Langer said he understands why airlines might try the approach. But he said carriers seeking good customer relations also must implement other strategies.

“Competition,” he said, “is not about who sells whose seats on his website.” Instead, he said, “it is a matter of who offers superior service to its customers and tailors it to their personal needs and interests.”

But Lufthansa Group is servicing customers at other carriers in a different way. In 2017, Lufthansa’s Innovation Hub launched a website called AirlineCheckins.com that allows passengers to check in on more than 100 airlines.

Early on, Langer said, a few airlines sent cease-and-desist letters. But he said passengers like it, and many airlines want to participate. More than 80 percent of check-in requests involve non-Lufthansa Group airlines. “It could be a separate business one day where the Lufthansa airlines are one customer among many,” Langer said.

More Sophisticated Ancillary Sales

Not all airlines will sell tickets on competitors, or help customers check in on another carrier. But most know they must improve ancillary sales.

This is not new. But while this business is already profitable, many executives say airlines still lag other industries.

When Jacobs joined Ryanair in 2014, travelers might make 25 clicks before buying a ticket, and at some point, the airline would ask if they wanted a rental car. If they said yes, they would go to a white label website.

Today, Ryanair is craftier. For cars, it uses CarTrawler, an aggregator, giving it access to more inventory. Even better, Ryanair knows more about customers, including for how long the person is traveling, whether it’s a business or leisure trip, and whether the traveler is bringing children.

About two months before a trip — when interest in cars peaks — Ryanair can send the customer an offer. “We will let them book the flight,” Jacobs said. “And then we will say, ‘Do you want to book car hire?’ And here is a Citroen Picasso with child seats available in Malaga at the time your flight arrives.”

But while many carriers, including Ryanair, have perfected email offers, Glade said airlines should consider reaching customers elsewhere. Sun Express sells tickets via WhatsApp, a popular social network among Turkish people living in Germany.

An airline, he said, must know “24/7, where are my customers, what are they doing, how do they live and what needs do they have? And then I need to shape the commercial offers purely around these concerns.”

KLM is also exploring new channels. In August, it became the first European carrier to accept payments through WeChat, the Chinese networking site. Later, KLM introduced a new bot on Facebook Messenger that can book tickets for customers.

“We are, of course, not at par with the likes of Amazon,” Jean-Marc Janaillac, Air France-KLM’s CEO, said in an interview. “They are the best in the world for that. But it’s our goal right now to organize this data and have the proper technology tools to know about the customers’ past habits, what their desires are, to make them offers that will increase their travel and their buying.”

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