Gautum Shekhar, senior vice president, regional head Asia Pacific and Middle East at IBS Software, explains why aviation traffic growth in the APAC region needs to be accompanied by an accelerated shift to digital
The airline industry is at a crossroads, where rising passenger demand and expectations are redefining operations.
The pressure to adapt is immense, particularly in regions like Asia Pacific (APAC), which is anticipated to witness the fastest growth in passenger traffic globally.
According to the International Air Transport Association (IATA), APAC airlines led global traffic growth in November 2024, contributing approximately 31.7% to the net increase in passenger traffic.
With such significant growth, airlines must invest not only in expanding fleets and routes but also in addressing the needs of the modern digital traveller.
The new consumer is digital-first
Digitalisation has become an intrinsic part of everyday life, accelerated by the pandemic.
Salesforce’s State of the Connected Customer report found that 81% of customers expect faster service as technology advances and 73% expect better personalisation. This is no different for travellers.
Today’s traveller has evolved from seeking mere transactional convenience to demanding personalised, experience-centric interactions.
Modern travellers expect seamless access across channels, the ability to bundle and unbundle journey components, and transparent information on travel restrictions and requirements.
These heightened expectations mirror the best-in-class retail experiences offered by digital giants like Amazon and Uber.
However, as the demand for personalised digital experiences grows, many airlines find themselves constrained by outdated legacy retailing systems.
These monolithic architectures and static content models prevent them from delivering the seamless experiences that today’s travellers expect. Addressing this gap requires a significant technological refresh.
Airline retail: beyond traditional models
Modern airline retail presents a unique opportunity to enhance the travel experience while unlocking significant new revenue streams.
According to updated McKinsey research conducted with the International Air Transport Association (IATA), the potential value of improved retailing techniques in the global airline industry could reach $45 billion by 2030—an increase from the previously estimated $40 billion.
To capture this opportunity, airlines can adopt strategies similar to leading digital retailers, leveraging passenger data to deliver personalised offerings.
By analysing customer preferences, browsing behaviour, and travel history, airlines can create highly customised experiences.
These might include tailored content such as movies, TV shows, music, and language settings, all designed to align with individual traveller tastes.
Airline retail extends beyond individualisation. Airlines can utilise booking trends, flight patterns, and even weather forecasts to enhance operational efficiency.
By analysing sales data, airlines can predict the demand for perishable goods on specific routes, reducing waste while boosting customer satisfaction.
Moreover, the retail experience can evolve to encompass the entire journey. From enabling customers to book specific car models with desired features at their destination to offering bundled holiday packages tailored to their preferences, the possibilities are vast.
Such innovations not only improve customer satisfaction but also diversify revenue sources, aiding the industry’s recovery.
Technology: the cornerstone of transformation
In December 2022, IATA launched the Modern Airline Retailing (MAR) initiative to support airlines’ focus on greater customer centricity and value creation, irrespective of the distribution channel and across multiple touchpoints throughout the customer journey.
The industry’s focus is now shifting from the traditional ticket sales mindset to a more multifaceted approach that encompasses aspects critical to customer centricity.
This includes more personalised offer creation, diversified and seamless payment transactions, and efficient order delivery.
The shift from traditional standards like IATCI to IATA’s ONE Order framework is a game changer for delivery and check-in processes.
By integrating these processes into retailing systems, airlines can streamline passenger processing and authorisation.
The ultimate goal? A future where airline apps replace physical check-in counters entirely, enabling automated background processing and on-the-spot ancillary purchases across airline partners.
This aligns with the broader principles of offers and orders (OOSD), which prioritise efficiency and customer-centricity.
However, transitioning to advanced airline retailing requires robust technological support.
A cloud-based, open architecture is essential to ensure the scalability and agility needed to meet modern demands.
Airlines must embrace AI/ML tools to personalise customer experiences dynamically, from curating tailored offers to predicting and preventing fraud during transactions.
Additionally, AI-powered chatbots can enhance productivity and streamline interactions across various touchpoints of the customer journey.
Dynamic pricing models and personalised loyalty offers can drive both engagement and profitability.
These advancements allow airlines to shift from transactional interactions to a holistic approach that puts the customer at the centre.
Data: the foundation of modern retailing
The cornerstone of effective airline retail lies in responsibly managing and leveraging passenger data.
With great power comes great responsibility; airlines must ensure robust data governance frameworks to protect customer information. Transparency in data usage fosters trust, which is critical to building long-term customer relationships.
When data is managed securely and ethically, it can fuel continuous innovation. From optimising retail offerings to enhancing in-flight services, airlines can leverage data to stay ahead of evolving consumer expectations while maintaining trust.
The future of airline retail
Balancing short-term gains with long-term value is crucial. While some airlines may choose to overhaul their legacy systems, others might build on existing technology to gain an early retail edge.
Regardless of the path chosen, the ultimate goal remains the same: delivering seamless, personalised experiences that cater to the modern traveller.
The path forward for airlines is clear. Embracing advanced retailing models and digitalisation will not only enhance customer satisfaction but also create a sustainable and profitable business model.
By prioritising personalisation and data security, airlines can build trust and foster loyalty, ensuring they remain competitive in an ever-evolving market.
In the APAC region and beyond, the next decade will be defined by those airlines that successfully transform into digital retailers.
By aligning their strategies with consumer expectations and investing in the right technologies, airlines can not only meet the needs of today’s digital travellers but also set the stage for a brighter, more resilient future.
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