© 2008 Amadeus IT Group SA 1 Internet in aviation IT industry Grach Muradyan Moscow 26 November 2008.

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Internet in aviation IT industry

Grach Muradyan

Moscow

26 November 2008

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Current situation review

Internet penetration in airline sales

( airline own web site vs. total bookings)

Western airlines:

Southwest: 74% (2006 - 70%)

British airways: 46.9 %

airBaltic: 43%

RU / CIS airlines:

Aeroflot: 6-7%

Air Astana: 4 %

Aerosvit: 3.15%

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Current situation review

“The web Veteran” - www.southwest.com

The first LCC and to establish a home page on the Internet

101+ mln pax (74+ mln pax booked online in 2007)

2997 pax per one WN employee

527 aircraft fleet (B737s fleet only)

Number One airline web site for online revenue

70% of customers are checking-in online or at self-service kiosk

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Current situation review

Internet in the airline IT: 3 dimensions at least

Data transfer media (terminal or host to host)

Traffic cost savings, global reach, standard protocols

Services access environment

Ordering and billing online, problem loading / servicing…

Sales and Marketing environment – competition is

moving from offline to online !

Advertising, promotions…

Travel agencies vs. airlines direct sales channel

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Current situation review

Ordering services online via Amadeus Extranet

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Internet sales effectiveness

Are Internet sales so easy as seemed initially ?

Full business package should be available…

( just one missing component decreases effectiveness)

Seamless booking scenarios

Flexible Fare Quote, simple & clear FQ rules

Reliable CC payments + options (ATO/CTO ticketing)

E-ticketing on the whole airline network + interlines

Post-sell support, including online rebooking, refund, etc… / Does anybody provide this service in RU ? /

Increasing pressure on the airline call centres

DCS services online (web check-in…)

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Internet sales effectiveness

Are Internet sales so cheap as seemed initially ?

Less savings as agent commissions went down

CC transaction fees appeared instead

Additional permanent costs for

Website Servicing and support (outsourcing)

Fraud protection

Marketing (banners, advertising on the search engines)

Payment solutions integrations costs

Call centre for online booking (post sell) servicing…

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Internet sales effectiveness

Marketing on easyJet.com: banners & references

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Internet sales effectivenessNeed for permanent promotion

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Internet sales effectiveness (post-sale services)

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Permanent support neededInternet sales effectiveness

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Internet sales effectivenessCheapest fares promotion – risk of loosing revenues

( sales “black holes” vs. upsell options)

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Variety of travel services to be offered

Internet sales effectiveness

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Content competition: airlines vs. agencies

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Content competition: airlines vs. agencies

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Internet sales

…website referring on the offline channel ?!

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Internet sales…site content should be clear even for “housekeepers”

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Internet sales effectiveness

Internet specifics vs. traditional distribution channels

Internet was not specifically designed for ticket sales Global coverage / unlimited access channel, but

multilingual interface needed No need for terminal distribution, but

requirement for user-friendly & intuitive interface No booking / abusing responsibility vs. agency case Risk of seats freezing (soonest payment needed) Booking cost is not fixed (vs. GDS Net Booking fees) Look to book ratio is very low (less then 2%) Competition area between airlines and TAs / portals

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Internet sales effectivenessGDS still behind…

GDS content while Internet used as an interface

Consolidating travel services (hotels, cars, etc…)

Acting as IT providers at the same time

Ensuring the sales integrity (E-ticketing)

Playing e-Commerce solutions providers role

Sabre IBE: SU, KD…

Amadeus IBE: FV, VV, KC…

Supporting Travel agencies Direct sales channel

Providing channel for higher revenue pax

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Internet sales effectiveness channels diversification history

Client

Client Client

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Internet trends

Provider – User relationship development

Stage 1: Provider gives no choice at all to User

Stage 2: Provider offers User to choose within a number of limited options

Stage 3: Provider establishes the rules, User creates the content itself

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Internet trends choice by the users – www.SkyExpress.ru

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Internet trends ( vs. “all inclusive” marketing concept)

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Internet trendsContent fully created by users – одноклассники.ru

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Internet trendswww.wikipedia.com

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Internet trends

Content provided by users - Wikipedia, Wictionary, etc…

A project (since 2001) to build free encyclopedias in all languages of the world

Everybody is free to contribute (neutral information) More than 10 million articles in 250 languages The largest Wikipedia - in English (2+ million articles) German, French, Polish and Japanese editions (each

containing more than 1/2 million articles) Seventeen other language editions contain 100 000+

articles More than 100 other languages contain 1000+ articles

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Internet trends Passengers to bid on airline website, similar to ebay.com?

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Internet trends Passengers to bid on airline website, similar to ebay.com?

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Internet trends Airlines consolidator website: SkyAuction.com

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Internet trends

www.SkyAuction.com

Airline tickets, room nights, tours, cruises and

all-inclusive vacations

Negotiating special deals with leading airlines, hotels, resorts and cruises

Business around two simple, but powerful, ideas: Consumers should pay for their travel however much

they feel it is worth (and not a penny more)

Purchasing travel should be easy and exciting

(and not difficult and boring…) !

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Some conclusions

Internet primary benefit is not (really) cost cutting, but instead

Unlimited capacity channel (24 x 7 uninterrupted services)

Unlimited geographical coverage

Flexible content control & shortest “delivery” time

Airline online activity to follow the Internet trends

Providing the complete business package (including all post-sell services and support + upsell option!)

Becoming more interactive and flexible for choices

Allowing User / Passenger increasing influence on the content & services offered by an aniline

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Some conclusions

Internet turned out to be not so cheap channel

as it seemed initially

Internet sales require permanent efforts & investments for support & development

Internet sales could lead to revenue loosing if misused (“black hole” effect)

It’s not simply online vs. offline, but mainly direct vs. indirect sales split choice

Offline vs. online sales should be well balanced:

Every channel has it’s value vs. it’s cost

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