May 2009


Of  all the technology aspects I see working with airline websites and call centres, payments would have to be the least appreciated. Everyone almost always underestimates the complexities, and then discovers closer to implementation how much work needs to be done. Combine this with some very scary things I have seen on customer site visits, such a plain text storing of CVV (3 digit security code on the back of the credit card) within a customer’s profile in a frequent flyer database, and you have an issue that demands much more respect than it curently receives.

Mark Prince, Head of Consulting for Security, Voice and Convergence at Sita, said: “The level of importance given to compliance by these airline IT Security professionals is encouraging but more can be done. Key compliance initiatives such as PCI DSS and ISO27001 are both relevant and time-sensitive. The major payment brands have all issued compliance deadlines for PCI DSS regarding data storage and validation procedures. Visa, for example, has set these at September 2009 and 2010, respectively, dates to which the global airline industry must pay attention.”

Apart from PCI compliance, online fraud is another aspect many airlines struggle to keep on top of. 

Another similar technology is used by the top five banks in the US as well as 120 e-commerce companies, US Airways and Continental Airline. This fraud prevention suite does not effectively tag users’ computers, however it stores information (such as time zone, language, browser type, flash ID, cookie ID and IP address) regarding individual users’ computers. It does this in order to query a degree of probability which tells it whether the computer accessing the bank’s online portal belongs to the person whose online account is being accessed.

Fraud scoring is obviously a big area; I’ve known of Retail Decisions for a number of years, and I’m aware that Bibit have a fraud scoring module, but recently I’ve heard that Merchant Connect and Pagos Online are claiming to offer airlines some functionality to help reduce fraud. I was also talking recently to a couple of guys from Accertify who operate in this area, and I’ve see another company called 41st Parameter getting into this space and making a surprising claim: 

Additional protection is also provided to an airline’s most valuable customers, frequent flier program members by securing passenger’s accrued miles from unfamiliar device access and account takeover.

I’d never even thought of that as being a problem, and I’m not sure why you would need an external company to help you in this area. Unfortunately I didn’t get a chance to talk to David Britton, Senior Vice President of Product Management for 41st Parameter when we were at the same conference recently,  but if anyone has any particular insight into this particular claim (and the extent of the problem) then feel free to leave a comment.

But no doubt about it, payments is only getting more important in the airline direct sales channel. From this story you can see Bill Me Later making inroads into the airline payments business. Both Bill Me Later and Paypal have been working with UATP to become more accepted by airlines. I’ve been asked more than once about POLi, and I’ve also set up a system to facilitate offline payment via a major department store chain for online created PNRs at one LATAM carrier. And then I can’t remember the amount of times I’ve been asked about dynamic currency conversion or 3D Secure. I’ve looked at many different internet banking models used by various airlines to reduce card acceptance costs, I’ve sat through countless workshops with airlines where payments has been the main or the only item on the agenda, and despite all of this experience, payments is the one area where no matter how involved I get, I always find there is still so much more I am yet to learn. Once I do start feeling a little more comfortable, either standards change, a new regulation or industry mandate is introduced, or some new technology comes along to try and claim previous methods are now obsolete. I made reference recently to the quote saying anyone working in airlines with distribution in their job title found their job similar to drinking from a fire hydrant, but I’d say this applies equally to anyone whose job it is in the airline to keep abreast of credit card acceptance, online fraud and related issues.

All in all, payments is not really the business I go chasing, but more and more it seems to come chasing after me.

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Spent a couple of days earlier this week at a work retreat with various colleagues at a place called Aldea Santillana about an hour north of Madrid. I can’t speak highly enough of the location, the level of service, the food and generally their overall attention to detail. The pity with going to places like this is that you often think they have such character that you’d like to be there with your own family for a short break rather than for work; and they did make me work for my stay there –  presented twice plus participated in a lot of Q&A and various other activities.

When I turned on the PC in my room, the first reaction was mild shock – no wifi signal at all. I managed to get online for a few minutes one day in a conference room to post on Korean Air, but other than that I actually enjoyed being semi-disconnected. Impossible to be fully disconnected when you are carrying a BlackBerry, but the real benefit in these types of events is working on building personal relationships, so the less technology the better. But it seems 47% of AA frequent fliers might disagree with me on that point.

My main presentation was explaining how to position the product I manage, Airline Robotics. Some of the people listening were sitting through back to back presentations over multiple days, so the goal was to keep the message simple and clear, yet very compelling. Hopefully they walked away with these three themes:

  1. Cost savings from increased automation in the direct channel back office (see here for one example)
  2. Increased ancillary revenue from optimizing conversion rates ( I used the Air Pacific case study)
  3. Increased efficiency by measuring average handling time for staff working queues

I’ve never posted on the last point, nor discussed it in detail outside private customer meetings, but it is a very interesting area and one that really rounds out the full picture for end to end continuous cost reduction in the airline direct channel that this product facilitates.

But enough of the sales pitch, time to give someone else a plug. I was surprised to come back home and look at the the news from the countless press sources including about 20 industry blogs that I monitor, primarily via RSS; surprised because it seemed like in the few days I was offline I hadn’t really missed that much at all. Most blogs I read have really reduced their frequency of updates recently, so the only real standout post I saw was from Dennis Schaal titled Taking You Inside Expedia’s Hotel Merchant Model. Of course, the news about Southwest delaying implementation of codeshare with WestJet and the guessing as to why was kind of interesting, as was an article on Kayak discussing what looks like becoming the next big over-hyped buzzword in online travel innovation circles, the semantic web, but generally there didn’t seem to be anything too earth shattering that I missed by taking a few days away from the PC screen. Maybe I should do it more often.

Received an email from Korean Air’s Skypass frequent flyer program the other day. Normally these types of emails never get more than one second of attention, before I move sequentially onto the next message, but this one actually got me to make the click. Maybe it was because the pictures in the email message were so small, or because the message itself was kind of interesting, but as your might be able to see from the image on the right, they were asking members of the program to vote on which uniform they liked the best from the past 40 years. 

Korean Uniforms

Korean Uniforms

Not a bad way to give the brand a bit of a personality, and to have frequent flyer members understand a bit of the history of the airline in the form of a competition. Execution wasn’t really ideal, as the prizes are pathetic, and when I did click on the link it wasn’t smart enough to know who I was to register my vote, and instead I had to log into my Skypass account. I still couldn’t see the pictures of the uniforms in any detail either, which was mildly annoying. Not sure how I was supposed to cast an informed vote based on only a thumbnail, but maybe I should remember it is just a random prize draw. Anyway, by this point I’m thinking that I’ve already spent 2-3 minutes on this, and if it wasn’t for the fact that I could sense a potential blog post in the making, it would have all ended right then and there.

I never logged into the site, so my vote was never recorded – really, how much time and effort am I expected to go to in order to win a 2GB memory stick! Last time I looked these were in the bargain basement bin of the local electronics store going for the princely sum of not more more than 99 cents. I thought the Koreans were cutting edge in terms of computer components, so if it was a 32GB stick (biggest I’ve seen in shops to date is 16GB) then this might be mildly interesting. So maybe fewer ordinary prizes, and one big one like a free flight might make the whole thing a bit more appealing. Or maybe drop the prizes all together.

Verdict: Nice idea, but not fully thought out. Still, overall I could probably say it left a slightly more positive impression of the Korean brand than I had before.

Here is an observation. When I started the blog about four months ago I had very few readers, but still managed to get some comments on posts. Now I am seeing readership grow significantly, but the frequency of comments has dropped. Two questions arise from this:

  1. Why?
  2. Should I be concerned?

My theory is that in the early days comments came mainly from people who knew me personally and wanted to be supportive of this endeavour. Lately I’ve picked up a lot more people in the industry that I don’t know personally, but more importantly, they are not people actively engaged in social media. They want to know what is going on, but many of them have probably never left a comment on any blog. I was reading blogs for well over a year before I ever left a comment anywhere, so regarding the second question, I’m fairly confident the answer is no.

There are so many people reading this who at any point in time probably know the subject matter of that individual post much better than me and have some interesting insight to add. I’ve deliberately allowed people to leave anonymous comments, or to post just using their initials. But I’m realistic enough to know based on my own past experience, that if you have never posted a comment anywhere before, there is a thought going though your mind something like “am I authorized by my employer to comment publicly?” In short, a lack of comments doesn’t bother me at all as I can see the readership is growing, but if you really have a valuable contribution to make, why not give it a go – anonimity is fine.

Another observation is that I am surprised at how popular email subscriptions are. They currently account for over one third of the total, whilst I would have though over 80% of subscriptions would have come from an RSS reader. This has made me realize two things:

  1. Even though I am a fan of RSS, clearly other people have a very different view to me. Either that, or maybe just as likely, they have never tried it.
  2. email really is one of the best things about the internet, if not the best thing. Simple doesn’t always mean inferior.

I’m also hearing of a lot more people joining Twitter recently, but I’m still a hold out. Great article from Alex Bainbridge on the ROI he is seeing from Twitter and comparing it to blogging. He makes the interesting observation that in order to get the message out to senior travel industry executives, the blog is clearly the way to go.  Sergio Mello from Satisfly was recently telling airline industry people they should all sign up with Twitter, but he was doing this at the same time as he was making the mistake I’ve made before of burying the lead. I spoke to him afterwards and told him he should be singing from the rafters about what he is doing with Hawaiian Airlines (I am not yet convinced, but I would have loved to hear about it in more detail). He missed a golden opportunity with about 50 industry people in the room listening to him, and instead he tried to get us all to sign up to Twitter. JetBlue are actively monitoring twitter and giving $15 credits to unhappy customers who tweet, but I suspect this is really more of a marketing initiative than a genuine customer service initiative. Southwest are very active on Twitter as well. But all of this leads to whether there is the real risk Twitter will become more and more like spam; to repeat a question others have already asked, is Twitter the next Second Life? I’ll just stick to blogging for now.

I tend to drop these posts on a Friday, but if I did it earlier in the week I might be able to rename this category Takedown Tuesday. Past winners include NCR and Continental Research; today it goes to Avis Europe for this quote from Travolution reporting on the Eye for Travel summit in London.

Sharon Lee, product development manager for Avis Europe, revealed some stats which suggested that car hire companies could sell ancillaries rather than just be sold as an ancillary. She asked people who booked with Avis Europe online whether they would be interested in buying other products from the web site. More than 40% of them would consider buying flights, hotels or parking at the same time. The figures were such as surprise that Lee’s boss made her go and do the research again to double-check! The findings came back the same.

I admit it is a bit unfair to hand out this award based upon a third party account rather than the original source, as I know on rare occassions my quotes have been taken out of context. I tried searching online for any slides from this presentation but couldn’t find them, so apologies to Sharon if she’s been misquoted.

I’ve made this point numerous times before, but what people say they will do is often very different to what they actually end up doing. Herein lies what is probably the fundamental problem with poorly structured market research. Make no mistake about it, ancillary revenue is not the exclusive domain of the airline, but for Avis, it probably won’t be coming from hotels and it definintely won’t be coming from air – at least not in numbers of any significance. 

To illustrate this point, just take a look at what David Wyshner – Executive Vice President and Chief Financial Officer of Avis Budget Group said on May 7th, 2009.

Ancillary revenues increased 18% on a per rental day basis reflecting the considerable progress we’ve made on sales of insurance products and where to GPS rentals. …In our international car rental operations ….Excluding the impact of FX, ancillary revenues increased 10% per rental day, again reflecting our initiatives in this area.

Insurance, GPS, and Dynamic Currency Conversion – this is where the big money is in ancillary revenue for rental car companies. Flights? Hotels? Maybe not. Let me know if you need some help on the third iteration of that market research study.

Work has had me flat out like a lizard drinking since I got back to Madrid, but yesterday I saw so many headlines related to ancillary revenue and other things direct channel that I have not had time to properly consume even half the information. Here is a quick roundup of things that came across my desk in the last 24 hours that caught my attention.

Firstly, seeing this interview with Bobby Healy from Car Trawler reminds me of the Andrew Dice Clay line from his one of his live comedy recordings where he says after the audience recites the puchlines of his old jokes, “OK, so I see you’ve been doing your homework, but that’s why I’ve come prepared with some new stuff.” He is still using my old data on purchase lead times, but I know Bobby was in Miami last week when I gave everyone the new improved data. My question is this; when I was doing my opening keynote speech where were you? I saw him present later during that conference and I also saw him present almost two years ago in Berlin; I love the fact that he is so passionate about his product. Can’t remember ever speaking to him, but he seems like an interesting guy and someone I’d be happy to have a beer with – if only he would start using my new data in his sales pitch!

Secondly Andrew Compart from Aviation Week gave me a great write up in an article titled Airlines Focus On Ancillary Revenue. The “five times” quote was actually referring only to destination content, but maybe Andrew is right and the opportunities are that big in other areas of ancillary revenue as well.

Thirdly, FACUA, the consumer protection agency in Spain has lodged an official complaint against six airlines.

The airlines accused of making money though their customer service ‘phone lines are: Iberia, Air Europa, Easyjet, Ryanair, Spanair and Vueling.

Not sure how much teeth this organization actually has, but it is hardly great publicity for the airlines involved. I’d imagine there is quite a bit of money at stake if they are forced to withdraw these phone lines, but it would be great for people selling tools to take manual work out of the call centres. I wonder who that could be?

Fourthly, easyJet announced another accommodation partnership, this time with Interhome who rent out holiday villas. Unlike earlier this week, no mention from what I read regarding the branding issues.

Fifthly, I was reading an article on Crane Loyalty System by Hitit. Not too much insight here, as it is more of a marketing pitch around better use of customer data, but interesting for me as I’m looking at building a link to this system for an airline customer of mine to do automatic points deduction. The way some airlines are doing this at the moment is almost fully manual which leads to errors and inconsistencies (eg. one operator types LAX and the next types Los Angeles and then both appear on the  member points redemption statement).

Finally, at one point yesterday it looked like all the email subscribers to this blog had unsubscibed en masse. Then I saw that one of the gurus of travel industry blogging, Tim Hughes was facing the same issue, and I breathed a big sigh of relief. Thanks for reading.

Here is the first part of a good article from Spencer Stuart executives Michael Bell and Thierry Lindenau. I just saw the second part of their two part story go up on the Flight Global site, and it is well worth a read.

Consultants popping up everywhere. In recent posts I’ve referred to Boston Consulting Group, linked to the McKinsey Quarterly, Derek Gerow from Bain was at the same Airline Sales Channel Forum as me last week, and a few weeks ago someone forwarded me an invitation to an event LEK are hosting jointly with IATA on ancillary revenue. Speaking of LEK, I can’t let this mention go without repeating a great quote from a former LEK partner I used to work for after he had left LEK.

“Women can come to the office dressed in any colour they please, whilst men can only wear blue or grey suits; but when the work gets tough a man can roll up his sleeves, whilst a woman who takes off her jacket is a secretary”

A real throwback to an earlier age, but he could still bring in the big consulting jobs and that was what counted. I can’t say he was overly popular with the women in the office though.

Back to LCC’s and their evolving business model, here is evidence of what on the surfact of it sounds like a very amicable divorce.

Duane Pfenningworth – Raymond James
I wonder if you could talk about your transition on the reservation system side from Open Skies to Sabre? Why you’re making this change and what would this enable you to do with partners such as Lufthansa that you can’t currently do?

David Barger
Good morning Duane. I think it’s a natural evolution in this chapter of our company’s growth, and very, very pleased with Navitaire over the first Open Skies system over the first nine plus years of our history. And then we take a look at not just our growth but also where we’re growing. Later this year 20% of our ASMs will be into international or Caribbean markets. The ability to as we take a look at the booking flow through the website and the ability to monetize the booking flow. By the way, this is all prior to whether it’s opportunities with Aer Lingus or Lufthansa and the Lufthansa family of airlines that we plan to have connectivity with later this year. So we just think this is prudent for this time because it really, we think, optimizes our revenue opportunities. And for this chapter of our growth, it was prudent for us to make the move anyway.

From the Flight Global Spencer Stuart article, here is a good quote, but what is even more impressive is the job title:

Garry Kingshott, chief executive advisor of Philippines budget carrier Cebu Pacific, sums it up nicely: “The next phase of low-cost development is to continue to play the price leadership game, to drive market stimulation, ultimately with zero fares and ancillary revenue.”

I don’t agree with the zero fare theory, but I am totally committed to increasing airline ancillary revenue. Did I mention the Air Pacific case study? (well, maybe about every second day for the past week!)

And then whilst still on the topic of LCC’s, news this week from Jetstar Asia:

The ability to interline gives Jetstar Asia greater visibility on the global booking system used by travel agents and will allow Qantas customers to more easily book an itinerary such as London-Singapore-Penang using the two carriers.

Regarding the above story I was talking to a colleague in Nice who was close to this, and he said to me something along the lines of:

“Selling is one thing but when comes to time of servicing then it is another story. Without interlining it is virtually impossible to sell chargeable SSR’s and when you think about adding rebooking you have to master the way fares are filed (cat31) so if you do not think about the full range of services from day 1 then you just create traffic towards the call center and as the fares cannot increase then the margin goes. As a customer this is great to be able to buy a ticket with an LCC carrier and a classic airline”

That is about enough LCC news for one day, or probably for one week, at least as far as this blog is concerned. And just in case you didn’t get it, the title is intended to be very tongue in cheek.

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