IN FOCUS: How airlines are handling big data

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This story is sourced from Airline Business
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Big data is the latest business buzzword. It has its own terminology and acronyms, while gurus and experts wait in the wings. It is a short, snappy way of saying that in our digital and online world there is so much data available, it now deserves the prefix "big".

Although the term big data was reportedly first used in 2001 by US technology industry analysts Gartner, it has only recently entered common parlance and conference agendas. Most large technology companies have a dedicated big-data section on their websites, and there are blogs and communities set up around big data and associated hardware and software.

Rob Drotar, travel and transportation portfolio director at HP Enterprise Services, the global business and technology services division of Hewlett Packard (HP), says: "We've been using the term internally for about 18 months. It covers how data is now seen in terms of velocity, variety and volume."

Velocity, variety and volume are known as the three Vs of big data. The volume aspect is noted by Drotar: "I don't remember there being a specific tipping point at which data became big, maybe it was the growth in data from social, Facebook, Twitter? But it also has something to do with when the volume of data started to get too big for the tools of the day to deal with."

Oracle is another global IT business with a strong interest in big data, especially its use in the airline sector. Vijay Anand, Oracle senior director, global lead, travel and transportation, thinks social media is significant in big data's emergence: "The impact of smartphones, around the time of the iPhone4, also saw a big hike in the amount of data available. Technology developments elsewhere are also driving big data." Engine sensors, for example, have become more sophisticated so more data derives from the operational and mechanical aspects of running an airline. Anand also notes that most airlines have a global footprint, which is also contributing to an increase in data.

Henry Harteveldt, aviation analyst at Hudson Crossing, has long argued data is an area where the travel industry should be excelling - after all, airlines invented e-commerce - but is failing to do so: "Aviation has been data-driven for decades, monitoring customers and operations, but has it been using it in the best way?"

If the three Vs are an essential backdrop to any conversation on big data, so is the distinction between structured and unstructured data. The former is simply data the airline controls and structures internally for specific purposes, while the latter covers just about everything else, from weather forecasts to what people are saying about your airline on Twitter.

STRUCTURED DATA

HP lists "ticketing and reservations, customer support, trade data, irregular operations, maintenance logs and crew maintenance" as examples of structured data. Interestingly, price does not come under its definition. "At HP, we see prices as structured, with rules and classes defined at the airline level," Drotar says. "We are more excited at what can be done with the unstructured pricing data around the ancillary product and third-party partners. Airlines can develop new revenue streams based on the intelligence from big data. They can upsell or tailor product and prices in ways previously impossible."

One potential revenue stream for airlines is based around near-field communications. In simple terms, this technology means airlines and their partners can target products or services to passengers, based on their location. "We're starting to see co-operation between airports and airlines," says Drotar. "Affinity partners can push offers, relevant ones, based on where the travellers are in the airport." This is where a difference in opinion emerges over the extent to which airlines need to tackle unstructured data.

Dave O'Flanagan, chief executive and co-founder of Boxever, a Dublin-based customer intelligence service start-up, suggests airlines take a step back before leaping into the big-data arena: "When we launched the business in 2011, we had plans to help airlines merge all the structured and unstructured data into a big database that would hold everything known about the customer. But fairly quickly we realised that a lot of airlines were still struggling to use the data they already had, so that's where our focus has been."

"Big data isn't as complex and scary as it sounds," says Ornagh Hoban, sales and marketing director for travel ecommerce software provider Datalex. "A lot of the big-data positioning in the airline business is around the data itself - we're looking at the merchandising opportunities of which data is a big part," she says. "The industry should have moved on from being pleased with itself that it can access this data - the real key is to segment it, make it actionable in real time and, above all, monetise the intelligence."

Terms such as "merchandising" and "ancillaries" bring big data firmly within the distribution fold. And what are the big data implications as the distribution landscape starts to change under IATA's New Distribution Capability (NDC)? "NDC can build off and contribute to the big data flows. It is a virtuous and helpful circle," Harteveldt says.

Harteveldt is looking long-term for the full impact of NDC in the world of big data: "Longer term, as airlines build up a better knowledge of their customer, they should create products based on this data. "The travel agent channel could become more useful and productive for the airline if the data is freely exchanged."

Datalex, a founding member of the Open Travel Alliance, is involved with various IATA working groups on the initiative. As Hoban points out, airlines need to be able to action and monetise the data from NDC: "Many airlines are still commoditising their product at the airline dotcom by not taking into account the individual who is making the booking. NDC could address this, but the airline needs to listen to what the data is telling it. If you can't do anything with the data, it's just data."

Oracle is also working with IATA and NDC: "We are supporting NDC and we are a strategic partner of IATA, involved in the discussions," Anand says. "We also work with GDSs, but we are in favour of anything that makes it easier for customers to interact with airlines through whatever channel."

Before he joined Hudson Crossing, IATA commissioned Harteveldt to write a paper entitled "The Future Of Airline Distribution - A Look Ahead To 2017". In it, he says big data has a major part to play in shaping the future, although more in the medium term. He introduces the phrase data-based commerce (dbCommerce) to sit alongside e-commerce (electronic), m-commerce (mobile) and s-commerce (social media) as business trends. Harteveldt says dbCommerce will "arguably be the biggest revolution to airline commerce since the internet became a viable consumer channel in the mid-1990s".

FUTURE SKILL-SETS

Big data is starting to change how organisations are structured, and airlines may need to rethink how they operate as a result of big data. One key question is: who is in charge of the data and what skill-sets will be needed in the future to action and monetise the data? O'Flanagan says the ideal CV to arrive on his desk would be "a data scientist with coding experience". In larger organisations the obvious choice to run big data is the IT department, but the most obvious is not necessarily the most appropriate.

Hoban says that when Datalex talks to customers or pitches for new business, a variety of people want to be in on the talks: "When we are out and about, we're finding different people in the room - finance, IT, revenue management - and they are thinking and working together. The traditional silo approach will not work with data."

New job descriptions such as "vice-president, customer experience" are emerging as a result of the shift towards a data-driven organisation, Harteveldt says. He thinks marketing is likely to be the biggest user: "This department can drive revenues, improve loyalty and help develop and assess which products should be brought to market, or even withdrawn."

Oracle produced an "industry scorecard" in July 2012, asking chief executives across a number of sectors their views on big data. Anand identifies the three most telling findings: "94% of top level executives say their organisation is collecting and managing more business information today than two years ago, by an average of 86% more. And, 93% of executives believe their organisation is losing revenue - on average, 14% annually - as a result of not being able to fully leverage the information they collect. Finally, nearly all surveyed (97%) say their company must make a change to improve information optimisation over the next two years."

Another argument is whether big data is best used for cost-reduction or revenue-generation. Big data intelligence can identify weak points in an airline's cost structure. Anand refers to his new airline engine sensor readings, which he claims can help a carrier predict and correct a mechanical fault before it has happened, reducing downtime and disruption.

However, driving revenue is where real opportunities lie. "Having focused so closely on costs over the past decade, airlines are finding it harder to cut costs, so there is a law of diminishing returns on cost-reduction initiatives," says Sundar Swaminathan, senior director of transportation industry strategy and marketing at Oracle. "Chief information officers have done a great job with data management for operations, cargo and, on the passenger side, pricing. But the change now is that the focus is on the customer-relationship benefits from managing passenger data, which is why airlines are so insistent that they have access to their own customer data."

However, some advocates of bid data see unstructured data as part of the customer relationship. Oracle insists accessing and using mobile and social data about a customer is essential if the potential of big data is to be fulfilled. Harteveldt agrees: "Wherever there is an interaction, anything in public that a customer says about your airline should be incorporated into their customer profile, because what people tell their friends about you still has a big influence on purchase decisions."

However, Boxever suggests airlines need to take things more slowly. "There are other data challenges which need to be solved before looking to monetise social sentiment," he says. "We suggest that airlines identify one part or function which could be a big data opportunity, and then implement it."

One of Boxever's first customers is Scandinavian regional carrier Wideroe. Boxever identified a disconnect between some of its systems and its call-centre staff. Once the systems were re-configured so they could talk to each other, call-centre conversion rates improved significantly, with Wideroe seeing a return on its investment within six months.

Datalex is also wary of airlines falling into the trap of too much, too soon. "There is enough data available for airlines," Hoban says. "We think it is more about using that data to listen to the customer and to respond in real time."

The big-data bandwagon shows no signs of slowing, but there is a world of difference between collecting data and using it. Airlines have had access to structured data for decades, but has the industry really used it properly?

Harteveldt uses a second-millennium term we all remember - direct mail - to show how big data may evolve: "Direct mail was never as sexy as the TV campaigns the airlines ran, but it cost less than other forms of marketing and drove more revenues." Fans of big data may shudder at the association, but the result - using available data to make your relationship with passengers personal - is scarily similar.