Helping digital pioneers take off. I’ve watched Low-Cost Carriers (LCCs) launch the e-commerce and digital revolution over the last 40 years and have been honored to work with many of these carriers on their impressive journey.
Helping digital pioneers take off.
I’ve watched Low-Cost Carriers (LCCs) launch the e-commerce and digital revolution over the last 40 years and have been honored to work with many of these carriers on their impressive journey. As true digital pioneers, LCCs started off strong and kept accelerating, transforming the once standard LCC model and formula for success with their own unique blend of offerings that make their customer’s digital experience ever better. LCCs are also finding new avenues for growth by capitalizing on opportunities with partners and optimizing with new technologies to reach more customers.
Evolving airline landscape
Throughout my decades at the vanguard of tech for LCCs, I believe that the boundaries between business models have blurred. There are LCCs offering direct connections to corporations and advanced loyalty schemes for frequent flyers, while some traditional airlines offer a la carte bookings, charge for in-flight catering and make money from seat assignments and baggage fees.
There is a similar blurring of the boundaries between the technology requirements of LCCs and full-service carriers, although the LCCs are leading the way. LCCs are highly focused on digital solutions to connect with their digital-savvy travelers, and use flexible, modern protocols that let them sell their full product suite via any channel. IATA believes that its move to Offers and Orders and the gradual phasing out of PNRs, EMDs and a host of other legacy processes will be the final step towards the airline industry’s digital retail transformation.
We believe that, too. When Navitaire first came on the scene 30 years ago, we recognized the power digital channels and advanced retailing would wield in the marketplace of the future. Concepts now referred to as ONE Order and NDC that remove the need for e-tickets, EMDs and traditional PNRs were built into our system from the beginning to create a foundation for today’s digital airline retailing. And it’s great to see the rest of the industry heading that way, too. Navitaire was offer and order native before Offers and Orders were a thing, giving our LCC customers an edge within the context of modern airline retailing.
That edge is evident each year. Airlines using Navitaire’s retailing solutions consistently lead the list of Top Ancillary Revenue as a Percentage of Total Revenue.1 In 2022, the top eight carriers in this category relied on Navitaire’s retailing platform to enable them to reach incredible levels of ancillary sales of 35% to 51% of revenues by leveraging retailing capabilities to let them sell what they want, how they want, when they want.
Cloud-native as a game changer
Navitaire’s success has been driven by understanding enterprise technology trends, understanding the needs of its customer base, and understanding the needs of the traveler. Enterprise technology underpins what we can offer to our customers, and always has done.
I'm sure everybody has heard about "Cloud" by now, but as a digital-first business we embraced the cloud from its earliest iterations. And last May weannounced that all our airline customers have now been fully deployed to Microsoft Azure, representing another milestone in the Amadeus and Microsoft global strategic partnership.
Looking ahead, we’re working on a range of features which are cloud-native, as in, they would be virtually impossible to launch at scale and cost-effectively if systems were hosted in on-premises data centers.
Cloud-native means that Navitaire is helping airlines do what they already do more effectively, but more importantly opens new and incremental revenue opportunities with even-more advanced retailing and personalization capabilities. This trend is something we have a strong claim to have mainstreamed years ago when we allowed airlines to unbundle their product and adopt menu pricing.
We pioneered dynamic pricing and ancillary price optimization and are confident that cloud-native next-generation revenue management techniques will boost revenue and profitability further. We’re excited about upgrading our digital and retailing capabilities, including integrating more analytics and enabling social media commerce. Cloud-native enterprise-scale artificial intelligence and machine learning are already proving to be a game-changer for airline revenues, and our work in these areas has helped our customers discover new ways to grow their business.
An ecosystem of partnerships
The enhanced analytics which the cloud supports builds on another trend where we can claim early adopter status. Data has long-been the cornerstone of Navitaire solutions, but it’s never been about data for data’s sake. Data must drive informed decisions and contribute to serving customers better. And again, as a cloud-native business we’re already set up – technically and commercially - to integrate the inevitable advances in data science.
In fact, as a cloud-native business, we’re already set up for whatever the future holds.
Partnerships are an increasingly important aspect of the airline industry today and will become even more business critical as we look ahead. The way in which the cloud is architected will support an ecosystem of business partnerships, which we welcome as we have a large base of LCC airlines that are part of an airline group. We know the strategic benefits that a low-cost carrier can bring to a group but recognize that an LCC needs to operate independently at the same time as having the ability to have some functions – loyalty schemes, irregular operations, rebooking - which may be handled at the group level. The ability to integrate seamlessly is key.
LCCs, whether operating as a standalone or part of a group, need a digital and retailing platform which can be linked with best-in-breed third party partners covering everything from digital marketing to payment gateways and carbon measurement tools. The cloud supports a modular, vendor-neutral approach which gives LCCs even more autonomy in who they work with, and how.
Overall, we’re excited about the future; the possibilities seem limitless. Our customers are determined and entrepreneurial, not afraid to be trailblazers, take calculated risks and test new concepts. We’re proud to have been part of the growth story of so many new, pioneering airlines and are already collaborating on the next chapter of the industry.
Staying relevant is key. The way people travel today has evolved. Traveler expectations are also evolving. The pandemic accelerated the need to transform, and now the industry is advancing very quickly. We have an incredible opportunity to make meaningful change, to lead this evolution. As the digital landscape continues to evolve and advance, our foundational principles of being digital-first and data-driven will become even more embedded in our new era of cloud-native thinking.
*Footnote: 1 2023 CarTrawler Yearbook of Ancillary Revenue: 2022 Top 10 Airline Ancillary Revenue Rankings by IdeaWorksCompany, published 27 September 2023.
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