Next generation technology accelerates digital transformation in airlines

Wowed by digitally native shopping experiences, travelers today expect smooth, personalized and intuitive interactions at every stage of their journey—from booking to boarding and beyond. They expect a smooth, effortless journey combined with exceptional, personalized experiences from their favorite airline.

This shift requires a new mindset and transformational technology to build, retail and deliver outstanding traveler experiences. To achieve this, the industry needs to place the traveler at the heart of everything they do. Airlines are looking to unleash their creativity to impress travelers with hyper-personalized and seamless experiences. This means redefining every touchpoint, every interaction, and every operational process.

In this piece, airline industry digital transformation is mapped out, looking at the barriers to change today and the tools that can be used to accelerate the transition. This article forms part of a larger series, each looking at the wider digital transformation taking place across the travel industry.

Modern airline retailing presents a transformative opportunity for airlines. For example, creating personalized bundles directly on an airline’s website —perhaps including a flight, lounge access, and a hotel stay—will allow carriers to drive ancillary revenue, while dynamic pricing in real time will more effectively allocate supply to meet demand, delivering better results for passengers and carriers alike.

A study by McKinsey & Company placed the value of this opportunity at $45 billion by 2030. “The precise impact for a given airline will depend on its maturity level. But for many, this could translate into an opportunity in excess of two-to-three per cent of revenue—or 15 percent of EBITDA,” the study explained.

New cloud-native offerings, which support airlines on the digital transformation journey, will play a vital role. Technology providers are today creating a new generation of flexible, open and modular solutions, allowing airlines to be more creative and truly differentiate, all while streamlining processes and improving operational performance.

Innovative technology will have the power to handle massive scale, meaning airlines can create tailored and attractive offers that convert searches to sales.

While the opportunities digital transformation and modern airline retailing present are now being realized, key challenges remain. These include:

• Traditional technology:Airlines rely on Passenger Service Systems (PSSs), which are built around static fare filing, availability, and booking logic. While these systems have served the industry well, they were not built to support digital transformation at scale.

• Gradual standardization: Industry standards, such as NDC (New Distribution Capability) and ONE Order are essential enablers for modern retailing, but adoption remains uneven. Many stakeholders still operate on traditional EDIFACT-based connections, though a transition is now underway. For example, the first native orders aligned with the IATA ONE Order directives are live in production, showing positive progress in this area.

• Upskilling: While airlines have not always operated as modern retailers, many are now taking important steps to build the skills and adopt the tools needed to create engaging digital storefronts and manage offers more dynamically. To facilitate this shift, data is key in helping airlines better understand travelers’ needs across their entire journey.

  
  

• Fragmentation: The airline distribution landscape is highly fragmented, with multiple players—including GDSs, online travel agencies, corporate booking tools and aggregators—all using different technologies. Integrating modern retailing capabilities across this ecosystem takes time and coordination.

Digital transformation in the airline industry is about moving beyond the initial sale. Airlines that realize maximum value from retailing will excite and retain travelers. They will be able to deliver outstanding experiences from inspiration to destination, becoming traveler-centric throughout operations.

Innovative technology providers will be able to help deliver on the retailing promises airlines make. Even in complex disruption scenarios, operational responses will be traveler-centric, with the original promise fulfilled thanks to close collaboration. This next generation of open, cloud-native technology will mean airlines can connect easier, build quicker and operate smarter, to bring tangible benefits for travelers.

With modular building blocks of IT capabilities and using the latest advances in Artificial Intelligence, airlines can identify the traveler experience moments that really matter and take smart, automated actions to differentiate.

New solutions will give airlines the power to design the new and exciting experiences travelers want. At the same time, ‘smart bridging’ from today’s solutions will offer a smooth transition, meaning carriers can immediately take advantage of new modern retailing capabilities.

Modern airline retailing consists of new mechanisms to create ‘Offers’ and ‘Orders’ in the airline environment—the new building blocks of the retail experience. The ultimate goal is to equip airlines with the agility and flexibility of digital-native retailers, meeting the evolving demands of modern travelers.

This transformation requires a departure from traditional methods, setting a new course for the future of the industry. This journey is focused on two main steps:

• Offer creation enables airlines to propose more products and services through an efficient multi-channel approach.

• Order fulfilment consists of simplifying fulfilment by replacing Passenger Name Records (PNR), E-Tickets (ETKT), and Electronic Miscellaneous Documents (EMDs) into a single record, the Order.

Finally, these two steps are underpinned by digital identity which leverages these Orders and biometric technology, to significantly enhance the current customer journey, making it smoother than it is today.

Digital transformation in airlines is driven by broader shifts in the technology landscape:

• Artificial Intelligence – The impact of AI will speed up the modernization of airline retailing in many ways. For travelers it enables dynamic, personalized offers based on real-time data and context, introduces new ways to interact with them on digital channels (such as voice and virtual agents), and expands retailing options to better cater to unique traveler needs. For airlines, this evolving technology enhances revenue management by predicting demand more accurately and adjusting prices and bundles accordingly. It also unlocks deeper business insights through advanced analytics.

• Cloud technology – The move to the cloud provides scalable infrastructure to support real-time data processing and Offer generation. It enables seamless integration across systems, allowing airlines to connect with partners, distribute content efficiently, and personalize customer experiences. With the cloud, updates and innovations can be deployed faster, reducing time-to-market for new retailing capabilities.

• Biometrics: Biometrics help drive digital transformation in the airline industry by speeding up identity verification, enabling faster and more secure passenger processing. It improves the travel experience at key touchpoints—like check-in and boarding—by linking an identity to personalized offers and services across the journey. This reduces friction, provides a smoother and more tailored retail experience.

Alexandre Sbragia, Senior Vice President of Engineering, Airlines, Amadeus, added: “AI, cloud, and biometrics are together accelerating the shift to modern airline retailing by fundamentally changing how airlines interact with travelers. Together, these technologies are enabling airlines to move beyond traditional models and deliver a more dynamic, responsive and traveler-centric retail experience."

Airline digital transformation will mean putting travelers at the center of everything an airline does—impressing them with personalized, frictionless experiences, and using end-to-end data flows and digital native technology to sell better.

If a traveler is shopping on an airline website, the whole experience could change if they are recognized, in full compliance with their personal privacy preferences, and welcomed back to continue where they left off. They can pause and pick up the shopping session the next day. The airline knows the traveler is back, who they are, where they were, and what they’re interested in.

New solutions mean the airline can offer a compelling family holiday package and it knows you will value extra-legroom seats, as you’ve been browsing luxury beach-front hotels recently. It knows you never rent a car and prefer private transfers.

The offer you receive is exactly what you’re looking for and is competitively priced. You can settle it with a single click, making payment frictionless.

This is what digital transformation in airlines enables for the traveler and is the future of modern airline retailing.