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Internet in aviation IT industry Grach Muradyan Moscow 26 November 2008

Internet in aviation IT industry Grach Muradyan Moscow 26 November 2008. Current situation review. Internet penetration in airline sales ( airline own web site vs. total bookings) Western airlines: Southwest: 74% (2006 - 70%) British airways: 46.9 % airBaltic: 43% RU / CIS airlines:

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Internet in aviation IT industry Grach Muradyan Moscow 26 November 2008

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  1. Internet in aviation IT industry Grach Muradyan Moscow 26 November 2008

  2. Current situation review Internet penetration in airline sales ( airline own web site vs. total bookings) • Western airlines: • Southwest: 74% (2006 - 70%) • British airways: 46.9 % • airBaltic: 43% • RU / CIS airlines: • Aeroflot: 6-7% • Air Astana: 4 % • Aerosvit: 3.15%

  3. Current situation review “The web Veteran” -www.southwest.com • The first LCC and to establish a home page on the Internet • 101+ mln pax (74+ mln pax booked online in 2007) • 2997 pax per one WN employee • 527 aircraft fleet (B737s fleet only) • Number One airline web site for online revenue • 70% of customers are checking-in online or at self-service kiosk

  4. Current situation review Internet in the airline IT: 3 dimensions at least • Data transfer media (terminal or host to host) • Traffic cost savings, global reach, standard protocols • Services access environment • Ordering and billing online, problem loading / servicing… • Sales and Marketing environment – competition is moving from offline to online ! • Advertising, promotions… • Travel agencies vs. airlines direct sales channel

  5. Current situation review Orderingservices online via Amadeus Extranet

  6. Internet sales effectiveness Are Internet sales so easy as seemed initially ? Fullbusiness package should be available… ( just one missing component decreases effectiveness) • Seamless booking scenarios • Flexible Fare Quote, simple & clear FQ rules • Reliable CC payments + options (ATO/CTO ticketing) • E-ticketing on the whole airline network + interlines • Post-sell support, including online rebooking, refund, etc… / Does anybody provide this service in RU ? / • Increasing pressure on the airline call centres • DCS services online (web check-in…)

  7. Internet sales effectiveness Are Internet sales so cheap as seemed initially ? • Less savings as agent commissions went down • CC transaction fees appeared instead • Additional permanent costs for • Website Servicing and support (outsourcing) • Fraud protection • Marketing (banners, advertising on the search engines) • Payment solutions integrations costs • Call centre for online booking (post sell) servicing…

  8. Internet sales effectiveness Marketing on easyJet.com: banners & references

  9. Internet sales effectiveness Need for permanent promotion

  10. Internet sales effectiveness (post-sale services)

  11. Internet sales effectiveness Permanent support needed

  12. Internet sales effectiveness Cheapest fares promotion – risk of loosing revenues ( sales “black holes” vs. upsell options)

  13. Internet sales effectiveness Variety of travel servicesto beoffered

  14. Content competition: airlines vs. agencies

  15. Content competition: airlines vs. agencies

  16. Internet sales …website referring on the offline channel ?!

  17. Internet sales …site content should be clear even for “housekeepers”

  18. Internet sales effectiveness Internet specifics vs. traditional distribution channels • Internet was not specifically designed for ticket sales • Global coverage / unlimited access channel, but multilingual interface needed • No need for terminal distribution, but requirement for user-friendly & intuitive interface • No booking / abusing responsibility vs. agency case • Risk of seats freezing (soonest payment needed) • Booking cost is not fixed (vs. GDS Net Booking fees) • Look to book ratio is very low (less then 2%) • Competition area between airlines and TAs / portals

  19. Internet sales effectivenessGDS still behind… • GDS content while Internet used as an interface • Consolidating travel services (hotels, cars, etc…) • Acting as IT providers at the same time • Ensuring the sales integrity (E-ticketing) • Playing e-Commerce solutions providers role • Sabre IBE: SU, KD… • Amadeus IBE: FV, VV, KC… • Supporting Travel agencies Direct sales channel • Providing channel for higher revenue pax

  20. Internet sales effectiveness channels diversification history Client Client Client

  21. Internet trends Provider – User relationship development • Stage 1: Provider gives no choice at all to User • Stage 2: Provider offers User to choose within a number of limited options • Stage 3: Provider establishes the rules, User creates the content itself

  22. Internet trends choice by the users – www.SkyExpress.ru

  23. Internet trends ( vs. “all inclusive” marketing concept)

  24. Internet trends Content fully created by users – одноклассники.ru

  25. Internet trends www.wikipedia.com

  26. Internet trends Content provided by users - Wikipedia, Wictionary, etc… • A project (since 2001) to build free encyclopedias in all languages of the world • Everybody is free to contribute (neutral information) • More than 10 million articles in 250 languages • The largest Wikipedia - in English (2+ million articles) • German, French, Polish and Japanese editions (each containing more than 1/2 million articles) • Seventeen other language editions contain 100 000+ articles • More than 100 other languages contain 1000+ articles

  27. Internet trends Passengers to bid on airline website, similar to ebay.com?

  28. Internet trends Passengers to bid on airline website, similar to ebay.com?

  29. Internet trends Airlines consolidator website: SkyAuction.com

  30. Internet trends www.SkyAuction.com • Airline tickets, room nights, tours, cruises and all-inclusive vacations • Negotiating special deals with leading airlines, hotels, resorts and cruises • Business around two simple, but powerful, ideas: • Consumers should pay for their travel however much they feel it is worth (and not a penny more) • Purchasing travel should be easy and exciting (and not difficult and boring…) !

  31. Some conclusions • Internet primary benefit is not (really) cost cutting, but instead • Unlimited capacity channel (24 x 7 uninterrupted services) • Unlimited geographical coverage • Flexible content control & shortest “delivery” time • Airline online activity to follow the Internet trends • Providing the complete business package (including all post-sell services and support + upsell option!) • Becoming moreinteractiveand flexible for choices • Allowing User / Passenger increasing influence on the content & services offered by an aniline

  32. Some conclusions • Internet turned out to be not so cheapchannel as it seemed initially • Internet sales require permanent efforts & investments for support & development • Internet sales could lead to revenue loosing if misused (“black hole” effect) • It’s not simply online vs. offline, but mainly direct vs. indirect sales split choice • Offline vs. online sales should be well balanced: • Every channel has it’s value vs. it’s cost

  33. See you in the web ! :-)

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