Ryanair vs Kiwi. An unnecessary flight fight? And an explanation of Kiwi!

Ryanair has launched legal proceedings against the Flight-OTA (Online Travel Agency) Kiwi.com in the Irish High Court because of Kiwi is screen scraping Ryanair (see link).

Ryanair has already lost against Lastminute in a similar case in a Swiss court (see link). And even if Switzerland is not a member of the EU the Irish court needs to take into account what the Swiss court has said, although it's not precedent in the EU. A court in Italy has also made a similar decision (see link). Lastminute is an Italy/Swiss company so I assume Ryanair hopes they will have better luck on "home ground" in Irish court against Kiwi.

It’s not an uncommon practice by companies to first launch court cases in Norway or Switzerland to then take similar cases to EU courts (see link/Swedish). Both countries are affiliate members of the EU to a various extent.

Ryanair deems OTAs as Kiwi as “useless”. Ryanair sees OTAs as an unnecessary intermediate. Of course, there is some truth in the statement. But business is a complex operation. Ryanair refuses to pay commission to Flight-meta engines like Skyscanner and Momondo. Flight-meta compares a lot of different Flight-OTAs and airlines so the consumers are attracted to Flight-meta like flies are attracted to honey (see below screenshots). It belongs to "fair commercial practices" that Flight-OTAs pay flight-meta engines commission. Flight-meta makes the market function better and it’s in the interest of the consumers with a healthy competitive flight market. Then it’s not in the interest of the consumers that Ryanair obstructs against Flight-OTAs. On the other hand, it's also in the interest of Ryanair to make it harder for consumers to price compare different routes. It would likely result in higher prices for the consumers and higher profit for Ryanair. But I am not so sure if that is a true statement in our new eCommerce economy because price comparison and virtual interlining can actually increase Ryanair's amount of passengers in a way it wouldn't have done without price comparison and virtual interlining. 

Google Flights are free for airlines and OTAs. But it’s not appropriate and suitable to compare Google Flights with Flight-metas as Skyscanner and Momondo because of several reasons (that will be another article why it's like that).

Google Trends Germany market, Opodo (Edreams in Germany) vs Skyscanner vs Ryanair. I can’t sadly add Kiwi because the word has several meanings, but I assume it's pretty close to a value of 0. But it's not a problem for Kiwi due to flight-meta (Skyscanner, Idealo.de, Momondo etc) drives a vast majority of Kiwi bookings.

Skyscanner for a particular flight itinerary

I can’t really see why Ryanair complains about Kiwi. Kiwi sells seats that Ryanair would likely not have sold if it wasn’t for Kiwi. It’s a win-win game for both Kiwi and Ryanair. And travelers are the real winners because of Kiwi provides customers with lower fares than traditional GDS airlines. The real losers of Kiwi business model are legacy carriers (LH, KL, AY, IB, BA, AF, etc). Kiwi business model has a crowding-out effect on legacy carriers because legacy carriers get a lower ranking on Flight-metas as Skyscanner and Momondo etc. And the real beneficiary is LCC (Low-cost carrier), travelers and Kiwi.

I think it more looks like a show-trial from Ryanair's side against Kiwi because they likely get the highest marketing ROI in a court than exercising traditional marketing through common marketing channels. But I must say it’s rather innovative and fascinating by Ryanair to exploit the court system for “marketing purposes”.

If Ryanair had a wish to really stop Flight-OTAs screen scraping, I am pretty sure it would have been pretty easy to do so. But it's some sort of cat and mouse game between Flight-OTAs and airlines. There are different methods for airlines to make it harder for Flight-OTAs to screen-scrape them. Some airlines make Flight-OTAs IP-numbers slower if they assume an IP-nr is used for scraping. Then it's important for the Flight-OTA to switch and jump between a lot of IP-numbers.

Some LCC and legacy carriers ban Flight-OTAs to display their content on Flight-meta (dependent on the law in a particular country). But often airlines only know about the Flight-metas Momondo, Kayak and Skyscanner. So it's only for Flight-OTAs to continue to display the results on less well-known Flight-metas or/and only have the airline set on/off outside airline HQ office hours. It will for sure take a while before the airline finds out. Legacy carriers are rather conservative, old-fashion, strict, posh and narrow-minded - therefore easy to exploit legacy carriers if the Flight-OTA works and thinks in the opposite way. And if the Flight-OTA is exposed by the airline, it's only to tell the airline "we have a new trainee that pressed on the wrong button".

Ryanair exploits the current situation to block Kiwi refunds of Ryanair flights

Of course, Ryanair exploits the current situation to appear as a hero (see link). It's actually Ryanair that blocks refunds to customers, no one else. Then Ryanair blames OTAs for not refunding and OTAs illegally screen scraping their site. Ryanair is the biggest airline in Europe then they have to live with OTAs screen scraping their site (see link). Ryanair doesn't have to pay the OTAs commission. Many legacy carriers pay OTAs incentive (or similar - marketing budgets and destination bonuses etc) and the GDSs pay OTAs segments commissions. Ryanair utilizes the current situation as a "marketing event". This form of blame-game is a much cheaper and effective form of marketing than a straight forward advertisement. The blame game together with the show-trial against Kiwi, I assume, has the best marketing ROI for Ryanair. Maybe nothing wrong with the marketing strategy, actually I think its rather innovative and fascinating. I like it when companies think outside the box.

Ryanair’s CEO Eddie Wilson said (see link):

“We are pleased to have made such significant progress over the month of June in eliminating the backlog of cash refunds due to the Covid-19 flight cancellations. Over 90% of passengers who booked directly with Ryanair and who requested a cash refund for travel between March and June will receive their refunds before the end of July. It is worrying however that a significant rump of our customers, who made bookings through unauthorised 3rd party screenscrapers / online travel agencies, have yet to receive their refunds because the OTAs gave Ryanair fake email addresses or virtual credit card details for these customers.

Why is Flight-OTA using "fake emails"? Could be several reasons. From a UX perspective, it could be confusing if the consumer receives a lot of confirmation emails and potential reschedule emails etc from the Flight-OTA and the LCC. If the customer wants to add ancillary services or re-schedule after received booking confirmation the Flight-OTA might need access to the email address.

Why is Flight-OTA using virtual credit cards (VCC)? The Flight-OTA acts as a merchant of record so the airline does not have the credit card details of the final customer. The Flight-OTA is in that way more in control of the booking. The current Covid-19 pandemic has starkly highlighted the advantages of VCC from a Flight-OTA perspective. The airline has to refund the Flight-OTA and in that way, the Flight-OTA can impose a cancellation fee on the customer. It isn't possible for the airline to refund directly to the customer (Ryanair has apparently a workaround). And if the airline instead issued a travel voucher, the Flight-OTA can keep the customer because the travel voucher belongs to the Flight-OTA (from a strict perspective). It saves Flight-OTAs acquirement costs because they don't need to acquire the customer twice.

From a UX perspective, VCC makes it less confusing for the consumer especially if it's a Virtual interlining flight itinerary with several carriers + ancillary services. It will not be several withdraws from the customer's bank account, only one withdraw from the customer bank account.

Some Flight-OTAs have prices below the airline net price and to cover the loss the Flight-OTA needs to use VCC. It's nothing strange with deficit markup. It's just as passengers in the front of the airplane (business class) subsidize passengers in the back of the airplane (economy class). What you lose on the swings you gain on the roundabouts.

Flight-OTAs earn kickbacks from the virtual credit card (VCC) companies. Some airlines disapprove of VCC as a payment method. It could hurt airline profits.

Kiwi business model

In my mind, Kiwi has the most innovative flight-product on the market. Kiwi Virtual interline flight itinerary that wouldn't be easy to bundle in a practical way for the average traveler.

Ryanair and Wizz will be huge after Covid-19. They have a great product at a good price. They do not pretend to be anything other than having a great product at a good price. This is how business should be. And I am sure that Kiwi can benefit from this with their Virtual interlining product.

Especially I like Kiwi self-service system and all the small details they take into consideration. Kiwi has excellence in the details. It's the little details that are vital. I assume Kiwi technology under the hood has a good standard without much tech debt because otherwise, it would have been more or less impossible to build a great self-service system.  

Kiwi takes advantage of Flight-meta as Kayak and Skyscanner etc to acquire an immense amount of bookings. Kiwi more or less outsourced their marketing to Flight-meta. That's great for Kiwi because then they can focus entirely on their Virtual interline product. Kiwi risk-minimize the potential problems with crowding-out effects with a huge marketing department that ranting around in office that could distract their Virtual interlining core business. Flight-OTAs are completely dependent on Flight-meta and there is no way out - Flight-OTAs are trapped. The most successful Flight-OTAs take advantage of Flight-meta strength and don't see them as threats. It`s just what Kiwi has done - ride on the wave of Flight-meta`s popularity to gain huge amounts of bookings to Kiwi. The successful Flight-OTAs are only pleased that they can outsource their marketing to Flight-meta. Examples of successful Flight-OTAs that take full advantage of flight-meta strength worldwide are Travelgenio (Otravo), Budgetair (Travix), Kiwi and Gotogate (Etraveli). A marketing-centric Flight-OTA with a big marketing department can easily entertain an entire Flight-OTA with empty phrases and building Potemkin villages (see link for meaning). And move the focus from what is actually important - acquire bookings from Flight-meta. A Flight-OTA is much about to get things under the hood to work properly - it's about self-service, automation of post-booking processes, customer service, internal processes, VCC, consolidators, price points, ticketing-optimization, scraping, globalization, NDC, revenue management, GDS connections, payment gateways, addons, price-robots, toolings, spamming Flight-meta, contracts with airlines and back-end focused to not create tech-debt etc.

If a Flight-OTA adds a lot of B2C marketers to above mentioned, it only makes things unnecessarily complicated and causes crowding-out effects. A Flight-OTA can easily be enraptured by the marketing department`s AdWords campaigns, radio advertisement, SEO, competitions, newsletters, blogs and Facebook posts. At the end of the day (whatever the Flight-OTA thinks of flight-meta) Flight-meta wins because Flight-meta has the lowest prices, most inventory and best availability. Regardless if a Flight-OTA likes it or not, a Flight OTA has to adjust to the reality - Flight-meta wins. On the other hand, it's important for Flight-meta to have a huge marketing department with all the fun marketing activities. So my view on the marketing department is dependent on where the travel-company is in the "food chain"/line of dominance. "The big B2C Marketing department strategy" is doomed to fail as Flight-OTA, although it works for Flight-meta because they are the top-dogs in the food chain due to the fact that they compare plenty of Flight-OTAs and airlines. The Flight-OTA`s goal on a Flight-meta is to get

• as many results on Flight-meta.
• as many unique results on Flight-meta.
• as many top-placements on Flight-meta on each individual result and still keep profitability.
• as many top-placements on Flight-meta filter parameters (flight-time, best and cheapest).

Kiwi is especially strong on unique Virtual interlining results on Flight-meta. The Flight-OTA Etraveli tried before "The big B2C Marketing department strategy" and it put the company in a vicious circle. Then Etraveli changed CEO and it went much better - they changed to "Flight-meta first strategy". The marketing department at OTAs has a certain tendency to dislike (unsaid) acquiring bookings through Flight meta-engines and they are reluctant to lose their position as the heart of the action at a Flight-OTA. They are not so keen on jump on the Flight-meta bandwagon. This ambiguity needs clarification at a Flight-OTA. Otherwise, this debate will yield only half a result due to crowding-out effects. So if there are no real good reasons the best way for a Flight-OTA is to dismantle the B2C marketing department or make it substantially less powerful (but that might be hard with an already existing organization). Outsource all B2C marketing to Flight-meta as Flight-OTA.

Maybe Kiwi might need to run "The big B2C Marketing department strategy" and "Flight-meta first strategy" parallel. The reason why is because virtual interlining flight+bus+train might not be from a UX point of view optimal in a Flight-meta environment. Then it's important that Kiwi management has a great amount of self-distance to what they are doing due to the Marketing department has a tendency to crowd-out the developers and other departments in a company. It's my experience.

Kiwi can use Flight-meta as a gravitational slingshot to achieve even greater success in interlining flights, buses and trains as means of transportation. Often Kiwi can supply Flight-meta with unique Virtual interline content which is great for Flight-metas because they get new non-GDS-inventory and it's great for Kiwi because they are rather free to set whatever markup, as they are the only OTA supplying Virtual interlining inventory. This means that Kiwi has the luxury to decide whatever markup without considering competitors. But I am pretty sure that this particular avenue of pleasure will soon be closed off. Edreams and Etraveli invest in Virtual interlining capabilities.

• What is Kiwi doing? Kiwi is screen scraping airlines like Ryanair and Wizz etc. This is a common practice by successful Flight-OTAs. Succesful Flight-OTAs screen scrape as many airlines they can, and if it's against Flight-OTA agreements with GDS airlines, some Flight-OTAs take advantage of subsidiary companies or/and external suppliers (example consolidators, Travelfusion, Kiwi, Tripstack, Pyton etc). As OTA it's important to find the cheapest price point when ticketing or/and in the search stage. Keep the difference as profit.
• Why is Kiwi doing screen scraping? Increase their inventory and price point sources. We will also see a liberalization by the Flight-metas so it will also be possible for Kiwi to display their Virtual interlining with bus and train. Before the Flight-metas were a bit redundant to display bus and train. But finally, Momondo accepts Kiwis Virtual interlining with flight+bus+train. I assume Momondo wants to differentiate themself from Google Flights. That sounds like a wise decision by Momondo.
• What differentiates Kiwi from other flight-OTAs? Kiwi interline flight itinerary that would not otherwise be available (Virtual interlining). Example bundle together Ryanair and Wizz in a flight itinerary (see below screenshot from Momondo).

• Kiwi insures the customer with a mandatory "Kiwi Guarantee" to assure the handshakes between the different legs in the flight itinerary. If there is any interruption in the flight itinerary, the customer will be assisted by Kiwi so the customer can reach their final destination. The insurance price is approx 15% of the ticket price (last time I looked at it).

Example of “small details” that make Kiwi successful.

• Last time I booked at Kiwi, I could fill in my birthday and passport name at a later time. I didn’t have to fill in the information immediately during the booking and payment procedure. It’s a great way by Kiwi to “rescue” bookings. Especially if it’s a multi-pax booking because many people have not a clue about their children’s, wife and friends’ birthdays. And definitely not their passport numbers.
• Kiwi also provides competitors prices and results, powered by the Flight-meta Kayak (see below screenshot), on their result page to secure that travelers are offered the lowest price. Why is Kiwi doing like this?

-- If you can't beat them, join them (because as flight-OTA it's impossible to win over Flight-meta).

-- Kiwi is strong and competitive regarding unique Virtual interlining. That's their core business.

-- Kiwi is weak at pure GDS results. Often substantially higher prices than GDS focused Flight-OTAs.

-- Kiwi can earn referral CPC from Kayak if Kiwi can't beat the GDS focused Flight-OTAs. Hopefully, it can bring Kiwi some organic traffic because the customer will know that if Kiwi isn't cheapest or has the itinerary, they will anyway provide and display the cheapest price from Flight-OTA competitors (see below screenshot from Kiwi result page).

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