Airlines see great opportunity in shopping personalization
CHICAGO — Airline customers are more satisfied with the booking process than any other stage of the air travel journey, according to the results of a recent IATA survey.
Still, airlines believe there’s plenty of opportunity to create happier customers and more revenue through air shopping personalization, even if the flyers themselves haven’t given much thought to what they’re missing.
“Just because it’s the highest [category] doesn’t mean we can’t improve it,” IATA director general Willie Walsh said of the booking experience during the trade group’s recent World Passenger Symposium.
According to IATA’s 2023 World Passenger Survey, 84% of flyers are satisfied with their booking experience. The survey was based on more than 8,000 responses by air travelers over this past spring and summer. Implementation of personalization in the air shopping experience is expected to come gradually as airlines improve their capability to offer products in real time through NDC-supported technology.
Ultimately, IATA’s goal is for airlines to transition to a sales environment that resembles the experience shoppers have at online retailers, which track customers’ purchase histories and use that information to make shopping recommendations.
Airlines mostly envision personalized offers coming as product bundle suggestions. For example, a flyer who has previously purchased premium products could be offered a package that includes an extra-legroom seat and lounge access but at a discount to the unbundled price. Airlines see such offerings as having the potential to raise both revenue and customer satisfaction.
A newly revised study by the consulting firm McKinsey shows that airlines could realize up to $45 billion in new value by 2030 via widespread implementation of what IATA calls modern retailing, which involves moving into an all-NDC environment for merchandising, payment, servicing and settlement. New offer capabilities, which include personalized offers generated dynamically at the time of a flight query, would comprise $27 billion of that total.
Thus far, some airlines have begun dabbling with personalized offers, though not on a widespread basis.
“There is very little personalized offer creation taking place right now,” said Henry Harteveldt, founder of Atmosphere Research Group. “I don’t want to say none. But I think that we will start to see more of it happen during the course of 2024 and speed up in 2025.”
Among the airlines that have dipped their toes in the water is American. The airline has begun tailoring some offers for AAdvantage loyalty program members, said Anthony Rader, AA’s director of airline retailing technology at the World Passenger Symposium.
Singapore Airlines noted in an April announcement that its NDC program has enabled it to put forward offers customized for a customer or a corporation.
Air France-KLM is another early adopter of modern retailing.
And United, too, is setting the stage for personalizing its offers. On Oct. 31, NDC technology developer Accelya announced a renewed agreement with United, which Accelya said will enable the carrier to distribute “targeted offerings.”
Will customers welcome personalization?
Meanwhile, the industry has made major progress in its ability to push dynamic offers, which is a prelude to personalization. According to fare-filing company ATPCO, 23% of sold offers in the marketplace this year were dynamically created as of July. Dynamic offers can be tailored in real-time based on the characteristics of a fare inquiry but aren’t necessarily personalized to consider the history of the individual making the query.
Once personalized offers do become widely available to air travel shoppers, data suggests flyers will be receptive.
An Atmosphere Research survey this past spring of more than 5,000 U.S. airline passengers found that 75% of respondents were comfortable sharing personal data with airlines if it meant they would receive appealing offers and better fares or prices. In addition, 70% of respondents said they expected airlines to track what they buy and use that information to show them better results when shopping for flights.
Walsh compared the development of personalized offers to the airline industry’s rollout of check-in kiosks a couple decades ago. Carriers implemented kiosks as cost-saving measures and thought there might be some resistance from customers in terms of adoption. Instead, flyers were largely pleased to not have to deal directly with a check-in agent.
“It turns out we were all wrong. This was brilliant for the customer,” he said.
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