If there is one thing all airlines want to make more use of it is their customer data. Unlocking the value of this unique asset, and in some cases even finding out where it exists inside the airline, is an entirely different matter.
One of the answers is to develop an effective data warehouse for the entire business, termed an enterprise data warehouse, and the list is growing of those looking at following the top tier carriers that are already well along this path. Instead of multiple versions of their data being held by silo departments, airlines that have progressed down the EDW path have just one version of the data that is easily accessible by all departments and used as actively as possible to create business opportunities and deliver competitive advantages.
A new wave of airlines is now looking at how they too can get in on the act, and the really far-sighted players are looking at what can be learned from other industries such as banking and retail, which are further down the EDW route than aviation.
One key opportunity area is in customer relationship management and while EDW offers airlines opportunities to segment customers and provide a more personalised service along the sales route, it also presents some challenges. Not least is the fact that despite the drive to personalisation, at the point of delivery the product experience is always aggregated. Another issue is the ability to recognise and respond to a customer with multiple attributes and treat them consistently whether they are in a high value business seat or travelling economy with the family.
With most of the world braced for a bumpy economic ride in 2009, airlines will be evaluating technology investment very carefully. However, Wayne Miller, director travel at global technology company NCR, is unequivocal that data is one asset really worth the investment. "What is the one thing you can invest in that the competitors cannot buy or replicate? It's your data. I have seen airlines in Chapter 11 or in very dire states investing in analytics to give them advantage," he says. "An enterprise approach is the best way of looking for areas of business opportunity where small improvements can make an impact on the bottom line."
The big carriers formed the first wave of airlines taking an enterprise approach to data warehousing, but the percentage is still relatively small. "Of the top 12, eight are already on the road to enterprise data warehousing," says Miller. The word enterprise is added to show how the technology ranges right across an organisation. But now carriers in the second tier are showing interest in an enterprise solution. The next challenge, according to Miller, is for the network carriers to build data warehouses and get more into predicting the way things might happen.
"Tier two should start looking at cost effective solutions so they can start playing on the same level as the big guys," says Miller. "They need to look at building enterprise data warehouses now, look at the business case to start eating the elephant and doing it quickly, because often by the time they've decided to build a data warehouse it could be too late."
Information silos proliferated because they were quick and cheap to set up in the first instance, with the initial investment under the approval radar. Now new technological innovations are making it cheaper to start building an enterprise data warehouse and there are more tools available. But EDW is not only about technology, it is also about people and processes.
"You also have to think about how you organise yourself as a company to take advantage of this enterprise environment. You may have to structure yourselves and reward employees in a different way," says Miller. He advises starting with a fully versioned passenger name record foundation warehouse, possibly to support a revenue management initiative, with clear vision of where you're going, so you create an enterprise-logical model - "a data warehouse, not a warehouse of data".
One airline now re-thinking its data solution is Gol. Its merger with Varig has been an opportunity to extend the Varig frequent flyer programme "Smiles" to the whole network of the new company and access information not available previously. Says Wilson Maciel Ramos, vice-president IT and administration at Gol: "Smiles data will make it possible to use business intelligence tools, because we will have behavioural information of our passengers associated with their profits, which we didn't have before because the majority of sales are made through travel agents that, for commercial reasons, do not inform passenger contacts and customer identification numbers to airlines."
Additionally, with the upgrading of its reservation system, Gol has a PNR database and this year will be implementing a passenger revenue accounting tool to better store and report sold and flown revenue. "We will be working on a data mining tool that is able to combine data from different databases and empower our analysts in several areas of the company to further understand our business, clients and operations and take better targeted approaches and decisions," says Ramos.
Some of the big opportunities - and therefore challenges - offered by EDW and the business intelligence it can deliver on customers are consistency and personalisation at the appropriate point in the transaction process and passenger journey. Richard Clarke, director of Travel Technology Research, says: "The drive down to a single customer focuses on the seat and we still treat customers as massively aggregated at the point of consumption. These things are misaligned. Airlines are not looking at the fulfilment of the product."
Clarke suggests that the emphasis has to shift away from selling to an individual consumer. "The data is critical about what consumers are willing to do, the choices they are making and where they make them, but not on an individual level. It has to be aggregated and you have to supply these products and services in a non-global manner."
The problem, according to Miller at NCR, is that airlines often segment on very small attributes and thereby fall down on treating customers consistently by failing to recognise the high-value business traveller is the same person when flying on budget tickets with the family. "The secret is to capture as many of these attributes as you can, but understand that I'm the same person," he says. "That's a real challenge and you need to deliver the information to people and devices - kiosk, website, people on the front line, the call centre, aircraft, all the different touch points."
So can EDW help airlines to personalise at the point of delivery? Mercator, the IT solutions arm of the Emirates Group, has come up with the KIS system for Emirates that downloads sufficient passenger information into the purser's flight manifest for the cabin crew to engage with them. "To make that happen is a very complex job to get the value of that customer on that seat, but the execution is very simple. The crew love it and use it in the crew briefing before they get on the plane," says Mercator vice-president Duncan Alexander. "The personalisation is better served when the person at check-in and on board has the information, because then you get the personal touch."
For Etihad's executive vice-president information and technology, Richard Dawson, it is all about bringing information together in a meaningful sense so people can make the right decisions. Etihad's efforts are focused on making its sales force more effective, particularly in the corporate market, and it is investigating the integration of customer relationship management, cost of sales, revenue data and market intelligence on one platform.
The aim is that the sales force will have a range of information at their fingertips when they visit clients. Phase one has been implemented and phases two and three will roll out over the next 18-24 months. The initiative will help the airline recognise the value of its customers. "More important, it will help our operations people understand that," says Dawson.
Airlines can also learn from other industries' experience of EDW. Dawson cites the example of airlines not normally closing their accounts until weeks after the month end because this time is required to reconcile ticket stubs with revenue received. If airlines want to use that data to predict averages going forward the information can be six weeks too late, whereas retailers have immediate sales information on the stock they are shifting, who's buying and the prices, so can be very responsive in their sales offers. "I think airlines are not particularly good at operating in the way that retailers or FMCG [fast moving consumer goods] organisations are, and the challenge is to get where they are," he says.
SITA's head of consulting and solution expert team Fabiano Chies also sees opportunities to learn from other industries integrating data warehousing into their call centre processes to make the experience more efficient for customers and staff. In the airline industry this could mean callers entering their frequent flyer numbers into the automated response system the system would match the frequent flyer data with the profile of an agent with the appropriate skills, who would not only have the caller's history and information on their screen, but would also be able to respond in the caller's preferred language.
"It is very common in the credit card industry, some banks and in service businesses, but I have not encountered it in air transport - that's where the industry has potential to increase efficiency and have more accurate information on their screens," Chies says.
One airline already using its data warehousing capability to create retailer-like efficiencies is TUI Fly, which included a profitability programme into the design of its data warehouse to input values on operating costs.
"We developed revenue management functions alongside our data warehouse very specific to the way we do business," says head of e-commerce distribution platforms Ingo Schölzel. "Revenue managers can look at past bookings and yield manage their flights, that's fairly normal, but we also have a function to look to the future and how some booking curves might develop."
Continental Airlines has been at the forefront of enterprise data warehousing and has gone further than most in making its data more real-time and using it actively. Over the last decade it has gone from having 45 separate customer databases and not knowing who its best customers were or their value to just one data warehouse containing 45 million customers, their frequent flyer numbers, service and web histories, plus four years of their travel history, with access to much of this information in real-time.
"Whatever channel you use, as soon as a booking comes through it's popped onto the database," says Mike Gorman, managing director of customer technology solutions at Continental. Staff receive the relevant slice of the data to be able to deal with customers on the spot. "We know the corporate affiliation, where you buy your tickets, which company you work for. We want to know the entire spectrum of influences on the customer. We are able to look at individual customers, put them into segments, understand their value and make sure we supply what they want to pay for." This allows interaction to be carefully targeted: "We wanted to put a second bag fee out there, because we have a data warehouse and know who each customer isif they are elite level, whether they have a co-branded credit card with us, so we had all this information to work out if we should charge them a fee. When we said we wanted to waive the fee for all co-branded credit and debit cards, it was instantaneous."
Continental's operations control centre has integrated all its departures and arrivals information with customer data, which means the airline can see how many high value customers they have on each flight, the revenue the flight has generated, and can better understand the value of the customer on that flight and the value of that flight. The enterprise approach helps achieve efficiencies in forecasting, revenue management, yield management and pricing.
Working with data analytic technologies specialist Teradata, Continental is now exploring how mobile technology can be adopted to enhance the service to passengers with onward connections. It already has access to connections information and conducts time and motion studies on how long it would take to trolley customers to the appropriate gate.
Teradata's vice-president travel and transportation global industry solutions, Monica Smith, explains: "For example, you can send a text message saying 'we've got a trolley waiting at the gate to take you to your next flight'. And on the same flight you can send another message to another passenger whose flight is late, but they have a long connection wait, you could send them a pass to the airport lounge. You can then measure if that passenger used that pass or if downstream they purchased an airport lounge pass."
Carriers like Continental are already analysing passenger data, using characteristics such as special meal requests, to assess the likelihood of no shows on each flight, and Smith predicts that the next level for airline DW will be to get deeper into predictive analysis, with greater integration between data warehousing and front-line systems to better understand what is happening in the marketplace and how the constant changes will impact. "The shorter the timeframe you can make decisions in and the higher level of confidence you have in the decision, then the better operationally and financially an airline can be," she says.
The emphasis to date has been on the operational side, but the challenge ahead is on the marketing side. "On the operations side, we've done an outstanding job. Now we're putting a lot of focus on being better marketers based on this raw data," says Gorman.
Having access to this level of business intelligence can change a company's thinking processes, as Bill Brunger, retired senior vice-president network at Continental and now an industry consultant, acknowledges. He says having access to passenger information led to the development of the no-show analysis: "Because we have the information we have been able to develop the thinking that makes this adjustment. Any question you can articulate before the fact, you don't need a data warehouse - a data warehouse is so you can keep asking more complicated questions."