Skip to content

Posts from the ‘Uncategorized’ Category

2016 New Year .. so what are you doing?

January 1, 2016

VaultPad

TWA super connieLike many people I like change. It’s healthy. I want to drive change, to be a change agent. I also would like a return to the golden era of service but this time powered by IT not just the good nature of great people.

Great so what?

The Travel Industry is a huge business. But it also is a business full of amateurs. Nothing wrong really with that except that it drives a sentiment of reliance on the tried safe and true. Travel Industry execs are generally a risk averse group. (I can hear howls of protest but it’s true).

What we need is an acknowledgement that there is a need to an overhaul of the infrastructure of the whole industry. Sadly the leaders who should be representing a movement in change particularly in driving improvements in standards seem to be stuck in 2nd gear.

This year is my hope that we will see change coming in several areas.

  1. Fix the PNR – we need a new system for the customer record. It needs to match the changes that have occurred in every other industry. The Travel industry just seems quite content to rest on its laurels as the first ever to have a customer record. Great in the 1950s. Not so great in the 2010s. Keep an eye open for One Order. Kudos to the IATA StB team for evangelizing this. OpenTravel – needs to get on board and start working towards a common framework for a customer record that is safe, secure and shareable. And no – that is not an oxymoron.
  2. Cache – can we please stop this insane amount of cache floating around the industry. We have layers and levels of cache. The evil that the Googleplex has inflicted on the Travel industry with expected instant results has yet to sink into the design of systems. We need trusted sources of true reliable data. Airlines and Hotels take note here – time to step up and start putting some trust into your offers.
  3. Honesty – we really need to have a bit more Truth in our words. Tell it like it is. Across the industry we have fake reviews, manipulated products and well a whole load of whoppers that make Donald Trump look reasonable.
  4. Search – yup still doesn’t work. Please fix this.
  5. Commercial impediments – aka bad contracts. The Travel industry is really bad at how it fails to share information and contribute to a common greater good. I would really like to finger the GDSs for having started the trend to appalling contracts but the more I see – the more I realize that we have a real problem that so many contracts are frankly just bad. The most abused entity in all this is the consumer.
  6. Sharing Economy – yes – this is my nomination for the most abused word in our industry. AirBnB and Uber are not about sharing. They are about leveraging a loop hole that lawmakers are doing a terrible job in acknowledging and handling. Or perhaps we should just open the whole of consumerism to “Sharing”. How about Medical Sharing?

For 2016 – I would really like to see fresh approaches to many issues. I would like to see a more open world of Travel. And most of all I would like to see REAL change.

How about you?

Cheers and here’s to a great 2016

 

Hattip to Airliners.net for their great images of aircraft

European Travel Agents Association File Complaint Against Lufthansa Group in DCC Battle.

August 1, 2015

VaultPad

Screen Shot 2015-07-31 at 9.17.21 PM

ECTAA the umbrella organization for the European Travel Agencies on July 24th 2015 filed a legal complaint to the European Commission. In this direct complaint the ECTAA group is claiming that the Lufthansa action in imposing a 16 euro fee for each booking with its DCC – Distribution Cost Charge made via the GDS directly contravenes several European Commission statutes. A full copy of the press release about their complaint can be found here.

Specifically ECTAA’s board charges that the DCC programme contravenes the European CRS Code of conduct. The full text of the regulation can be found on the European Commission Site .

ECTAA claims the following:

Following a detailed legal analysis of the Lufthansa announcement, ECTAA has decided to file a complaint with the European Commission Directorate-General for Mobility and Transport as Lufthansa’s action constitutes a breach of the EU Regulation N° 80/2009 on a Code of Conduct for GDSs.  in particular in what concerns the provisions of the articles 10.4 and 10.5 of the Regulation. Indeed, if the Lufthansa’s Agent booking platform falls within the definition of a GDS as defined in article 2.4 of the Regulation, Lufthansa as a ‘parent carrier’ must comply with parent carrier’s obligations as specified in articles 10.4 and 10.5.

Further the organization is evaluating further action under EU law:

“ECTAA and its Members are further pursuing legal investigations to see whether Lufthansa’s actions infringe European competition rules (Articles 101 and 102 of the EU Treaty).

In the first instance for their complaint against Lufthansa Group there is one clear statement in the regulation that would appear to invalidate the position of ECTAA. Namely and specifically there are questions whether Lufthansa in operating the website Lufthansa Group Agent.com would be in breach of EU regulation. Under the act’s definitions (Article 2 section 5) it states:

5. ‘system vendor’ means any entity and its affiliates which is or are responsible for the operation or marketing of a CRS;

EU CRS Code of Conduct Articles 10.4 and 10.5 which were quoted by ECTAA state:

4. A parent carrier shall neither directly nor indirectly discriminate in favour of its own CRS by linking the use of any specific CRS by a subscriber with the receipt of any commission or other incentive or disincentive for the sale of its transport products.

5. A parent carrier shall neither directly nor indirectly discriminate in favour of its own CRS by requiring the use of any specific CRS by a subscriber for sale or issue of tickets for any transport products provided either directly or indirectly by itself.

It would appear that ECTAA is trying to argue that the new airline platform is indeed a CRS as defined by the code and therefore there is discrimination going on vs the other CRS companies – namely Lufthansa Group Agent.com    is favoured against the competing platforms of Sabre, Amadeus and Travelport.  However on close examination of the CRS Code of conduct there is a clear exemption which would appear to invalidate the ECTAA claim.

Specifically Article 5 we believe exempts Lufthansa’s direct channels as follows:.

5.   This Article shall not apply to a CRS used by an air carrier, or rail-transport operator, or a group of air carriers, or of rail-transport operators, in its or their own office or offices and sales counters or on their own websites clearly identified as such.

As we can see from the attached screen shot this would seem to confirm the view that the site is clearly identified as being branded by Lufthansa.

Screen Shot 2015-07-31 at 9.03.38 PM

With regard to ECTAA’s view that Lufthansa is in breach of the main competition law of the European Commission,  the invocation of Articles 101 and 102 of TFEU. The complaint could also fall afoul of such European regulation itself.

Here is part of the text of TFEU Regulation 101  in particular one should examine the key provisions of Article 101 which states:

Article 101
(ex Article 81 TEC)

1. The following shall be prohibited as incompatible with the internal market: all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the internal market, and in particular those which:

(a) directly or indirectly fix purchase or selling prices or any other trading conditions;

(b) limit or control production, markets, technical development, or investment;

As has been seen from the recent hotel price fixing allegations against Sabre’s hotel system with rate parity clauses being essentially outlawed – any attempt to force rate, fare or fee parity would appear to be in conflict with 1.(a) above. This would tend to support Lufthansa’s stated view that it would be against the law if the airline was not being able to change rates by channel and type and also to charge different prices by different channels.

However where ECTAA may have a point in that Lufthansa could be seen to be attempting to undertake behaviour which is specifically outlawed under TFEU  section 1.(b) above. Additional support for ECTAA may be the question of whether Lufthansa is trying to leverage its dominant position. Further an examination of TFEU article 102  states:
Article 102
(ex Article 82 TEC)
Any abuse by one or more undertakings of a dominant position within the internal market or in a substantial part of it shall be prohibited as incompatible with the internal market in so far as it may affect trade between Member States.

Who will win?

This is going to be interesting. There is a certain sense of urgency since Lufthansa’s DCC charge goes into effect on September 1st 2015, for four members of the airline group’s legacy carriers – Lufthansa (LH), Swiss (LX), Austrian (OS) and Brussels (SN).

My opinion is that Lufthansa is on solid ground with its process and decision. Further this movement has put a significant focus for the agency community who must now face the more urgent need to build deeper relationships with their providers.

DISCLAIMER:

The opinions and analysis expressed here are of the author and the examination of the available information. I am at pains to state that I am not certified as a legal expert and all views and writings expressed here should not be regarded as formal legal opinion and therefore must not be relied on as such.

Open Reply to Amadeus North America President and CEO – Scott Gutz

July 6, 2015

VaultPad

Amadeus last week fired a salvo in the war with Lufthansa Group over the DCC. Read my very lengthy review of the detailed points with a surprising recommendation at the end. I believe that Amadeus needs to come clean about its own practices before it starts flexing its muscle against its former founding airline.

On 2nd July 2015. (copy attached below) i received a letter sent from Amadeus North America President and CEO – Scott Gutz. I would like to address the points raised in the letter.

It’s a Holiday weekend in USA. Lots of food and celebrating. Cries of “Liberty” and “Let Freedom Ring” are everywhere as we celebrate the Independence of this great nation. As a recent citizen, I tend to take the hard fought freedoms and liberties offered by this country quite seriously.

If I may – I would like to challenge some of the assertions made in the letter. Clearly there is a major difference of opinion between Amadeus, its CEO Luis Maroto and Mr Gutz and Lufthansa. Amadeus has shared its opinion how it believes the Lufthansa Group (LHG) Distribution Cost Charge (DCC) programme “will mean higher prices for travelers and how this is not about technology, but about commercial strategy.”

Interestingly I would say that Amadeus as a GDS owning company that they are right but perhaps unwittingly so.

If this is purely a commercial issue – I have to ask why Amadeus is not coming out in favor of a truly open commercial system? The argument Amadeus appears to be making is perhaps disingenuous. The commercial strategy of Amadeus is world domination. Already the largest GDS, and in a short while (unless a regulator wakes up one morning and realizes what is going on) it will be by far the largest PSS company owning 3 businesses:

  • Amadeus ALTEA
  • Hitit (Turkey)
  • Navitaire NewSkies

I would like to ask that Amadeus needs come clean and shows a standard contract for an airline with global distribution agreement (GDA) and the full content agreement (FCA) terms completely explained. This includes the pages and pages of commercial restrictions that are apparently one sided in favor of Amadeus. And these restrictions have nothing to do with technology.  I doubt they will do that citing some “confidentiality” clause. However why not ask Lufthansa or another other airline, hosted or not, to disclose the non-financial terms of the contract. Despite quite a number of efforts for disclosure, Amadeus seems to show that the company actually has something worth concealing. What is it, I wonder?

It would seem that the company is playing a bit of a shell game. The letter from Mr Gutz claims that Lufthansa Group is raising the price to the public. Has any GDS come to the public in recent years and announced they are raising the cost of distribution either directly or via unbundling certain products that it now charges for? It would seem, through analyst reports and the press that we have formal evidence of price raising tactics since yield and profits on the GDS and PSS businesses show rises every year. Has Amadeus let the market know that the full content agreement actually prevents many airlines from offering lower prices via certain channels? A practice that has been found to be largely illegal in the hotel industry?

Within the content of the letter, the statements would seem to imply that Amadeus has no restrictions on how Lufthansa distributes its product. Is that correct? Let me ask explicitly – does Amadeus allow LHG to freely direct connect any user to its content hosted in ALTEA with no restrictions and without any commercial penalty?  And another question: “Was there any part of the GDA (the now expired contract for distribution with Lufthansa) that prevents or restricts LHG from distributing its content?

Is the argument Amadeus is making that it truly wants to provide Lufthansa with a totally free and open agreement for the airline to distribute the airline’s product anywhere?  This would seem to be the implication with the letter. Or did the GDA and FCA agreements actually restrict what the airline can distribute, where and to whom? Further does the contract set (since you unbundled them in 2011) place restrictions on an airline selling its product? Does the contract even go as far as has been rumored specifically naming companies that an airline cannot do business with? Are the contracts with other airlines similarly restrictive and against the interests of a free and open market?

Returning to Mr Gutz’s letter, it states “The market has also rigorously opposed LHG’s surcharge, with strong reactions from travel agencies, corporations, their respective associations and consumer protection associations.” Further you state that “Travel agencies have felt deceived by LHG and this has led many to question their relationship with LHG.” I would say that there are a lot of airlines who would disagree with that statement. Perhaps the deception really is from Amadeus.

I really liked the part where the letter says how “A number of industry participants have questioned the legality of LHG’s approach, and the impact on consumers’ and corporations’ ability to compare airline offerings in a transparent and neutral manner.” The bit I really like is the statement “Amadeus supports initiatives that protect consumers, and the principles of comparison, transparency, and neutrality, and we have been explaining our position to travel associations about the impact the surcharge will have on such principles.” I would like to see how you have clearly explained everything including how Amadeus proposes to demonstrate this commitment to transparency and consumer protection.

Continuing on the letter it states: “Meanwhile, the feasibility of LHG implementing the surcharge in such a short timeframe is still unclear given that LHG has yet to share the details of the surcharge with Amadeus. We have raised a number of questions to LHG as a result.” So let me ask – do you share the Amadeus travel agent contracts with Lufthansa or any other Participating airline who has signed a GDA? Does Amadeus share its airline agreements with the agencies? So what are those questions you seek answers to? Can Amadeus please be very specific about them? With regard to the time Amadeus has implemented major new programmes in the past in just as short a time. 3 months is not such a short period of time.

I find the section where Amadeus questions Lufthansa’s approach is very interesting: “In terms of LHG’s commercial approach, we have seen that not all markets or agents will be subject to the surcharge.” In the spirit of fair play and equality does Amadeus charge universally the same fee or impose the same fees on all airlines and all Travel agents in all markets equally? Perhaps LHG is saying that the fee will be charged only when it is legal to do so. So does this actually differ from Amadeus behavior?

On the subject of Direct Connect, the letter states: “LHG has also hinted that direct connect alternatives might exist, sometimes offering commercial benefits for their adoption. LHG has already engaged with some of you and you will have already experienced the increased workload this means for you and the airline. As discussions evolve, you may also be tackling new topics such as content and economic guarantees, readiness and ease of alternatives, integration and maintenance costs, or approach to data. All these are important elements of your decision making. You are right – there is a price for disruption and change. The alternative point must also be asked. Is there a price for staying with a system that demands so much effort to actually produce a PNR? Has Amadeus ever done a study that shows that on the average ticket that it is faster/cheaper/easier to produce one via an agent or via an automated service? It would be great for everyone to see the actual costs associated with each channel. Will Amadeus share this data that it would appear the company possesses.

It seems that Amadeus North America is none too fond of the idea of IATA’s NDC – New Distribution Capability. Although some of the comments coming from Amadeus airline IT teams’ side have been sounding super enthusiastic. Lufthansa’s own announcement made it clear that they are supporting the standard. Which is it, does Amadeus feel – as it appears the letter implies that – NDC is bad for agents?

I think it is benevolent that Amadeus is committing to its monopolistic position. “Amadeus continues to strongly believe in the GDS and the service offered by travel agents to consumers and corporations. It is an efficient and cost effective channel, providing very significant value to travel agencies, travel providers and consumers alike.” Can you show how this works with regard to a fair apple to apple comparison. Since you have all the data (owning both a GDS and a PSS) perhaps you can give us metrics that show if this is truly the case. Or is the system so complex that such an analysis is not possible?

I think it would fair for Amadeus to show that the following really is true. “As you know, Amadeus is also an airline IT provider, offering direct connect solutions as part of our Airline IT Solutions”. Actually surprisingly there are still many agency customers who have been led to believe that the hosting services of Amadeus gives superior content to those who are Amadeus subscribers, even though there is supposed not to be any differentiation via the GDS channel.  While there is no GDS regulation within this country, there is in Europe where Amadeus is based.

The letter states “LHG has had this technology for a long time but never deployed it, presumably because agencies never had an economic justification until now to adopt it.” Allow me to posit an alternative answer or answers to this analysis. Perhaps either the commercial terms were not pleasant. Or perhaps the Amadeus Direct Connect solution is not so technologically advanced which is why so many other companies are keen to try and improve on it and develop products that are really innovative and customer valuable.  Indeed some are now in the marketplace.

Regardless of the IT provider, this would be a LHG controlled channel commercialized, managed and supported under LHG’s full responsibility.” I struggle with this last statement. Is there something wrong with a product’s owner controlling how their product is commercially offered? Is it not actually quite arrogant of Amadeus to imply that they (and only they) should be the arbiter of what is commercially good or bad for the market? This part seems to be at direct odds with your opening statements that include: “…Luis has shared how the surcharge will mean higher prices for travelers and how this is not about technology, but about commercial strategy.”

Commercial issues will mean that there has to be a change in the commercial structure of the market – perhaps this is not a bad thing. “Some of the key concerns travel agencies have raised with direct connects are: the agency’s ability to seamlessly service their end customers’ needs (given that the PNR would be owned by LHG, for example); the agency’s ability to seamlessly integrate direct connects to enable true fare comparison; the very high costs of integrating customized solutions for airlines; and the higher cost of managing many diverse content definitions compared to today’s standardized world of full content.” In any case is this a fiction? What is the percentage of services worldwide offered by airlines that are available through Amadeus or any other GDS? Is there a truly seamless solution in the marketplace? Is there a right of anyone in any market to have unilateral and unencumbered access to another company’s property?

LHG has chosen an aggressive strategy, using an approach that is unilateral and dismissive of the needs of travel agencies. We can only hope that LHG will listen to the concerns of the market, and earn back the trust of the industry. While I cannot and will not speak for LHG, I can only surmise that this position has been deemed to be aggressive because Amadeus was not informed first and that the announcement caught Amadeus unaware. Has Amadeus too, been aggressive both in the marketplace and also in the direct dealings with the airlines and travel agencies alike? Basically the PCA (GDA) and associated contracts from my understanding can be described as one sided and quite commercially aggressive. The same can be said for the agency Subscriber agreements. Some might say oppressive. The concerns of the marketplace – if the marketplace is deemed to be the travel agents –  are that they are in a difficult position – squeezed on all sides. Yes, this was initiated by the Airlines. However, there is no need to hide the behavior of the GDS behind the skirts of the Travel Agents. They are really quite capable of taking care of themselves I would surmise. Given the size of the larger players such as Expedia and Priceline – I don’t see this as an issue. As Intermediary ticket sales have fallen to less than one third of the total airline ticket production – perhaps there is a clear message to the GDS marketplace that restrictive practices are not driving a positive market environment. Would you agree or disagree with that statement?

The Amadeus letter says: “We are committed to work together with our partners to find a resolution. If you have any questions or comments, please do not hesitate to contact us.” I am contacting you with just this set of questions. Does this mean that Amadeus is willing to open up its contracts and commercial practices to an open and transparent view and verification that they without punitive restrictions to either the airlines or the Travel Agents? If so – and Amadeus provides the best technology and solution – then surely there would be no need for Amadeus to have restrictive clauses nor a need to pay incentives to use their system. Is that a fair statement?

So let’s talk further about transparency and neutrality. Is Amadeus really trying to imply that it is transparent and neutral? I believe that there are many discriminatory contract clauses (for both airlines and agents) but I cannot divulge them – nor should I. Amadeus why don’t you do this,  if you wont show the contract why not come out and give a solid pledge to the marketplace. And put teeth into by allowing an independent body to verify these statements and contract terms.

Here is my challenge to Mr Gutz and his colleagues at Amadeus. Put your money where your mouth is (in German, Spanish, French or any other language you like). Come with a pledge and say the following:

(Please repeat after me)

I, Amadeus do solemnly swear that all my contracts are in the best interests of the consumer, my airline and travel agency customers and the betterment of the Travel Industry. I confirm that none of my contracts break any laws nor do any of my agreements place a burden on my customers that may cause them to break any laws. I further promise that I do not in any way harm competition and neither prevent nor restrict access to my customer’s content on any of my commercial facing systems. I promise that my employees act in the highest possible ethical standards and have not in the past nor are today nor in the future will be aggressively pursuing either airlines or travel agencies with threats or coercive tactics. Further I promise to show a neutral consumer advocacy group every year my contracts to ensure that there are no commercial consumer restrictions in any of my agreements. Finally I promise to work with my partners to find a resolution to the long term cost of airline distribution and to work on the development of new technologies that will benefit everyone.

Go on – I dare you.

Thanks for reading this.

Cheers

Timothy O’Neil-Dunne

Managing Partner VaultPAD Ventures.

For a copy of the letter from Mr Gutz to which i refer in this post please click on the link below.

A message from Amadeus

The World of Travel Technology is changing.

November 9, 2014

VaultPad

Screen Shot 2014-11-09 at 9.09.23 AM

Its subtle but its there.

Mobile not Social
Ground not Air
Packaging stays true to its routes

The world of Travel Technology is part now of shifting sands as the universe changes (consumers are changing) then also the service model needs to change. At WTM (World Travel Mart) this year I really felt that the world is moving away from its traditional roots. In my view that is a good thing. Consumer facing technologies are great but the Supply Chain access and management remains stuck in the 1960s legacy platforms.

I like to wander at Trade shows. I of course spend the time looking intently at what people are offering in the sectors “du jour” and in the bits that I am personally interested in. Having done the Trade show walk for many years – what used to be somewhat chaotic is now a delicate dance and balance. Where I get quite a lot of inspiration is in listening to the questions that real punters – er I mean customers – are asking vendors for.. In truth I have become blasé about the wiles of the Steppes or the pebbled beaches of the Northern Med but the technology that powers consumers options both on the supply side and the demand side fascinates me. For much of my professional career in the Travel Industry – I have to say that much of what happens is actually a lot of smoke and mirrors. Complicated solutions built on fragile legacy technologies that in today’s real time economy really look archaic.

For technology I like to understand what is the shift. Not what the spin doctors are saying but what the users of tech are finding from their customers. In my somewhat jaded perspective I sense that much of the technology never gets used. So listening is very important. And what users are asking for is interesting? Yup you bet.

However while we are seeing some good stuff occurring in what the providers are focused on – sadly I still see that the Travel Industry sees itself as somehow uniquely wonderful and special. IE they don’t believe that the rest of the world is in that special place that Travel has occupied for decades and will continue to do so. How wrong can they be?

The latest set of startups I have seen are showing themselves as being far better designed and better suited for today’s consumer. However the bottleneck remains in the access to the supply chain. What we need is a better set of tools there. The days of an evolutionary approach I think are nearing the end and we are about to see some revolutionary changes. I hasten to add that this is not being driven from within the industry but from the periphery and definitely from the likes of the Big 4 Ecommerce players – Apple, Facebook, Google and Amazon.

Stay tuned folks this is going to be quite a ride.

If you are a traditional player – get your finger out and start rethinking your platforms.
If you are a new entrant or just interested in the category. Be careful where and how you source your data.

Cheers

The Changing Face of Startups in APAC

October 28, 2014

VaultPad

The 4th Annual WIT Bootcamp was so overflowing they had to change venues at the last minute to accommodate the additional people attending. As WIT is now celebrating its 10th Birthday it is relevant to reflect on the changing face of startups in Travel in Asia.

Speaking with several of the attendees, speakers and pitchmen during the sessions – I was impressed with the maturity and the focus on the important elements of what will make a success of their business. From the audience there were a number of investors on the hunt for good startups. A happy marriage one would hope. However let’s not get all soft and gooey about it. I am sure that many wil write about the detailed nature of the individual pitches being made and winners (or losers). You will be able to follow that on #WIT2014. My focus here is on the underlying current of the startup world.

Asia has matured and evolved from being the wide eyed follower to the pragmatic – where should the local investment community be spending their money and the business areas to be followed?

Allow me to start with some of the silly things.

If I see another Taxi hailing app – I think I will probably puke. The very idea of having a taxi app that gets you a taxi tells me several things.

  1. The Taxi companies have been woefully inadequate.
  2. There is not enough money in taxis to make a living off the hailing app.
  3. There will be a race to the bottom in price.
  4. Investors can be really stupid.

it seems that everyone in the investor community needs to have 2 things to be hip and cool. A home-stay app and a taxi hailing app.

Fortunately on the positive side – I see some real appreciation for the challenges (and opportunities) to use the cash floating around Asia to good use. Here are some areas I see startup entrepreneurs looking at.

Air Search, Planning and Booking.

Yes that old chestnut. its STILL not done well and there is still a lot of opportunity to address better ways of servicing the customers

Hotel Search, Planning and Booking

Surprising with all the possibilities this is not really well done. The plethora of Hotel booking apps just shows how bad the back ends must be.

Travel Planning.

Sadly I think some still believe that there is money in pursuing the passion. Let me set your mind straight here. There is NO MONEY in Travel Planning. But please keep these ideas coming its a lot of fun to see them

Local Activities.

Darn it… why can’t we get this right? Surely Viator is not the only answer. I think there is a lot of work to be done here and with each variation a clearer picture emerges. But there are no winners here and there are a LOT of pretenders.

Non-Air Transportation

During the WIT Startup pitches – I counted 4 times that Rome2Rio was mentioned. Clearly the Australian company led by Viator’s founder – Rod Cuthbert – has found the right niche and this is a really valuable piece of kit. As a long time map/Geo-spatial aficionado – I am really pleased to see this get handled right. The ground transportation market still suffers a great deal. Too many options and too little scale. I think there are nice ideas out there. Rome2Rio can power a lot. Will there be a clear winner? The jury is still out.

So Timothy is there still a place for some smarts outside of this group?

Actually I am glad you asked. I see that we have a really tough challenge in the financial settlement and fulfillment process. In the APAC region ApplePay is not going to be that solution for a while if ever. Regulatory confusion and conflict is holding things back particularly in the cross border world of international travel.

I hope that by next year’s WIT Bootcamp I will see players working on this

Cheers.

Did I just enter the Twilight Zone?

October 19, 2014

VaultPad

TheTwilightZoneLogo

Rod Serling the writer and creator of that iconic TV show used to start each of his episodes of the famous TV show with a little monologue. Here is one:

“This highway leads to the shadowy tip of reality: you’re on a through route to the land of the different, the bizarre, the unexplainable…Go as far as you like on this road. Its limits are only those of mind itself. Ladies and Gentlemen, you’re entering the wondrous dimension of imagination. Next stop….The Twilight Zone.”

In San Diego this week at the IATA World Passenger Symposium. I really felt that I had entered this bizarre place. After directly witnessing (and feeling) the GDS companies ire, obfuscation and direct attacks on NDC for years and the Open Axis Group before that, it seemed as if I had stumbled on the campfire round which everyone was singing Kumbaya. The very companies that were warning of the dire consequences of NDC, paying high (and low powered) consultants, lobbyists and others to kill NDC even before it was born now embrace it with open arms.

Well not quite – picking through the well rehearsed lines and statements was a large bit of fudge. But frankly I don’t care how they got here. THEY ARE HERE. Yes ladies and gentlemen the bizarre and the unexplained has happened. The GDSs now believe that NDC is the best thing since sliced bread.

However, not so fast. We do not appear to be going into the land of the “different” quite yet. And this is my big concern. NDC is becoming shrouded in legacy processes and structures. This is where we could see the effort go off the rails. In my view the initiative is at a quite precarious state. There is a significant danger of the industry not taking advantage of the opportunity that has been afforded to it with the adoption of NDC (the communication standard not the panacea).

NDC is not new. XML is not new. Dynamic pricing is not new. Ancillaries are not new. But that does not mean that NDC cannot  bring change and positive benefit to all levels and potentially ALL stakeholders in the Travel eco-system. The problem has to be now that adoption will require rethinking processes and long held assumptions about Airline Product Distribution.

The marketplace is dividing into three distinct groups.

# The early adopters and market movers. They are clearly out front and trying to distance themselves from the laggards.
# The great middle group who are confused.
# The sheep – those who must wait till its all safe and there is a clear model to follow

The first group is clear. There are airlines and IATA who are doing hard at work and have clear direction to adopt NDC not just in their indirect distribution but also they see there is value in the direct distribution area as well.. Companies like Farelogix, OpenJaw and Datalex who are IT providers are clearly in. And now it would appear that the GDSs are here too.

The second group is confused and the vast majority of players. Most Travel Agencies have no idea what it means because their primary source of knowledge has been the GDSs. Now that the GDSs have moved towards adoption – they need to spread the gospel to the Agency Community.This group is going to be thirsty for knowledge and will expect a high degree of coaching to get to the next level – adoption – of NDC.

The third group is waiting and waiting in finding a model that they can understand and adopt so they will wait until this process is well under way. The concern I have is that by waiting and hoping that it will go away – they will have a significant challenge to incorporating the new processes of NDC into their organization.

For those of us in technology, what we are sensing is that the users both internal airline and travel agency must step up their game. The agent community over the past decade did not go through the same extensive re-purposing of  their roles and corresponding training that the airline staffers did. Can they? Will they? Every Agency now needs to have a technology person on staff or available to bring different content into the displays. The GDSs have clearly stated they cannot provide ALL content ALL ways ALL the time?

Where to from here?

The complete switch over by the GDSs as laid out during IATA’s WPS sessions must be turned into action. The GDSs must bring their customers into the 21st century. This includes extensive new products for the agency community and corresponding training and education.

So to end as Rod Serling would do allow me to end ……

On the road to sustained acquiescence and stupor, the GDSs didn’t quite make it. Something happened that changed their lives and those of all around them. The signposts were ignored about the end of the road. And there they found themselves and a different road. A detour through the Twilight Zone.

Rod Serling

How to Sell An Airline Seat (Technically)

October 11, 2014

VaultPad

Ah – let us consider the humble airline seat.

Many start-ups question me on the complexity of Travel based applications. For many there is a quizzical tone in their voices as they struggle to understand why Travel is so hard, so complex and has so many variations. Let’s look at one of the most fundamental of systems that Travel has to interact with: the airline reservation system or more correctly PSS.

If you must go and look this up in Wikipedia – you will find unfortunately a fair amount of incorrect and misleading information. Sadly there is a lot of horse output spoken about the PSS systems. But sorting through the effluent – here are some salient things to know from a Technical perspective.

  • PSS system are based on one way asynchronous “fire and forget” type messaging. A core concept is that the transaction is assumed to be successful unless you get a rejection message.
  • Most availability functions are now cached at some level.
  • The construction of an available price is comprised of a Fare, Rules and appropriate availability.
  • Each state is out of date as soon as served up.
  • Only GDSs have guaranteed results. For which the airlines pay a hefty fee.
  • All XML type messages are never the full answer. They are ALWAYS a subset.
  • A human can always find an alternative result (and in most cases at a lower price).
  • Do not forget the add-ons for example seats and bags
  • Consider data privacy
  • Consider financial fulfilment
  • Optimization is the best you can ever hope for.

The current standard for message interaction for transactions is the Open Travel Alliance (circa 2011 b) is probably the most representative of what is in the market. One can find various flavours of this floating around the web. However this is being replaced with the NDC standard. Current ratified version is IATA’s NDC 1.0 You can download the Schema here. This is about to have a baby,  (which may be a sister or child – we haven’t quite figured that out yet.)

In looking at how this can be interpreted – there are a number further cautions I will provide.

  • There is no universal source of airline supply. Both technically and commercially there is no ubiquity of service delivery.
  • Make sure you have your own customer and transaction file system. Do not rely on the host to provide that service
  • Be prepared for managing a constantly evolving set of services. Be prepared for constant change.
  • Make sure you have considered the operational aspects. IE what to do if something goes wrong. Who will fix it? Don’t assume the airlines will help you out here.
  • Selling on the web requires some form of commercial license. This means that selling airline tickets (if that is what you want) requires approval and there are many local and international rules that govern this.
  • Whatever time-frame you think of – Add 6 months.

And where to go if it goes pear shaped?

This is where it gets ugly. Sadly there are few very good places to go for advice. I can offer some of this directly. And will answer the first question. But after that finding a reliable partner who truly understands the vast complexity of airline system interaction will require a lot of patience. There is no master class on this.

I wish you the best of luck on your quest. This is not for the feint of heart.

Cheers

Timothy

The End of Competition – a Takeaway from CAPA Airlines in Transition Event

April 13, 2014

VaultPad

Image

if you are a startup airline – you face many challenges. The sheer enormity of the regulatory, commercial, legal, operations and technical challenges. Does a startup really have a chance to get established? Judging from the sessions over 2 days in Ireland at the CAPA Spring AIT – Airlines in Transition Conference, the answer has to be negative. 

What we see today is the homogenization of the marketplace.  Last year’s event saw the emergence of the financial metric ROCI – return on Capital Invested. This year, that was no longer new but assumed. For new entrant carriers there is a significant change from the growth of LCCs in the last 1990s and 2000s which has given way to profitable but “too big to fail” large airline groups. IAG’s Willie Walsh and the regulators both were speaking about market efficiency and preventing irrational competition into the marketplace. How great it was that the marketplace was now a rational and safe place for the market forces to work effectively. However I believe that this is not a good trend.

Why?

Good question – the chief reason is that the legacy carriers achieved 3 major changes over the past 10 years.

  1. Mergers and acquisitions have radically changed the landscape of the airline marketplace.
  2. FSC Airlines persuaded the regulators to allow them to engage in legal closed relationships that normally would not have been permitted under conventional anti-Trust legislation.
  3. The LCCs showed FSC/Legacy carriers how to make money through unbundling and merchandising

These changes have dramatically altered the landscape and airline competition has been replaced by a closed marketplace to all but the biggest carriers. The significant reduction in competition in both LCC and FSC sectors is hurting the consumer. Slower growth rates, higher prices are obviously linked.

Image

The regulators who spoke at the conference and the larger carriers such as IAG were patting themselves on the back at how well the marketplace works. However there was little attention paid to the two critical areas of consumer competition and the economic impact of the reduction in competition. There should be strong concern that the airlines are being protected by the regulators and that protection should be removed.

In my view – the continuing anti-trust support for the various Joint Ventures such as A++, DL/AF and BA+AA does not pass the test of consumer value. It should be ended. However the opportunity for new carriers to enter the marketplace has barriers never before seen. A removal of the regulatory protection  and the banning of the Joint Ventures will significantly increase competition across the Atlantic. Further loosening of the ownership rules (but not control) should permit the European and US carriers to compete against the Gulf and Asian airlines more fairly and directly benefit the consumer.

The end of competition is evidenced by the sheer size and reach of the European conglomerates. That IAG is highly profitable yet AF/KL and LH Group are struggling is an example not of a fair marketplace but a dissonance of outmoded and inflexible regulation and poor labour management. 

This is a great industry. It has the ability to benefit the consumer significantly. The regulatory framework does need to be reformed. That reformation should be consumer focused not supply side focused.

Food for thought.

 

Examining Global Travel Trends – Domestic vs International Travel

April 6, 2014

VaultPad

Examining Travel Trends is a fascinating exercise. Gleaning nuggets of wisdom is often fun to do. As I travel a far amount – I am not likely to be your typical traveller. However there are trends that support what one can intuitively feel.

For some time I have been watching the decline of the domestic market travellers. On face value this trend was driven in most part by the high cost of fuel. In general many believe that the high cost of both gasoline and aviation fuel have slowed growth of domestic travel (both leisure and business). However there are other trends which are fueling the decline in growth. Image

The following chart shows the disparity between domestic and international growth rates in accommodation 2002-2023. (From the Oxford Economics/Amadeus Travel Trends 2014. http://blogamadeus.com/wp-content/uploads/2014/04/AmadeusTravelTrends.pdf).

In my view there are multiple factors driving this trend, here are my take on these:

  1. Hassle factor – short haul traffic is not fun. In all regions of the world the ability to travel at all has created a barrier to entry that just makes short haul travel – well not nice.
  2. Technology reduces the need. Desktop communications such as Skype and Join.Me has dramatically reduced the need for direct face to face travel in total but particularly for short haul. Desktop small meetings have also reduced the need for these to take place. This may seem counter intuitive to the need for increased meetings (yes you know what I mean).
  3. Unmetered (free) mobile communication tools the emergence of such tools as WhatsApp, Wechat, Line etc etcmeans that the small meeting market has become itself mobile
  4. Yes men can actually multi-task. We have all learned the skill of multi-tasking.
  5. Consolidation and Concentration in the air transportation sectors. Domestic and International is now an oligopoly. This has resulted in far higher costs per travel unit
  6. Congestion and poor shorthaul traffic infrastructure and lack of efficient medium haul public transport. (See also #1)
  7. Cost per unit of each travel component. Hotel, Air, Ground, Meals etc etc
  8. Peer to Peer travel products such as AirBnb, Uber et al. While I personally find these services to be illegal or unreliable – the other factors make these attractive.

I think its important to recognize that when we are looking at the long view – be careful with short term data trends.

Cheers

 

 

 

 

Travel Is NOT About Branding

January 3, 2014

VaultPad

Conventional wisdom says that branding is really important. It drives higher value, promotes loyalty. etc etc.

Well in the USA that doesn’t seem to be the case. Travel is a chronic under-spender in the category of advertising. But worse how its spent shows that the US at least has totally wasted a significant amount of its ad spend by going after direct response. In airlines that probably means that branding on the planes is irrelevant.

Have a look at this chart. This is from eMarketer. Its scary in its direct numbers.

Image

Let’s look at the context. Travel is 5% of the total US GDP. The US GDP in 2012 was $15,684.80 billion US dollars in 2012 http://www.tradingeconomics.com/united-states/gdp . Travel’s value was $855.4 billion http://www.ustravel.org/sites/default/files/page/2009/09/EconomicImpactTravelandTourism2013update.pdf. Travel as a category represented 8% of the total ad spend so as a category it punches above its weight.

This should help put to rest whether price matters. Of course it does and price advertising in Travel is the door opener. If you dont tell people you have a price deal that they can assess in the opening moments of their decision process – you WILL BE EXCLUDED from the sale.

Sadly this points to some bad habits by brands and a continued shoveling of cash at Google.

Think about that as you set up your ad plans for next week’s campaigns.

Cheers

(Images taken from eMarketer email).

Image

But go to the original chart and you see that in fact Travel has the highest disproportionate spend of any category of brand vs Direct Response.