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Airlines Eye Tech Partners to Tap Customer Data

The goal: Identify and market to high-value customers.

Rob Wilson / Shutterstock

Airlines are seeking to work more closely with travel technology companies to mine customer data for ways to generate more revenue beyond ticket sales, emulating other industries already using such methods.

While retailers have implemented ever more ingenious ways to make better use of customer data, both online and offline, many airlines have been slower off the mark, only recently looking to harvest more profitably the wealth of information provided by their frequent-flyer loyalty schemes.

“Revenue from the ticket is barely covering costs these days,” Uwe Klenovsky, Commercial Director of Thomas Cook Airlines, said at the CAPA World Aviation Summit in Antwerp, Belgium.

The International Air Transport Association (IATA) forecasts that global airlines will achieve a net profit margin of only 2.4 percent this year, higher than 2013 but a long way from the 10 percent margins in the 1960s.

A historically tense relationship with global distribution service (GDS) companies could take a back seat as airlines recognize the potential goldmine of information that the tech know-how of such businesses can provide.

Airlines have been reluctant to publish all fares on all distribution channels, often keeping the lowest prices on their own websites, rather than eroding margins further by paying their GDS partners such as Amadeus, Travelport and Sabre to market them.

Ryanair Chief Executive Michael O’Leary once vowed never to work with them but has signed GDS deals this year to target higher-spending corporate customers as part of a wider strategy to increase customer numbers to 114 million passengers by 2019, from 82 million last year.

Like others in the industry, he wants to be able to send out targeted offers depending on a passenger’s travel habits, such as discounts on particular routes and days, rather than the blanket advertising emails sent out in the past.

While traditional retailers are able to glean information from consumers who shop weekly, or even daily, airlines need help to gain a fuller picture of the habits and spending of customers for whom air travel is a relatively infrequent activity.

Sabre can store customer transactions for three years, equating to about 1,000 pieces of data per customer, but says that airlines have also been requesting information on customers’ social media profiles and activity.

“We have to help them extract that and use it,” said Stan Boyer of Sabre Airline Solutions.

Amadeus, which powers flight search systems for many airlines and comparison sites, sees an opportunity to expand into hotel bookings and intelligence on travel shopping, which can help airlines to maximize customer spending.

For Ethiopian Airlines, better use of customer data will allow the company to track higher-spending customers more closely and encourage them to spend more.

“We want to identify the high-value customers, not only on the ground but in the air,” Chief Executive Tewolde Gebremariam told Reuters on the sidelines of the Antwerp summit.

Data shows that airline customers are often concerned only with price when booking tickets but are more inclined to spend freely once they reach the airport and board their flights, said Amadeus’s head of distribution marketing, Decius Valmorbida, offering the chance for targeted marketing of anything from food and drink to consumer products.

Part of the problem is that airlines have too long thought in terms of cost and revenue per seat, rather than per customer.

“To manage on a per customer basis will be a huge challenge,” Air China executive Zhihang Chi said. “Anyone who can help me provide a good experience for the customer is welcome.”

(Additional reporting by Eric Auchard in Barcelona; Editing by David Goodman)

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