Airline Tech Startups Try to Adapt to Brutal Sales Market

Business prospects darkened this year for several venture-backed startups focused on providing technology to airlines to run their operations and strategy better.

Skift checked in with a random sampling of startups — Countalytics, Duffel, Elenium, Flyr, LocusLabs, Unicoaero, and Volantio — to take the segment’s pulse as airlines undergo an epic revenue crunch.

Some startups have diversified their customer base outside of aviation. Some have used luckily timed funding rounds to fine-tune their products. Other companies have tried to stay relevant by either inventing new products or reviving old ones.

“While many people think that this isn’t the ideal time to create a travel startup, the opposite is true,” said Bonny Simi, president of JetBlue Technology Ventures, the investment and innovation arm of U.S. carrier JetBlue. “There are plenty of opportunities to be had with early-stage funding while founders determine product-market fit.”

“Travel startups have to be creative about working with airlines right now,” Simi said. “One way to do this is by demonstrating value through proof of concepts. My advice to founders is that they should be mindful of the associated cost due to spend sensitivity across the industry and consider proving their near-term value through low or no-cost trials.”

Join Us For Our Skift Aviation Forum Online Conference November 19

Seek Allies

Countalytics has had a good and bad year.

On the positive side, Google for Startups picked it this month as a Black Founders Fund recipient. A cash infusion and a related mentorship and networking program have helped the Atlanta-based startup, which uses computer vision and machine learning to help clients save money in inventory costs.

The rest of 2020 has been challenging, though.

“When the pandemic began, we were starting a pilot with Delta and Gate Gourmet,” said David Hailey, co-founder and CEO. “We were also talking with Lufthansa about a pilot in Frankfurt. As soon as March hit, all that went out the door.”

Countalytics, founded in 2018, uses cameras to take pictures of an airline’s inventory, such as its in-flight catering items, and it uses software to count what’s in the images. Before and after photos of a flight can track what’s changed in, say, the number of airline meals, faster and more accurately than people can manually.

The company hasn’t given up hopes on the airline sector.

“Our messaging to airlines is that, as your catering ramps back up, we can help you save money and succeed,” Hailey said. “We help you hold caterers accountable for quality assurance, and we help you analyze consumption to get smarter about forecasting what’s worth stocking.”

The company’s interactions with Google engineers about artificial intelligence and other disciplines may help improve its product and business.

But Countalytics is also looking in other industries for prospects. It signed a contract with Duke Hospitality, which runs 10 hotels. It’s about to start a project with a large university in North Carolina.

Invent a New Product

Elenium Automation, which is based near Melbourne, offers automation technology like self-bag drop machines for airlines and airports. But with few passengers flying, airlines and airports had little capital to invest, pushing operational efficiencies off their priority list.

A person demonstrates a self-service kiosk from Elenium Automation that aims to help identify travelers with medical conditions. source Elenium

So the company tried to find other ways to help airlines and airports reduce their costs and prepare to reopen. It developed technologies this year that resulted in a “vital sign detection” kiosk, which can help automate vetting that passengers are healthy enough to fly.

“This effort has helped us rebuild the pipeline across other industries and has taken some slack from the drop in demand from the aviation players,” said Ilya Gutlin, chief commercial officer and board member at Elenium. “But to get here, we went from a concept to a shipped product in six weeks, shipped dozens of these kiosks by June, and we crossed the 100 kiosk mark in August. We have recently developed a second-generation version of this kiosk, ready for mass production.”

The company is currently certifying the kiosk as a medical device in the U.S., Australia, and Europe. The product’s early success helped the company raise an undisclosed round of funding that about $21 million ($30 million Australian), according to press reports.

Timing Is Everything

Flyr launched in 2013 as a service to forecast the price of airline tickets and create insurance products against last-minute price changes. It pivoted three years ago to a business-to-business model. It now sells a “revenue operating system,” which aims to help airlines understand their pricing.

“It turns out the system we’ve now invested about $30 million in is well-suited to Covid-19,” said co-founder and president Alex Mans. “Before the crisis, our customers saw a 3 to 5 percent revenue uplift from using our system,” Mans said. “Now, they see revenue increases in the 8 to 10 percent range. That tells you how bad legacy forecasting systems at dealing with this volatile environment.”

The startup, which has about 65 employees, has kept all its contracts with two low-cost carriers, three hybrid carriers, and two large network carriers.

Flyr now competes with tools from companies like Pros, Amadeus, and Sabre.

“We ingest a lot more data, or signal, if you will,” Mans said. “We integrate an airline’s schedules, inventory, historical pricing, marketing campaigns, events, competitor schedules, competitor pricing, revenue accounting data that prices beyond just the fare to include other factors like ancillaries.”

Find a Hidden Gem

In February, airline tech startup Volantio focused on helping airlines with full or nearly full flights tempt flexible passengers with compensation in exchange for rebooking on other flights. It also had a product for marketing automation, but that product wasn’t part of its sales deck’s main offer.

Today, with airlines often struggling to fill flights, the Atlanta-based startup has put its SmartAlerts product front-and-center. Volantio has shifted the focus to the tool’s ability to help an airline anticipate shifts in demand by studying data.

“We had an a-ha moment for our company when looking at the data this tool was generating,” said CEO Azim Barodawala. “We realized there was gold there. We thought the product was for marketing automation, but it’s actually for demand anticipation.”

Airlines use Volantio’s tech to enable shoppers to set alerts when they’re browsing on airline websites. Most alerts travelers are setting are for dates that happen to be for about three months ahead.

“The alerts give a window into travel in the future,” Barodawala said. “We can demonstrate that alerts have good track records in anticipating trends in transaction data overall. The alerts set by people have greater predictive power than other tools in this year’s volatility.”

Volantio, founded in 2013, has disclosed raising about $2.6 million in investment. For its SmartAlerts tool, it leveraged a partnership with one of its investors, Amadeus, by integrating an Amadeus tool called Instant Search.

“We have two new carriers that, hopefully, will go live in the next month, and we have one full-service carrier in Asia that’s at a contracting stage,” Barodawala said.

Double Down

Duffel, a London-based company focusing on smarter ways to distribute airline fares, benefited from having raised $51.5 million across rounds last year.

Given that heavy funding, some people might expect investors to pressure the startup to make changes given the current airline crisis. But Duffel has doubled down instead.

“There’s always a temptation when business slows down to start doing many other things in product development to hope something picks up speed faster,” said founder and CEO Steve Domin. “But even though it can seem a bit insane to double down on the airlines right now, that’s what we’ve done. There’s no doubt things will recover, and we want to be there with the right solution when that’s the case.”

Duffel is creating a marketplace where airlines can distribute their fares to resellers. For example, it has secured Americas-focused partnerships with Air Canada, American Airlines, and United Airlines, supplying their content to agencies like Milla, a Chile-based company that offers booking and management tools to corporate travelers.

But building any marketplace takes time. Will it go slower during the crisis?

“Signing up about 80 airlines gives you something like 80 percent of passengers boarded worldwide, and we’re a quarter of the way to signing up those airlines,” said CEO and co-founder Steve Domin. “Next year, we’ll be more than half the way there.”

Pivot

Unicoaero is a Sunnyvale, California, company that in 2017 debuted a business-to-business service, namely, a central baggage management platform that allows airlines to track and manage their bags from end-to-end.

The startup subsequently raised $3.6 million in seed funding. Last year, Unicoaero had 56 airlines, such as Air France, Emirates, and Singapore Airlines, using its platform at more than 80 airports. It averaged at least 500 interactions a day.

Unicoaero this year saw its revenue drop about 90 percent. The company responded by speeding up its plan to add a white-label service that manages door-to-door luggage couriers on behalf of airlines, splitting the revenue.

“We’ll vet and contract drivers in Moscow, Delhi, Casablanca, etc., who will go to your Airbnb, hotel, or home, scan your boarding pass to retrieve the data on how much any bags you can have for free, check you in, and help you seal the bag before the driver drives it and drops it off at the airport,” said Ziko Atamuloev, founder and CEO. “On a flight’s arrival, our team clears the bag through customs and delivers it onward to the passenger’s end destination.”

“We’re about to sign a contract with a major carrier at dozens of locations,” Atamuloev said.

Diversify

LocusLabs is a tech brand that helps operators manage and communicate everything about their physical space through a spatial mapping software platform. Airports and airlines were early critical customers for the company, which debuted its tools in 2015. Scores of airports worldwide have used its depth cameras, lasers, and software to create “centimeter-accurate” interior maps.

Last November, Acuity Brands acquired LocusLabs. That deal turned out to be well-timed. Acuity’s investment enabled the brand to take a long view with its customers.

“The industry conditions have led us to focus on use cases that positively impact operational efficiency, which we expect is a direction that will ultimately lead to even more value for our customers,” Karlee Kennedy, vice president, global sales and strategic accounts at Acuity Brands.

“We’ve maintained very high retention, even though our [airline and airport] customers are in a challenging position,” Kennedy said.

Yet, like Countalytics, LocusLabs has had to ramp up outreach to customers in other sectors like hospitality and corporate real estate.

Be Both Prudent and Faithful

How long will the sales slump last?

“Yogi Berra famously said that “It’s tough to make predictions, especially about the future,’ and when you are coming out of a once in 100-year event, it is more so,” Gutlin said. “The aviation industry still has a long way to go before a full recovery to 2019 levels. I have seen 2024 or 2025 given as a time frame.”

Many startups can’t wait that long.

“If it takes four or more years for airlines to recover, 90 percent of startups will die,” Atamuloev said. “We’ve restructured, so we can last. But most companies will be in a bad place.”

Acquisitions are also likely. A case in point is how Freebird, a startup that offered services for managing flight-disruption, was acquired by Capital One in August. The bank declined to provide an update on product development.

In short, there appear to be many reasons why airlines shouldn’t go dark on working with startups.

“During this time, airlines need to be ‘ambidextrous’ – focusing on both solving for the current pandemic’s challenges, but also looking for opportunities to innovate for the future,” Simi said.

Register Now For Skift Aviation Forum, Happening Online November 19