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02Investment priorities for airlines in 2024
Travel Technology Investment Trends research suggests a top priority for airlines this year is improving service at the airport, while also working to deliver an outstanding experience across the entire journey.
New solutions will help carriers achieve both ambitions, personalizing every aspect of the trip using rich traveler profiles for context-aware service, biometric recognition, and one-click payment. New airline technology coming online today means travelers can be empowered to self-serve any change they like, including seats or ancillaries, across any touchpoint.
At the same time, new retailing technology can spot traveler experience issues as they happen and help airlines to respond intelligently through automation.
What do you see as the top three biggest priorities in airline technology currently?
FSC
LCC
Anticipated impact of technology over the coming year.
When anticipating which technologies will have the greatest impact on the airline industry over the coming year, there is some agreement between LCCs and FSCs. For example, both expect machine learning and digital payments to be an important influence, while the role of cloud computing is expected to increase in both segments.
Notably, both types of airline expect machine learning to have the biggest impact on their businesses, not only in the next 12 months but over a five-year time horizon too. The role of Generative Artificial Intelligence (Generative AI) is also predicted to be central in the near future.
Technologies LCCs expect to make the greatest impact over the next 12 months:
%
Machine learning
%
Cloud computing
%
Digitalization
%
Digital payments
%
Data analytics
%
Biometrics
Technologies FSCs expect to make the greatest impact over the next 12 months:
%
Machine learning
%
Cybersecurity
%
Generative AI
%
Digital payments
%
Digitalization
%
Cloud computing
%
Self-service technology and data analytics
When considering plans for the actual deployment of new technologies over the one-to-five-year horizon, there are significant differences in the ambitions of LCCs and FSCs.
LCCs are focused on the practical elements of a journey, with modernizing ramp operations (32%), automatic service (26%) and driving the airport experience (26%) all cited as key areas of implementation over the coming year.
Anticipated deployment of technology over a one-to-five-year horizon.
To some extent this reflects the existing digital sales and merchandising methods of LCCs – in many cases, these carriers are already using an Offer & Order approach, so investment in this area is naturally less of a priority.
In contrast, FSCs are focused on ‘offer creation’. This is cited as the most sought-after technology over the coming year by 46% of the study, followed by ‘order management,’ cited by 44%. These results are very much in line with the modern retailing transformation as described by IATA, underlining the accelerated adoption of new retailing capabilities across the market.
LCCs are focused on implementing the following capabilities in the short-term (next 12 months):
%
Modernizing ramp operations for load controllers
%
Automating service across our airline
(e.g. self-service and ticket change)
%
Airport experience
(e.g. self-serve check-in, bag drop, boarding and biometrics)
%
Loyalty management
%
Building 360-degree traveler profiles by integrating data from multiple systems
In comparison, FSCs are more
focused on Offer & Order:
%
Offer creation (e.g. packaging your
own and third-party services into a personalized offer)
%
Order management
%
Automating service
across the airline
%
Modernizing ramp operations
%
Digital traveler experience
(e.g. online retailing and associated technologies)
“It’s no surprise that full-service airlines are focused on unlocking new value creation possibilities”
Meg O’Keefe
VP, Airline Solutions Product & Portfolio
Amadeus
Taking a closer look at loyalty, 54% of FSCs plan to implement a new, or significantly upgraded, loyalty system in the next five years.
At the same time, FSCs told Travel Technology Investment Trends researchers that an ‘ability to inform agents at the contact center and airport to serve travelers based on their specific history’ (38%) and ‘tailoring benefits based on passenger value’ (30%) were among the top service challenges. Looking out over the five-year horizon, this picture remains relatively consistent, with LCCs working to improve efficiency.
However, only 16% of LCC and 22% of FSC respondents selected ‘delivering a modern distribution approach’ and ‘selling more through New Distribution Capability (NDC)’ as a priority. This may be explained by many airlines focusing on their own direct channels, or perhaps that other priorities are competing for budget and attention.
Over the next five years, LCCs are focused on the deployment of:
%
Airport experience
(e.g. self-serve check-in, bag drop, boarding and biometrics)
%
New developer tools that allow consolidated data from touchpoints and partners
%
Modernizing ramp operations for load controllers
%
Network planning
%
Automating service across the airline (e.g. allowing passengers to self-serve, change tickets / orders etc.)
Over the next five years, FSCs are focused on the deployment of:
%
Modernizing ramp operations for load controllers
%
Airport experience
%
Automating service across the airline
%
End-to-end disruption management
%
Order management
A clear priority across both timeframes for LCCs is investment in self-service technology, both at the airport and digitally pre-trip.
When combined with a focus on improved ramp operations, it is clear LCCs are working to reduce costs through operational efficiency at every opportunity – without sacrificing the passenger experience.
“The ‘low-cost’ in LCC comes from the way these carriers operate”
Dave Evans
CEO, Navitaire
Amadeus Travel Unit
How Finnair is making modern retailing a reality
In December 2022, Finnair was announced as Amadeus’ first customer for Amadeus Nevio to support its transformation to modern retailing.
Amadeus and Finnair are working closely together on sixteen different cross-department ‘value streams’ – sets of actions that take place to add value for a customer and drive business outcomes, to accelerate the benefits of the transition to traveler-centric retailing.
During 2023, significant progress was made. An early focus has been dynamic pricing, which is replacing traditional fare classes so airlines can flexibly price offers based on contextual factors like the duration of a trip, time to departure, travel day and revenue management insights.
Dynamic pricing also encompasses ‘continuous pricing’, which frees airlines from rigid, historic fare classes so they can choose any point on the pricing curve for an offer. Finnair has tested dynamic pricing across key routes and generated a 3% revenue increase, which is ahead of expectations.
Travel Technology Investment Trends research found support for the roll-out of continuous pricing. Some 46% of FSCs and 32% of LCCs are looking to be able to offer any price based on the supply and demand for a flight, rather than being constrained to 26 booking classes, within the next two years.
Amadeus Air Dynamic Pricing, driven by artificial intelligence, allowed us to test continuous pricing considering contextual insights on 70-or-so Origins & Destinations (O&Ds).
We saw a revenue increase of 3% on average, ahead of expectations. Our focus now is to deploy the solution at scale, to unlock the full revenue potential, extend functionality and logic to ancillary services and pave the way to total offer optimization.”
Antti Tolvanen
SVP, Network and Revenue Management
Finnair
