Demand data is an essential for forward planning and travel agency incentive scheme management, but with patchy reliability and recent court-imposed restrictions airlines are having to review their demand intelligence strategy, writes Oliver Wyman partner Stefano Sala
Airlines need reliable, detailed, comprehensive and up to date demand data to plan and control their business. This data can be extremely expensive and its reliability is often patchy. Some attempts have been made to find alternative solutions to these problems, but recent legal developments may put a serious question mark on the future viability of these approaches.
One of these demand data sources is MIDT, which gives granular booking and travel agency sales data and is gathered by GDSs. Another is BSP data, which isairline ticket information sourced from IATA during the billing and settlement process. Both MIDT and BSP have their own peculiarities.
MIDT is good for future planning because it gives detailedbooking information. But it is costly and airlines can pay millions of dollars per year forlarge data sets. Perhaps more importantly, MIDT does not include direct sales and the increasing popularity of this cost-effective channel means the market coverage of MIDT data is getting less and less comprehensive.
Like MIDT, BSP also excludes direct sales, but instead of looking forward it reflects flown bookings and contains extremely detailed revenue data. It stems from competitively sensitive data needed for the internal workings of IATA. This means its commercial availability has been the subject of much debate. This further intensified when IATA began to market a BSP-based product at a lower price than MIDT, although it is also less precise.
DATA USE
The main airline activities which need demand data are network planning and sales. Strictly speaking, network planning does not need the whole wealth of data provided by MIDT, as it is mostly concerned with passenger volumes on given city pairs and the itineraries they fly. However, the sales department needs travel agent codes to manage trade incentive schemes, fromcommissions, to kick-backs, targeted promotions, super-commissions and so on. Therefore it relies on the detail of BSP and MIDT. And, while many incentive scheme elements are past-oriented and can be managed via the IATA BSP data, the planning of future schemes relies fairly heavily on the booking performance of the agents, identified by their codes in the MIDT.
In May the European Commissionruled that IATA should mask the identity of travel agents and corporate clients in all BSP data for European transactions. A few weeks later, the arbitration court of the International Chamber of Commerce effectively blocked IATA from using Amadeus ticketing information in its BSP-based products and ordered it to use this information exclusively for the "orderly BSP operations".
While this is still mostly an EU-specific issue, Sabre also filed a similar case against IATA, due to be discussed in court in Canada "very soon".
Why is this relevant? First of all, as discussed, MIDT is expensive. As competition to the MIDT products decreases, the choice of what data airlines can use gets narrower and possibly even more expensive.
Additionally, this happens as the information contained in the MIDT also decreases, and airlines would be justified in questioning whether they are still getting value for money. Interestingly, this gives a new "lease of life" to MIDT data, which, despite the progressive shrinking of its market coverage, is confirmed as the only reliable source of demand data - still.
A broader, more significant issue is the need to redesign the relationship between airlines and travel agencies in Europe, as some of data is simply not available following these latest rulings. The approach of the largest airlines seems to be quite muscular. As the representative of one airline put it: "If they do not provide us with the data, we do not give them the incentives." However, it is difficult to see how this can be applied to markets where the airline does not have a strong market share.
The time seems to have arrived for airlines to rethink some of their operations: up to now, airlines were simply "supposed" to have MIDT data. In the words of one of our clients, "it's like a beer in the fridge: it has to be there".
The two rulings should incentivise airlines to act, exploring other ways to achieve the same goal with lower costs (and fewer legal issues). This could involve alternative data sources, such asticket control data which helps track agency ticket issuance, or process redesign. A possibility we are analysing in some detail is the re-definition of incentive systems in a way which allows an airline to infer relevant sales and market share trends without the need for much extra information. And in these days, if anything can be done cheaper, it should.
For more on the latest developments in data warehousing see our recent marketing special report at:flightglobal.com/marketing
Source: Airline Business
