Support Skift’s Independent JournalismMake a Contribution Now
Airline retailing is fragmented and complex. Every airline is working with multiple leisure agencies, travel management companies (TMCs), online travel agencies (OTAs), and global distribution systems (GDSs). But no matter how complex the back-end of airline distribution gets, the travelers’ ask is clear — they want the same level of service no matter which channel they use to book an airline ticket.
Airlines Reporting Corporation (ARC), a company that settles more than $94 billion in sales annually between airlines and agencies, has access to an incredible amount of data about air travel spending. SkiftX spoke with ARC’s President and CEO Mike Premo on how both airlines and agencies can benefit from a more omnichannel approach.
SkiftX: How would you define ARC’s role in the industry today? What gap is it filling?
Mike Premo: Our role since 1964, when we were founded, was to enable agencies and airlines to do business more efficiently. An agency can report their sales according to their own records, make adjustments, correct errors, and submit a final sales report. Our approach in the U.S. is different from the rest of the world where agencies are simply told how much they have sold and are presented with a bill from Billing and Settlement Plan. It’s a more collaborative environment here.
Today, our role has evolved even further, and it will continue to do so in the future. We have to rethink the divide between direct sales and indirect sales. If you buy a ticket through any travel agent and call the airline for help, the airline will send you back to agent. The opposite is true for when you book direct and ask your agent for help. Though those two worlds have traditionally been separate, we see travelers wanting to blur those lines. There’s a role for ARC to facilitate this new type of retailing, where agents and airlines are equally equipped to resolve the problem.
SkiftX: With airlines wanting more direct revenue, do you think they would share data with agencies?
Premo: I think U.S. carriers have been clear that they want to engage with agents because, ultimately, they don’t want to negatively impact their relationship with entities such as corporate travel agencies that are serving their best customers. Also, airlines are fighting for the long-term loyalty of their customers; becoming truly omnichannel is the way forward. It will help them provide the best possible experience to every customer — no matter which booking channel they use. The first step is to make sure that both agencies and airlines have access to the reservation record itself and all the data that goes with it.
SkiftX: Which technologies do you think will be the most significant in setting up the airline industry for the omnichannel future?
Premo: I think GDSs building connections with carriers that are compliant with New Distribution Capability (NDC) standards is going to have a significant impact on the industry. It will move the needle in terms of NDC adoption by agencies and democratize access to airline content. But at the same time, Application Programming Interfaces (APIs) open doors for more new entrants to get content directly from the suppliers. We are starting to see that happen a lot as the TripActions of the world are establishing direct NDC connections with their suppliers.
But the reality is that the industry has a technology debt. No matter how much time or money airlines spend, it is a big mountain to climb. One technology that will help airlines be more effective retailers in spite of the different systems they use is blockchain, a shared ledger environment that provides transparency across systems.
SkiftX: Compared to other industries, where do you think airlines stand when it comes to offering personalization through every channel?
Premo: I don’t think any industry has the scope and pace that the airline industry does. When you take the number of destinations, fare classes, carriers, offers, booking channels, and price points into account — it is extremely complex. The fact that the industry is able to manage the products, offer dynamic pricing, and make all of that immediately accessible is a testimony to what it does really well.
What the industry has not done well is to understand the customer, which the retail industry does well. This is because airlines, until the advent of loyalty programs, did not really keep customer records, and there was a lack of transparency between different systems. For example, if you are a second airline on somebody’s trip, all you get is a name and arriving flight details. Access to consumer-specific data is new to our industry. The retail industry, I think, is a bit better about how they share data, Due to the competitive nature of our industry, that comprehensive view of the customer is difficult to create. Until you really know the full breadth of your customer, it’s hard to deliver relevant content, product, and offers.
SkiftX: What can technology providers such as ARC do to help airlines be more omnichannel?
Premo: It comes down to transparency between the companies that serve the customer. As an airline, I may not necessarily want to give agencies access to customer booking and ticketing data. But today, the motivation to share data is not just about catering to agency needs but that’s what customers want. However, before I give that access, I’ve got to understand if the agency is in good standing. Companies like ARC have that information that shows if an agency is in good standing or not, and can facilitate cautious but extremely beneficial sharing of data and insights.
Consider a corporate traveler who wants to book on an airline website directly. This airline needs about eight or nine different capabilities: It has to authenticate that traveler, know which company he or she works for, know their travel policy, what this traveler is entitled to, and so on. Right now, there’s no real way for airlines to know that. But these are services that airlines have to provide because that’s what the customers want, and that is where retailing is headed in the future. We have our own innovation efforts underway on that front as well.
SkiftX: What do you think the industry players need to do in the future to continue to reduce the gap in service quality and delivery?
Premo: The good news about the corporate market and travel agencies is that they are not buying just 10 tickets a year like I am. They are buying millions of dollars worth of tickets, and they can influence a change. We are constantly seeing an increasing demand from customers to be serviced the same way, even if they are using a travel management company, when they go directly to the airline to solve a problem. As agencies and airlines continue to realize that, we’ll see more integration and transparency across the board.