And we did.

In those days, most processes were manual. We got confidential price lists from the airlines. We learnt the ins and outs of the particular contracts and then added our mark-up and distributed our pricelists via fax to all the agents in the countries with routes and booking classes.

Most of the agents made their own bookings and queued them to us for ticketing. Some called in and let us do the work for them. It was intricate work much of the time. The reconciliation process was equally tricky.

We had fare analysts and ticketing specialists. We needed all the help we could get because rules were often quite messy.

Offline Asian carriers, such as Malaysian and Singapore Airlines, which used feeders from Scandinavia to a hub in Europe, had thorny rules to say the least.

Some allowed stop overs in Asia, en-route. Some allowed stopovers for a surcharge. Some airlines like PIA, JAT, Aeroflot and others had their own set of rules and could only be ticketed by themselves.

Some airlines allowed a stopover where the airline paid for the hotel, such as Lan Chile, Iberia, TAP and others. Some you could change, some not.

On top of all of this, there were also seamen’s rebates, youth discounts, student discounts, religious fares, government and parliamentary fares. You had minority fares for people in Spain who live on the islands.

There were special published fares for certain ethnic groups. If you flew business class you could construct routes with Hip’s and there were lots of intricate ways to lower fares. There were even fares you could combine with train and ferries.

In those days there was no chance in the world the CRSs (now GDSs) could help you out with all these fares. You had to do it all manually. The CRSs could handle published fares, point-to-point and, in some cases, simple route constructions with the highest fares in economy class.

I would argue little has changed. Not the GDSs, and certainly not the level of complexity around fares. In fact, the complexity has worsened.

And we as an industry have dealt with it by not dealing with it at all, leaving out a huge business potential, meaning that there are fares and combinations out there most people in this industry have no idea about.

In 2010, most global fares are point-to-point, much like domestic fares in the US. We have all the low cost carriers which do not publish fares through ATPCO.

The common flight currency like FCU or NUC is not being used as extensive as it was 20 years ago to construct fares. Instead we use multiple local currencies with hourly fluctuations, making a multi-stop itinerary easier to calculate, but harder to get right simply because you have multiple sources of information.

Again we have dealt with multiple sources by not doing anything, or too little. Twenty years ago it was simple – you had the CRSs, the APT and all the consolidators. That’s it.

Airline fares online have come to a place with almost supposedly “perfect information”. Perfect information for the one who supplies it that is – GDSs.

Compare any two websites or more and you will basically get the same routings and fares because all use the same sources.

To differentiate your offering as an OTA you have to use content from multiple GDSs and LCCs, be able to tweak your results, or both.

What mattered 20 years ago, still matters today. People want a combination of the lowest fare and the perfect routing. For instance, South Africans do not care about having to fly via Dubai, because Emirates planes are new, have better seat pitch and better in-flight entertainment. Plus people can do great shopping in Dubai.

I know that thousands of people from Stockholm fly via Budapest to London because, essentially, it’s cheaper and they get a whole day in Budapest for sightseeing, shopping and Palinka.

So I am not one who subscribe to the idea that sorting by “agony” is the best way forward – it’s only one.

That two companies, Everbread and Vayant, specializing in airfare search got lots of attention during the PhoCusWright’s Travel Innovation Summit says something. Both companies have been in the making for the past four years and are not a sudden response to the Google–ITA Software deal.

Assen Vassilev, founder of both companies, simply knew he could do it better and that time is ripe for fares differentiation – besides it a huge market.

Online travel as we know it, is a simplified version of what travel agents did in the past but without all the wisdom and experience a good fares and ticketing expert had.

While hotel rates distribution has come a very long way the last ten year, airfare search has stood still, up until now.

There is a tremendous resistance to change in airfare search. Reasons are that few understand the underlying complexity, therefore arguing – why change.

Second is that there has been no alternatives up until now. Resistance is rooted in the belief that the GDSs have it all, and they want us to continue to believe that, to protect their business that is now being challenged in a world with fewer and bigger players in the history of our industry.

With metasearch engines and now Google entering the travel space, OTAs are looking for alternative ways to differentiate their offering and finally crack the code to start make money on air.

One size does not fit all, and that’s what the industry slowly is starting to realize.

NB: Author is an investor and board member of Everbread.

Market leader is Aircell, providing services to the likes of American, Delta, Airtran and many others.

According to Aircell, 1,009 commercial aircraft are equipped with wifi access from Aircell called GoGo Inflight Internet.

Meanwhile, Row 44 announced this week that it has raised $37 million, this only eight months after Aircell raised $176 million.

While others use ground based antennas, Row 44 leases telecomm satellites which can provide wifi access globally.

This is great news for the aviation industry as well as for passengers. Wifi is therefore perhaps the killer ancillary that people are actually prepared to pay for without feeling cheated.

Keeping passengers occupied with stuff that matters to them most will have them using their plastics like never before.

The ancillary business in aviation is exploding and last year the global airlines made more than $13 billion. Inflight wifi is so far a minimal revenue source.

But, lest we forget, so were check-in fees and other forms of ancillaries in the beginning.

The Flipboard is much more than about sorting and presenting our social network feeds in a beautiful form.

As I hinted last week, it will not only change media, it will change commerce and, therefore, travel as we know it. Here is why…

Aesthetics touch our emotions and amplify our will to engage, be it business, art, religion or politics.

This was true for divine ideals in the renaissance, it was true for politics when the modern newspaper was born and it’s true for business today for companies like Apple, Virgin, Monocle magazine etc. Aesthetics drives engagement and business.

So I believe that the Flipboard will drive more people to buy the iPads and to start use the social networks to a larger degree than before, as it is looks great and is easy to use, and simply because people will be more engaged with content when it is more relevant.

Social networks with members that I trust are more valuable than adverts. In fact, a friend’s recommendation with a rich content ad, delivered dynamically, is hard to beat.

Think of it as Google Adsense, but with rich, beautiful content plus a transaction widget or online access to customer service of a company that I’d like to do business with.

Trusted friends recommendations + aesthetics + ease of use and call to action. This is something we have talked about since the advent of internet but yet have failed to deliver. It’s all happening now and it’s called Flipboard. No, really, it is…

Twitter feeds will be the main source of information for the Flipboard and will eventually kill all online communities.

When it comes to twitter we have seen nothing yet. Think about it as a puzzle. All the gazillions of 140 character messages out there are simply pieces of info floating around waiting for some context, waiting for a home.

The more info that’s produced and the more people aggregating this content the better and the more perfect the puzzle will become.

We have gotten used to social networks living in silos, even though this is changing. But the walls still exist between the networks and transaction.

So when we go to our online community we come to talk and sometimes to listen but never to buy. Flipboard changes that.

Merchandising is all about context and packaging. At Disneyworld you cannot exit any ride without going into a souvenir shop filled with relevant products.

Even I bought a vintage Michael Jackson T shirt after a revisit to Captain EO this summer.

Say you are a hotel buff, like me. I love five-star places that make me feel like I’m stepping into another world, in another time.

For me the destination is secondary (well, it’s an expensive hobby). I can’t trust Tripadvisor and I can’t use any ordinary commercial hotel websites.

Instead I use travel mags and do a lot of online research. This takes time.

If I can create a separate Flipboard for the trusted hotel buffs that I follow, and have beautiful rich content ads integrated from the likes of Villa Galici, I think my resistance to use this ad would be very low.

And, furthermore, the more information I get from different social networks and Twitter feeds into my Flipboard, then the more useful it becomes.

To use an anology. We are now looking at the possibility where Flipboard will throw the first global virtual Tupperware party, lasting 24 hours a day 365 days a year.

We are very happy to bring our plastics as long because of who we trust, especially when are buying into something bigger than just ourselves. We can´t stand to be left behind.

In short: mixing trust with aspiration makes for a very powerful combination. And that is why Flipboard is a game-changer.

But the lack of interaction to transaction has been discouraging to say the least. I believe this will change with the latest kid on the block, The Flipboard.

Flipboard, backed by the likes of Kleiner Perkins Caufield & Byers and Index Ventures, has begun “a quest to transform how people discover and share content by combining the beauty and ease of print with the power of social media”.

And for once this bold statement is true.

Flipboards app for iPad will have people come rushing to the stores to buy the iPad and many more will sign up and start using networks like Facebook and Twitter because it´s suddenly makes sense and puts things in context and is super user friendly.

Flipboard says about their iPad app: “It brings to life the stories, photos, news and updates being shared across Twitter and Facebook.”

What does this mean for the travel industry?

1. Word of mouth is the industry’s big seller and nothing gives people more confidence than a friend that recommends a supplier or destination.
2. The Flipboard and the iPad are some of the final missing pieces for social media networks and communities to translate into a transaction.

Presentation and finesse are parts that have been missing for social networks; plainly speaking, it has been ugly and boring. Not so with the Flipboard.

Your own and your network’s messages are presented beautifully. Presentation, ease and beauty sells, ask a gazillion of Apple users.

Travel suppliers will be able to interlink content, pictures and most likely tie that in with some transaction process.

Networks like Tripadvisor will get competition from startups that will aggregate mash up content from Twitter and travel content websites across the web.

Tripadvisor on the other hand has a tremendous upper hand if they, for example, tie in suppliers like hotels, websites and social media feeds and gain consumers loyalty by allowing people to sign in or cross reference their reviews with their Facebook and Twitter profiles. This would give TripAdvisor back their credibility.

For airlines it was never easier to come close to their customers.

For people making their living out of sending traffic to affiliated websites a whole new world of opportunities opens as the transactional web and the social networks finally merges.

There are of course tons of other opportunities and implications out there. The Flipboard is a game-changer. I just found out about the Flipboard this morning and decided to buy an iPad instantly.

Here’s a clip:

www.youtube.com/watch?v=v2vpvEDS00o

Traditional travel companies downplay the importance and the other side, OTAs and metasearch engines, might overreact. The former falls into the trap of not doing anything, and latter overdo and take decisions in haste.

Here how it plays out on a football field:

First of all, I see hardly any difference in an OTA and a metasearch service. For an industry insider there’s a world of difference, but not to an end consumer. Why would we as the travel insiders see things differently than our customers? So let’s stop kidding ourselves about the immense value we provide to the travel chain.

SCORE: Google/ITA 1 –  OTA/Meta 0

With the wider accepted practice of unbundling it is getting harder for both OTA´s and meta to provide true value to customers, both are still in the game of price comparison. The OTA/meta value proposition hasn’t changed much but meanwhile the airline industry has entirely altered over the past few years. Google/ITA is not going to be able to change that either.

SCORE: Google/ITA 1 – OTA/Meta 1 (penalty kick)

OTAs used to lead innovation. Suppliers and Google do this today.

SCORE: Google/ITA 2 – OTA/Meta 1

According to Google: “Today, almost half of all airline tickets are sold online. But for many people, finding the right flight at the best price is a frustrating experience; pricing and availability change constantly.” Google/ITA is not going to change any of that with the acquisition. No goal.

INCIDENT: Google/ITA 2 – OTA/Meta 1 (crowd boos due to defensive play)

Google is getting too big and too powerful. Google has too much reach. People are getting worried about this and voices are raised, split up the company. One man gets red card in the Google/ITA team.

SCORE: Google/ITA 2 – OTA/Meta 2 (own goal)

As Google gets deeper and deeper into different areas, such as maps etc, they will have to compete with any other service who might do things better. Here is of course the real opportunity for the OTA/Meta team.

INCIDENT: Penalty kicks after added time.

So, who will win?

The OTA/Meta team only scored one goal, via a penalty kick. The other was through an own goal.

Post-match summary: OTAs and Meta will have to take the lead in innovation or be disintermediated.

There’s lots of discussions going round, especially in the consulting circus about the future validity of OTAs.

Will they (we) be around in ten or even five years from now, and what will we look like?

Metasearch websites, Google, Bing Travel and other new intermediaries are slowly paralyzing our industry.

New players are hailed by business strategists and consulting firms. But while the OTAs are asking what sort of value they bring, consumers flock to these so-called new players.

An industry insider and veteran says: “People opt for frozen, processed food (meta) when they can find fresh (OTA) one mouse click away.”

The same OTA executive labelled meta channels of being Mercedes compared to the OTAs being a VW.

This very well pictures a common problem in the OTA circles. We don’t know where we are going, why, and even how we got to where we are.

In the 1990s the industry focus and aim was to challenge trade structures for the better of the consumer, now sadly most have crawled back into caves of defence “working” as outsourced contractors for our suppliers – the GDSs, the airlines, the metas and Google.

We challenged the sugar daddies that were sucking up for suppliers, screaming for industry Viagra, kickbacks and incentive.

And now WE are all there standing in line waiting for handouts. It only took a little more than ten years, and in the process our suppliers got stronger.

It’s all in the volumes. If you don’t have volume your are nobody, or so they say.

BUT, it wasn’t the volume that got us here. It was the Mojo!

Being on the bleeding edge in the evolution of OTAs since it’s inception some 13 years ago, I have seen industry players going from being agile and full of a warrior spirit to become complacent and focusing purely on volume.

The OTA´s have a distinct role and purposes to fill and if we don’t we might as well sell hot dogs. So what is the purpose of the OTAs and what is the calling? Well here’s the five raison d’être for any OTA:

1. Drive innovation – Before the OTA´s there was literally nothing online to talk about. Companies like PC Travel, TISS and others showed how to use technology to present, package and sell flights online. OTAs have also paved the way for ancillary sales, dynamic packaging etc. What was innovation then are standards today. Innovation today, in online travel, comes from small start ups developing gadgets for parts of the travel process with little and no use without context. With the advent of the smart phone the field is again wide open. The browser was the catalyst to change the booking process.  The phone will change the payment, customer services and post booking process. There are many other areas to innovate in; Marketing, social media, supply access you name it. You can shred the OTA business to pieces and find hundreds of areas to innovate in.
2. Customer advocacy – OTAs should set standards for customer service levels. The customer advocacy mandate is not about schmoozing, it’s about being the industry pesticide for bad practise and terrible service. The airlines job is to fly passengers as safe as possible from A to B. Unfortunately they get themselves into trench wars with agents allowing their hotlines to break down every time there’s a major delay, strike or God forbid a terror incident. Somewhere around the globe there’s an airline that defaults almost every month and one of the OTAs jobs is to make sure that airlines with a questionable near future doesn’t get any bookings. The mandate also implies that we make the industry “greener” meaning that we fight for common standards and decency.
3. Create demand – Google, metachannels, affiliates etc drives a lot of traffic to websites. But it doesn’t create any demand. Through presentation, creative marketing, newsletters, social media and so on the OTAs can and should drive demand for new and exotic products that perhaps wouldn’t find the market otherwise. Here’s were the long tails works wonder in travel marketing. Specialized operators can niche destinations or special interest groups and fill up hotels and seats on destinations that otherwise would be unsold. We often talk about the need of creating an iPod for the travel industry, meaning creating a product that no one knew that they need or want. Suppliers and consumers will come rushing to an OTA with a creative mind.
4. Lower fares – A world without OTA would be a dark place with high fares, dodgy rules and bad service. The OTAs job is to lower fares, democratizing travel and bring order and transparency. Fares and bad business practice are brought down through transparency. Nothing brings competitors to their knees more than the truth. And the truth is the transparent UI. Network carriers, benchmark fares through the OTAs. It’s amazing what the power of UI holds. In the old world the airline brands were incredibly strong. In 2010 the UI is everything. Today OTAs have the power to address lack of airlines cooperation by simply cutting them off the UI or price them so high that they will not appear amongst the first search results. The power has truly shifted. And for some markets it’s simply waiting to happen. In many cases, unfortunately, the OTAs are busboys for the airlines.
5. Drive distribution – The OTAs were the first ones to explore the wonderful world of online marketing. Still today OTAs work harder to find their customers online than any supplier, but suppliers are catching up fast. Our business is judged by how good we are at finding (and keeping) customers. Today most OTAs depend heavily on three major traffic sources – large affiliates, Google and metasearch engines. Just like many OTAs lack in innovation I see many fail in finding customers in a clever way, and again fall prey to play the volume game. This is however a dangerous game since the business you “buy” easily can be taken away from one day to the next.

Reason matters more than size, or so it should. Customers are more and more unfaithful, and why shouldn’t they.

A partner who doesn’t go the extra mile to impress is not fun to be around after a while. My five raison d’être can reshape the future of any company and put it back in the lead. I for one believe that the race is always on and you can always change the outcome if you are prepared to change the rules a bit.

But the problem is as always in this industry: who do you work for?

Otto Lagarhus and Kai Holmberg

FEEL Air recently announced the launch of a long-haul, no-frills, “feel-good” air service between Stockholm and Oslo to New York and Bangkok.

I had a talk to the chief executive and founder Kai Holmberg:

Give me some ideas on how you will combine Ryanair’s intense low-cost focus with Air Asia’s or Virgin’s more flamboyant style, after all, all three airlines have some pretty charismatic leaders that are tough acts to follow?

AirAsiaX has really been our role model from day one. Our references to Ryanair and Virgin are done more accidentally to give the market a sense of direction of our thinking rather than saying we’re copying them.

We have a dozen more role models within all different niches and, all in all, this will create a unique feel-good brand and a world-class operation.

As far as combining a puristic cost religion with an informal and friendly service concept, we don’t really see the contradiction.

Actually, there is a synergy. In the same way that you gain lower costs while supplying a high quality operation (e.g. with regards to aircraft dispatch/reliability), the same goes for service.

We believe that treating your employees nicely makes them deliver a more efficient and profitable product.

To be able to offer 50% lower fares than our competitors, we know we can’t offer the highest wages in the industry, hence why it’s important to create a brand and a team culture that the crew wants to be a part of.

Working for FEEL is a blast. And we call our service “differently enjoyable”, so that when we have our guests onboard up to 12 hours, they will come back the next time both because of the fares and because of the cool, honest and informal service.

I might not be as charismatic as the leaders of these three companies, but I know that our joint team will be.

Charisma normally comes with the actual job and not the person so that will be developed over time. How do you intend to make maximum aircraft usage to your advantage? Many people claim that true low cost only works on short haul flights.

Combining NYC and BKK on an inconsistent schedule makes us able to utilize our fleet 16.7 hours a day on average. Where we use one aircraft, legacy carriers might use two. Short haul do not fly at night. We do.

And even without having departures or landings at odd times.

Again the BKK and NYC combination out of Scandinavia is something quite unique.

We’ve optimized our schedule for New York weekend trips. Scandinavian guests will go the airport after work on Thursday and fly out at 16:30 so that they can land at JFK before 19:00 – just in time for dinner.

Their return flight is at 21:00 on Sunday night so that they can go straight to work on Monday.

Seems like your timetable is geared towards the holidaymakers. How do you think they will react to paying for food?

First of all, in 2010 we don’t think that people like to be dictated what to eat. They want choice. FEEL offers a selection of meals that most people like.

They can pre-order on the web at a price advantage or they can order whilst onboard. Some people eat more, some eat less.

Important also, this is a win-win element for the environment – too much food is wasted in the existing long haul model.

It’s a mystery to me why Norwegians seem to be most successful in Scandinavian aviation. Why?

Perhaps it’s partially by market and partially by accident. There are great aviation professionals in both Sweden, Denmark and Norway. But because of the long and hilly geographics, no one flies as much as the Norwegians do!

How do you intend to build market confidence after all the airline collapses last couple of years.

Three elements are important to us:

1. It starts with organization.  Recruiting Otto Lagarhus as our accountable manager is the best decision I’ve made so far. Otto’s background is amongst others accountable manager for the entire SAS Group, the director general of Norway Civil Aviation, consulting many of the worlds best airlines (both legacy and LCCs) on quality and safety issues, and having his heart with the quality and safety area makes him the best man for the job. He only attracts the best people around him.
2. Viable business case. We wouldn’t have started this operation if we couldn’t see a rapid profitable business. We’re in this game to make money (and to have fun at the same time).
3. Thirdly, it’s about protecting the downside and mitigating all significant risks. The casualties of 2008 had not protected themselves from fuel costs rising to $147 per barrel. So, in the same way that a pilot always need to have a plan B for the flight path, our business intelligence needs to have one too.

Tell me about the distribution strategy?

Feel Air chooses a risk mitigated approach to sales and distribution. Our primary focus is to fill up all seats, hence why Feel will sell tickets through intermediaries as well as direct on our website and call centre.

We focus on the leisure passenger. But because we want to attract the whole market and even the incoming market as well, we want to offer TOP’s, charter companies, OTA’s and travel agencies’ the ability to book via GDS or even a direct link for volume partners.

So that’s good news for the intermediaries in these days! Finally what do you personally bring to the table?

As signalled on FEEL’s aircraft livery, I want to bring a profitable and fun balance between the very distinctive low cost logo and the more sophisticated service pattern to go with the long flight lengths.

Apart from that, I bring guts, a clear vision, and a substantial mortgage on my house!

The airline industry is in tailspin, hoping for a recovery some time maybe next year.

It will take years to make up for last year’s losses. But it’s basically always the same story; losses in bad times wipe out the profits of previous fat years.

In good times the airline bosses get obese and act like there is no tomorrow.

But what does a real entrepreneur do when he’s about to hit rock bottom or when everything is going the wrong way? He reinvents himself.

Most industries in the world have been through a metamorphosis over the last ten years and many have adapted.

The music industry doesn’t make money the way they used to; the Telkom industries doesn’t; nor the computer manufacturers; or the movie industry – and the list goes on.

But the airline industry refuses to change. The best thing they have come up with so far is trying to disintermediate the resellers and fight with the distributors – ie the GDSs – and sell over the Internet.

SAS, for example, have done not one, not two, not three, but seven savings and turnaround plans and they still don’t get it right.

Now they are talking about the eight plan. SAS can do 100 turnaround plans and they still won’t get it right.

They are trying to get back to a market that does not exist anymore.

It is easy to forget even Ryanair once was a losing carrier just like everyone else. It took an absolute menace like Michael O’Leary not to turn it around but redefine what business they are in.

But lets do something even more radical than Ryanair. Let’s look at crowdsourcing the aircraft.

Lets have a quick look at the problem in aviation.

For airlines, customer acquisition costs, distribution and general overheads are too high, they sell to few seats and at too low price.

The aviation industry also blames high fuel costs and the cost of aircraft leasing.

I’m not going to comment about that here, because all industries have costs for producing a unit and you have to calibrate your business to compensate for the costs – or do something else, like selling hot dogs.

In short there’s a shortage of ownership and guts.

But let’s look at how we could solve the actual problem – not counting, of course, legacy problems, IATA, government involvement, politics, unions etc:

• Say that an airline decides to crowdsource – effectively they will stop selling and give customer service at point of sale of its own inventory.
• The airline also stops all marketing activities.
• The airline basically focuses on finding the most attractive routes and to service them at absolute lowest costs.
• In this scenario very little overhead will be needed. An airline can even have its registered base in a country where salaries and taxes are very low.
• The airline opens its API for the inventory system to anyone, say a reseller or licensee.
• To resell you have to license the API and sales system, which allows the airline to track all sales and payments in real time.
• The airline has a rock bottom price, which cannot be undersold; the price should cover the basics to operate, airport fees etc but not more.
• The airline can at any time decide to increase or decrease frequency or simply decide to discontinue a route. So, a lot of guts is needed.
• The reseller/licensee is able to sell and package the inventory wherever, however and to whoever he wants. He can take as much or as little risk as he wants.
• The reseller/licensee is the contracting party towards the passenger, not the airline as it is today.
• The reseller/licensee would pay the airline a flat fee plus a percentage of the gross profit. The airline cannot yield and price as they do today, that will be at the discretion of the licensee.

This approach would open up a floodgate of innovative approaches from the market on how to price, sell, market and distribute the airline inventory.

And, potentially, in five years it would change the market dynamics.

There are of course hundreds of holes in the idea about the crowdsource scheme as described.

The core of my message is this: the aviation industry has severe problems that will not be solved by a few airline execs around the world.

What they should do is allow the crowd to solve its problems by simply letting go – people (all the fat overheads); the closed distribution models they operate under; the legacy; the business model; but, most of all, the prestige.