Nigel Howard, a partner at Covington & Burling, spoke to ABN about the two workshops at the upcoming T2RLEngage event and what delegates who attend them can expect. He said the change that is happening today in aviation retailing and distribution is among the most fundamental and exciting he has seen in his 25 years working in the sector.

“It’s one of the most interesting, probably one of most difficult periods, in my career in this space,” Howard said.  “This shift to offer order management systems is pretty dramatic and what makes it complicated is it’s not just a case of you moving yourself to a new system.

“It’s still being able to interact with all your alliance partners and all the other players in the ecosystem, some of whom are going to be on the old tech for some time. You have this problem of parallel systems or some form of translation engine that’s translating the messages from one system to another. And that is an almighty headache for airlines, most of whom have considerable legacy technology debt. They have to maintain these old systems and invest in the new system and so the risk of essentially paying twice for this function within your airline is a very real one.”

Howard added: “This is probably one of the most exciting times in my career in this space.

“It’s very interesting to see some of what these new systems can do in terms of retailing, thinking about how air travel and airlines are evolving to be retailers.

“You’ve got this captive audience, loyalty systems, relationships and engagements with customers. That not unique to airlines, but it’s certainly some of the deepest. And then the data that’s generated that’s very rich and tells us an awful lot about purchasing habits and people’s interests. The airlines are evolving from being transportation businesses first and foremost to being retailing businesses.”

Tech Purchasing

In tech contracting the main problem airlines have is they buy a single system but by the time they’ve implemented it, or before the contract has expired, it is out of date. That means airlines must build into contracts an expectation they are buying an evolution of capabilities and “not just a specific product or snapshot of that product today”.

“That’s probably the single biggest risk,” Howard says, “because airlines are essentially going back to the vendor and asking for the new system a couple of years later but by then they’re dependent and it gets very expensive. It’s important you are getting the improvements, making sure that you at least have the right to get future iterations of the product you’re using. We see a quite a large range of requirements from airlines. There’s some that just want pretty much the standard product and there’s others that have almost endless customisations and specific requirements. There’s a lot to be said for the community model of having essentially the same system across carriers. We certainly encourage our clients to think about that.”

Howard said technology transition is an ever-present challenge in the aviation sector and the move from legacy distribution to ‘offer, order’ is only just at the beginning.

(Interview continues below)

 

Airline workshops at T2RLEngage

Two airline workshops at this month’s T2RLEngage conference will provide delegates with expert legal advice on technology and distribution partnership contracting. The two two-hour sessions will take place from 4pm on September 18 ahead of the main two-day conference and before an opening reception for delegates.

 Legal expertise and insights in the two interactive sessions will be provided by leading global aviation sector law firm Covington & Burling. T2RLEngage is an annual forum for aviation, retail and technology firms to debate important changes taking place as the sector moves away from decades-old legacy technology.

Distribution Masterclass for Airline Technology Teams

Intelligent Contracting Through the Transition

Speakers:

Richard Clarke, chief executive T2RL

Steve Mossey, special counsel, Covington & Burling

Josh Gray, Special Counsel, Covington & Burling

“It’s like a continuum it’s always going to keep on evolving. There is an opportunity for some carriers to leapfrog from legacy and rethink their retailing as a whole. That is happening at some carriers, but it’s a really bold step because the systems available on ‘offer, order’ are still new and carry the risk of being an early adopter. There are multiple challenges.”

Although this latest tech transition is expected to take time, Howard is confident it will be smoother than the implementation if IATA’s of New Distribution Capability (NDC) data standard. A decade sounds a long time for a technology transition, but even today I’m still doing things now that I was doing 25 years ago. Things take a long time to shift in this industry. There’ll be less barriers with the transition to ‘offer, order’ than there were for NDC which has taken so long to be adopted because of other factors in the marketplace. The interests of intermediaries have played a big part of the slow adoption of NDC. That was an overriding factor that impacted NDC that you just won’t see with ‘offer, order’.

“’Offer, order’ just makes sense for everybody. It’s a question of it being complicated and time consuming, but there’s no big roadblocks other than technological. Within NDC there were technological roadblocks and vested interest in the status quo. That’s why we’re 15-plus years into the NDC process and it’s really only started to take off now.”

Data sharing

One area where there has been a “quantum shift” has been in the area of data sharing which modern retailing partnerships must allow for companies to work together.

“A lot of the restrictions today are actually systematic, it’s the computing between the intermediaries and the airlines that constrains some of that data sharing. That’s changing for the better. Obviously privacy and compliance with data transfer laws are table stakes, everybody has to do that so that, but I do think there’s been a quantum shift in that it used to be that no one paid much attention to data. It was shared somewhat and intermediaries, in particular, were very careful to not let a lot of information that they had shift to the airline side. There has been an overall shift to more sharing because everybody realises that all the different players can, in the aggregate, be better.

(Interview continues below)

Technology Masterclass at T2RLEngage

As the industry starts the transition to new technologies and commercial models, airlines need to manage technology contracts with flexibility and control for both incumbent and new providers, to ensure a smooth transition.

In a process likely to last many years, airlines must be able to run current systems alongside additional systems for a successful transition. This masterclass session will highlight key points around contracting and commercial processes for the transition.

 

Technology Masterclass For Airline Distribution Teams

Interactive Distribution Workshop

 

Speakers:

Ian Luck, President distribution, T2RL

Nigel Howard, Partner, Covington & Burling

 

Many airlines find themselves negotiating and managing increasingly complex distribution agreements, which often now cover traditional and new distribution arrangements, or soon will.

This masterclass session will provide top tips and practical advice on critical distribution issues and best practice approaches to managing distribution agreement lifecycles effectively.

“The worst position to be in the travel industry right now is to have just your own data and no one else’s, because then you’re definitely in a losing position. The best strategy going forward is sharing on a more holistic basis but making sure that in turn that you’re seeing access to data of the partners that you’re working with. There is a difference between operational data like a situation when your bag goes missing versus other type of behavioural information that someone might have.

“You should see plenty of sharing of the operational data and more staggered sharing of the behavioural information.”

Howard said the purpose of the workshops at T2RLEngage are to provide practical answers outside of any specific commercial or anti-trust considerations. “In my experience there is a great imbalance between the knowledge that exists on the side of the intermediaries’ legal teams and the distribution teams within airlines,” he says. “If you’re a GDS lawyer or you work for an OTA or one of the other players in the space, you’re doing these deals with travel service providers all the time so your knowledge base is very deep and rich.

“For most airlines it’s once every five years, so what we try and do with these workshops is create a level playing field, make sure there’s enough information on the airline side to make the conversations with the intermediaries constructive and move faster. The purpose of the programme is to provide public information about the kind of models that are in the marketplace. Airlines very often, like a lot of big organisations, have lots of processes and procedures and stakeholders”.

“A lot of the focus will be on how you get all the various different stakeholders within the airline to consider the options available and what the strategy should be for distribution and go through a change management process to be ready for dealing with the change,” he concluded.