Can airlines still turn to the Internet to differentiate and gain a competitive advantage, or are all airline websites starting to look the same? Report by Brendan Sobie in Washington
Over the past 15 years the Internet has clearly driven dramatic shifts in the airline industry. Globally, more than a third of all sales have shifted to this distribution channel and the low-cost sector used this as its jumping-off point, with a steady stream of start-ups basing their entire business model on the Internet.
The look and feel of airline websites also dramatically shifted as leading online players continued to innovate. Certain airlines have gained competitive advantages by keeping their websites at the cutting-edge and offering pioneering tools, while others lagged behind. But with nearly every airline now focusing on the Internet and a particular emphasis on using the web to grow ancillary revenues, are all websites starting to look the same?
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"The rush of innovation is now consolidating," says Travel Technology Research
partner Ian Tunnacliffe. "Airline websites in today's environment are very similar. It's hard to gain a competitive advantage these days just through a website." Lufthansa
head of e-commerce Marcus Casey agrees airline websites have started to look similar and blames a lack of suppliers specialising in airline e-commerce platforms: "There are not many providers out there. It's like Airbus
." But he is quick to add that "there's still a need to innovate" and Lufthansa is investing in new tools, aimed at expanding Lufthansa's online offering. "An online evolution never stops," Casey adds.
SITA chief technology officer Jim Peters, who began working on airline website projects in 1994, says "the bar kind of moved" and airlines are now focused more on dynamic packaging or "the super PNR". But while airline website designs have matured and seem to be looking more and more alike, Peters believes "there's still research to be done in that area".
Virgin America chief information officer Ravi Simhambhatla also still sees plenty of room for airlines to innovate on the Internet. The carrier, which has focused on the web as a key part of its strategy from day one, introduced a revised website at the end of January. "The look and feel has changed dramatically," Simhambhatla says. "We don't want to be just another airline website or another consumer website." Virgin America vice-president of marketing Porter Gale adds: "We've seen some sites follow us in adding flash and functionality. We've tried to stay ahead of the pack."
Alaska Airlines director of e-commerce Mark Guerette is also confident alaskaair.com can stay ahead of the pack. Guerette was on Alaska's original website team when Alaska became the first domestic US carrier to sell a ticket online in 1995, 12 years before virginamerica.com was even born. "We're known for innovation," Guerette says, pointing out that Alaska in 2000 also became first US carrier to introduce online check-in.
But Guerette acknowledges there has been a change in focus as the growth rate for online bookings has started to slow. He says "from inception the push was to drive channel share", but "going forward the demand is to look not just at transactions". While Alaska is still trying to push more sales to its website, which currently accounts for nearly half of the carrier's bookings, Guerette says the priority is now to turn it into not just an airline site but an overall consumer site. Guerette says: "Our approach is to look at the lifecycle. That's where there are opportunities."
He promises new "social engagement" tools, which will be rolled out later this year. These are aimed at taking airline-passenger communications to the next level and giving customers a new way to interact with each other "in regards to all things trip planning".
Other key initiatives for alaskaair.com in 2010 include improving online yields, growing ancillaries and introducing new mobile phone applications.
Lufthansa.com has a similar online roadmap, with various initiatives under way to improve yields, expand ancillaries, enhance its mobile phone offering and grow its portion of tickets sold online beyond the current 25%. There are also several tools in the pipeline which Casey says are designed to "inspire" passengers and attract new groups of people to the site through new interactive features, such as travel videos. "We want the site to get more sticky," Casey says, explaining the goal is to persuade more passengers to go to lufthansa.com for their pre- and post-travel needs.
He adds that Lufthansa's new "trip finder" tool, introduced late last year, has already increased the average time that visitors spend surfing the airline's site. The Amadeus-developed tool removes the need for passengers to specify a destination, instead giving passengers the flexibility to search based on their budget and what kind of activities they are interested in pursuing during their holiday.
Casey says the product is a key part of a lufthansa.com's strategy of addressing each passenger's individual needs and having them enter the site in different ways. He says the "trip finder" product had a successful "soft launch" in Germany, the UK and USA and will be rolled out across all major markets over the next few months. He adds that "dynamic packaging is the logical next step", as the carrier looks to further integrate its product offering. "This [dynamic packaging] is a big area of growth. I don't think anyone in the airline industry is doing a good job jet."
Amadeus vice-president sales and e-commerce platforms Denis Lacroix says Lufthansa is now the only airline using "Affinity Shopper", but Amadeus is talking with several potential customers and two undisclosed carriers have already signed up. He says Affinity Shopper, which has been under development since 2008, is part of an Amadeus initiative to offer more attractive search options, which in turn help airlines up-sell and build loyalty. "We want to inspire and attract customers in a better way," Lacroix says.
Amadeus director of marketing and portfolio management Jerome Letissier says another Amadeus initiative is to offer airlines "contextual marketing" functionality. Available from 2011, the contextual marketing products will be able to recognise individual passengers and use information from their frequent flier profile to offer specific products or proposals.
Amadeus, which now supplies more than 100 airlines with e-commerce platforms, also plans to enhance Affinity Shopper by the end of 2010 to include non-air elements. While dynamic packing functionality will take much longer to develop, as it involves integrating several complex components, Letissier sees a growing near-term requirement for working with airlines to support ancillaries.
He says several carriers have bolted ancillaries on to their e-commerce platforms, such as charges for checked bags and exit row seats. In many cases these products cannot be sold offline and re-accommodation at the airport can be a slow and costly process. Amadeus is now working with several airlines to give them the ability to cross-channel ancillaries, meaning that the same products can be sold on all channels, including at the airport check-in counter, airport kiosk and call centre.
SITA's senior product manager for access and ancillary products, Jill Cox, also points out that there is a lot of online content that is not yet offered at the airport, call centre or via mobile phones. "I think that's where more of the innovation will come. The customer wants a consistent interaction with you, whether it's on the web, with the call centre or on the mobile," she says.
Tunnacliffe says the Internet has been a crucial facilitator in the drive to increase ancillaries, as products such as checked bag have quickly been unbundled. "The mechanism for doing that is the web. In many cases GDSs and travel agents can't facilitate that," he says. "That's beginning to change. The GDSs aren't stupid and are beginning to address this requirement, but they'll be playing catch-up for quite a while."
Ancillaries are clearly the biggest focus these days when airlines look to invest in website enhancements. Southwest online marketing director Michael van Houweling says the low-cost pioneer is still trying to push more sales to southwest.com, which already accounts for over 80% of Southwest's bookings and continues "inching up". But Southwest is also now investing in new mobile phone applications and enhanced car and hotel offerings.
Like Ryanair, Southwest has blocked all online travel agents to keep control of all its bookings and it spends a big chunk of its marketing dollars alerting consumers they cannot buy Southwest tickets on other websites. It is now working to further exploit this advantage by further improving its non-air offering. Van Houweling says the visibility of hotel and car products on southwest.com improved last year as part of a website re-design which also allowed the carrier to begin offering an early check-in/boarding product. Further hotel and car product enhancements are planned for later this year as Southwest, which also relies heavily on direct marketing, looks to further grow its ancillaries. "The customer will experience noticeable differences in southwest.com in 2010," promises van Houweling.
Virgin America's Gale says new ancillary products, including insurance, were key in the recent virginamerica.com redesign. Simhambhatla says the changes, which also include functional enhancements to speed up the site, came in response to customers' input. Virgin America says it is dedicated to further investing in the site, which generates 75% of the carrier's bookings, to ensure it stays technologically savvy and representative of the Virgin brand. "People are expecting websites to conform to modern trends and sites they frequent," Simhambhatla says.
Airlines seem to recognise the importance of continued website investment, despite the economic downturn. "Even in a year like this our investment online continues to be strong," says Lufthansa's Casey. SITA's Cox adds: "We haven't noticed specifically any reduction in investment." But Peters, also from SITA, points out only projects with a very clear return on investment are being approved in the current environment. "They [airlines] are looking to spend to save," he says.
In many cases that limits the investment to bolting on new ancillaries rather than wholesale redesigns. "There are still day-to-day refreshes and incremental changes as the modern online consumer expects these. But major revisions and re-architectures have slowed," Tunnacliffe says. "At the moment airlines should be doing as much as they can with as little as they can."