At the Two Sis café in Pyrmont where I had lunch my last day in Sydney, the place was packed with youngsters from Asia – there’s a local university nearby and so it’s popular with students. Let’s say my friends and I brought up the average age substantially.
Latte that goes beyond art from Two Sis Cafe
The café, owned by a Cordon Bleu-trained Thai woman, serves fusion dishes that are made for the Instagram generation. Every dish is pretty to look at. It’s known for its coloured lattes – from taro to rose to matcha. Every dish is carefully photographed before it is eaten.
The two Thai girls sitting next to us have an SLR camera and they take photos of their food from every angle. They could be KOLs (Key Online Influencers), after all, posting for their living. They appear to be more interested in how their food looks than how it tastes, picking at their pancakes which come with a topping of carefully-orchestrated candy floss.
I felt I could have been in a hipster café in Bangkok or Tokyo or Seoul. I hear Mandarin, Cantonese and Thai. When an Australian bloke walks into the café, all eyes turn to look at him – okay, he’s a good looker but he is the minority in this carefully-curated new world of food-meets-social media.
At the CAPA Australia Pacific Aviation Summit in Sydney, executive chairman Peter Harbison spoke of the growth in inbound tourism to Australia. China is clearly leading the way with 1,449,264 visitors expected in 2018. Growth rates since 2010 have been in the double digit. Other growth markets over the 2009-2018 period are all from South-east Asia – Vietnam, India, the Philippines and Malaysia. Markets that have declined in that period are Ireland, Japan, South Africa and Israel.
You don’t have to be a rocket scientist to know where Australia’s future lies and many know it already. Qantas’ growth in the last few years has been in international and Asia, not in domestic.
As I sat through the two-day conference, attended by aviation and corporate travel executives, I thought about how several (urgent) mindset changes are needed in the industry in Australia to face its future.
- Tourism needs to become more visible
Peter Harbison: Time for government to pay more mind to tourism over mining.
One is the governmental mindset about how it views tourism vs mining. Harbison lamented that despite the growth in tourism, it remains invisible to the Australian government.
“It’s time for the government to get serious. Tourism jobs are AI-resistant and as long as tourism isn’t recognised in its own right, it doesn’t get political recognition.”
It accounts for more jobs in related sectors – construction, retail, transport, accommodation, education and arts and recreation – than mining, he said.
- Look at new markets anew – from Asia to Latin America
Two is the mindset change for travel companies in Australia to not only think of new markets but seriously address them from the product, service and infrastructure side. The potential of Asia has been talked about for some time and there have been efforts by some companies to address the opportunities in the region. Qantas’ growth over the past few years has been in international, particularly Asia, while domestic has remained steady. So look to Qantas and Jetstar to dig even deeper into Asia.
Even Nicolas Goldstein, senior vice president of global sales, of LATAM Airlines Group urged the audience to have a mindset change about Latin America – that actually it’s closer to fly to South America than it is to Europe.
- The NDC journey to 2020 – get onboard or get off
Three – and most critically – it’s the mindset change needed to embrace the new airline world. Harbison said that operating an airline is now the easy bit; what’s hard is the sales and marketing, given the tech and consumer disruption and, specifically for traditional travel agents selling traditional airline products, the implementation of NDC (New Distribution Capability) by IATA.
Ian Heywood: 20% of third party transactions via NDC by end of 2020.
Ian Heywood, global head of new distribution of Travelport, broke down the journey towards 2020. A total of 28 airlines are now certified to IATA NDC Level 3. By the end of 2018, certified airlines will account for 59% of all passengers boarded. Forty seven IT companies are aggregators are now NDC capable to IATA NDC Level 3.
By the end of 2020, IATA has declared that 21 airlines will have 20% of third party transactions via NDC. Qantas is the 21st airline and has said it will transact 20% of third party sales through API by December 31, 2020.
He urged agents to think carefully about what this means because clearly it won’t be just Qantas’ domestic but Asian content too. “How will this change the industry in Australia? What will the competitors’ reaction be? Will they use the carrot or stick to get agents onboard? Will it give them the results at the bottomline?”
If you think he has the answers, he apologises because he doesn’t – just know that a lot of disruption is coming to the travel agency world. Airlines are embracing NDC because they want to get back control of their distribution, improve sales capabilities, reduce reliance on the PSS, have commercial model flexibility and innovate in the way they sell, market and distribute.
“It’s not what will happen in the future, airlines are doing it now,” said Heywood.
Airlines will move from fares to offers and dynamic pricing. There could be different price points for different passengers, different prices for different agents. And airlines are using the carrot-or/and-stick approach to persuade agents to move to the new world, he said.
“Lufthansa has introduced surcharges, British Airways is using technology. We’re starting to see different ways airlines are forcing bookings through the API route. In Asia, we have yet to see moves, but it could be more carrot than stick but if the carrot doesn’t work, then they might use the stick,” said Heywood, who’s worked on the airline side of the fence.
“No models have yet been proven. 2018 is the year of plumbing and from mid-2019 to 2020, we will start to see things happening.”
The biggest challenge is as much the technology but also the human processes that surround it. “Airline revenue managers are good at doing their job, and now they have to move from 26 booking classes to possibly more than 200. Can the people do it?”
- Be less insular, more diverse – beyond gender
Last but not least is the mindset change needed around diversity and recruitment of talent into the industry.
Merren McArthur: “
Merren McArthur, CEO of Tigerair Australia, opened her talk by referring to the by-now infamous comment made by Akbar Al-Baker, Qatar CEO, about “how women cannot run an airline because it is such a challenging job” back in May during the IATA meeting in London. He’s since apologised but his remarks fuelled renewed debate over gender diversity in the industry.
She then contrasted his comment with the one made by Warren Buffet – “We’ve seen what can be accomplished when we use 50% of our human capacity. If you visualise what 100% can do, you’ll join me as an unbridled optimist about America’s future.”
Having said that, she noted the lack of diversity in aviation – women form 3% of CEOs in aviation compared with 12% for other industries, 8% of CFOs vs 19%, 9% of HR Directors vs 23% and 3% of COOs vs 9%. (see chart)
She said she’d like to see the debate broaden to diversity across age, gender and personality – “the deep thinking quiet executive vs the articulate alpha male”.
“Values come from different viewpoints and perspectives, and maybe from outside. When was the last time we hired from outside? In this day and age, skills are transferable. Our insularity could mean we lose the leading edge in innovation.”
One way Tigerair is introducing gender diversity is to identify high performing females and sending them abroad for exposure and training and introducing flexible work practices. Tigerair’s management team is made up of 4 women out of 10 and women form 41% of its overall team.
“It’s not about positive discrimination (a term Harbison used when he asked her a question around how she would improve gender diversity) but by being alert to unconscious biases and looking at people who don’t fit the traditional mold.”
McArthur also said there needed to be a mindset change about the term “low cost carrier” because it makes people think “cheap and nasty”. Her personal preference is “airlines of choice”.
Whatever we call them, they have certainly brought change into the world of flying. On this trip, I flew Scootbiz for the first time. It was pleasant enough. There’s ample leg room – 38-inch seat pitch. It’s not a flat bed, but it reclines enough for comfort. Scootbiz comes with Scootv which you download before the flight. It comes with one meal. You want more? Pay. You want wifi? Pay. I like the buy-as-you-fly and as a frequent flyer with Singapore Airlines, its parent company, I can imagine some cannibalisation of business – but it might as well go to the other pocket than someone else’s.
As an aside, I spoke to a Scoot executive to ask him about MARVIE, the chatbot, newly-introduced by the airline to handle customer queries and eventually transactions. Turns out that even there, MARVIE does better with Singaporean English (Singlish) than Australian English.
Apparently, MARVIE gets our more direct way of speech. Good to know we talk like robots and eat like social media stars.