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03A journey to
modern retailing
The opportunities afforded by enhanced retailing capabilities could generate significant revenue for airlines. For example, McKinsey finds that, by offering passengers greater choice, new products, services tailored to their specific needs and greater pricing flexibility, airlines could earn an additional $45 billion by the end of the decade.
In an industry where profit margins are consistently slim, this is a significant figure – and airlines are increasingly aware of the potential. Indeed, Finnair has worked with Amadeus to trial dynamic pricing across 70 or so origin and destination pairs. This new approach to pricing Finnair’s offers incorporates traveler context to deliver more relevant and precise prices. The initial project is already delivering a 3% revenue improvement, well ahead of expectations.
IATA is aiming to see 100% of airline transactions take place in an Offer & Order environment by the end of the decade – and it appears the airlines responding to the Travel Technology Investment Trends survey are aligned with this goal.
When asked about their approach to Offer & Order management:
FSCs were asked ‘have you started implementing or do you plan to implement any of the following steps to transition to Offer & Order management’?
Steps in transition to Offer & Order management:
We have not started this yet
This is in progress
We have implemented this
“We see clear advances in airlines readying themselves to tackle the retailing transformation”
Meg O’Keefe
VP, Airline Solutions Product & Portfolio
Amadeus
Value of Offer & Order transition.
There is optimism around potential revenue generation following a shift to Offer & Order.
A quarter of FSCs (24%) anticipate a 5-10% uplift in revenue over the next five years from transitioning to Offer & Order and becoming a ‘retailer,’ while 36% expect a 10-20% uplift and an optimistic 32% anticipate a 20-30% uplift.
At the same time, 12% of LCCs expect a 5-10% increase in revenue from the transition to Offer & Order, while a third expect the value to be 10-20% of revenue and nearly half expect a 20-30% rise in revenue.
On average, FSCs are expecting modern retailing to achieve a revenue increase of 18% when fully implemented.
Anticipated % revenue uplift over next five years with Offer & Order – LCCs
Anticipated % revenue uplift over next five years with Offer & Order – FSCs
How long will it take to realize the full benefits of Offer & Order?
On the journey to Offer & Order, airlines can realize value from technology more quickly with an agile approach aligned to their specific business objectives.
There’s no need to wait for community functionality – instead each airline can build or request the new capabilities they want. Best-of-breed modules can be deployed individually or end-to-end based on each airline’s strategy, leveraging the full power of the entire partner ecosystem.
A good example includes the dynamic pricing innovations seen at Finnair outlined in the case study previously.
When asked to estimate how long the full transition to Offer & Order would take, airlines told researchers it would take an average of four years, with a third of respondents arguing it will take less than three.
- LCCs plan to move towards the model faster, expecting the process to take an average of four years, with around a third believing the process can be completed in three years.
- FSCs argue it will take an average of five years, with 28% optimistic it can be done in just three.
“Every airline is unique, and the pace of change will depend on the strategy of each individual carrier”
Cyril Tetaz
EVP, Airline Solutions
Amadeus
Enabling exceptional guest experiences for Saudia.
During 2023, Saudi Arabia’s national flag-carrier and Amadeus announced the airline will transition to Amadeus Nevio, to help Saudia grow revenue, differentiate itself and better serve its guests.
These new offerings will allow Saudia to transform every aspect of its operations to become more guest-centric in full alignment with IATA’s vision of a more dynamic and modern shopping experience. With the move to Amadeus Nevio, the airline will be able to offer guests more relevant and personalized travel experiences that include its own and partner products, like hotel, airport and destination services.
The new partnership encompasses the full spectrum of end-to-end modern retailing capabilities, including:
- Dynamically priced offers to present granular pricing options that best suit the particular needs of guests.
- Distribution of offers through the widest possible distribution channels, supporting end-to-end NDC booking flows.
- Modernization of every aspect of the guest experience, from digital touchpoints to the contact center and airport service points so guests can self-serve if they choose.
- The use of AI for network and schedule planning to predict potential disruption and build flight schedules that deliver better on-time performance.
We want to refocus every aspect of our business around the guest, which is in line with Saudi Arabia’s Vision 2030 – from the offers we make, the schedules we operate and the level of flexible and personalized service we provide across all our touchpoints.
We want every aspect of the Saudia experience to delight our guests. Amadeus Nevio will give us new levels of flexibility and the ability to achieve this throughout our entire operation.”
Arved von zur Muehlen
EVP & Chief Commercial Officer
Saudia
