Digital Assistants & Airline Retailing
Bob Branston meets Oliver & Ricardo to talk about dynamic offers, travel marketplaces & fast cars
Regular readers of Airline Revenue Economics will remember our imaginary airline entrepreneur friend Bob Branston. With assistance from a venture capitalist in Tel Aviv he has received funding for Vestal Atlantic, a new airline based in Canada which will be using business models generated by artificial intelligence.
You can read about Bob Branston’s previous adventures here:
AI & an Airline Startup – Part One – Bob founds Vestal Atlantic
AI & an Airline Startup – Part Two – Bob uses AI to prepare Vestal Atlantic for launch
Thomas Cook’s Forgotten Recipe – Bob ponders why Thomas Cook failed & what he can learn from them
Bob Branston’s Two Lists – Bob considers further obstacles & opportunities
If Bob really existed and we had flown to Tel Aviv to meet him for dinner (we like meeting people for dinner) it might have gone something like this…
MEETING TRANSCRIPT
Date: Wed-7-Jun-2023
Location: Hilton Tel Aviv, meeting room 54
Time: 1700 local
Bob Branston: So, we’re all here and I think it is really happening. We have the first 30 million. I am looking forward to our dinner at Manta Ray later – it’s just down the street through Charles Clore Park by the beach – I’m going to have the shakshuka and granola yoghurt. You can’t see it out the window, it’s far in the distance, but we’ll jump in a cab after we’re done. But first let’s talk about these tour operators.
Oliver Ranson: There’s lot’s to share. Tell us exactly where you are.
BB: Well Ben Levy the investor at Pomodoro Ventures is all-in, but it took a lot to convince him. Airlines just don’t attract good exit valuations these days, even if they do well. So we are positioning Vestal Atlantic as a tech co with aircraft and a fintech spin-off on the loyalty side. Ben reckons that will achieve double the payout for the investors when the time to sell comes.
OR: Right. Look at American Airlines for example. In 2019 the airline was worth nearly seven billion but the loyalty arm was worth 20 billion – that’s 75% in fintech. And look at AirAsia’s superapp, which is just so much more interesting than the usual ancillary and revenue optimisation stuff.
BB: What Ben said was that the tour operator and travel marketplace concept have legs as a tech co. He really gets it and that made me feel relieved, because the other investors I have spoken to just don’t. They think that modern online travel agents are a great idea and don’t get a strategy of user-generated shopping paths, ingested content and decentralised social commerce at all.
Ricardo Pilon: That does not surprise me. One of our recent clients felt the same. We had to lay out our entire execution strategy to specifically draw attention to the fact that this is outside traditional channels. There need to be new types of contracts, with new business models built that link the tour operator, suppliers and travellers. Or how we will sell licensing rights and time share of both aircraft seats on Vestal Atlantic and the digital real estate of the airline.
BB: Hang on Ricardo. Let’s do this in baby steps. The thing is that I get the principles but not how exactly all the technology comes together. And I need to explain it to my board as simply as possible.
OR: It’s quite hard to satisfy the 19 points on your two lists all at once.
RP: Let’s make it tangible – something everybody can imagine. We reckon Vestal Atlantic needs to be like a Ferrari.
BB: Ferrari? You mean like shiny red, fast and expensive?
RP: The Ferrari business model is more about scarcity. The roads are full of fast cars but there just are not that many Ferraris around so when people see one it is more of a special event. And they want one more.
OR: Amir Al Fakar the CEO of Qumran Airways has a white one. The Chief Technical Officer parked in his space once when he was new and it was a good job I noticed and pointed it out in time. Could have been tricky for him otherwise as Amir gets upset about things like that.
RP: Back to the Ferrari model please Oliver. You can tell Bob your war stories over dinner. We will ensure that Vestal Atlantic always has less capacity than there is demand, and that the adventure, experience, hotel and other providers think that Vestal Atlantic customers are more desirable than those from other channels.
BB: How are you going to do that?
OR: By putting the customer in charge. We are adding a digital assistant on top of the shopping path that allows the traveller to design and filter their own priorities, based on their own recommendations. We then make it smarter and faster with deep learning. The important thing is that customers do not have to go on to your website to search. They activate the digital assistant through the platforms they use every day, especially social media. There is a hybrid intelligence-based interaction between the traveller, the social media content and recommendations that pop up in the Vestal Atlantic metaverse using augmented reality.
RP: That addresses a big gap in the market for air travel today. Almost every airline considers the decision to travel as something the passenger just does anyway.
OR: Or as economists say, it is decided exogenously.
RP: Thanks, Oliver. But the reality is that decisions to travel are not independent of everything else a travel shopper buys. They can decide to take a holiday or a business trip. But they can also decide to buy an X-Box, paint the walls or grow the team. The Ferrari model is about keeping travel in people’s minds so that they `are interested in buying it much more than today. That increases demand by a whole order of magnitude so it is more than you and your marketplace merchants can ever hope to serve.
BB: I’m confused. What exactly am I looking at on my screen here? [Bob is referring to a slide being projected on the wall showing what Oliver and Ricardo are talking about]
RP: This is not just your screen. It looks more like a videogame. We must be clear, there are two sets of digital assistants. The first is customised by the traveller and interacts with Vestal Atlantic’s platform. The other is on your platform, receives and manages the interactions and pushes back what it reckons the shopper wants to see. It uses multiple AI techniques and deep learning. It’s called composite AI, but that does not matter right now.
BB: OK. That makes sense.
RP: The interaction between the two can be experienced, manipulated and transacted on with your eyes and fingers using biometric analysis. The camera on the phone or other device like VR glasses will read, interpret and transmit the travel shopper’s interest to the shopper’s own assistant, which then sends it over to you so Vestal Atlantic’s assistant can make the most relevant offers back.
BB: So things the travel shopper is doing right now will be read by both assistants so the shopper can see things that we reckon will interest them?
RP: Exactly. Comments and social media that the travel shopper’s assistant knows that they like will be built into the analysis. And if they have full sharing enabled on their settings we can even measure their responses to the offers, like eye movement, stares, a frown or a smile. This technology has already been used by banks to sell mortgages for more than a year.
BB: But what about the stuff we are selling. That has to come from somewhere, right?
OR: That’s right. With Vestal Atlantic’s digital marketplace suppliers can offer their own products through an open API. NFTicketing technology also allows the travel shopper’s assistant to make offers to you, not just you sending offers to them. We are just at the start right now and there are 1,001 things to do. We will create the tangible plan tomorrow.
BB: When are you guys flying home. Tomorrow night after we have set down the plan?
RP: Yes. KLM for me. British Airways for Oliver.
BB: Comfy seats?
OR: Always.
BB: Am I paying for that?
OR: Not in the short term.
BB: OK, great. Let’s go and have dinner. Oliver, please tell me more about Qumran Airways on the way. It sounds like an interesting place.
OR: It is.
[END OF MEETING]
What will Bob do next? Join me next time to find out…
ricardo DOT pilon AT millavia DOT com (author)
oliver AT ransonpricing DOT com (editor)
Are you enjoying Airline Revenue Economics. Check out some more cool articles by Ricardo in the archive.
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