Welcome to Travel Again presents the weekly travel roundup covering the headwinds and tailwinds impacting the business of travel. Please welcome our hosts Mike McCormick and Ed Silver. Hello Mike. Welcome back. Good to be back as always. Season 3, episode 6. Woo! We are cooking with gas this season. Yep, we sure are. It’s rolling rolling along. And once again, we’re here. We are and can’t believe how quickly the year is going by. What is it, May? It’s May already. Holy smokes.
So, Mike, today we are going to cover the news as always. And man, there’s a lot of travel news. So, hold on to your hat as we cover that. Navigating it all, figuring out how what impact it’s having will be our main topic today. And we’ll be able to ask our guest how the airlines are working their way through it. Today’s guest is another major player in the industry. We don’t often on the show get to do a deep dive into the business side of airlines. So, today, that’s exactly what we’ll do. Mike, yeah, a few things going on, like tariffs, Transat Canada slowdown, travel bans, inbound travel slowing, guidance changing. Lot lot of things, little bit going on in the industry. Lot going in the industry. Yep. As always.
All right Mike, why don’t we bust right into the first article? And actually I have two articles that kind of summarize a bit of what’s going on. So the first article is actually direct from American Airlines. And there have been all kinds of industry rumors and media reports about American’s discussions with JetBlue. And so American came out with their own statement. I’m going to put it up on the screen. Maybe you could give some context. American shared a letter that was sent to its team members from its vice chair and chief strategy officer. So Mike, I’ll throw that up on the screen and why don’t you tell us what this means?
Well, first off, just want to say hats off to their PR folks for like actually just doing this because rather than have things go out and like you said rumors, etc., etc. about the relationship where it’s going between American and JetBlue, you might as well take the narrative into your own hands. And that’s exactly what they did. It’s interesting because the history of this goes back to when they formed that Northeast Alliance trying to get approval, bring things closer together. And at the time they got denied after a lot of time and money spent in court fighting through trying to get approvals for it and then ultimately it was they were told that it was non-competitive or uncompetitive and bad for the industry or bad for consumers. I think first off that was a huge mistake. I didn’t believe that at all. I thought the alliance was good for both airlines, good for consumers. The days of like individual airlines like a JetBlue being able to compete… the competition isn’t like you’re not eliminating competition between American and JetBlue. You’re actually forming a bigger competitor to Delta and United and a more robust one for consumers, which gives them, along with Southwest, more viable options. It was actually would have would have helped JetBlue be more successful and be able to compete more aggressively than it was the other and I thought it was just a huge mistake.
So then it’s compounded by the fact that that goes away. Then they come back from all that like in more recent times with an administration here that is at least verbally saying they’re less regulation less oversight. So then American and JetBlue said well let’s take maybe float this again. Is there an opportunity to bring this back and maybe have a chance to re-engage? They’ve tried and it looks like they couldn’t between themselves come up with something that would work for both of them. American’s a different airline now, so it’s JetBlue in a sense, right? Things have changed since those days when they were putting that alliance together. So, I think we’re back to a situation where, okay, that didn’t work. So, JetBlue, look, they’re trying to survive. So then they’re reportedly gone and they said Marty St. George said we’re talking to a bigger partner, a potential partner. Of course, everyone immediately figures it’s United and thus your next article. But it is like an interesting kind of dynamics here that really have changed ultimately changed the outcome and maybe the future for a JetBlue through no fault of their own but just circumstances in terms of regulation and the environment competitively and otherwise. It is a shame that American and JetBlue couldn’t put it together though. I go back that originally. Had that been approved, I think it would have been good for the consumer and created a more robust network in the Northeast and you’d have three strong networks competing for customers in the Northeast. But here we are.
So this article, Mike, that I just pulled up is just a rumor. I could not find anywhere that it has been confirmed by either airline, but it is this is being reported by Reuters with a source that says indeed the new partnership will be with United Airlines. Now, at the year end when we look back and do our year in review and we come up with our best quotes of the year, I’m going to read the one I’m gonna nominate at least for one of those positions. I know I know where you’re going. I love this. So United CEO Scott Kirby said that while the company would like to have a greater presence in New York, it was not ready to deal with all the regulatory hurdles. He said, I quote, “I would like to have a presence on the other side of the river at JFK. But man, all the headache, all the brain damage of buying a whole airline to get there, that’s a lot to do.” I thought it was really terrific, really candid quote. Clearly been around and knows of the mergers that have happened over the years that they do result in a lot of brain damage to get them done. Some get done better than others, but ultimately, here we are. And with the Delta Northwest combination, the United Continental combination, the American America West US Airways roll up of those, it is… I mean even Alaska and Virgin, they will everyone will tell you it’s a lot of brain damage. It is hard but I just thought it was a great quote and it kind of says like they on the surface they’re saying they’re going to create maybe some kind of put a toe in the water, do some alignment, although the article said that they were kind of denying, saying that they’re not looking at pricing or scheduling or anything that’s going to… So, I don’t know what it would do other than maybe have some sort of loyalty program tie in, which is a whole different animal and could make more sense than some of the other harder things to do.
One final note on this, Mike, that quote at the end of the American letter that they sent out, there’s a paragraph at the end that says, “One final note, in case you see it in the news, we filed a lawsuit against JetBlue today to recover money owed to American following the unwinding of the NEA.” So, a brilliant letter all across the board, but what’s with the lawsuit? Is there money left out? No, I mean look, they both incurred a lot of cost, right? And as you would, between again all the testifying they had to do, they hire experts they did. I mean, we were very close to all that and there is a lot of cost and opportunity cost of just resources. I thought it was pretty in the category of you can’t make this up. The fact that they were they’re kind of suing them for recovery of cost was a bit unusual. It tells you that the relationship clearly is broken down between American and JetBlue. And I love how they just answered at the end of the note: One final note. By the way, right.
All right, Mike. Moving on. Our next series of articles is about airline and travel disruption. Let’s cover the first article which is from The New York Times. Widespread power outages hits Spain and Portugal. Let me throw that one up for you to look at. The blackout hit critical infrastructure like airports, caused transportation disruptions across the two countries and the cause of the outage was unclear. This article is from a few days ago, but I then did a fact check because there was all kinds of rumors about what was going on here. Mike, Spain is still investigating the cause of the blackout. Apparently, at one point they thought solar flares and the waves that solar flares cause was to blame, but that has so far been debunked. Solar flares are not to blame. So, any any insight here into this disruption, Mike?
Well, not not any more than what you’ve studied and read and are basically reporting back to us on. But I think to me this one and the next article we’re going to talk about it just points to how ultimately in a sense how fragile our ecosystem is. I mean we’re everybody globally is so dependent upon our global aviation system in so many ways as we know. But environmentally there’s so many things that do have an impact and can on any given day and it’s just what we know. It’s what we all have to live with. But clearly, we there continues to be these types of disruptions and that the next article I think you’re going to bring up is about everything that’s been happening in Newark and in our backyard basically.
Yeah. So, let’s let’s just bust right into that. 5-hour delays, diverted flights. United Airlines has cut I think 30 flights out of the hub. Staffing shortages are apparently to blame. Runway closures are also included. What is going on in Newark, Mike? Well, again, I think it’s what it’s what we’re seeing and something that we’ve known, we’ve lobbied for, we’ve worked on for man, how many years now? I mean going on 15 years of trying to get funds put into invested into our whole infrastructure that we rely on. I mean everything from air traffic control which is the technology’s been outdated for 20 years. I mean let’s be real. I mean, we’re way beyond outdated in terms of what needs to be done and the investments that need to be made and some that have been made and unfortunately squandered because we haven’t gotten the result we’re looking for. So, we’ve got those problems. We’ve got staffing issues, got training. And this is again back to a whole having we don’t have a national transportation aviation policy and plan. Because we don’t have those things in place, because we’re not making the proper investments and getting the results in terms of updated technology… technology exists, the capabilities are there.
It’s frustrating to watch and see because again the get commerce, safety, guarding against terrorism, all the things we need to do to protect this fragile ecosystem is so important and yet it seems to get a lot of lip service at times, but we don’t get the result we’re looking for. Now, hopefully, hope springs eternal that we’re getting to that point where we will get that kind of result, but we need a really not a political effort. Well, we need a political alignment, but we need real a real tangible workable plan to get us to where we need to go and start seeing those improvements being put in place and then being able to in turn then hire in the appropriate people, resources that can be trained on new systems and ones that can be done can create and not just get the safety security benefit but the efficiency that we can get. Be able to fly more direct routes, eliminate some of the congestion in markets like the northeast where you have a ton of New York area congestion for air traffic, that can all a lot of that can be alleviated if we have the proper systems in place. So again I remain optimistic in our lifetime we’ll find a way and unfortunately it might take what it is what’s happening now which is it’s taking like critical failures and breakdowns to get us to a place where we just do what we needed to be done years ago, but here we are.
Okay, thanks for that, Mike. I’m going to turn to and I could have chosen any airline to talk about macroeconomic uncertainty. But I chose Southwest, which came out and not only cut flights, but pulled guidance, which by the way, almost every major airline has now done. I’m not sure Southwest is unique in this, but I wanted to highlight that. Just this macroeconomic uncertainty is really hitting airlines, hotels across the board. The airline said it expects unit revenue to be flat to down as much as 4% in the second quarter from a year earlier. Southwest said it is not reaffirming its guidance for earnings before interest in taxes for 25 or 2026 at this point. So Mike, what is going on in the airline industry that is causing everyone to not provide forward guidance?
Well, I think you’ve got this, either what is a effectively a virtuous circle or a I don’t know what the opposite is. A what’s the unvirtuous circle? Is that a word? But in this case, look, as airlines go, the travel industry goes. As the travel industry goes, so goes the economy. So, let’s just like put that like in context. What the airlines are saying is we’re seeing softening. Because of what’s been happening, I think there’s a it’s not that companies aren’t and the economy in general is failing. It’s just there’s a lot of uncertainty and I think companies are certainly for a business travel perspective are being more cautious. We’re seeing it in decision making; things are being put on hold. If I can do this, I’m going to get together my whole team… well, maybe I’ll wait. I was going to do it second quarter, maybe I’ll do it fourth quarter. Let me let me kind of see how the year’s going. I’ve got to make some business decisions around how many people I deploy for this or do for that. Or maybe I’m contemplating a partnership that let me let me hold off on that a bit because I’m going to kind of want to wait and see what the environment’s going to do.
That has an impact on obviously then travel and travel demand that has an imp and the current environment has an impact on consumer demand and then that has an impact on the airline economics and then that then has a then downstream impact although the hotel chains are trying to be optimistic and saying we haven’t seen the impact yet and maybe they haven’t but if this continues they will. And then that affects the overall economy. So you see this circle; it either works for you or works against you. And I think right now it’s kind of like teetering between both. And so the airlines are really, I think, in kind of an untenable position where they’ve got to say, look, we can’t they’re they’re struggling to forecast next month, let alone rest of year right now. So it’s a wait and see kind of environment and that’s what they’re all they’re all feeling and the ones… but it is exposing when you Southwest had challenges anyway. This doesn’t help.
I’m sure our guest today will have a lot to say about how this uncertainty is impacting the airline business. Well, and also excited to hear more about where he he thinks it’s all going too. All right Mike, with that we will be right back with our guest. Mike we recently recorded a spotlight episode covering Phocuswright’s latest report: Phocuswright travel innovation and technology trends 2025. Generative AI and digital identity coverage. That is a mouthful, sir. I’ll throw that up on the screen so our listeners can see. There you go. But this is a fantastic report. It is available both on our website and at Phocuswright’s website where they go deep dive into what GenAI and digital identity is, how it’s converging, and ways in which it’s impacting travel businesses. They’ve had two or three webinars on this so far. The next one in their series is May 15th. It’s called Harnessing the Power of AI. May 15th at 3 PM Eastern. AI is redefining how travelers are inspired, plan, and book, and the most forwardthinking leaders are already putting it to work. Join the webinar to learn more, and make sure to download and read this fantastic report from our friends at Phocuswright.
All right, Mike. Now, on to our guest. Today, we have Henry Harteveldt. Henry is a well-known airline and travel industry analyst. Henry, who is president of Atmosphere Research Group, a research-based travel industry strategic advisory firm, has been an industry analyst for 25 years. Henry’s industry experience includes various commercial roles such as marketing, planning, loyalty, and distribution at several iconic travel brands such as Continental Airlines and Fairmont Hotels. Everyone, please welcome to the stage Henry Harteveldt.
Hey. Hey, Mike. Hey, Henry. Welcome. Nice to have you on the show, Henry. Thanks for joining us. Thanks for inviting me. So, man, we… Well, look, we’ve known each other a long time and back from your Forrester days, when I was at Phocuswright back then and you were at Forrester and did had a lot of lot of interaction back in those days. Now you’ve been with Atmosphere… I can’t believe 13 years. That’s incredible. You know I guess we were going through the news and I can’t say I’m surprised anymore by things but it certainly never stops in being intrigued by things. Do you get surprised by anything that happens in our industry anymore?
I would say it’s more shock than surprise. I mean what for example what happened at Newark, the loss of radio and visual contact with airplanes for somewhere between 30 and 90 seconds at one of the largest airports, one of the busiest airports in the world and arguably the largest most complex airspace in the United States. That’s alarming. Now we know the FAA has been held together with spit and scotch tape for far too long and it’s tried and tried to get the funding. But this I think is as you said earlier perhaps the tipping point that will get Congress and others to say okay we need to fund the FAA not only adequately but in a different and as you also said non-political way to get the be able to invest in the technology it needs, to hire the people it needs. The Secretary of Transportation Sean Duffy has said he wants to make a sincere effort to hire more air traffic controllers. That’s great, but it takes a lot of effort. You just can’t hire people off the street. And we are thousands, approximately 3,000 controllers short right now. I’m really concerned that what happened in Newark could exacerbate early retirement requests from people who just say I’m done when they hit their 56th birthday. As air traffic controllers, that’s the retirement age. There’s… air travel is safe. I don’t want anyone watching and listening to this think I’m questioning the safety of air travel but we as a country need to do much better to serve the entire aviation industry than we have been doing.
Well, and you mentioned Secretary Duffy, but I have heard good things about how engaged he’s been on the issues. I mean certainly the tragedy of American 5342 and everything brought it right to the forefront right at the beginning of his term. But I have heard that from multiple airline execs that he is really engaged on not only that but also this whole issue and problem again. But we’re really to your point, I mean, we’re really counting on this actual things being funded and action being taken finally, right? It makes it very real and not just… these aren’t just business issues. These are real issues that affect everybody.
Right. And you know they’ve got a nominee for the FAA administrator, Brian Bedford, who’s CEO of Republic Airways. Republic is one of the largest regional airlines. Bringing somebody like that in who has airline operating experience, especially regional jets where they’re flying in and out of these major airports doing lots of takeoffs and landings far more so during the course of a day than a mainline airline pilot may be doing… I think that will be very helpful to the FAA.
Agreed. Wow. So, you’ve been busy. You recently released a report that I mean really terrific, very I’d say exhaustive and thorough report called “The Future of Airline Retailing, bringing a customer first model with offers and orders.” Excellent report as always. But I think I really I want to dig into it a bit because I think you really this is on the business side of airlines like Ed talked about in your intro. There’s a lot here and I’m going to I have some questions about it, some things I want you to kind of elaborate on a little bit for our audience. And then I want to push a little too because Ed and I have a have a little bit of that going. We’re always trying to… we’re still waiting in a sense for the benefit… consumer benefit to come actually finally be be revealed in all this… all the money and time and effort and everything that’s gone into this. I think we want to we want to really kind of look through the consumer lens as well.
But to start off, I mean your report finds that while 66% of airlines use NDC today, 27% have made substantive progress on offers and orders. But what what are the barriers that are holding back the airlines from really seeing this through all the way and creating a really dynamic offer order system that they can they can then get, in theory, much more aggressive and creative in how they how they market and retail with customers?
Sure. Thanks. Okay, good question. First, let me just clarify the report was written for Accelya. If anyone who wants to can go to the Accelya website to find and download the report. It’s free. To answer your question, Mike, there are several factors that contribute to this. First, obviously, as it always is, is budget, right? I mean, airlines are capital intensive businesses and transitioning to retailing is going to be a long-term expensive process. We can’t ignore that. Second, IATA has created the NDC standards and out of that what was initially called One Order and now modern airline retailing. And while IATA had made progress, it was only in… not until 2021 where the first true retailing based standards came out and those have since been updated with what’s known as 24.1, which is viewed as even better. So now that these standards are out there, I think it gives airlines more to work with.
Third has been just legacy contracts that airlines may have with incumbent technology providers, whether those are PSS providers, GDS partners or others that limit their ability to pursue retailing. And then fourth is simply airlines are still trying to even figure out: what is retailing for them? What does it mean and how do they pursue it? What is the strategy? What are the benefits to the point you just mentioned? What are the real benefits to the traveler, to the airline and more? And then there are all the things that go along with retailing. It’s going to require changes to revenue accounting. It’s going to require changes in revenue management. It’s going to require bringing together often disparate parts of the enterprise together. We’ve all worked in large organizations where the silos, the organizational silos are as thick as nuclear shelters and trying to get department A to work with department B is not always easy. So that is a challenge. There’s lack of incentives between departments, financial incentives even, which really need to be part of the picture. Marketing, you need to do this to help revenue management. Revenue management, you need to do this to help marketing, etc.
So, there are all these challenges and more that are part of the mix. But one of the biggest things also is the promise of retailing, which is personalization. I remember reading a book about one-to-one marketing. I forget who wrote it ages and ages ago back when we actually read hardcover books. Remember those? Or soft cover books but printed books. But that has been the promise since I was a wet behind the ears puppy working in advertising. The promise of tailored advertising, personalized marketing and so on. One of the biggest benefits that I see of retailing in airlines and in travel broadly is the ability to tailor offers so that Ed is seeing something that appeals to him, Mike, you are seeing something that appeals to you, I am seeing something that appeals to me. The Venn diagram of that may have a substantial overlap, but it’s the parts that are unique to each of us for the types of people we are, the types of trips we’re taking. That’s where the money is made. That’s the honeypot. And that is one of the biggest challenges and that’s where airlines really do struggle because they sit on mountains of data… terabytes, more than terabytes, petabytes or whatever is beyond petabytes of data, but they can’t bring it together, they can’t harmonize it, they can’t normalize it. And that’s one of the biggest challenges they face as businesses.
I mean the cynic in me is… it feels at times that from an airline perspective it’s really just: hey I want to squeeze some more money out of the supply and demand curve. I can have infinite number of price points. It allows me to capture lost revenue or opportunity cost opportunity the benefit of getting that additional revenue and then ultimately the consumer will just feel like they’re kind of having the same old experience. Well you’re not wrong in terms of: how do we squeeze an extra penny or dollar or ten out of the traveler? But I think where where the difference here is is it’s they don’t… airlines don’t want this to be seen as if you will nickeling and dimming. What they want this to be seen is that again we are seeing offers that resonate with us. They reflect our loyalty status if we have it, corporate contract status if there’s one between our employer and the airline, as well as the things that may be extra but which they believe we will like, value and be willing to buy.
And that requires airlines doing a much better job of tracking the the products we buy. 18% of airlines don’t even associate the fares we buy with us as individual travelers. It remains limited just to the PNR, the passenger name record. So when you have one out of five airlines to round to an even number missing one of the most fundamental ways of associating the most fundamental product we buy, you’ve got a problem. So, let alone figuring out if you’re buying the hamburger or the turkey sandwich or the fruit and cheese plate or whatever it is on the plane or paying for bags or buying a lounge pass or whatever it is that that that makes you happy.
So there’s an enormous opportunity. But Mike, you made a very good point in your comment just now which goes into continuous pricing. The three of us here grew up with fare codes, the RBDs, revenue, the fare buckets, and that exists today. It’s now 26 fare buckets. I remember when at Continental we went from six to eight. We popped sparkling wine. We were too cheap to buy champagne. We popped sparkling wine and it was awful. But that was a big deal. But now what continuous pricing allows an airline to do is price between the fare buckets. In theory that means both pricing higher but also lower. And what it also does is it allows the airline to say: you know what, if we’re going to sell more high margin ancillary products to this person, we can lower the fare a certain amount to help create value. To them, it doesn’t really matter, right? Internally, certainly the finance organization, tax, revenue management may have says, but at the end, if you’re making more money and making the traveler happier, that’s great. And by the way, if they’re also saying well this traveler is a high status traveler and as a result we are obliged to offer them complimentary this, that, and the other thing, we may hike the fare just a little bit to eke out a few more shekels, right?
It’s like in the category of what’s old is new again. We might get back to a point where we get a fare incorporates everything, right, and that you like to your point of like you don’t feel nickeled and dimed. I’m not being charged extra for a bag. I’m not being charged like the place we’ve had to go or they’ve had to go to to be financially viable as airlines. But now it’s like: can we get back to a place from the customer perspective where it’s like I’m paying a total cost for the experience with the elements I want and need and it can be customized? Okay, I always check a bag now, the airline knows that, well they’ll bundle they’ll give me a fare that bundles that in where I feel like: okay I’ve got good value I’ve got all that included. It actually in so many ways like you could see it is funny how it can come full circle again but in a present day environment that could be beneficial. Those are the things I get excited about.
They’re all exciting, Henry, in theory. And I know you used the word hopeful earlier, but I mean, I feel like we’ve been hopeful for 10, 11, 12 years as we’ve been hearing this same story that it’s coming. It’s coming. Where are you on the optimistic scale? Are you a skeptic? Are you optimistic? Or better yet, when do you think we will start to see some of this in reality?
I look, I am a native New Yorker. I was born cynical. So I am hopeful and there is progress being made. Qantas is making progress. They just announced something they’re working with a company called TPConnects that they’re seeing great uptake on NDC offers. TPConnects is one of several flight-based travel aggregators. And so Qantas is seeing results. American Airlines, United Airlines, British Airways, Lufthansa, they’re all starting to see results. Singapore Airlines and others. But the thing is you have to… we are all familiar with the crawl, walk, run scenario, right? the continuum. We’re somewhere between crawl and walk right now.
And the thing is that the airlines who are committed to retailing, the airlines that were on the IATA leaderboard when that was a thing, these are airlines that have vision. And they’re not all necessarily mega global carriers. A lot are, but they have a vision of what they want their customer experience to be and that includes retailing at its core. So I think that we are within a couple of years of reaching the proverbial tipping point. And what we’re seeing is airlines are doing a lot more on their own direct digital channels because they can; it is easier. Of course there they can. The challenge is everywhere else.
Well, right. But you know what’s going to happen is the airlines will be making progress with their direct digital channels and perhaps with their contact centers. It’s the third party that is the challenge. The travel agencies are interested—at least the smart ones, the smart TMCs, the smart online travel companies, traditional travel companies and others. But one, they’re wed to the pipeline of money that they get from their GDS partners in terms of segment fees and other financial incentives. And the GDS companies are making steps. I mean Amadeus and Sabre to their credit are taking steps but they are slow and not as fast as the airlines would like. Maybe 24.1 will help, but I think a lot of this is the result of commercial struggles which again are not new.
Mike, when you were at Phocuswright, when I was at Forrester, those struggles existed. They’ve existed for a long time ever since really the internet became the platform for airline distribution and airlines realized: oh we can do a better job of selling direct to consumer than when we were strictly limited to toll-free numbers. For anyone who remembers toll-free numbers… I think that the… I guess you look back at the decisions that are made and and how that impacts everything, right? But I think there were decisions made in the airline community that said: hey, we can do more to sell direct. And during that time they made let’s say strategic decisions to try to basically turn the dial back to the agencies with an effort to try to discourage the Expedias and Pricelines whatever from from growing. That wasn’t happening and then ultimately a lot of money that could have gone into investing in that whole the part you’re talking about didn’t happen because commissions were being cut. The industry… there was a decision to really push direct to the detriment of the rest of the distribution chain.
And now that’s kind of leveled out and now you see the investment is being made across the board. But to your point too on the GDS side, it’s like: the hard part for them is of course they’re trying to serve many masters. You can say they’re slower and I know the frustrations, but at the same time, look, they’ve got a huge ecosystem that they’re trying to develop for and inevitably they they can’t do more for a certain part of the distribution to the detriment of others. They have to try to develop to a broader array of intermediaries and customers. It’s a harder job and it’s going to be slower but it it is tough.
Look, when you are an Amadeus or a Sabre, you are serving airlines from the largest airlines like Lufthansa Group, United Airlines, etc. These very, very large mega global carriers down to the national or regional airlines that may have a relative handful of planes operating a very limited network. And where do you place your focus? How do you pace your development and so on? Who is… and I certainly respect the complexity that the GDSs face because they have to make hundreds of airline customers happy, and airlines by nature aren’t happy to start with. And so you multiply that by several hundred and it’s a challenge. I respect that but this is where and why I believe that the new IATA standards will be very useful for everybody.
What’s also interesting is in the last few years you have heard the airlines temper their rhetoric about GDSs, which I think is very healthy and positive. And it’s more about finding distribution partners who create and provide value. But retailing is going to be a core of that. And if the GDSs drag their feet too much, I’m confident that airlines are going to say: well we’re using these third party or these NDC-based travel aggregators. We’re going to help TMCs, travel agencies, etc. go onto those. We’re going to make sure they interface with as they should with MID and back office systems and so on. And airlines are going to have to start writing some checks to help some of their key partners who lack the financial resources do some of this work. I again, airlines love it when money comes in but boy they hate it when they have to write checks. But they’re going to have to do that to help some of their partners get up to speed because ultimately it means that the airlines will be able to sell their products and make the money the way they want.
Yeah. Last year I was down at CAPA’s Latin America conference. And to that’s when you get a real… at times I know it’s easy to kind of fall into your point of the mentality of like dealing with United and dealing with Delta and American. You have the big… we have these big airlines with big ultimately big resources etc. But man you go down and you start talking to a number of Caribbean and Latin American airlines; they want to do all these things, but they’re knowledgeable, like they’re trying to keep up and make the investments. But to your point, they just don’t have the critical mass that gives them the capital budgets to do the same things that they want to do that the standards help, the the support helps. They’re learning from each other and from the big carriers and from IATA, etc. it it’s not a lack of desire to do it but to your point it’s like at some point they need help and they need they need resources to be able to push some of these initiatives over the top. I mean they’ve got CTO, CIOs who are like doing everything they can with the budget they have but that only gets them so far. You’re right.
No. And you know what’s also interesting is there are some airlines who are midsized airlines that are some of the most aggressive and creative because they use that size, their relative small size, to their advantage and they are very creative thinkers. Copa Airlines for example is a real sharp group. And they’re one of the pioneers and I have a lot of respect for what they’re doing and I think they will actually show even some of the larger airlines creative ways on how to pursue retailing. But I think what’s also interesting is in the report we found that airlines expect they’re going to have to live in a dual world of NDC and Edifact distribution for 10 or so years and that they may move on to new more contemporary retailing platforms but they’re going to have to have backwards connectivity to traditional PSS passenger service systems for 10 to 12 years. So it’s just like when e-ticketing was started in the 1990s. IATA set a deadline and then they pushed it out and pushed out. It took roughly 20 years for the entire industry to migrate to e-ticketing. I hope it won’t but it may take that long for the industry to become retailing based.
And to your point, look, I think what I always try to say and have appreciation for as do you, I think, is like as much as from the outside we can say like: oh, technically this could have happened in six months, we should have done this a long time ago. It took this long but the realities are it is a really back to our where we started in so many ways… it’s a fragile ecosystem with so many dependencies, so many links in the chain and to there’s no overnight solution to any of this. It’s like it is a it’s a long process of kind of you’re making changes, making improvements, but then you have to keep each part of the chain has to then do their part in turn. And synchronizing all that budgetary resources, training, everything… like it it’s a long process. It just is. And then economic downturns don’t help when when budgets dry up and then come back again, etc. You get stop and start that doesn’t help either.
Look, retailing could touch a hundred or more software systems in an airline and it’s going to require major changes in processes, in functions, department organizations and and more. And again I don’t want to understate or underestimate the complexity of all of this. It’s very real, it’s very substantial. And I think that again from the outside it’s like: well why can’t you just do this? It’s not as easy as flipping a switch. This isn’t a Windows upgrade that you just install on your computer overnight. It is far more far-reaching. And you also have to consider the data security that is involved, cyber security, need to comply with privacy protections and regulations in various regions and countries and even states here in the US and more. So lots of little things that are part of it.
Well again a fascinating topic. Again, the report’s terrific for anybody that is interested. Should certainly go to Accelya, get the report, download it. I think it’s really again it it sheds a lot of light on the topic. Again the complexities of it, but also the promise, which I think for all of us… I mean we’ve been in this industry for our careers as skeptics. Yeah, we’re skeptical but also remain… I do remain really optimistic that we’ll continue to see the progress because again and so much that it creates a healthier airline industry. That’s good for everybody along the way.
Well, Henry, our closing question for you, this is our season 3 wrap-up question. We’re all faced with real and perceived chaos in our personal and professional lives. How do you cope with chaos in your life?
Ah, that’s a good one. You know, I have begun going to the gym and using a personal trainer to help me be better at my workouts because it was really pathetically bad. And that is a great way for me to disconnect and get rid of stress. I live in San Francisco and walking around here with… we have a couple of hills in this city, so walking around… you know sometimes you turn around and you got the most beautiful views. We have a lot of great parks here that are lovely to go sit in when the weather cooperates and the fog’s not here. And those are really the two ways that I try to deal with the chaos. I listen to a lot of classical music. We have again a great local public radio classical music station here that I stream constantly. And I enjoy that. And reading, just reading. I like historical fiction just because it has more of a kind of grounding to it.
Yeah, reading… it’s one of those that we end up spending so much time in front of a screen and the work we do. I keep the same. I try to come back to picking up a having a book to read is a is a treat. It really is. I prefer the… it doesn’t have to be a hard cover, it can be a soft cover book, but I prefer reading books because again it it allows me to disconnect from a screen, removes the temptation of opening other tabs or apps or whatever. And the other thing is I find… and maybe this is just me… but I find I tend to concentrate more when I’m reading a book than when I’m reading an e-book.
I think you’re right. Well, Henry, real pleasure as always to have you. Terrific insight, great report, and keep doing what you’re doing. We need credible coverage of our industry and you certainly bring that to the table all the time. So, thank you very much. Thank you Henry for your time. Henry Harteveldt is president of Atmosphere Research Group. Henry, thanks again for joining us today. Best wishes.
Thanks. Very interesting, Mike, as always. So, what what’s your what’s your biggest takeaway from this one, Mike? Well, I think in the no surprises category, I mean, it’s what we knew. I think it was really interesting though just again the perspective of kind of where we are in this whole process of moving along this… the orders and offers and where we’re trying to get to. And I come away like again somewhat encouraged. I think although there’s a long road ahead, there’s also a good number of miles behind us too and I think a lot of learnings. And I think even the way he was characterizing it feels like a more cooperative environment on all this.
There was a lot of tension and conflict between… it was us versus them of the various links in the chain and the distribution system, etc. And that wasn’t getting anybody anywhere. And if we’re in an environment where it’s a lot more cooperative, people are working together trying to solve these issues… look, there’s plenty of benefit to go around throughout the the the distribution system. So, it’s encouraging to hear that. That was probably my biggest just general takeaway. How about you?
Look, it’s nice to talk to someone who’s hopeful about it, considering in my head I’m so such a skeptic. I do I do worry that it it’s taken a long time and as Henry said, it could take a while before it really all comes together. And by the way, by the time it does come together, things could be very different. AI agents may be doing the shopping, just the infrastructure could change. So by the time it does come to the benefit of a consumer and a traveler, will they see it in the way that it’s imagined 15, 20 years ago? I just don’t know. I love I love the hopeful side. I do think modern retailing is important. Personalization could really go a long way. We talked about that with past guests in terms of whoever unlocks that really wins the race. But I love that Henry’s hopeful and obviously he’s an expert in this area working with Accelya. So, we’ll see. That’s all I can say.
All right, Mike. As always, terrific stuff. I love our guests. That was another great episode. Really great. All right, Mike. That is our show. If you have a challenge in your business and want to better understand the chaotic world of travel, reach out to us at Travel Again to see how we can bring clarity to your business. Now backed by Phocuswright data and research. Mike, we’ll see you back again in a few weeks for our next show. Thanks everybody. Good to see you Ed. Cheers.