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“The primary market is the time between when the booking window opens and when a ticket is sold. There's a number of great tools on the market to do that. But we felt that there was an opportunity that existed after tickets are sold to continue to optimize revenue from those tickets themselves – and that that opportunity was being missed,” says Volantio CEO and co-founder Azim Barodawala.
Back in June, Volantio, a travel tech startup focused on airlines, secured its most recent investment, along with a partnership, from global distribution system Amadeus.
The backing and alliance from Amadeus represented yet another big vote of confidence in Atlanta-based Volantio and its singular focus on solving airlines’ “post-booking” problem came a year-and-a-half after the company closed a $2.6 million second round of funding. That funding raise also came with strategic partnerships and backing from International Airlines Group (IAG), JetBlue Technology Ventures, and Qantas Ventures.
In a conversation during Skift’s Global Forum in September, Volantio CEO and co-founder Azim Barodawala discussed the company’s growth and how it’s decided to maintain its concentration on doing “one big thing well” as opposed to attempting to do several things and seeing what sticks.
Volantio’s platform, dubbed Yana, uses machine learning to send mobile notifications on behalf of its airline clients to customers who are booked on flights that have experienced a spike in demand. Yana’s algorithm targets potentially flexible passengers with offers to switch to lower-demand flights. If the flier accepts Volantio’s offer, its Yana system automatically rebooks them.
"Our platform provides a rare triple-win,” says Barodawala. “Flexible passengers receive a benefit for changing their travel plans, last-minute travelers are able to access flights that otherwise would have been full, and airlines can better maximize network capacity and unit revenue, while putting greater predictability and control back in the hands of their customers."
We caught up with Barodawala to discuss how the idea to hone in on overbooking as a tech issue came to be and how it’s attracted the interest of high profile brands in the aviation sector.
Kambr Media: Let’s begin with Volantio’s origin. Where did the name come from?
Azim Barodawala: The name doesn't mean anything, honestly. The story behind the name was that we needed to create a name, and we didn't have a lot of time, because we just had too many other things to do. My cofounder and I sat in a windowless room in Melbourne, Australia. It wasn’t even a room; it was a space created with plywood and sheet plastic at a coworking space with no ventilation, no windows, and no view.
So we had to get out of the room. Fenn Bailey, Volantio co-founder and chief architect, wrote a little script that created words. We looked at the list that was created and saw “volantio.” We checked the domains to make sure the dotcoms were available and with that, Volantio was born. We actually looked up the word afterward, and “volant” means “like a bird in flight.”
Aside from the name, how did you decide to create the company?
I used to work in the travel and transportation practice at the Boston Consulting Group. I’d been there for a number of years in various leadership positions.
After more than 3 years, I went to Australia, and was hired as the global head of strategy for Jetstar Airways. I met Fenn while I was there through a mutual connection. And at the time, he was working on a different business. He and his existing cofounder of that business invited me to join them and help them to refocus what they were doing to work more directly with airlines. So I did that. From there, we divested that old business, and effectively re-founded the company as Volantio in 2014.
How did you view the challenges and opportunities Volantio would solve by working more directly airlines?
The key challenge that we've seen with airlines is that they have a lot of tools to help them optimize revenue in what we call the primary market. The primary market is the time between when the booking window opens and when a ticket is sold. There's a number of great tools on the market to do that. But we felt that there was an opportunity that existed after tickets are sold to continue to optimize revenue from those tickets themselves – and that that opportunity was being missed.
I have to be honest, the idea wasn't ours. The idea came from Kevin Ger, who is the VP of pricing and revenue management at Alaska Airlines. I give him all the credit. He and I were friends because he had also been at Jetstar.
Kevin said, "This is a real issue. Airlines are leaving money on the table. Look, my revenue management system does a great job optimizing revenue. But what happens when the demand profile and the flight changes five days prior to departure, and I start seeing a spike? My customers are going to spill, and that's a missed opportunity.
“I really want a tool that enables me to create a marketplace where I can reach out to passengers, find out who might be flexible to move to a different flight, and be able to move them, and then be able to resell that ticket to somebody who really needs to be on that flight, who is willing to pay a premium for that."
When we started thinking about that, we realized that we had all the tools in place to do that. We could be the enabler of that marketplace. And that's how we started out. So Alaska Airlines were one of our early customers, along with Qantas. Since then, we've really grown and expanded. It's put us in a very exciting position now for the future.
How did you decide to seek and accept investment?
Once we started getting some traction, we were backed by JetBlue Technology Ventures, as well as Qantas's venture capital arm, British Airways’ and Iberia Airlines’ parent company IAG, and now Amadeus. We're really the only company that has gotten the global backing of the top four travel focused corporate venture capital brands. I think they recognize that we have something that is very valuable.
What is Volantio’s value proposition for airlines? How do you differentiate from other travel tech brands?
We're really focused on doing certain things and not doing others. To be the best at doing something, you have to be very tightly focused. Some of the other folks in the market are doing soup to nuts, everything from chatbots on down.
We don't do that. We lose revenue because we don't do that. But we gain expertise and value from our platform, and over the long term, it's the right strategy. We don't optimize ancillaries, per se. What we do have the ability to do, though, is optimize ancillaries as an incentive that can be offered to customers when they want to move between flights.
How does that work?
As an airline, you could say to a customer, “Look, we'll give you a lounge pass if you change your flight. Or we'll give you an extra bag?”
The idea is to create incentives for customers by giving them something that the customer values. For an airline, that is important because it gets a person to start valuing an ancillary where they wouldn't have purchased it in the past. Maybe a customer wouldn't buy fast track. But you give them a fast track, say, for a European airline, they might like it. And the next time they fly, they’re inspired to purchase that kind of offer.
So indirectly, yes, we help promote the sales of ancillaries. But no, we're not going out there directly looking to drive more ancillary revenue. Our solutions look for ways in which both the airline and the customer can get value. In these cases, it’s not the airline charging the customer for something, but it's the airline getting a lot of benefit, and the customer getting benefit, as well.
On average, our airlines have seen somewhere between 10 cents to 30 cents per passenger boarded in profit by using our platform. We expect those results to triple to up to $1 per PB within the next few years as our platform matures and we deploy more modules. Those are tremendous results.
That's why I think the JetBlue Technology Ventures and the Amadeuses of the world were so excited about this. This can be something that can really grow what they have to offer.
The other area which is really exciting is that you can also dramatically improve the experience when your flight ends up being oversold. That's hugely valuable to customers, as well as the airline, because now you can remove the friction that exists between the airline operations teams and revenue management. We are doing this for carriers like Alaska Airlines and IndiGo in India. We're enabling them to start overselling when they never oversold before, because they know that they can still maintain a positive customer experience. And for airlines that did oversell, they’ll be able to oversell more, without sacrificing customer experience.
How do you view the relationship with Amadeus? It’s reasonable to assume they might view a company like Volantio as a potential competitor.
Amadeus views us as a complement to them. And so do we, because Amadeus is the industry leader today, in terms of the number of airlines that they work with. They work with over 100 airlines globally. Amadeus’ Altéa platform is the leading global platform for airlines.
What Amadeus is getting out of our partnership is the ability to bring fresh, new technology to their airline partners very quickly. What we gain out of it is distribution and the ability to ramp up with airlines that we would never have had a chance to be able to communicate with otherwise. Both of those things in my mind are really, really exciting, because it's a win-win, both for Amadeus and for us.
How do you achieve that balance between satisfying airlines without sacrificing customer experience due to oversold flights?
You achieve the balance by being able to more reliably find volunteers who will volunteer happily to move to another flight. The problem with the current system today is that it's broken. It's all gate-based. It's all announcement-based. It's all reliant on last-minute volunteers, and it puts so much stress on your frontline staff and on customers, who are sitting there in a packed, cramped environment, listening for announcements about an airline that needs three volunteers.
Because of that, airlines are really skittish about overselling their flights. What if the entire process could be done in advance of a customer being at the gate? You could be associated as a volunteer before you even get to the airport. In some cases, an airline could even clear you before you leave your house. And then for the last minute changes that have to be made, instead of having to go up and stand in a queue, you just get your rebooking right on your phone, and your award.
In some cases, we can still execute it at the airport because the challenge for airlines is they don't know the final show rate on a flight until people actually show up. Even in those cases, with our platform, you can tailor the offering.
The problem today is that airlines have pretty much a peanut butter offering to everybody. But we can say, “We know that Mike doesn't travel so much, and so why don't we offer him a flight that takes off four hours later and give him a lounge pass?”
Conversely, an airline might say, “Azim, travels a lot, why don't we give him something he probably cares more about like 5,000 elite qualifying miles?” We use machine learning to be able to tailor all of that. That's the other important point.
Have you always employed machine learning into Volantio’s system?
Our entire platform, which is a key difference between us and anybody else in this space, is built from the ground up on machine learning. Everything we do is built on machine learning and data. We have over 8 million transactions that are guiding our platform.
At the beginning of the year, that was two million. A year ago, that was one million.
Each transaction has within it hundreds of individualized data points inside of it, in terms of attributes that we can then optimize on. First of all, everything is anonymized and de-identified. But it's statistical data that we can use to say, “In this type of a situation, we should offer x. Is this is the right amount to offer to a customer to incentivize them to move from one flight to another?”
What we do is based solidly in the discipline of revenue management, and our system compliments very nicely existing pre-booking RM systems such as PROs, Amadeus, and others. We consume RM data (or proxy information) to determine the right amount to offer passengers to move them from one flight to another, the right number of seats to recover, and the appropriate alternative flights to offer. We also take into account potential displacement costs on alternative flights. Machine learning ultimately optimizes all of these dimensions.
What's the growth strategy you're looking to 2020?
We're primarily focused on doing whatever we can to capitalize on the Amadeus partnership, because they've been great. We're going to be working very, very hard to execute and to grow that partnership for both Amadeus and for ourselves, and just continue to grow out our platform and introduce new features. That's what we're doing.
