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Emirates is hoping to return to profitability next year by trimming costs while recapturing demand ahead of its rivals.
The Dubai-based carrier has been revealing details about one of its newest strategies. It aims to make its distribution more cost-effective. In July, Emirates will adopt a carrot and stick approach to encourage travel agencies to get more of their content from its data feeds rather than from middlemen tech companies.
Emirates’ “carrot” for travel agencies is that it has rolled out a digital portal to make it easier for agents to book products that the carrier has only been offering for sale via Emirates.com.
The “stick” is that — beginning on July 1 — Emirates will slap a surcharge on tickets booked through the software of global distribution system players. Travel agencies will avoid the fee by booking instead through the carrier’s direct connection gateway, launched last October.
“Our strategy is to become more agile,” said Adnan Abdul Fattah Kazim, Emirates’ chief commercial officer. “We want to move away from the marketplace treating our content like it’s a commodity.”
As a side note: Emirates’ contract with Sabre for new and old types of airline distribution content ends in July. The companies are negotiating, Kazim said.
Emirates is arguably now the largest carrier to introduce surcharges, joining predecessors Lufthansa Group, Air France-KLM Group, International Airlines Group, Singapore Airlines, Aegean, and Qantas. Emirates is the world’s fourth-largest airline — after American, Delta, and United — when ranked by revenue passenger-kilometers, or the distance that paying passengers flew pre-pandemic, according to the International Air Transport Association.
Emirates’ Breakaway Distribution Move
Why now? Emirates is a relative latecomer to “unbundling” its product. In 2019, years after some other carriers, it “unbundled” its business class fares. It offered business class seats as standalone products. It required passengers to pay more for lounge access, advanced seat selection, chauffeured drives to the airport, and other benefits that the carrier had once included with the typical seat purchase.
Airline Weekly has pointed out the context for this unbundling move. The recent bust in oil prices has weakened many economies, such as the United Arab Emirates, Saudi Arabia, and Russia. That, in turn, has hurt business class ticket sales. (Airline Weekly subscribers can read “Emirates’ Heavy Metal Muddle.”)
Emirates found itself competing in some markets against rival carriers that had already unbundled products, giving them a cheaper base price point for more bare-bones tickets.
So Emirates responded by setting aside some of its products, such as seat upgrades and the ability to pay excess baggage fees, for sale only on its consumer site, Emirates.com. Its new gateway portal will make this same content available to participating travel agencies and other trade partners.
Emirates plans to roll out “dynamic pricing,” also known as “continuous pricing,” through its gateway, Kazim.
“Part of our strategy is to have more dynamic pricing, with fares changing quite rapidly in response to market requirements on a daily basis,” Kazim said.
For context on the trend, see Skift’s recent article: “Air France-KLM Joins Airlines Getting Ahead of Fare Wars by Mimicking Uber.”
A Journey With Agencies
Some travel agencies that are already coping with pandemic-related disruptions may balk at new workflows. Some won’t like seeing their traditional incentive payment models overturned, too.
“We’re working very closely with agencies so that the end game will be a benefit to these agencies,” Kazim said. “We’ll be working with them on the incentives and other factors.”
The carrier is in talks with major travel management companies, such as those like American Express Global Business Travel, Kazim said. A spokesman for Amex GBT denies any talks took place.
Emirates is even requiring Dnata, which Emirates Group owns and which is one of the Middle East’s largest corporate travel management companies, to access its content via aggregators.
“Dnata isn’t involved in any of these distribution processes that we’re working and developing and doesn’t have a special connection to the content,” Kazim said.
Opportunities for Tech Vendors
Emirates’ distribution shift is creating opportunities for many tech vendors.
Salesforce, a maker of customer relationship management software, provided some key components to support the Emirates Gateway.
“Our in-house IT team built most of the platform along with the help that’s coming from Salesforce.com,” Kazim said.
Salesforce can help Emirates adopt tools beyond its loyalty program to understand its customers better. This work builds on work tech vendor SAP began for Emirates a few years ago — helping the airline track the seat and service treatment individual passengers get. Among other things, Emirates has a custom implementation of a content management system on Salesforce’s community cloud. (For more on Salesforce’s interest in travel, see Skift’s recent story.)
“We’re trying to move away from B2B [business-to-business] thinking to move to the B2C [business-to-consumer] thinking,” Kazim said.
Larger agencies connect to Emirates via its Gateway Direct portal. Tech vendor Accelya‘s FLX system is supplying the data feed used by agencies for this portal and to orchestrate offer and order management and create dynamic offers. Emirates uses Accelya’s FLX Open Connect, FLX Merchandise, and SPRK products.
Smaller agencies can access Emirates’ content via a certified technology partner. Verteil Technologies, TPConnects, Infiniti Software, and Duffel are some of the vendors the airline has authorized so far.
“As a homegrown brand, we are delighted to partner with Emirates,” said Rajendran Vellapalath, CEO of TPConnects, based in Dubai.
What about the tech giants? A few of the airline groups that introduced surcharges years ago have in the past seven months announced deals involving cooperation with some of the global distribution systems, such as Lufthansa Group signing a December deal with Sabre.
Emirates is in “close dialogue” with the global distribution systems about how they can take part in its new distribution strategy, Kazim said.
Emirates will “extend its outreach” to travel agencies, too.
“The journey that we’re in can’t be one-sided,” Kazim said. “Some things may not be right in the beginning. But it’s our commitment to make sure we give all the backup and support our partners need to get the benefits of the change.”
Exploring Other Ways to Sell Tickets
For a couple of years before the pandemic, Emirates participated in a program called Worldwide where EasyJet sold flights on it and other airlines, such as Cathay Pacific, Singapore Airlines, and Virgin Atlantic, with a promise of “seamless” connections with its own flights for baggage transfers and handling delays and cancelations. Dohop, a tech firm in Iceland, ran the program.
Emirates started with connections via London’s Gatwick Airport. It was expanding with connections via Italy’s Milan Airport before the crisis hit.
Emirates has more recently mirrored this so-called virtual interlining closer to home.
It partnered with FlyDubai, a budget airline owned by the gov’t of Dubai, to be part of a similar seamless transfer arrangement at Dubai Airport. It moved FlyDubai’s operations from Terminal 2 to a stretch between Concourse C and part of Terminal 3 to enable a more seamless transfer of luggage between the two carriers.
“You need one platform and one tech solution hosting the whole thing from A to Zed,” Kazim said. “People in today’s world don’t want to be jumping between three different carriers or between different airports or different terminals to complete a trip. You need a seamless approach to the baggage transfer, too.”
“I think the concept could work in different places, but for us, we always believe that once we bring in everything under one platform and make it seamless for the customer, that’s where the success is always biggest,” Kazim said.
UPDATE: This story was updated to include a denial by Amex GBT that talks ever took place with Emirates, despite what the airline’s chief commercial officer Kazim said.
UPDATE: Emirates says it mentioned Amex GBT in the context of the kinds of companies it is talking to, as a hypothetical. That was not made clear by Kazim in the interview.