Is Delivery Having its Cinderella Moment?

[MUSIC] Hello, and welcome to T2RL Talks, conference special edition. And today in the studio with me, I have Sean Richards, who is the chief executive officer of Inc Innovation. And I also have Amanda Campbell, our head of research at T2RL. And we're going to be talking about delivery in the world of offers and orders. So, hi, Sean, hi, Amanda. >> Hi, Ian. >> Hi, guys. So, last year at T2RL Engage, Sean and I recorded a video interview which went a little bit viral on LinkedIn. When he pointed out that nobody invented the light bulb by continually improving the candle. And that's a bit of a paraphrase because I realize I've forgotten the exact words. But I think it's important because Inc Innovation has really taken a new look at the processes around departure control and now order-based delivery. And one of its big successes in the last year is to go live with the first ever network airline to be purely based on offers and orders. And that, of course, with Rhea there. So, Sean, how's it been with Rhea there and what lessons can you offer the rest of us from your success there? >> Yeah, so first off, thanks for the opportunity to talk again. I would sum up the experience with Rhea there by saying it's exciting for sure. It's fast pace, we were speculating that it is actually the most aggressive rollout of any airline. Certainly of that size, the only thing that's actually holding back the pace is the delivery of the fleet. But that is speeding up now. So, the pace at which they open stations is mind-blowing. We've seen the deployment schedule, which we can't share. But it's certainly eyebrow raising, eye opening, slightly terrifying, all of the above. But it is really something to witness an airline starting up this way, bringing this many resources into the process. Obviously, many people have things to say, some good, some not so kind. But in the end, in the world we live in, we can't expect all feedback and opinions to be positive. So, it's just part of the course. But certainly being on the inside of it is something to behold. >> Okay. And on that fleet delivery point, I think I saw last week, didn't they get some like 12 aircraft delivered all at once when they were expecting to begin them one a month? >> Yeah, I mean, it all depends on things that are not really under their control. Obviously, there's a lot of macroeconomic factors. The manufacturers have their hands full. But they've placed an order for new aircraft, the Farnborough. And that's just signaling the confidence in what the airline is doing. So, yes, I mean, we're all quite excited when new aircraft arrived. But we know what it means in terms of the intensity of the operation. And probably for you, one of the impacts of that is that they'll be opening up new stations pretty rapidly, probably more rapidly than most airlines have done before. Does that land a lot of work on your shoulders? >> Yeah, that's the terrifying bit I was talking about before. So, they opened up Madrid's last week, so very, very happy on that one. So, me and some of the team supervised that one. They also opened up Malaga, but there are many more to come. And yes, it does put a lot of pressure on all of the teams actually, because I think it's easy to forget how many companies are involved with their ecosystem. I know that there's been some analysis on LinkedIn, some diagrams and stuff like that. But when you actually look at the level of orchestration, all the way from top to bottom, the number of vendors that need to work with each other, the number of processes that span multiple companies. Yeah, I mean, I think it's quite intense on everyone. So, it is intense, technically, it pushes relationships and all of the preparation that's been happening over the last few years make all of the difference now. Even the interpersonal relationships, when you know people going through what are pretty demanding times, it matters a lot. How you work together, not just on a technical basis. Amanda, we've just published our market survey report on departure control systems or delivery systems as we should start to get used to describing them. And one of the outstanding things really is that even with the changes that we know the airline industry is going through, still the vast majority of airlines use the departure control system provided by their PSS provider. Yes, I think you wrote that report Ian. That was no one of mine, but yeah, I think it does an interesting one, actually. So the departure control system is such a key fundamental to getting an airline off the ground, I remember it. Tito Rallyngate was at last year. One of the CIOs was on the stage and he was talking about his OOSD journey and he started to put plans and board brushstrokes into place as to how he was going to approach the transformation, the transition. And when it got to the DCS, it was like, "Cup launch." No, we have to go with this provider. We cannot consider anyone else that's not up for discussion. So a real high openness to me is to how key this piece of tech, this piece of tech really is to airline operations, it was very surprising. Yeah, I think in the report we identified there were out of 1100 airlines that we track only something like 50 or 60, used a DCS or a delivery system other than the one supplied by their PSS vendor. And I think sure, that's something that you would like to see change over time, especially as we move into the more modular world of offers and orders. Yeah, I think that's been one of the real positives of trying to move to an OOSD model, at least it's trying to introduce more competition into the market. So with any mature market consolidation is just a feature of how markets develop. So that's understood. But I think there's a fine line between that and having sufficient competition for the market to function in a healthy way. So you do have an opportunity with offer order to take up to the board the ability to mix and match. Whereas now I think it's very hard for an airline to build that business case that they do want to combine systems. So what we're certainly finding is that more airlines want to take control of one particular part of their stack that tends to be around their inventory management. And whether that then translates into order management or something else, the main thing is there is an ability now to introduce the delivery part of the stack as being different from the core provider of the booking process. And as a matter of fact, we've had against a very curious inquiries coming in from airlines that we would not expect to be shopping around, actually shopping around. So I think it just goes to show that there is space within an airline strategy to start thinking outside the box. Yeah, and I think that point about strategy is important. In the world in which standards are being defined for the modern retailing environment, the OST environment, there is a school of thought that says delivery becomes just a very small add-on to order management. There is another school of thought, which I think that you would hold, that says that there's a huge opportunity to expand the role of delivery and use it as both an efficiency tool, but also as a revenue generating tool for the airlines. Do you want to talk about that just for a moment? Yeah, I think one of the easy traps to fall in is being a bit evangelical and one side or the other. And actually, I do think that modularity gives you the architecture to pursue both. If you want to just make delivery a very thin add-on to the order management part of your stack, feel free to do that. Your architecture can lean towards this very thin delivery layer, especially if the delivery and the order management come from the same supplier. It comes from the same vendor, sits in the same data center, same side of the wall. It starts to blur. The reason is that you need to look at the same data center. reason why it blurs is because delivery is so tightly coupled to auto management in OSD. Whereas in the previous P&R world, there's a very hard divide and a pretty significant air gap actually between a booking being taken and then pushed down into, it's called airport control or ground handlers departure control systems. So departure control phase of travel tends to become a black box. So if you take that forward, you do want to start looking at look, do you want to tightly integrate the delivery phase into the booking phase and then allow more processes to happen during the delivery phase. So additional shopping, manage my booking and salary sales and I think that's the direction we were coming at it a couple of years ago. Now we still see a huge role for delivery otherwise we wouldn't be in the business but it just again depends on how you look at it. How much retailing do you want to do after the initial order is placed and I think many airlines differ on that when you're running a low cost airline that has, let's call it more of a bias on making additional revenue after the initial sale. The airline because they're so dependent on that probably wants to control all of that themselves because it's a huge part of their business model. So they don't want to let that go to maybe an external provider or be too far away from the order management system. So there's a number of different ways you can combine all of this. Last week I was sitting with an airline talking about the comparison of modularity to Lego and I think it's been probably made before but if each model, sorry if each module is seen as a Lego piece, however you put it together is a Lego set. So different people can assemble it in different ways, run it in different ways, own different parts and then that would reinforce their view of the world whether delivery is a small thing or a huge thing. The reason why we see it as a bigger thing than departure control is because we see it extending across more of the journey. We don't just see it as something that is getting people onto planes. We see it as something that extends through your actual journey in flight. If it's multimodal, you may be traveling in different ways. You saw your sector makeup might be quite different and as you get into what offer order and lots, there will probably be more airlines looking to do non-air revenue which includes hotel stays and entertainment, things, experiences and stuff like that. So the itinerary starts looking less than, less like a traditional airfare itinerary and looking far more mixed with far more going on and then in order to keep a handle on what is happening with all of those moving parts, that's where delivery comes in. Yeah and I think that's a very important point that many airlines, not all, but many airlines are looking to sell a broader variety of services than simply a flight and maybe some bags and some seats and whatever and whatever and delivering all of those things becomes a multi-dimensional problem because the hotel operators or the rail operators or the airport lounge operators won't necessarily speak the same language as the airlines. I don't think we can ask a hotel chain for an edifice link for example. So if you're charged with delivering and being sure that those things have been delivered effectively, you've actually got to put the yards in and you've got to put the work into having those links to all those other different kind of providers and understanding the way they operate, more so than airlines have had to do in the past. Yeah it just depends on how deep an airline wants to go into, well we call it service delivery rather than just delivery because I think only delivery makes a sound like we work for, we literally work for Amazon or something like that. So we try to, by calling it service delivery, it focuses the mind that it is on actually delivering the service, delivering the service that you've sold. So it just depends on how deep an airline wants to go into that. Do they want to say okay we've sold a bit of third-party content so not our problem. Here is the phone number and call them and deal with the problem or do they really want to get more involved in not just orchestrating the booking but orchestrating how a person gets the service they bought. And before you get into the complexity of managing this for third parties, airlines and even airports can do a way better job on delivering their own service because that's what annoys people when they don't have connection to enough information when things go wrong. So the happy path is great, right? We sell your ticket, we sell your bag and goodbye. But if something goes wrong then you see that Irops is a huge topic so irregular operations, whether or not that is close to departure. I think the further away it is from departure is just itinerary change to be honest. But as it gets closer to departure, it starts looking more like traditional Irops and then where else would Irops sit in OSD? It sits in delivery. So it's a big deal depending on how much you want to do it. If you just want to do your Irops in a manual way then you can start seeing that maybe delivery is not that important but the more you care about irregular operations which is where additional spending goes on covering when things go wrong. So just connecting all the way up from flight operations when you start knowing something is going to go wrong to all of the different layers that get affected. So we see Irops as a multi-layer problem. So it's the order, the flight itself, the airport and your whole network. So there's a bunch of different layers you need to think about then there's a time dimension. So just looking at Irops, that's a big part. Communication is a big part and when you start putting all these together, I think it would be a mistake to interpret delivery as something that is just giving a boarding pass in a bag tag and counting it off and putting everyone on their way. I think there's a lot more to it depending on where you see delivery fitting. That's certainly my feeling based on a few years working in this industry is that delivery is a lot more than just issuing a boarding pass in a bag tag. Just want to come back to something you said a moment ago about Lego. One of the reasons that Lego is so successful and so versatile is that the standard little novel on the top of the Lego brick has been the same since Lego was first invented and it fits into every other Lego brick that's ever been built. The equivalent in our world would be the standards for how the different components are meant to operate together. Do you think that the industry is far enough along with defining standards for the different components to work together? Well that's a very interesting question. When it comes to standards I remember a couple of years ago I think at T2RL. I was actually saying something different to our chief product officer Victor Alzate. I was saying yes, standards are great for interoperability just like you just mentioned you can turn up with a piece of Lego from the 1960s or something is going to click into something from 2026 and it's just going to fit just fine. I might look great but it will fit together and it will work. Whereas he was saying well you know standards are probably not that important because this AI takes over standards kind of go away. I think the industry really needs to think a lot more about its obsession with getting standards to fit exactly because outside this industry yes standards do help interoperability and speed to market and compatibility to a level but then you end up spending so much time trying to get the compatibility just right that you add so much friction to the development and the progress of the standard itself. It starts becoming counterproductive right when you go through the different versions of a standard and you're not actually deploying it because as you look to deploy there's another version out and it kind of knocks you back. You actually start thinking well is this the best way or should you be following something a bit more agile in terms of standards and leaning a bit more on the flexibility that AI gives you in the development of interoperable technologies. So I think there are things to look at there but certainly I think modularity is the key when an interoperability is a very nice second. I think Amanda is looking now and as you refer to using AI to manage with shall we say less prescriptive standards it reflects a conversation that she and I had earlier this morning when I think Amanda is quite a big fan of using AI in creative ways. Yeah I just think that yeah it's scary yeah where are the boundaries you know can the world afford to support you know AI technology can we afford to support that the models and its creation etc but I've just just being the astounded person. personally, like when I've been using it over the last couple of months, just to what it can achieve. And I really, my eyes have been opened in a big way as to how it can really solve problems and make things more efficient. So, yeah, I'd be a big fan. And I notice for Inc. Innovation as well, very much leaning into AI, certainly a few announcements. I think product announcements lately as well, Sean, can you speak to how you guys are using AI? Is it just with regards to interoperability or are you using them in different ways? Yeah, we're using a few different ways. So, first is to help with basic development. So, it has propelled our pace of development, but we've been very heavy users of AI in that space since 2024. So, we have our own very small, but very effective AI department and they touch every part of the business in terms of how efficiently they talk to each other and how we get things done. So, it might consume it on the outside or certainly on the inside it has a big effect on the way we work. Another place that we use it is we're embedding it more deeply into our product. How we roll it out probably isn't helped by things like EU laws, which I don't think is particularly productive when the entire world is moving in this direction. And another interesting way that we are using AI is in agentic functions. So, it's really looking at roles within our company and interestingly roles within the companies that buy our services. So, we've been looking at some for some time at what agentic computing can do in airlines, for airlines. So, not just as something that we are using in our product, in our product stack, but actually changing the way they work. And, you know, removing a school of manual tasks and just being more flexible in handling the wide variety of problems you have to deal with in an airline. How can you remove some of the drudgery and shift some of that time to actually helping people are working on real tough problems instead of, you know, just working on very tedious work. So, we do use it in a number of different ways and we're quite excited by how it leaps forward every time a new frontier model is released. So, it does make a huge difference in terms of, you know, how we work and we know that it can change things like, for example, the interoperability we were talking about. It becomes a non-issue when you're using AI. So, if you have version 18 or version 19, version 20, 24 or something, it can just keep moving along with far less of an issue than it poses to human development teams, which allows, let's call it, just higher momentum within the airline. Okay, that is a really interesting conversation and we could go on, but we've kind of run out of time for this short taster ahead of the conference. I would like to remind listeners that Inc Innovation is an engagement partner at T2RL Engage, which is taking place in London in September. And the usual reminder that I give at this point is that if you're an airline executive, an airline manager, an airline worker, who's interested in attending the conference, there is no charge for airline attendees to be delegates at T2RL Engage. And I hope that many of you will be able to come along and carry on this conversation with Sean and Amanda and myself and all of the other people who will be there. And so, right now, I'd like to thank Sean and Amanda for starting off some of these conversations that we will continue in September. And as always, I'd like to thank you for listening and I look forward to talking to you again on the next issue of T2RL talk. Thank you. Thank you very much. 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