The Future, in Brief
The two fundamentals of the airline industry are about to be uprooted – in tandem, as they are interrelated and, in some sense, feed off each other:
- The regulation of flying. Ownership and control rules (O&C) are being overturned steadily by a combination of “cross border joint ventures”, cross border equity investments, and the rising influence of the new markets of China and Asia Pacific. Removal of O&C transforms the bilateral market access system that has lasted 70 years; and
- The selling of tickets. New (non-aviation) retailers, armed with highly specific data and the skills to exploit it, are about to take on the role of selling end to end travel, of which the airline segment is only one part. Meanwhile airlines are confined to (usually) poorly exploited data about (only) their own customers, and to infighting with intermediaries: GDS companies, OTAs, metasearch, and others.
The result: a vastly different industry where airlines become mere pipelines, and retailers become the platforms for sales.

https://centreforaviation.com/analysis/ ... -it-339418

(please read the entire article, its an intriguing one).

The title of the article is Airline disruption: it will happen I'm he next decade- but no one is preparing for it.

I read the article and to be honest don't really understand what it is trying to convey. The first part of the title is correct. Disruptions are happening in the form of new long haul airlines like Norwegian taking advantage of bilaterals as well as joint ventures.

The second half of the title is arrogant in my opinion. Airlines are changing and adapting and preparing for it.

I think this goes along with your post about foreign airlines in the US market and discussion about international companies and foreign ownership. I see the point, but don't really see how foreign investment is reshaping the industry other than the major shift in the European Union market in the last 20 years.

The article has a somewhat arrogant tone especially regarding big data. There was a section on airlines may struggle to come to grips with big data. The big US airlines have invested millions in IT infrastructure and revenue management. I think the author of the article completely underestimates the revenue management changes in the industry in the last 5-10 years. The fare structure model is changing and we are seeing load factors and revenue per available seat mile show the impact of better revenue management.

There are a lot of regulations to protect and influence competition that the article seems to ignore. There are regulations against sharing passenger data between airlines because of anti trust requirements. We have seen a rise in joint ventures. Bilateral agreements also influence access to markets.

I suggest you to patiently read the article again.

Broadly, it predicts the market forces will change. Facebook, Google, Apple and other data owners will bat for market liberalization.

how is this really much different than fractional ownership of corporate jets? While technology make it easier for jets to squeeze more flying in this doesn't really impact the core of the commercial flying business b/c it doesn't make financial sense to hire a jet unless we really feel that the cost is going to come down to where commercial aviation prices are. Unlike cars and extra bed rooms, people don't tend to own their own private jet that they can just fly around in their free time to get extra cash...and most people aren't interested in taking a trip on your private light aircraft to get to a meeting. Notice how uber isn't quite in the yacht-sharing business yet....

I would contend that the article is right but 15 years late...that web technology disrupted commercial aviation well before it disrupted taxi services, lodging and retail. Using the web to find cheaper flight options happened in the 1990s way before AirBNB was even an idea.

Uber and Airbnb for air travel....? Really...? There can only be one meaning to that analogy: Someone is going to buy a small aircraft and play the sharing economy with air travel. Ain't going to happen. It is a bad title for this thread and a poor analogy in the article.

The article starts by saying it will make two points. First, in control of distribution, airlines are taking it back from GDS's, so airlines are heading towards MORE control of distribution, not less. So the point is flawed. The second point about operating aircraft, they don't even try to build an argument.

This article is trash.

The article claims air travel will become more like Uber and AirBnB because neither of those entities actually own cars or apartments, they just analyze data and let others shoulder the cost of owning the asset. Airlines in the future will be those who shoulder the cost of assets, and Facebook, Apple, Amazon, etc will be the ones who analyze data and sell travel more broadly. A company like Google could possible distribute travel from door to door tying together Uber, Airlines, AirBnB, etc.

Incitatus is too kind.

flyby519 wrote:

The article claims air travel will become more like Uber and AirBnB because neither of those entities actually own cars or apartments, they just analyze data and let others shoulder the cost of owning the asset. Airlines in the future will be those who shoulder the cost of assets, and Facebook, Apple, Amazon, etc will be the ones who analyze data and sell travel more broadly. A company like Google could possible distribute travel from door to door tying together Uber, Airlines, AirBnB, etc.

That already exists and is in retreat: It is called a travel agent.

incitatus wrote:

flyby519 wrote:

The article claims air travel will become more like Uber and AirBnB because neither of those entities actually own cars or apartments, they just analyze data and let others shoulder the cost of owning the asset. Airlines in the future will be those who shoulder the cost of assets, and Facebook, Apple, Amazon, etc will be the ones who analyze data and sell travel more broadly. A company like Google could possible distribute travel from door to door tying together Uber, Airlines, AirBnB, etc.

That already exists and is in retreat: It is called a travel agent.

I agree, but the article makes the arguement that OTAs/GDSs are poorly equipped to sell anything beyond airline flights from A to B arranged in order from cheapest to most expensive.

There is much more valuable data to be mined from travel itineraries that isn't being used now. Big Data companies cold turn that into Bg Money, or at least that's the premise of the article.

flyby519 wrote:

The article claims air travel will become more like Uber and AirBnB because neither of those entities actually own cars or apartments, they just analyze data and let others shoulder the cost of owning the asset. Airlines in the future will be those who shoulder the cost of assets, and Facebook, Apple, Amazon, etc will be the ones who analyze data and sell travel more broadly. A company like Google could possible distribute travel from door to door tying together Uber, Airlines, AirBnB, etc.

The problem with the analogy is that Uber and AirBnB lowered the barrier to entry into those markets (offering taxi service, or renting a room/apartment) that was previously very high. The asset owner (of the car, or the house) can make money on the side.

It's not clear at all how that would apply to airlines. Apple, Google, or Amazon can sell tickets, but they can't fundamentally change who is doing the flying the way that Uber changed who was driving for-hire vehicles; or the way AirBnB changed who was renting rooms. They both introduced new competitors to the marketplace - the person with the car, driving for Uber on the side. Who fills that role for the airline? Nobody has a lot of spare planes lying around waiting to operate them for air service.

It's not at all clear what they're arguing for. That an airline doesn't have the growth potential of Amazon? Obviously. So what?

blockski wrote:

flyby519 wrote:

The article claims air travel will become more like Uber and AirBnB because neither of those entities actually own cars or apartments, they just analyze data and let others shoulder the cost of owning the asset. Airlines in the future will be those who shoulder the cost of assets, and Facebook, Apple, Amazon, etc will be the ones who analyze data and sell travel more broadly. A company like Google could possible distribute travel from door to door tying together Uber, Airlines, AirBnB, etc.

The problem with the analogy is that Uber and AirBnB lowered the barrier to entry into those markets (offering taxi service, or renting a room/apartment) that was previously very high. The asset owner (of the car, or the house) can make money on the side.

It's not clear at all how that would apply to airlines. Apple, Google, or Amazon can sell tickets, but they can't fundamentally change who is doing the flying the way that Uber changed who was driving for-hire vehicles; or the way AirBnB changed who was renting rooms. They both introduced new competitors to the marketplace - the person with the car, driving for Uber on the side. Who fills that role for the airline? Nobody has a lot of spare planes lying around waiting to operate them for air service.

It's not at all clear what they're arguing for. That an airline doesn't have the growth potential of Amazon? Obviously. So what?

Correct - these case studies are examples of digital companies that identified assets with value not being used in a market that is either high cost or highly regulated, then shook it up. The same parallels are not true of the air travel industry, there simply aren't masses of planes sitting idle waiting for someone with the connectivity and network to fill them with people.

However, the airline industry is a classic incumbent awaiting a shake up, it's models and methods are entrenched and long-standing - I'd love to create the disruption and make money out of it, it's just difficult to see and I don't think it will follow the Uber / AirBnB model.

flyby519 wrote:

I agree, but the article makes the arguement that OTAs/GDSs are poorly equipped to sell anything beyond airline flights from A to B arranged in order from cheapest to most expensive.

There is much more valuable data to be mined from travel itineraries that isn't being used now. Big Data companies cold turn that into Bg Money, or at least that's the premise of the article.

If I rely on your perspective (which I appreciate) I could re-write the argument of the article entirely: Travel intermediaries are on the verge of a big come-back. They will mine personal data to offer a much more individualized travel/vacation product. The only companies capable to do that will be the ones that can chug through enormous amounts of data to create meaning - like Amazon or Google. They will become so powerful that aircraft operators will be relegated to white-tails, de-branded.

I think that is a less-hyped plot description than this wacko article. But I am still skeptical that it may happen.

However, I find possible that Amazon might go into passenger transport and try to emulate Norwegian or Air Asia and build a cross-border brand. But that is not the future this article is "predicting".

Charter operators are already doing this. Travel Agents are already doing this. Airlines are already doing it, farming out flying to regionals or in the case of IAG- Vueling, LEVEL. LH- Eurowings, etc.

Airlines have such high fixed costs and thus barriers to entry. Where they do and will continue to face pressure is these point to point small charter operators. Many of those are already on-demand (to use Uber/Lyft) but where the real threat is the ones that also offer scheduled service.

But until Apple, Google, Facebook, etc have the planes they will be nothing more than travel agents or charter operators (if they choose to enter the space).

Actually, you would be surprised how much information airlines have on their passengers. If you belong to an F/F program, that airline has information about you. If you are an elite member, the airline has a lot of information about you.

I'm not sure that individuals who wanted to fly airplanes the way auto owners drive for ride-sharing services can. I know that rules regarding the type of driver's licenses required for transporting passengers vary between taxis, liveries, and ride sharing vary from state to state and city to city. But, the FAA regs. probably don't permit the kind of ride-sharing that Uber and Lyft offer for auto owners.

ckfred wrote:

But, the FAA regs. probably don't permit the kind of ride-sharing that Uber and Lyft offer for auto owners.

You can replacement 'probably' with 'definitely.' There have been numerous FAA rulings on this in recent years. The FAA won't even allow someone to offer up a seat in their aircraft at cost via some sort of service, let alone offer it for more than cost. This will never happen because pilot proficiency and aircraft maintenance has a significant impact on aviation safety.

Perhaps this will be more of a thing in 50-70 years when completely pilotless planes are an option.

In one sense nothing new, airline bankruptcies over the last 30 years, vastly more than existing airlines in the US. As an outsider I am always amazed how much control pilots have over the strategy of airlines. It would not be tolerated in any other field except medicine. Both airlines and medicine operate in playing fields with multiple market failures. I don't think medicine will every be able to escape those failures. Airlines may be able to.

There are plenty of unfilled seats flying around the skies today, even at ~85% LFs. That will probably be the easiest frontier for innovation. Buying bulk unfilled seats within 24hrs of departure to then resell via mobile apps.

blockski wrote:

flyby519 wrote:

The article claims air travel will become more like Uber and AirBnB because neither of those entities actually own cars or apartments, they just analyze data and let others shoulder the cost of owning the asset. Airlines in the future will be those who shoulder the cost of assets, and Facebook, Apple, Amazon, etc will be the ones who analyze data and sell travel more broadly. A company like Google could possible distribute travel from door to door tying together Uber, Airlines, AirBnB, etc.

The problem with the analogy is that Uber and AirBnB lowered the barrier to entry into those markets (offering taxi service, or renting a room/apartment) that was previously very high. The asset owner (of the car, or the house) can make money on the side.

It's not clear at all how that would apply to airlines. Apple, Google, or Amazon can sell tickets, but they can't fundamentally change who is doing the flying the way that Uber changed who was driving for-hire vehicles; or the way AirBnB changed who was renting rooms. They both introduced new competitors to the marketplace - the person with the car, driving for Uber on the side. Who fills that role for the airline? Nobody has a lot of spare planes lying around waiting to operate them for air service.

It's not at all clear what they're arguing for. That an airline doesn't have the growth potential of Amazon? Obviously. So what?

To expand on your comment:
Uber and AirBnB allow monitization of idle assets by unskilled individuals who employ the assets only at the times and rates of their choice.

I could see an Uber for business jets, but how much demand is there for say $3k tickets? If the flight out (and probably back) are not at a profit, no sale.

I know people who Uber and people who AirBnB and they only option in at the priciest times when they are willing to share their asset.

Both services, as you noted, worked by lowering the barrier to entry.

For air travel, where is the mass of empty airports?

UPS tried a variation of fast conversion between pax and freight to better utilize there assets. But the conversion needed to be under an hour and that isn't possible (I'd love to be proven wrong). If someone could invent a set of galley, lavatory, and seat pods to roll into a cargo jet, there could be a business case, but this wouldn't be Uber, it would be a freight operators maximizing asset use.

Lightsaber

flyby519 wrote:

There are plenty of unfilled seats flying around the skies today, even at ~85% LFs. That will probably be the easiest frontier for innovation. Buying bulk unfilled seats within 24hrs of departure to then resell via mobile apps.

Those are the most profitable seats for airlines! They go empty as the prices are extremely high. Dropping the price undermines how airlines make money.

Heck, AA keeps standby MD-80s available if there is a rush. I've flown on one LAX-DFW. Due to a conference in Dallas, last minute tickets went for over a grand round trip and so the on call pilots and F/A were called in.

The elastic supply is very high cost. Uber relies on very low variable cost supply. The profit margins in airlines aren't high enough for a part time ametur to jump in.

Lightsaber

Nothing like AirBNB or Uber will upset airline travel. What WILL upset airline travel are self driving cars. If you could leave work on Friday and have your car drive you for 14 hours while you sleep, that opens up a lot of travel opportunities that are way cheaper and more convienent.

It won't put it under. But it will disrupt it a lot.

Especially when cars are redesigned for this reality and make them more comfortable for sleeping.

Well the main thing is, travel will become a point to point activity, and airlines will only be a pipeline to transfer the passengers.
You will not book DEL-LHR, you will book delhi home to london home, via Uber of aviation.

Google, Facebook etc have a lot more data than airlines. At the most, airlines can know about past travels and preferences of passengers.
Google can know their future destinations, and a lot more about their personal life.

The article also predicts that current rules & regulations, which were framed 70 years ago will soon go away. Rise of Asia will be the main stimulus for this. Amazon can enter local markets, but Delta or United can't. This will change.

Interesting ....
There is a crucial difference though, between cars, hotels, apartments; and an airline corporation ... The first is a small business who would swiftly appreciate any exposure to wider clients, and would give up to any exploitation by the data provider. On the other hand, and airline corporation is a multi-billion entity. Although they would go along way to any possibility to greater exposure, even through mediary, but I don't believe they would fully give up a bigger share of the cake than they have to ..

If you see Airlines are very small compared to IT companies. The world's most valuable Airline, Delta is worth $33 billion. Google & Apple stand around $600 billion.

The AirBnB of airlines are the smaller airlines wetleasing their capacity to the major carriers when needed. The closest thing to Uber are the business jet companies. But that's more like Uber Black. I don't see how a genuine Uber for airlines would look like. If someone does, they could probably make a lot of money.

JetBuddy wrote:

The AirBnB of airlines are the smaller airlines wetleasing their capacity to the major carriers when needed. The closest thing to Uber are the business jet companies. But that's more like Uber Black. I don't see how a genuine Uber for airlines would look like. If someone does, they could probably make a lot of money.

Well my mistake. I should have explained this earlier.

Uber of aviation will be a disruption like Uber was in taxi industry. It will not really follow Uber's business model.

anshabhi wrote:

JetBuddy wrote:

The AirBnB of airlines are the smaller airlines wetleasing their capacity to the major carriers when needed. The closest thing to Uber are the business jet companies. But that's more like Uber Black. I don't see how a genuine Uber for airlines would look like. If someone does, they could probably make a lot of money.

Well my mistake. I should have explained this earlier.

Uber of aviation will be a disruption like Uber was in taxi industry. It will not really follow Uber's business model.

My fault, didn't read everything before posting. In that sense I'd say that Norwegian is a kind of Uber - disrupting long haul travel with more direct routes in new efficient airplanes, and following a very different business model over all.

JetBuddy wrote:

anshabhi wrote:

JetBuddy wrote:

The AirBnB of airlines are the smaller airlines wetleasing their capacity to the major carriers when needed. The closest thing to Uber are the business jet companies. But that's more like Uber Black. I don't see how a genuine Uber for airlines would look like. If someone does, they could probably make a lot of money.

Well my mistake. I should have explained this earlier.

Uber of aviation will be a disruption like Uber was in taxi industry. It will not really follow Uber's business model.

My fault, didn't read everything before posting. In that sense I'd say that Norwegian is a kind of Uber - disrupting long haul travel with more direct routes in new efficient airplanes, and following a very different business model over all.

I read the article and I agree that Norwegian is the type of disruption that will grow in the industry. I disagree with the premise of the article that airlines are not preparing for it.

To deal with Norwegian we are seeing airlines unbundle fares to price out food, seat assignments, baggage and frequent flyer points. For disruptions like Spirit, airlines are offering basic fares which come close to matching the fare and fee structure at Spirit.

Revenue management is improving constantly. I doubt the author of the article has noticed but if you are an elite member at an airline, hotel or car rental company they almost always have a status match available for their partners. If you are a platinum member at Marriott, they will give you United Premier Status and Hertz Gold status for free when you sign up for it. There is a little disclaimer in that status match that allows the companies to share your travel history. If you book a ticket on United to New York City you are immediately going to get offers for Marriott hotels and Hertz car rentals when making your reservation including discounts. Even if you used a travel agent and never went to United's website, if your frequent flyer number was input on the reservation, Marriott and Hertz are going to send you targeted advertisements for your New York trip.

Airlines are also actively blocking outside travel agents and hotels are starting to try. Airlines make it hard for a travel agent to make any money because they eliminated the kickbacks to travel agents a decade ago. A travel agent or online company like Expedia or Orbitz no longer earn any money for booking on airlines for a basic domestic ticket. International travel and package travel has some potential earnings, but that is mostly from hotels. Hotels and cruise ships still offer kickbacks. Hotels are trying to get away from that by not giving rewards points or elite benefits to bookings made through non corporate travel agents. Google is an advertising company. Websites like Kayak can earn money through advertising but so far there is not a way to completely change the industry through big data. Airlines got smart a decade ago and made a significant push to get people to book travel on their own websites.

Newbiepilot wrote:

I read the article and I agree that Norwegian is the type of disruption that will grow in the industry. I disagree with the premise of the article that airlines are not preparing for it.

To deal with Norwegian we are seeing airlines unbundle fares to price out food, seat assignments, baggage and frequent flyer points. For disruptions like Spirit, airlines are offering basic fares which come close to matching the fare and fee structure at Spirit.

Revenue management is improving constantly. I doubt the author of the article has noticed but if you are an elite member at an airline, hotel or car rental company they almost always have a status match available for their partners. If you are a platinum member at Marriott, they will give you United Premier Status and Hertz Gold status for free when you sign up for it. There is a little disclaimer in that status match that allows the companies to share your travel history. If you book a ticket on United to New York City you are immediately going to get offers for Marriott hotels and Hertz car rentals when making your reservation including discounts. Even if you used a travel agent and never went to United's website, if your frequent flyer number was input on the reservation, Marriott and Hertz are going to send you targeted advertisements for your New York trip.

Airlines are also actively blocking outside travel agents and hotels are starting to try. Airlines make it hard for a travel agent to make any money because they eliminated the kickbacks to travel agents a decade ago. A travel agent or online company like Expedia or Orbitz no longer earn any money for booking on airlines. Hotels and cruise ships still offer this incentive. Hotels are trying to get away from that by not giving rewards points or elite benefits to bookings made through non corporate travel agents. Google is an advertising company. Websites like Kayak can earn money through advertising but so far there is not a way to completely change the industry through big data. Airlines got smart a decade ago and made a significant push to get people to book travel on their own websites.

You are missing the main point of article.

Certainly the legacy airlines have had to deal with a new breed of low cost operations, long and short haul. But almost without exception those legacy operators are still there, fundamentally unchanged.

Please read the article again, patiently.

The disruption that we are talking about here will not be an airline, it will be an IT company.

I read the article. I am not missing the point, I am disagreeing with it. I disagree with essentially the thesis that there will be a disruption where retail is controlled by third parties. The aviation industry has been moving in the opposite direction.

Uber increased the supply of for hire cars. Airbnb increased the inventory of available beds for rent. What disruption is coming? The article rather arrogantly implies it is coming without defining it.

Airlines have adapted to the online world. They turned off any incentives there were for travel agents. The latest type of travel agent online that is growing are websites like Kayak. They make money with advertisements, offer a free search function to compare fares and then send you to the airline or another booking agent to buy the airplane ticket. Airlines have figured out how to use third parties to direct traffic to their website. When you are there they have a host of options available for upsell like extra frequent flyer miles, premium seating, lounge access, as well as car rental and hotel referrals. I would say that United, Alaska, Delta, JetBlue and American have embraced it. Allegiant is truly a leader and earns money being a travel agent. Where airlines are behind is in markets outside of the United States and Western Europe. In those markets airlines may still have the traditional sales channels and fare system.

Airlines also get you with loyalty programs and preferential treatment that other industries don't offer. If your flight is cancelled and you are flying United, if you are a premier member you get preferential rebooking treatment. You get special phone lines. If you have their app, you can get rebooked without ever talking to anyone. You get better treatment using their app since you have access to inventory not available for sale and standby options. Bing, Expedia, travelocity and Orbitz don't offer that.

Where there is opportunity is vacation bundling. That is mostly because the hotel industry is way behind the airline industry in inventory management and revenue management. If this article was about hotels, then I would agree with it much more.

anshabhi wrote:

If you see Airlines are very small compared to IT companies. The world's most valuable Airline, Delta is worth $33 billion. Google & Apple stand around $600 billion.

But so what? Airlines valuations are low because they have been chronically unprofitable businesses. That is, they are unattractive businesses for investors. The current valuations actually look good. Just because an industry has overall low valuation, it doesn't mean that Google, Amazon or Apple will take it by storm. That is faulty logic. They might as well take over the apartment rental market. Why not? Data could do wonders. The same (weak) arguments can apply. Or buy Expedia and American Express. Or go after other sectors of the economy that have mediocre returns.

Do you, or the writers or the CAPA article even know what kinds of products Google, Amazon, Apple have that airlines use? Or what kind of relationship exists between those companies and airlines? Probably not.

Now Uber is going to sell door-to-door London to Delhi and make airline brands irrelevant? I don't think so. If Uber puts me on Air India or Uzbeq Airlines instead of British Airways, I am not buying from them ever again.

Again, this article is trash. It is predicting a revival of travel agents into super powerful brands. But travel agent sounds like a thing of the past, so they filled the article with current buzz to sound impressive.

Except that the travel agent here knows everything about you. I am not saying they will ever purchase an Airline.
Your past, your future, your preferences, your plans, all your personal details.

Wait for some more time. You will see it happening.

And really....? Facebook, Google etc which themselves are big advertising firms, will use CAPA for advertising? CAPA is a very trusted firm.

Btw, I can see. Your choice is quite poor (sorry)

anshabhi wrote:

Except that the travel agent here knows everything about you. I am not saying they will ever purchase an Airline.
Your past, your future, your preferences, your plans, all your personal details.

Wait for some more time. You will see it happening.

And really....? Facebook, Google etc which themselves are big advertising firms, will use CAPA for advertising? CAPA is a very trusted firm.

Btw, I can see. Your choice is quite poor (sorry)

Who says airlines aren't using Facebook and google? When Donald Trump said something about a terrorist attack in Sweden, I googled Sweden. Ever since then I have been getting advertisements from Norwegian Airlines to visit Stockholm and Oslo. The goal of the airlines is to get you to book your ticket on their website. Once there they will try to get you to buy all sorts of add ons like seat assignments, premium economy, baggage, lounge passes, and then send you to their partners for hotel and car. They use Facebook, google, Kayak and other sites to get you to their website so they can get you to buy more than the basic economy fare. Airlines earn more when you book on their website and have been very active trying to get you there. At least that is true in Western Europe and North America.

Newbiepilot wrote:

Who says airlines aren't using Facebook and google? When Donald Trump said something about a terrorist attack in Sweden, I googled Sweden. Ever since then I have been getting advertisements from Norwegian Airlines to visit Stockholm and Oslo. The goal of the airlines is to get you to book your ticket on their website. Once there they will try to get you to buy all sorts of add ons like seat assignments, premium economy, baggage, lounge passes, and then send you to their partners for hotel and car. They use Facebook, google, Kayak and other sites to get you to their website so they can get you to buy more than the basic economy fare. Airlines earn more when you book on their website and have been very active trying to get you there. At least that is true in Western Europe and North America.

And were those Sweden ads of any use? Did you had any intentions of visiting Sweden?
Google​ and Facebook can answer this, airlines can't.
Even here, Google provided Norwegian with data. It has full control over it. Without Google, Norwegian couldn't have known about it.
This is the beginning.

“Travel distribution: the end of the world as we know it?”. This study was first done independently by London School of Economics in October 2016:
http://www.lse.ac.uk/website-archive/ne ... ution.aspx (it's a 60 page report)


Google has already started doing it with Google Flights. This is another article about it: http://www.hispaviacion.es/google-fligh ... el-agents/

Google has some smart people trying to figure out how to earn money through travel. They have a pretty cool search engine. It has great ways to plan a cheap vacation. But do you know how it works? It still sends you to the airline to book the travel. Google found your destination and showed you fares, but then you actually book your ticket on the airlines website so they can upsell you. Pretty smart.

Google is also searching your email and putting flights in your calendar. They make flight status super easy. Google does some great things. So far the airlines still control price and book the ticket on their website.

Google is doing great things, but I still feel the article is rather arrogant in its claim that airlines are not preparing for it. I think they are embracing it. It is a really big leap to think that Google will start to influence pricing.

Airlines are very innovative. In the 1980s American launched the modern frequent flyer program. In the 1990s Alaska was a leader in E tickets, online reservations and online check in. In the 2000s JetBlue was a leader in live TV. Allegiant was a leader in bundling hotels and flights into vacation packages. Ryanair found ways to make use of smaller and remote airfields and debundle air fares. More recently Continental/United led the app development and put rebooking and seat changes and upgrade lists on their app. Delta is a leader in revenue management philosophies and challenging the traditional fare bucket and inventory strategy. Norwegian was one of the first successful companies at long haul leisure. Airlines are preparing and leading the next big evolution.

Sometimes the tech guys in the Silicon Valley's of the world think they are smarter than everyone else. Sometimes they are right and massively disrupt an industry like Tesla, Amazon, Airbnb, and Uber. Past history is not a guarantee that they will always succeed. The airlines that survive have to be innovative.

I've done a lot of work in this field, on what I believe is the next paradigm shift for airline travel. While it is still in its infancy, it is costed and plans are moving forward. I've seen some of Google's work as well.
The airline business model will change, and will change drastically, and in a way that legacy airline companies are not able to prepare for.

Full disclosure, I am one of those "tech guys in Silicon Valley". Except not actually in Silicon Valley.

dredgy wrote:

I've done a lot of work in this field, on what I believe is the next paradigm shift for airline travel. While it is still in its infancy, it is costed and plans are moving forward. I've seen some of Google's work as well.
The airline business model will change, and will change drastically, and in a way that legacy airline companies are not able to prepare for.

Full disclosure, I am one of those "tech guys in Silicon Valley". Except not actually in Silicon Valley.

Aviato... Erlich, is that you?

Thanks for sharing, its not a bad article but, things are not going to go from staying almost the same for 70 years to changing drastically in 10. Things will be tested, fail, be tested again, fail, be tested again, regulated and then implemented. Things take time, for example, you're not just going to see planes go from piloted by a human to a robot in ten years, things take time especially in the airline industry.

~Zac

incitatus wrote:

Uber and Airbnb for air travel....? Really...? There can only be one meaning to that analogy: Someone is going to buy a small aircraft and play the sharing economy with air travel. Ain't going to happen. It is a bad title for this thread and a poor analogy in the article.

Reading the title I was daydreaming, already thinking about quitting my job and starting to work on my CPL...

Too bad !

SomebodyInTLS wrote:

Aviato... Erlich, is that you?

I own 10%.

dredgy wrote:

I've done a lot of work in this field, on what I believe is the next paradigm shift for airline travel. While it is still in its infancy, it is costed and plans are moving forward. I've seen some of Google's work as well.
The airline business model will change, and will change drastically, and in a way that legacy airline companies are not able to prepare for.

Full disclosure, I am one of those "tech guys in Silicon Valley". Except not actually in Silicon Valley.

So you are saying you can't really say anything but you are super smart so we have to trust you that "something is in the works". Really? What an awesome argument!

If "legacy airline companies are not able to prepare for", then there is very little value in secrecy. If I can figure out some change in the auto market that GM and Toyota are not able to prepare for, I don't have to hide it from them, I can just move on and reap the rewards, correct?

Notice this thread was started by an article anticipating revolution. But its arguments could not stand even the tiniest scrutiny.

I'm surprised that no one is mentioning here (and not even in the article from CAPA, BTW) the IATA initiative called "One Order", an unprecedented game changer that in few years will see the Airline Industry acting more and more as the Retail Industry, eliminating the unnecessary complexity represented today by the plethora of objects (PNR, ticket and EMD) that the Airlines, the GDS, the Travel Agents and the individual passengers have to deal with.

With One Order all of this will disappear in favour of one single reference record that will represent what we purchased and what an airline and its partners have to deliver.
In other words, the Airline Industry will sell its services is the same way of any other retailer.

Without the complexity represented by PNR, Ticket and EMD, new players may come into the game and sell flights as aggregators, leveraging their existing penetration into the retail market: I personally believe that in few years buying tickets from Amazon, Google, Alibaba and adding in the same transaction a Uber ride or a room with Airbnb will be just normal.

This year in pretty much focused on refining the requirements and developing a prototype, while the final IATA approval of this new standard is expected next year with an implementation at Airline and GDS level around 2019-2021.

For those that are interested, here is the link to the IATA website: http://www.iata.org/whatwedo/airline-di ... order.aspx

I'm surprised that no one is mentioning here (and not even in the article from CAPA, BTW) the IATA initiative called "One Order", an unprecedented game changer that in few years will see the Airline Industry acting more and more as the Retail Industry, eliminating the unnecessary complexity represented today by the plethora of objects (PNR, ticket and EMD) that the Airlines, the GDS, the Travel Agents and the individual passengers have to deal with.

Thanks for this. I would also add, as necessary bibliography, IATA's NDC (new distribution capability), a.k.a why LH and others can now levy a fee on bookings through GDS...and get away with it. NDC reduces airline dependency on GDS... but also enables NDC-enabled agents (be they GDS, Expedia, Google...) to connect to the airline and sell ancillary items, something not fully possible through traditional GDS. IATA has been very smart with this move (plus One Order), by anticipating -internally- what would have otherwise eventually come forced from the outside.
Disruption is coming indeed... from IATA, not Uber.

Amazon is a non-airline airline... it brands wet-leased cargo planes. It does not hold an AOC, its wet-lessors hold the AOCs.

Amazon could easily extend this non-airline airline model to include pax, flying on Amazon-branded pax planes. I would be very surprised if Jeff Bezos has not thought of Amazon-branded air travel since he has thought of (or more accurately, is building spacecraft for) Amazon-branded space travel (https://www.blueorigin.com/).

Bezos vs Branson?? Again?? Also in commercial airlines?? That would be more than worth it!

Two disruption possibilities come to mind, first there is a lot of potential selling unused corporate or private jet space, ideally passengers would have to be vetted, and given the earning power of jet owners its possible no one wants to share their plane and does not need the actual revenue.

The other would be changes needed to disrupt the "regulations" governing flight crew. Many years ago at an aviation event it was hypothesized that if cockpits could be made to a common standard and if the regulatory environment were less restricted it would be possible to outsource flight crew. Of course I don't see this occurring in my lifetime, single pilot operations are more in the realm of possibility.

Realistically the Uber/Airbnb of aviation would need to address all these factors and more. Disrupt ticket prices, fixed costs, and service levels.

I'm not certain this can be done currently in the US. While a discount carrier with access to large airframes may be able to reduce CASM the problem has always been gaining enough yield to make the whole thing worth while. Southwest was one of the few to get costs low and ticket prices high and make people not blink an eye because it was worth it.

I still believe that US has yet to have it's own Ryanair serving unused tertiary airports, F9 and G4 are close but they skew heavily towards leisure and are not known for serving large routes like NYC to LAX.

In the short term, the limiting factor is going to be not the volume of data but the Artificial Intelligence to use it profitably. In my particular case, I have been travelling to the Philippines 2 or 3 times a year for the last 6 years or so. Big Data could analyse this with no problem and proactively bombard me with flights, offers etc. AI would ask me whether I still want to travel there with part of the country under Martial Law and effectively an armed insurrection going on, and would I like to try Indonesia instead ?

Big Data Travel would be disruptive to the online booking/search sector, simply because it has the computing power to not only show me an all in cost and booking for everything - transport to airport,flights, hotels, hotel transfers etc. - but the ability to show potential savings by tweaking the booking - flying a day later, moving hotels a day earlier etc. But even so, is it any more than a high tech,high speed travel agent?

Maybe it changes the airlines deciding what a schedule is to the aggregator (lets use google in this instance) determining what/how the arrangements are made. If the plane you get on says united or virgin or whatever on the side most people wouldn't care, most people wouldn't care how they even get there. Like has been mentioned it will be an end to end thing.

Here's the scenario: There is a flight at specific time from LHR-JFK (lets say 09:00) but en route the A380 diverts to BOS because there are X-number of people there who need/want to to be in/near Tokyo and the number of folks is too many for anything else, the smart piece knows that its ok/profitable to divert and get the uber-trains and uber cars and uber "tubes" to transport the poeple from BOS to their final destination in other ways based on the fact that they paid lower for their ticket so the final time to destination wasn't so critical.

The uberisation of air transport could offer/enable a much more flexible integrated system that cares very little about national boundaries.

Last minute expensive fares? In a transport system that is much more flexible to needs this might end...

Fred

The article is bullshit from the beginning to the end. No one, except a new airline will disrupt the airline travel market. No Uber, no Facebook, no Google, no IT company at all.

All the success models we've seen in the IT business, was built on either replacing a established service with something new (Amazon > local shops / Uber > Taxi / NetFlix > cable TV) or by using the model of the shared economy (AirBnB / CarSharing). In the aviation business, there is no sharing to do and getting into the business is way to expensive (because of the fixed costs) for some California IT Startup...

The disruption in the airline market already happened by online travel agencies replacing most local travel agents and by LCCs conquering a lot of market share or just establishing a new market with customers who couldn't afford to fly before. The next disruption will be narrowbody mid- to longhaul jets like the A321LR. Lots of legacy airlines went bankrupt or were bought or forced into mergers because of these disruptions...

Big data? Overrated in every business. Even useless if you don't know what to do with all the data or if your conclusions out of your statistics are wrong. The data doesn't lie, the conclusions and by human logic created statistics could lie, if you do it wrong. And who should exploit the aviation market for their personal profit with the help of Big Data? Travel agents & IT companies "seeing the full picture" and selling more than just the flights? Right? No, not at all. Look at the trend of the last decade. Package holidays are dead. People book individually. They book the flights on their own. They book the hotels on their own, the rental cars, the adventures, everything. And the Airlines are profiting out of this trend...

lightsaber wrote:

flyby519 wrote:

There are plenty of unfilled seats flying around the skies today, even at ~85% LFs. That will probably be the easiest frontier for innovation. Buying bulk unfilled seats within 24hrs of departure to then resell via mobile apps.

Those are the most profitable seats for airlines! They go empty as the prices are extremely high. Dropping the price undermines how airlines make money.

Heck, AA keeps standby MD-80s available if there is a rush. I've flown on one LAX-DFW. Due to a conference in Dallas, last minute tickets went for over a grand round trip and so the on call pilots and F/A were called in.

The elastic supply is very high cost. Uber relies on very low variable cost supply. The profit margins in airlines aren't high enough for a part time ametur to jump in.

Lightsaber

Sorry to burst your bubble but AA didn't put an extra flight on at the last minute just because you booked an expensive ticket.