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Insights / Aviation

Leadership insights on digital ancillary revenue recovery

August 27, 2021
About the author Kian T. GouldKian T. Gould
CEO & Founder AOE, Chairman Omnevo

5 Reasons Why Digitalization is Aviation’s Best Route to Revenue Recovery

From major FSCs to small LCCs, digitalization provides the most effective, low-cost path to new levels of operational efficiency and revenue recovery to all airlines. Kian Gould, Chairman of digital revenue innovators Omnevo, explains 5 reasons why.

Let’s start on the bottom line: any airline – including everything from flagship FSCs to small regional LCCs – can now cost-effectively digitalize their attack on the recovering market and seize the digital route to recovery. Let me explain why.

Digitalization - A low-cost solution to a high-cost problem

Omnevo, created from the merger of AOE’s multi-award-winning aviation e-commerce solutions and supply-chain and in-flight expert SHIFTEO, was born out of crisis and was specifically created to give all airlines a viable, low entry cost, digital end-to-end solution for revenue recovery in F&B, Retail and Experiences, including omnichannel commerce, buy-on-board and supply-chain management. We spent most of 2020 merging our two operations into one company remotely to provide a new model for operators to respond as the recovery takes shape.The crisis changed everything and made traditional aviation revenue models even more unstable, so we’ve had to think differently, work differently, become more agile and adaptable in creating solutions that reach the pain points that the aviation sector is facing.

Some airlines, such as premium FSCs, might look to adopt a fully comprehensive omnichannel model but, for most airlines, the key is the flexibility to tailor a digital model to their needs, starting small and scaling fast. They can digitalize their priority issues first and have the future-proofed control option to expand where and when they wish.

Of course, the harsh reality is that many airlines feel in no position to invest right now, so we’ve also developed a unique subscription and revenue-share based approach that enables them to develop their digital path with minimized risk – a low cost solution to a high cost problem. On the bottom line, the investment cost is no longer a barrier to airlines increasing their ancillary revenue streams and becoming digital revenue leaders.

Your customers want you to digitalize

The crisis has changed many things but not Rule No.1; listen to your customer. They increasingly expect a high quality, reliable digital experience. Any operator ignoring that will face an even tougher recovery challenge. The crisis accelerated digital living by a decade in less than a year, creating powerful shifts in what passengers will expect from their travel experience. They expect hugely expanded choice within seamless, sophisticated, personalized digital experiences in everything from grocery orders to configuring their new car – and these experiences are no longer exceptional, they are embedded in daily life.

Airlines must understand that they’re competing with those digital experiences in getting the customer’s attention and persuading them to spend time and money; they’re certainly not a captive audience. Consumers are actually surprised when an operator or brand fails to provide a coherent digital experience. Pioneering airlines and airports – such as Singapore Airlines and Frankfurt and Heathrow airports – have already digitalized and have proven to deliver far-greater engagement, stronger loyalty and much higher revenue, and that pattern continued even in the midst of the crisis. They’ve radically extended the window of opportunity (customers don’t even need to fly) and strengthened their visibility and power as brands, enhancing their long-term revenue potential.

Traditional ancillary revenue models cannot adapt to the post-COVID climate

Traditional revenue models are already suffering the burden of declining conversion, low spend and back-end inefficiencies and simply do not have the capacity to adapt to the customer’s needs. They cannot deliver core elements such as extensive, relevant product and brand choices, personalization, 24/7 access, pre-order selection, and delivery and collection services etc. and this will be a heavy burden on airline performance in the recovery phase.

 As travelers return, the contrast in their online experiences versus their travel experience might well feel abruptly different, provoking frustration, confusion, and drive them even further away from the offer. Also, don’t forget, this is all on top of the impact of the already disruptive COVID-driven changes in the passenger journey, affecting both passenger mindset and the capacity for airlines to operate their inflight offers.

Digitalization delivers operational gains for FSCs and LCCs

Although many airline managers are aware of the capacity of digitalization to create that quality of customer experience they’re often surprised by its potential for new efficiencies and cost saving – including lower overheads, better forecasting, less waste and less weight - while actually selling much more. FSCs can adopt a digital path that includes luxury offerings, premium positioning and brand perception while LCCs and small airlines can focus on selling more and more efficiently; and both gain significant operational efficiencies.

The on-demand consumption model means you’re loading onboard only items that will actually be consumed. Transporting tons of unsold or unused products as your most ‘frequent flyers’ cannot be part of any credible sustainability or ESG strategy!  On one LCC airline partner, for example, our pre-order F&B solution enabled a 30-minutes improvement in crew time; that’s a huge opportunity for crew to enhance the passenger experience and sell more on-board.

The most effective first step to digitalization

Our team contains extensive experience within airline operations and logistics, so we truly understand the challenges faced right now but it’s crucial that airlines shift their focus above survival and look ahead. In the challenge to revolutionize the passenger experience and drive revenue, pre-order is the single most critical element; whether it’s luxury goods on-board an FSC or sandwiches on an LCC, give them new options and choices designed around their needs and they will spend so much more. Spend per head can soar well ahead of the pace of traffic recovery. It’s readily implemented. All our solutions are modular, fully-integrated, work out-of-the-box and are adjustable to any existing software regardless of whether we serve e-commerce, ePoS, or logistics and operations.

Already encountering the most turbulent phase in its history and the prospect of fierce competition in the recovery phase, the aviation sector has the added pressure of seismic shifts in customer behavior. It’s a perfect storm, but there is a safe revenue path through it. The customer is increasingly living in a digital world – the world’s airlines urgently need to join them.

Aviation

Press release: Omnevo and Fraport extend long-term partnership by 5 more years

Frankfurt, July 14th, 2021 - Omnevo, leading provider of revenue-increasing digital platform solutions for airports and airlines and part of the AOE Group, and Fraport AG, owner and operator of Germany's largest airport, announced today that Frankfurt Airport goes live with the latest advanced version of Omnevo's award-winning omnichannel e-commerce solution. Additionally, the two companies announced that they have extended their long-term partnership for another five years to further develop the digitalization of the airport's range of products and services for the almost 70 million passengers (before COVID-19) who travel through Frankfurt Airport each year. With go-live, the existing digital solution platform, which Omnevo’s parent company (AOE) had originally developed for Fraport, was migrated to the latest Omnevo product version. Through its original partnership with AOE Fraport utilized the OM³ digital platform (now known as Omnevo) to become the world’s first omnichannel airport focused entirely on omnichannel both before and, especially, during the pandemic. The newly enhanced Omnevo cloud solution enables the operation of a complete airport marketplace solution for all travel retail sales at a fraction of the costs previously required for such a leading ecosystem, creating new revenue opportunities for crisis-hit airports of any size. Thanks to the highly flexible SaaS solution, Fraport has also effectively future-proofed its digital strategy by integrating directly in the Omnevo product roadmap, enabling it to benefit from Omnevo’s strategy of continuous improvements to the solution.

Aviation

A personal perspective on leadership

The past year has been extraordinary in so many ways and, while the tragic impact on lives takes precedence, we’ve also had to deal with the huge changes in our working life too. As the crisis developed early last year, I was busy planning in my new role as CEO of Omnevo - AOE’s new specialist product division - positioned as a digital solution pioneer in the travel industry, launching in early 2021. As the crisis grew, this became the most challenging experience of my career, but I’ve been surprised to find that it’s also become one of the most instructive and rewarding experiences too. Creating and launching any new company is always a huge challenge but we suddenly faced extraordinary new barriers as the way we do business had to be transformed. Much of 2020 was spent planning the new company and today, still operates almost exclusively remotely. Many of us, including some of the founders, worked together for almost a year but have still not actually met in person! Yet we already operate successfully in a global network and are scaling and winning new business. Omnevo is a truly virtual organization; this is how we were born and that is how we thrive. In this short time, we’ve already made our mark on this industry, with a culturally diverse, agile and highly committed team working alongside customers of all sizes around the globe. We’re gaining a lot of attention because we are recognized as game changers - and that innovative spirit is integral to our team spirit. We are committed to being the digital challengers and innovators in the travel and mobility industry – an ethos drives us every day. And it’s working. But what is the glue behind this, what makes us successful? Why is it working and, in these bizarre working conditions, how did we manage to get the team so well and engage with our customers so quickly? I’m obviously proud of what we’ve achieved but I want to share my personal perspective on how we made this happen and hope that it will resonate with others in the industry - and, hopefully, help you with your management challenges too.