Airlines Will Turn Their Focus to Big Data

In a few short years, a passenger’s entire journey will be commoditised by data, leaving the airlines that move quickly much better placed
australian aviation
Andrew Truswell

This article was first published in Australian Aviation.

Australian airlines are in a race against time to expand data revenue streams before regional rivals catch up, tighter privacy restrictions cramp down on margins and the potential for fines escalates dramatically. 

In March, online aggregator Airgateway quietly announced that Qantas’ New Distribution Capability (NDC) content was live on its platform. It was the latest in a long line of deals to carve up airline data for greater profit, something the industry desperately needs more of in light of COVID-19 and the Ukraine crisis.

The International Air Transport Association’s (IATA) NDC frees up the way in which data is captured and used. Under the old Global Distribution System, all fares go into a giant pool that travel agents pluck from. The old EDIFACT code, on which GDS data was transmitted, is also very limited. Meanwhile, NDC flight data is way more sophisticated, with airlines able to offer tours, accommodation and packages directly to passengers or via a broader network than the traditional GDSs.

Major investments have also been made upgrading underlying tech platforms for the shift from inflexible dynamic pricing to continuous pricing. By investing in data, airlines are seeking more flexibility and power in offering passengers fares and extras tailored to them – offering them what they want, when they want it.

Last year, Virgin re-signed their GDS contract with Sabre. Qantas has gone hard with its breakaway Qantas Distribution Platform, it even started charging a surcharge for bookings made on the GDS, a move that has since been followed by carriers including Singapore Airlines.

The GDS surcharge gave a public face to a private legal battle all the airlines, local and international, have been fighting since the NDC was first introduced. They’ve been trying to extricate themselves from their outdated GDS restrictions and renegotiate their contracts to secure freedom to sign new NDC contracts.

These GDS contracts require like-for-like content. In essence, airlines are contractually obliged to give the same fares to their GDS network as appears in any other channel, including their own website. The whole goal of NDC is more flexibility, so this has slowed the airlines down. 

The question for the Australian carriers as passenger demand recovers, is how quickly will their larger global competitors be able to extricate themselves from legacy distribution contracts and to what extent will they embrace NDC? This is particularly the case for carriers in Asia-Pacific emerging from the pandemic.

The consequences for consumers will be profound. I expect that within three to four years the premium passenger’s entire journey from destination search to the car ride home will be completely commoditised. Usually fancy a massage during your layovers? Here’s a smartphone notification pinpointing the nearest provider in this airport you’ve never visited before. Economy passengers will follow shortly after.

More data equals more revenue, but also increased cyber and legal risk that the airlines will have to mitigate. The European Union’s General Data Protection Regulation is the global standard for data protection. The legal landscape in this area is under review in Australia, and the laws and penalties will only get stronger.

Under the old GDS system, the risk on the airlines was lower, as the travel agent bookings were made on the GDS, and the airline had one big content pipe. That’s changing under NDC. There’s so much more data and it’s held by so many more sources, with bookings made on the airline’s systems, the risk is greater. 

Industry is still reeling from the £183 million ($319.8 million) fine levelled at British Airways in 2018 by the UK’s Information Commissioner’s Office for a data breach that impacted 400,000 customers. Granted, this was downgraded to a much more manageable £20 million in October 2020. But it was noted at the time that “the economic impact of COVID-19” was taken into account. With restrictions lifted and passengers returning to the skies, industry is under no illusions. The days of low-cost data breaches are over.

In Australia, the Attorney General is considering changes to the Privacy Act to bring us more into line with Europe. Submissions on the responses vary wildly. But it’s fair to say even the stuffiest industry participants have acknowledged radical change is required to tighten Australia’s privacy laws.

Airlines need to embrace the new technology and carefully negotiate themselves out of a GDS world, while keeping a tight control on data and networks.

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Andrew Truswell
Andrew Truswell
Andrew has focussed his practice on the intersection between aviation and technology with a specific focus on Data (Privacy and Cyber), Information Technology (Cloud, SaaS, Infrastructure, Outsourcing and IP), and Insurance (Aviation, PI & Cyber). Andrew has advised airlines like JetAsia and Qantas Airways, and market leading travel sector technology provider, Amadeus. During this period, Andrew was exposed to passenger system (PSS) and Distribution (GDS and NDC) transactions with many leading airlines, including managing data protection and cyber risks.
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