July 2009

Thanks for reading over the past six months, but it’s time to take some time out from anything remotely work related and enjoy a holiday with the family. If I get stuck indoors with rain and hear of anything really interesting I might put up the occassional post, but no more regular posting until late August.

Congratulations to Star Alliance for launching an around the world booking engine. And also to Qatar who have just announced online redemptions with a one month availability display. 

Before getting onto the main topic of around the world fares, I was looking at something on Qatar, and saw this link about the airline. I’ve never before seen a page that fades when you start reading it and then prompts you to sign up in order to continue. Very annoying, but probably also very effective.

I’m never sure whether to use the phrase around or round the world, but internally we always used the abbreviation RTW. One thing I am absolutely sure about is that is that these round the world booking web sites are a major achievement. The itinerary planning screens at the front end are built by Innovata and the booking engine is Amadeus e-Retail. I wasn’t involved with Star, but I do recall sitting in the oneworld head office in Vancouver a few years ago and negotiating the contract on their round the world booking engine, with Steve Brown from Innovata sitting next to me. If ever there was a case of the sales guys leaving all the heavy lifting to the implemetation team, this would have to be it, as the complexity in getting one of these sites into production cannot be understated.

I recall being exposed to the arcane world of pricing by fare basis, fare and class combinability, segment limitations, and so many other rules and concepts that are normally best left to the experts in product definition and development. Planning these trips is not neccessarily the hard part, but combining it with the ability to actually book the trip online is the real technological advance; to my knowledge only oneworld and Star have this ability on their website. When you think how long it takes an agent to make one of these bookings, plus the number of calls/visits that don’t result in a sale, then the ability to make these fares available for sale online has the potential for a very large efficiency dividend.

Saw the Q&A below from AMR (Amercian Airlines) on July 15th.

Michael Linenberg – Banc of America
Tom, you gave us the booking view for the third quarter, down 1.5 points. Correct me if I’m wrong, but I think we are seeing a much shorter booking curve or a more compressed booking curve this year versus last year, and if that is the case, what do bookings look like closer in because that may give us a better sense or maybe adjust for the fact that people even leisure passengers seem to be waiting until the last minute to make their bookings.

Thomas Horton – AMR CFO
I think you’re absolutely right about that, Mike. We’re seeing some later booking than we have customarily seen. Unfortunately that revenue is not technically the best revenues, so we’re still suffering from a negative mix effect, but clearly there has been some late booking, which is why our actual load factors came in a little bit better than we had guided to when we talked 90 days ago.

This is just updating some of the quotes I’ve shown before on the same topic, but it may have an interesting impact on the airline’s ability to generate ancillary revenue. The link with the booking window quotes above also has a chart illustrating why a contraction between air purchase, and hotel / rental car purchase is a good thing for the airline (just the Bow Tie Model in practice), but I never intended for the airline curve to shift down, it was always supposed to be the other curves on the chart moving up!

Japan Airlines just signed with Hotels.com, so I’d be curious to know how much of a lure an extra 100 frequent flyer points is versus more effective marketing of the offer to customers through a broader range of media than the JAL website itself. I’m not on the hotels side of the business, but I do believe that the negotiation is often largely around increased commissions rather than how to increase overall sales and therefore increase total ancillary revenue to the airline. The shortening of the booking curve has a negative impact on change fees, as David Barger of JetBlue said, but it also presents a very good opportunity for airlines to increase the conversion rates for other lines of ancillary revenue. The reason is that passengers almost always buy items such as a hotel or rental car prior to boarding the plane, so maybe the bow tie needs to be updated again, although this time it might look a little lop sided. At least there may now be less time for non air competitors to grab these sales, so long as the airline promotes its offer correctly. I’m trying to put a silver lining on the negative news coming out of an airline’s revenue management department – time will tell if there was any substance to this, or if it was just wishful thinking.

Not likely, but the a German court has found against Ryanair and their credit card surcharges; this would have a negative impact on revenue for many airlines if it spreads to other parts of Europe. Secondly, a story in Travolution today showing how it is possible to actually have Ryanair pay you to make in-flight purchases, rather than the other way around. I doubt the second trick will last for long, but the first story really does have wider implications if it catches on. Credit card surcharges are something many people in the US find hard to understand as the card schemes have been successful in cutting off this practice, but it is a legitimate practice as card acceptance is a real cost to the airlines. Passengers must realize that the benefits from paying with a credit come come with a cost, and if they don’t like the cost, then they should use an alternate form of payment. It seems the problem for Ryanair was that the fee free form of payment they offered was not common in Germany, and hence the reason for the court finding against them.

William Galkin has written a decent story on a topic every airline selling via the internet should be aware of. I’ve covered payments before, but today’s post is a very specific (but very important) subset of card acceptance. 

“Using a third party to process, store or transmit credit card information does not remove a merchant’s obligation to comply with PCI DSS for these functions. Therefore, the merchant is responsible to see to it that the third party providing these functions is compliant, or face the consquences. Section 12.8.2 of PCI DSS requires a merchant to “[m]aintain a written agreement that includes an acknowledgement that the service providers are responsible for the security of cardholder data the service providers possess.” Merchant’s can’t assume that third party vendors are PCI compliant.”

I was talking recently to a senior executive from one of the card companies and he was asking about non compliance I had personally seen at airlines. He was trying to get me to name names, but of course that was never going to happen. When he talks to the next person in the know, those airlines may not be so lucky. Clearly companies that do not take PCI compliance seriously do so at their own peril.

Continental may have just launched their website in Portugese, and a new gaming company (Flight Deck Gaming) aimed at generating more in flight ancillary revenue may have just launched, but it is impossible today to beat this story.

By using the virtual social network Facebook – which used free of charge, Malaysia Airlines enjoy the online ticket transactions service which reach two million Malaysia Ringgit or approximately equal less than IDR 5 billion. “This is a effective progress and we can use Facebook for free. Nowdays, customers can also print their own ticket and make a ‘boarding pass’ before flying,” said Malaysia Airlines Commercial Director Dato’ Rashid Khan

I had a quick look around on Facebook, but didn’t see a booking app; therefore I can’t confirm or deny the veracity of this claim, but it sure sounds incredible. I’m wondering if part of the story was jumbled in the translation to English. If anyone can add any clarity to this claim, please let me know. Malaysian are hosted in SITA, but I’m not sure who they use for an internet booking engine (IBE). I’ve never before heard of someone creating a Facebook IBE application for an airline, but would love to know about it if it is indeed true; especially if the functionality is half decent and even more importantly if it utilizes any of the social networking features that would be available within Facebook.

Better communication with passengers is clearly a no brainer when it comes to instilling some loyalty in customers. So it was interesting to read firstly in Dallas News and then via the press release about the improvements on AA.com. But best of all, view the demo (with sound), as it really is very good.

What I liked most were options to add a second person (eg. secretary) to get the same or different notifications on your flights, and even notifications by voice message (I assume automated) if this was preferred to SMS or email. Also the ability to add notification option if you are meeting someone on the flight, but are not actually on the flgiht yourself. And the ability to set a preferrred time preference (eg 1 hour or 3 hours etc) prior to the flight to receive notifications was also a very nice feature. But have a look at the demo and see it for yourself, as this really is something other airlines should be looking into if you are not already doing so.

I’ve had discussions with a few airlines on adding technology to improve the way they communicate with passengers, but I can’t deny that I am impressed with what I’ve seen today from American (based on the demo alone), as this really is in my opinion money on technology very well spent.

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