7th Apr 2022
- Airlines are accelerating their digital adoption
- Data analytics refine air travel offerings
- Technology is helping airlines replace the travel agent and improve customer booking journeys
But as the saying goes, that which doesn’t kill you makes you stronger. Forced to reassess business models and take stock of their revenue streams, airlines seized the opportunity to advance digital transformation and take advantage of the edge offered by data analytics, artificial intelligence (AI), and contactless technologies.
“Every CEO that I speak to agrees about accelerating digital strategies,” says Dee Waddell, managing director for the Travel and Transportation industry at IBM. “Many of them see this as a gamechanger during COVID-19, to position themselves to take advantage of new digital technologies coming out during the recovery.”3 Here are some of the ways that tech is helping airlines and airline stocks to bounce back.
Optimizing offerings and operations
Airlines are connecting existing data, tapping into new sources like social media chatter and partner data, and applying machine learning (ML) analytics to extract deeper insights. With this new visibility into customers and markets, airliners are able to better understand what travelers are looking for and refine their offerings accordingly.
Airlines that leverage customer data are well placed to meet demand for personalized products and marketing messages. For example, an airline might suggest a beach holiday in Spain to a family that flew to a villa in Greece last year, but recommend a historical tour of Malta to a couple who enjoyed a city break in Athens, even though both customers took the same flight to Greece.
With air travel still shaken up by the pandemic, McKinsey analysts recommend that airlines apply data to increase efficiency, cut costs, and optimize operations4. Business decisions that could be based on data insights include:
- Reconfiguring cabin layouts, as business travel remains depressed but demand for premium-leisure rises;
- Rethinking destinations from long-haul to short-haul, and shifting away from business-friendly “hub and spoke” routes towards point to point flights;
- Reassessing flight frequencies, replacing schedules that have smaller planes flying more often with larger places flying less often;
- Adjusting pricing to make up for the loss of profitable business flights, without putting off budget-conscious leisure passengers.
For example, Athens International Airport is implementing the ICARUS project, which uses descriptive and predictive analytics to analyze challenges like flight delay prediction, capacity modeling, airport traffic forecasting, and slot allocation. It reports that “data analytics has allowed it to discover hidden patterns and implicit relations between operations and scheduling.”5
Athens is also trialing ML analytics for in-flight food and drink and duty-free buying preferences, so airlines can optimize the items they bring on board for each flight, and pinpoint the bundles and discounts that drive the most revenue6.
Owning the customer journey
The pandemic coincided with the near-death of the travel agent. Accustomed to ecommerce for everything, today’s travelers expect to book their own vacations. Airlines that provide transparent cancellation and rescheduling policies, easy to understand pricing, and clear options for layovers and connecting flights own the customer purchase journey, and reap the benefits in the form of more first party data.
Leading airlines go a step further, suggesting accommodation, ground transportation, local tour guides, and don’t-miss activities and attractions at the traveler’s destination. In this way, they offer customers a streamlined booking experience in place of a disconnected planning process, while also creating new and profitable travel partnerships.
They also need to keep travelers informed about changes to their flights, flying conditions, entry requirements at their destination, and more. Airlines are fielding chatbots to answer customer questions, offering self-service customer portals, and beginning to embrace automated data sharing with travel partners.
For example, PLAY, an Icelandic carrier, adopted travel startup Plan3 to manage delays and improve passenger experience during disruptions such as volcanic eruptions, which can frequently interrupt air traffic in Iceland7.
Reassuring travelers about health and safety
The more that airlines raise hygiene standards, the more confident travelers feel about booking flights. For example, Qatar Airways planes implemented a UV cabin system that kills pathogens, and air filtration systems with HEPA filters to remove particles from recirculated air8.
Airlines and airports are rapidly rolling out contactless check in and boarding experiences, with 64% of airports and 82% of airlines saying they aim to introduce self-boarding gates by 20239. Passengers can scan digital boarding passes stored on their smartphones, confirm their identity at smart security cameras, have their hand baggage checked by security bots, and use biometric passports to pass border control.
Technology is also surfacing fast, efficient ways for travelers to store and prove their health status, so everyone can feel reassured they aren’t traveling with a super-spreader. International digital health passports store data about the bearer’s vaccination status, travel insurance coverage, covid test results, and more10. Richard Makerson, CEO and a co-founder of BlueFletch, speculates that “wearables could contain digital health records, travel itineraries, and recent health statistics to enable a “fast pass” type of experience.”11
Contactless shouldn’t end with boarding. Airlines are developing apps for passengers to order duty free and transmit their meal and refreshment choices while onboard. Singapore airlines launched an app that converts the traveler’s smartphone into a remote control for in-flight entertainment, removing the need for passengers to touch a high-use shared screen12.
Travel stocks can rebound, with a little help from technology
Airlines that have weathered the COVID-19 storm, accelerated digital transformation, and are adopting technology to increase efficiency, improve market understanding, and attract travelers, could be appealing for investors considering which travel stocks to buy.
In the words of Scott Kirby, CEO of United Airlines, “We always had supreme confidence in the ultimate recovery. And our view was that technology was going to be the road to restructure the airline and create a better customer experience.13”
Like cruise stocks, hotel stocks, and other travel stocks, airline stocks have suffered greatly from COVID-19. But for investors who like to speculate, the best airline stocks could offer the chance to turn a profit before the sector (hopefully) returns to its previous heights.
For investors who feel nervous about choosing the stocks for their portfolio, investing in an airlines ETF, aviation ETF, or even a travel ETF like CRUZ, from Defiance ETFs, is a way to spread your investment across a number of promising travel and airline stocks in a single purchase, thereby mitigating your exposure associated with the concentration risk that comes with buying just one or two stocks.
For current performance and holdings, please visit defianceetfs.com/CRUZ
1 “Back to the future? Airline sector poised for change post-COVID-19” April 2, 2021 https://www.mckinsey.com/industries/travel-logistics-and-infrastructure/our-insights/back-to-the-future-airline-sector-poised-for-change-post-covid-19
2 “Will airline hubs recover from COVID-19?” November 5, 2020 https://www.mckinsey.com/industries/travel-logistics-and-infrastructure/our-insights/will-airline-hubs-recover-from-covid-19
3 “Contactless travel has arrived: from pandemic experimentation to long-term innovation” May 18, 2021 https://www.ibm.com/blogs/industries/contactless-travel-airlines-airports-pandemic-customer-experience/
4 “Back to the future? Airline sector poised for change post-COVID-19” April 2, 2021 https://www.mckinsey.com/industries/travel-logistics-and-infrastructure/our-insights/back-to-the-future-airline-sector-poised-for-change-post-covid-19
5 “9 travel tech startups that can accelerate post-COVID-19 recovery for airlines and airports” June 2021 https://www.futuretravelexperience.com/2021/06/9-travel-tech-startups-that-can-accelerate-post-covid-19-recovery-for-airlines-and-airports/
6 “9 travel tech startups that can accelerate post-COVID-19 recovery for airlines and airports” June 2021 https://www.futuretravelexperience.com/2021/06/9-travel-tech-startups-that-can-accelerate-post-covid-19-recovery-for-airlines-and-airports/
7 “9 travel tech startups that can accelerate post-COVID-19 recovery for airlines and airports” June 2021 https://www.futuretravelexperience.com/2021/05/new-startup-carrier-play-adopts-plan3s-passenger-disruption-tool/
8 “5 pandemic tech innovations that will change travel forever” November 3, 2021 https://www.nationalgeographic.com/travel/article/5-pandemic-tech-innovations-that-will-change-travel-forever
9 “Contactless travel has arrived: from pandemic experimentation to long-term innovation” May 18, 2021 https://www.ibm.com/blogs/industries/contactless-travel-airlines-airports-pandemic-customer-experience/
10 “5 Technologies for Travel and Tourism Industry in Post-COVID Era” March 15, 2021 https://www.digiteum.com/technologies-travel-tourism/
11 “Proactive tech strategies for airlines to succeed after COVID-19” April 5, 2021 https://www.fastcompany.com/90633012/proactive-tech-strategies-for-airlines-to-succeed-after-covid-19
12 “How Singapore Airlines Uses Tech to Transform Each Step of the Traveler Journey” April 27, 2021 https://skift.com/2021/04/27/singapore-airlines-using-technology-transform-traveler-journey-covid-19/
13 “Contactless travel has arrived: from pandemic experimentation to long-term innovation” May 18, 2021 https://www.ibm.com/blogs/industries/contactless-travel-airlines-airports-pandemic-customer-experience/