On demand | Elevate 2022

INTERVIEW  •  DYNAMIC OFFER CREATION

More innovation. More modernization. More transformation. We have some special announcements to share with you about how the game is changing for ATPCO and the airline industry.

Tom: First time I got to greet you, I'm Tom Gregorson, Chief Strategy Officer. 

Actually, I want to just share a little bit. I've run six marathons, Jerry's run one, and for those that don't know me, I have been doing this for 25 years now in front of you talking about the ATPCO and what we're trying to do and it's really a pleasure to be back. 

There's one thing I was asked over and over last night… how is Fargo doing? So, my one tidbit for the day, over 600,000 passengers in Fargo this year year-to-date. They're 20% up year-to-date. They're on the road to recovery, just like we are back together, we're working together, moving the industry forward, so let's start us off. 

Alex: Very good. Thank you, Tom. 

So, boy, ATPCO’s story began over 60 years ago. Really started as the Airline Tariff Publishing Incorporated with four gigantic professional printing presses and in those days, all the tariffs would be printed and then shipped off to city ticket offices and travel agencies and that's the way the world worked. 

By 1978, all of that started to become electronic and it went from ATPCO updating about 100 pages a day to be able to start to manage millions of filings in a day. 

In fact, if you fast forward first by 2010, it turned into about a hundred million filings a day and by today, it's about 300 million and that's just what's in the database. 

When you look at the changes, the updates to those, because those can happen hourly, we have days in which we get 5 billion changes in a single day. So, it is truly impressive. 

I want to add a little story here. When I was a kid, I don't know how many people know, this my mother owned a travel agency. She was a travel agent. And there were days when school was off, and daycare didn't really exist back then, so my daycare consisted of her bringing me to the office, putting me in the back, and I got to play with the ATPCO books. 

Tom: Oh, that’s funny. 

Alex: The saber set and the line printer. So, that does explain a lot of my character traits. 

Tom: That does explain some stuff. 

Alex: To this day. We, another little known fact, we have actually continued to print all the way up until last year. 

We have finally sunsetted those printers, so if anybody needs space in Dulles, we have a lot of space available for a really good price for subletting because those machines were really, really big! 

But, in all seriousness, we kept everything that we printed. We kept at least one version of it. And earlier this year, the Library of Congress asked, and we donated over 1600 volumes of tariff books going all the way back to the 40s. 

So that they're now available in the Library of Congress for researchers, people that are interested in the history of the aviation industry and how it's changed over time, that has now become a public resource. 

Tom: Let's go on a tour next Thursday–everyone go down the Library of Congress and look at some tariff pages! 

Alex: But today, we are still the foundation of modern retailing and we are still committed to the dedicated success of the whole industry and we're continuing to develop innovative solutions that can anticipate where the market is going so we can support the ecosystem in the transformation that is going to be required to get there. 

So, whether you're an airline, you're a system, you’re a channel, a seller, our goal is to support your work so that you can provide the right offer, to the right customer, at the right time, in order to drive your business forward. 

So from creating the offer, to distributing the offer presenting the offer and publishing it, ATPCO has traditionally played a role in all of those historically and we're going to continue to play a role in the future. 

So given that our role is and our mission is to drive innovation and efficiencies in the industry, that's why we created, that's why ATPCO was created, we envision a future in which the industry can fundamentally move from filed fares to dynamic offers and from attributes to merchandising and attribute-based selling. 

So, we this year, created a long-range plan. This is the first time in the history of ATPCO in which we worked on a long-range plan in which our success and our goals are not based upon ATPCO things. 

Like typically companies have revenue or building specific products, our goals are industry goals and the first, and maybe most important one, is to drive the industry to 80% dynamic offers by 2026. 

Tom: Wow.

Alex: So, I'm not making a prediction that the industry will be at 80% by 2026 because then it's easy to say, “I don't believe that…it's not going to happen.” 

The question is: What can ATPCO do to help the industry foundationally be prepared so that 80% of offers in 2026 can be dynamically created? This is a fundamental shift in how ATPCO has historically been thinking about this. Our success has almost always been driven by features and capabilities and requests. Now, it is by industry outcomes. 

So, to achieve this vision, significant transformation and innovation is going to be required, not just by ATPCO, but by the entire industry. But we believe that we can help drive the industry by leveraging that transformation and our current content and technology that will help facilitate new content in evolving our standards changing how we do business to enable this future. 

So, what does that mean? 

Well, first off, you can't just say 80% of fares are dynamically created because there's a whole lot of other things that have to change in order for that to be successful. It means that 80% of indirect offers have to be constructed by the airline. So that means things like NDC really have to be successful. 

It means that presenting the offer really has to change. In some ways I think about this as a fundamental shift and maybe the third shift that I've seen in my lifetime. 

So, if we think back to the regulated era, the 1978 earlier, since prices were primarily regulated, most people purchased tickets based upon schedule and brand because the prices were essentially the same. 

So I chose my brand. I chose my schedule and during deregulation, now a huge increase in the number of fares available through ATCO, it fundamentally shifted from schedule-based searching to price-based searching. We see this third shift as the third fundamental change. It doesn't negate the other two…they're always going to be happening. 

In fact, today, many people still do schedule-based search because being there at the right time is more important than the price. It's never going to go away, just like there will be people where price is going to be the primary component, but we see a world in which you can do dynamic offers and attributes-based searching that is nearly impossible to do today. 

If I wanted to, say, do a lay-back seat with Wi-Fi, that was what is most important to me, my schedule can change, my prices. Today, you'd have to first pick dates. You'd have to do a schedule. Then, you'd have to do all of the fare searching, and then, you'd have to filter it for the few. 

So, how can we think about putting those attributes back into the core of search so the customers can pick exactly what they're looking for and give those indicators back to suppliers so that they can get better at curating their products to what customers are looking for? 

Then, finally, how can we do all of this in a way where service, settlement, and posting the offer is what we would call a no-touch world? That's the offer world, which is all of that work has been done up front and you don't need to think about it downbound. 

Tom, tell us about dynamic offers. 

Tom: So, why dynamic offers? Why are we so focused on that? It really is because we see that is one… there was the McKinsey study. It's 40 billion dollars of airline revenue. It's their high value to the airlines, but fundamentally, it changes the way that the world will work in order to be able to find, search, and relate to customized offers. 

It provides more value for your customers and sellers. They're better able to find the best product for them–better experiences from your customers. They'll say, “boy, I got really what I wanted to get from this offer.” It generates more loyalty–they'll come back and shop more and more if you show them the offers and the ability to fine-tune what they want to receive. 

And last, but not least, going back to the 40 billion dollars. It should generate higher yields for you because, many times, the customers want more than just the cheapest fare from A to B. They want something incremental on top. They want to be able to customize their offer and that will mean more revenues, more yields for the airline industry. So, that is why we we're very focused on that. 

And as Alex said, we at ATPCO, we're not here just to try to support you in your journey. Absolutely, we'll do that, but we're actually here to identify what are the key things that are bringing us forward and how do we enable those for the industry? 

So, we are making large bets on a lot of topics and saying these are things that really have to happen if we're going to evolve to this dynamic offers. The 80% of dynamic offers, let's put that in context. 

We really see that we will still have a large repository of filed fares, probably the same as we do today. The 80% comes from really all of the at-time of shopping transactions. The airlines are able to adjust the price or adjust what's in that product composition and be able to create more and more offers. 

So, they'll create hundreds of thousands more offers than we do today and that's why the 80% is unlocking all of that customization that can happen at the time of shopping that really delights the customers. We’ve got to do this in a lot of different ways. 

In order to be successful in this, we have to move from a rules-based system and incorporate more science-based. We need to be able to debundle product and price management, and we need to do a lot of steps that we're doing. We have identified what we can do to unlock those capabilities. 

So, if you're talking science-based, what data can we provide to the science to make sure that that works and operates better? If we're talking rules-based, how do we debundle some of the complexity of our current rule structure to make it more effective to be able to dynamically create it? Managing product and price, we have a key one that we’ve identified already this year that really will help enable that. 

We're introducing this today–airline order posting. This is something that we have worked with two major North American airlines on. It's in a POC right now, and one of their problem statements is they've been able to fine-tune their algorithms to adjust price. 

So, they were able to overlay a price of an ATPCO filed fare with the product composition, but they said, “that works great, but I still don't have a 100% order management system. I need to get that data into all of my other systems. I need to get that data, that adjusted fare, into my reissue process, which Jerry showed, into my refund process, into my fair management process, and even if we move fast-forward, if government filing is still required, how do I get that filed to the governments?” 

So, what we're allowing the airline to do is really adjust their price, send to ATPCO the order with the shopping context to say, “this is what was shopped.” 

We will create and put that in an ATPCO data format to make sure all of those downline processes continue to run and operate so they don't have to wait until they're completely up on 100% One Order, which may take several years. They can unlock that dynamic fare adjustment today, get all of their current servicing and functionality in place. Huge value. One, it creates what I call a playground for innovation. Now if you think about it, I still have filed fares. I still have a rules-based system. I can do my science-based to adjust the price. I can turn on and off as much of those as I want and you'll know that the ecosystem will still manufacture and flow. So, you can play with your adjustments as much as you want see, what's working what's not. If it's not working, go back to a filed fare base. Both of them will flow through it. 

So, it's a way for the airlines to explore how to innovate. Better customer experience and support the downline processes. It would be a tragedy if we did all this work to put in front of the customer a great shopping result of a great offer and they had to make a change or they had to make a refund and they say, “Well, sorry. Let me do that as a manual process or let me do some retrofitting and do something.” 

That would be a poor customer experience. This makes sure all those things still work. They still are still flowing through. Although the processes are still automated, and we still can have that, and the last, but not least, we really believe this process would really be a lowest cost implementation. 

Instead of having to do some one-off implementations into every single revenue accounting system, every single settlement system, every single reissue system, they can use this and allow the same data to flow that flows today. 

So, once again, simple concept. I'm adjusting the offer and adjusting the price at the time of shopping. I'm taking that, sending that to ATPCO, we will create it as an order posting process. So, once it's sold, I will create the order and post it into the into the ATPCO data set and make it flow all the way through. That is in a POC right now. 

If you are interested, as an airline or a system to get involved, dynamic offers, we will talk more about that and how you can get involved in that process. 

Alex: Very good. 

Tom: Back to you. 

Alex: Thank you. I think many of you had heard ATPCO had, for a few years, had a partnership with SITA building what we called NDC Exchange. 

This was, I think early on in a realization that there really wasn't a major third party company that was trying to do the work, the connectivity, between all the systems and the airlines to make this work on behalf of sellers. 

Well, let's fast forward to today, and I think IATA shows no less than 50 companies that are in this space. Two things to note. 

The first one is ATPCO is not really in the business of creating competitive products for areas because there's already a lot of competition. We really see ourselves as an industry utility, where maybe having a single player or collaboration among multiple players is a better outcome than pure competition. So, we believe that there is competition now in the NDC space. There's plenty of providers. 

The second is, when you saw that last slide, we have a goal of 80% indirect, which being computed by the airlines, given the speed that we were bringing airlines on to NDC exchange, if that was the only place that that could be done, we would never make our goal. And worse, because we are now competing with our ability to engage with systems and technology providers, became difficult because they saw us as a competitor. 

So, today, we're ready to announce two things. 

The first one is all of the work that we did on the platform is now available to you. If you are a system, if you're a technology provider, if you're an airline, especially an airline that may not have an NDC interface yet, at the end you'll see a place where you can go. You can indicate interest and we can share this with you to enable the ecosystem to go faster. 

Tom: Alex, how much is that going to cost them? I'm sure it's going to cost an arm and a leg. We invested a lot of money to build it. 

Alex: We get a lot of commentary about how expensive ATPCO is. The short answer is nothing. Remember, our goals are industry goals. They're not revenue goals. They're not ATPCO success goals. So, we want to drive 80% of indirect bookings. We think that this is a really good way to do it. 

The second is, I have been back in the industry, I was out of the airline industry, for I don't know…over a decade. I came back and it was amazing to me how little had actually changed. I was tilting at windmills with G2 back in the day, trying to do direct bookings and it was our friends at T2RL who kind of said it's about the same percentage as it is today. That will not cut. That will not make this work. It's not going to be the giant unlock that's going to drive value for all the players going forward. 

So, the second thing that we are doing is we are creating a Design Group that those that are involved in NDC, whether an airline, a system, or a technology provider, you can join this, and actually this is a first for ATPCO, you do not have to be an ATPCO customer or Community Participant. If you're a technology provider that does things in NDC, but you have never bought anything from us, that's okay. You can join. 

In all of the problems associated with NDC or the complaints that we hear, our goal is to start to build reference implementations inside of here to start to solve those things. So, things like nets, how do you handle those? How do you handle login? You don't want 400 airlines to have 400 different types of login systems. How do you handle a back-office integration? Does every Airline have to build their own back office integration to every major back office system? Doesn't make a lot of sense. 

So, thinking about reference implementations that the ecosystem can use rather than each person having to build their own is going to start to make a lot more sense and then, we can actually provide those back to IATA if it makes sense to put those back in standards, but at the very least, it creates a foundational platform for both suppliers and systems and technology providers to have a common understanding on how these things get implemented going forward. And for us to try and drive this to go faster. 

Presenting the offer, Tom. 

Tom: For presenting the offer, it does us no good to be able to create great offers, distribute great offers, if the customers can't find and realize what they're getting in this great offer. So, presenting the offer is a key enabler for creating great offers. You need to be able to present it accurately. We really think that's what's changing. 

As Alex mentioned in the very beginning, is moving away from just a schedule and fare-led search, but also introducing attribute-based searches and improved shopping processes. 

So, what we are introducing right now, and we actually have it out there, we have the standard attributes (for those that are on the standards say it's the appendix N) there's 16 attributes that we identified as an industry that are key attributes that are relevant to shoppers that they're looking for. We make sure we have all the data for all the airlines in those, so you can be able to search and find on those and we're putting those into the filters. 

We're actually working on what we call a “product catalog,” which, to me, is the next generation of that, which will actually allow the airlines to remove the management of price from the product. We're building product catalog, or product attributes if you will, that allows you to build building blocks, in order to be able to do those. That's in present the offer because it's not only a “create the offer thing” 

How do you build great offers with this product catalog, but you need to then expose that to the customer to say, “these are the things that you can now go find from an airline, from a service, and be able to search and find those.” 

So, we see that those really are going to evolve from just a filtering process on the search engine, to actually the airline or the customers asking for something, and it goes all the way into and communicate to the airline, and they can create the offers based on what they're asking, which will really change the way that works. 

The benefits of this are really clear, and we've done a lot of studies. If you put better presentation layers with videos, images, and product attributes, and the like, you get higher conversions. Customers can filter and find the products they want. They can see what they're going to get and be delighted in the experience. It's consistent and clear of what they're going to get. You don't have a bait and switch issue saying, “I thought I was going to get Wi-Fi and I didn't get it… what happened?” 

And last, but not least, once again, higher yield. The customers want to be able to find your stuff. Let them see it. Let them find it by using the attribute-based searches and the product catalog of the future. 

Last, but not least, and this is the one I think is the most easy to describe, but it's a huge transformation of where we're at today. In today's back-end processes, the settlement, servicing, reissuing, all those today, it's really a recalculation and every single touch point using the data. What we want to achieve as an industry is move all of that calculation up front. 

When we're creating the offer, we know all of the values, all the information that I need to do in order to be able to reissue, refund, settle the ticket based on all the stuff that how was created. 

For the airline, there will be better control in making sure the offers they’re creating are available to be serviced and settled properly, and using that information in order to create it, but it's not a trivial task. 

What we're doing here is we're working with our colleagues across the industry. We really believe that this is really an industry transformation that will take all of us together. So, we are working very closely with other industry organizations. We have an agreement right now with ARC, where we're moving our sales data exchange process onto their platform in order to create what I would call an order repository for the industry that will help this transformation move forward. 

We have recently signed an agreement with ACH (Airlines Clearing House). We actually are their tech provider and running their settlement platform on their behalf, and we're looking and just signed an MOU to commit together of “what are the next generation of industry transformations we should work on together?” and we're going to go together in order to unlock it. 

And last, but not least, we are working closely with IATA. We created an agreement paper of where we think we can better improve the standards and creation in the IATA framework, and what role we should take, what roles they can take, and now we're into the product area. What products can we do to unlock some of this capability? The one that we're starting with is taxes. 

We drafted a white paper of taxes of 13 gaps in the overall tax process, from beginning to end, that makes tax calculation inaccurate. There's a discrepancy. There's a dispute. We're going to try to close those 13 gaps and move as much of that information to create 100% percent automation of tax up front in the process, working hand-in-hand with IATA on that process. This will really help reduce industry spend on all that back-end processing. 

It, to me, for many, many years as an airline guy, I call it “the big revenue leakage,” that you start to out with what you think you're going to get this, and you end up receiving something totally different, closes that completely. It'll expedite industry utilities. We see that there'll be utilities that we will provide, the rest of the industry can provide, that will lower your barrier to move. 

Last, but not least, it'll reduce the cost for tax regulatory compliance and my goal before I walk off the stage for the last time in my career, which is still several years, I want to be able to say we got 100% automation of tax upfront. No disputes, no inaccuracies because taxes are something we just must pay and we shouldn't be doing all this discrepancies around it. With that, I'm turning back over to Alex. 

Alex: Thank you. 

Tom: Take us home. 

Alex: So in fact, I think taxes are what, like 25% of all of the… 

Tom: They’re 30% of the rejections that go in interline settlements are tax-based. More than fares themselves. Auto pricing of fares is better than auto pricing of taxes in the industry. 

Alex: It's just crazy given the complexity of each one. 

So, as you've seen, the first step in innovation are the areas on the life cycle. All of it is to that goal of getting to 80% of fares in the market dynamically created by 2026.  

Now, we said a lot up here today. I realize we talked about some POCs, we talked about some new design groups. If you're interested in getting involved, this is the best way to do it. 

So, we have our Dynamic Offers Design Team, our NDC Solutions, our new NDC Solutions Design Team, and, finally, if you're interested in the areas that we're going to start tackling on taxes, you can actually download the white paper that Tom referenced earlier. All of this is available at atpco.net for your perusal down the road. 

In addition, we also have four active Councils and more than eight Design Teams working on other challenges and solutions for transforming the industry. So, as Tom said, even things like product catalog, we've already put out requests for comment on it. So we're really interested in hearing back from you as we start down this transformation journey to 80% dynamic offers by 2026. 

Tom: I think it's an amazing thing and we can't do it alone. We really want you all to be involved. We all need to do it together, but you have few opportunities in life to actually change the way the world is going to work, and I think we're at the start of that. We're going to change the way that the world works and shops and behaves with dynamic offers and orders. So, really, get involved. Sign up. Participate in it, and we'll hear more and more of our next innovations that we're rolling out. 

Alex: So, thank you, and I just want a commitment that ATPCO is not the old ATPCO. 

This is the new ATPCO that is here to help the industry, to ensure that we get a clean transformation, and that there's interoperability between the old and the new to make sure that this works for everybody. 

Thank you.

Tom: Thank you.