Distribution technology provider Farelogix has taken a strategic step in positioning itself as a primary technical supporter of airline merchandising as carriers firm-up their retailing strategies during the next 18-24 months.
The company recently separated its merchandising engine from its core direct connect technology, which allows travel sellers to access an airline’s inventory directly instead of using the traditional step of viewing a carrier’s offerings through the global distribution systems (GDS).
Product unbundling among full-service, hybrids and ultra low-fare carriers has grown rapidly during the last few years, and its maturing quickly from basic baggage collection fees to sophisticated product upsells that range from packaged expedited security and priority seating to chartered drivers for sightseeing during extended layovers.
“The tea leaves say merchandising is getting more traction,” says Farelgoix CEO Jim Davidson.
In conjunction with offering the merchandising engine as a stand-alone function, Farelogix has enhanced the functionality of the faring and merchandising system dubbed FMS2 to encompass customisation and a baggage pricing mechanism from the Airline Tariff Publishing Company (APTCO), which collects and distributes airline fare and fare-related data to to GDSs, online travel agencies and other computer reservation systems.
FMS2 supplies airlines an ability to offer merchandising options across a range of distribution channels including through kiosks, travel agencies, and if they wish, the GDS companies.
Davidson explains that he does not believe airlines want to make multiple purchasing decisions with their merchandising engines. “We’d rather be the engine of choice,” he declares.
As product unbundling and repacking some elements of the airline travel experience for upsell evolves, carriers are increasingly looking for ways to personalise their offerings to different types of customers, from top tier frequent flyers to the more infrequent travellers. FMS2 allows for various rules parameters that can be defined by the airline to offer targeted products to an array of customers.
Current users of FMS2 include Air Canada, AirTran and Emirates. Davidson says Farelogix is on track to reveal another FMS2 customer in the coming weeks.
Davidson has been impressed with the level of innovation and creation airlines are assuming as merchandising evolves. There is an interest in bolstering so-called recovery merchandising, which allows airlines to target travellers that have been delayed or missed connections to craft special offers such as complimentary Wi-Fi or a lounge day pass. At the same time there is a recognition of the sales opportunities to infrequent travellers that are willing to buy-up after opting for lower-end fares. The key is an ability to interrogate databases to ensure the offer is properly tailored to a given customer, says Davidson. He provides the example of airlines being able to distinguish among passengers so that top tier fliers are no offered day passes to and airline club when their status already allows them unfettered access to those lounges.
Not surprisingly, Farelogix has not gotten any response from the GDS companies regarding the merchandising engine. As merchandising has gained more traction some airlines have directed sharp criticism at GDS companies arguing those firms do not have robust enough technology to support merchandising functions. There is a complex workflow web between travel agents and GDS companies that needs to be unravelled to include merchandising functionality in transactions.
Davidson explains that GDS companies do not have the proper workflow technology in place to support the type of database interrogation that allows for the customisation of certain of offers. At the moment those companies are “limited to what they can get from an airline”, he explains. The options for GDS companies are to work with third parties to bolster their technology or make the necessary investment themselves. “We encourage them to do that [make the investment],” says Davidson.
GDS firms fire back that they do have capabilities in place to support airline merchandising. Prior to its cutover to the “Shares” passenger service system United sold its Premium Economy offering through the GDS platforms, including Sabre. In late 2011 in a company-published magazine Sabre commented that “Technology to support merchandising within the corporate market place has been around for many years. It has kept pace and evolved with the needs of airlines, agencies and corporate travel programmes.”
But the debate over GDS technology to support merchandising continues. Other contentious issues have arisen as reflected by lawsuit US Airways brought against Sabre in 2011 charging that Sabre has engaged in anti-competitive behaivour and essentially strong-armed the carrier into a new contract that protects Sabre from competition. The deal included US Airways selling its “Choice Seats” product through the Sabre GDS.
Airlines face a challenge of being beholden to GDS companies as those firms have entrenched relationships with travel agents that serve key corporate customers of air carriers. Delta recently reached a deal with Travelport to offer its Economy Comfort extended legroom product through the Travelport GDS as a way to broaden and target sales to high-yielding business travellers. However, technological details of the deal were not disclosed.
As the arguments continue over how airlines and GDS companies should work toward resolving merchandising capabilities, the momentum of retailing in the airline business continues unabated. It would benefit all parties to quickly reach business terms that enable airlines to fully exploit merchandising opportunities across their entire passenger base.
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