In a sector that has changed significantly over the past few years, Transavia is going through a fundamental digital evolution, migrating a number of key systems and processes to the cloud. At the Q1 2017 Finance Director Europe Amsterdam briefing – produced in association with Oracle NetSuite – Transavia’s chief financial officer, Dirk Neelis, explained the rationale behind this move. Steve Dunkerley reports.
On 7 March 2017, finance leaders gathered at the Hotel de l’Europe in Amsterdam for the latest FDE dinner briefing. Held in partnership with Oracle Netsuite, it focused on ‘finance transformation in a digital world’. The centrepiece was a keynote address from Dirk Neelis, chief financial officer of Air France KLM’s fast-growing budget airline, Transavia.
In the past couple of years, the business model of Transavia has undergone significant change. Previously, the majority of its operations consisted of charter activity for the main tour operators that offered package deals to customers, including a Transavia flight. The business of the tour operator is still an important and significant part of its trade, but the business model has shifted dramatically to offering scheduled flight services where the tour operators can book a fixed allotment. This also allows customers to book their flights through direct channels.
Chief financial officer at Transavia, Dirk Neelis has been with Air France KLM Group for almost two decades. He told delegates that, driven by this change, Transavia has been going through a fundamental digital transformation as part of its strategy to compete with larger low-cost carriers. It has made notable investments in its mobile optimisation and customer service channels, including using WhatsApp as a core customer service channel, and a new interaction platform streamlining all flows within the customer/flight journey. While the airline has always achieved strong customer satisfaction scores, Neelis explained, it aims to maintain this reputation by delivering consistently high-level experiences and service to its customers.
“We make low-cost air travel feel good, and a key part of this is the total customer journey, where we aim to provide the smoothest experience – from searching for flights to booking and payments,” Neelis said.
As well as investing in digital tools to enhance the passenger journey, he continued, the majority of back-office processes have been moved to the cloud due to the reduced expense and expertise required to keep them running at peak performance.
“Two years ago, we decided to outsource every IT application to third-party cloud providers,” he said. “This decision influenced our approach to IT investments, as we no longer needed to invest in hardware and new versions of software. We went from being capex-focused to more opex-focused. This change in focus also enabled more predictable cash-flow projections, which was another reason we decided to migrate to the cloud.”
The back-office transformation meant Transavia leaving behind a number of legacy systems. Financial processes, for example, relied on an AS 400-based system at its office in the Netherlands and an Infor system in France, complemented by Microsoft Excel spreadsheets. These systems were maintained in house, and required costly infrastructure management and application updates. According to Neelis, the decision to move to NetSuite’s OneWorld cloud platform made complete sense.
“Our previous Excel-based processes were time-intensive and prone to errors.” he explained. “The agility, scalability and flexibility of NetSuite OneWorld has helped us efficiently enter new markets, expand operations, grow revenue and simplify processes.”
The decision to roll out OneWorld was made by Transavia in April 2016. It was a coincidence that, two months later, NetSuite was acquired by Oracle.
The supporting address was delivered by financial-software veteran David Turner, senior marketing director EMEA for event partners at Oracle NetSuite. Turner echoed Neelis’s comment about the disruptive digital force of the likes of Airbnb and Deliveroo, and highlighted a paradigm shift where companies that traditionally sold products are now wrapping services around their products to future-proof them from commoditisation.
Turner gave the example of Rolls- Royce no longer selling aircraft engines but, instead, an agreed number of hours of flying time. He also talked about the example of mobile phone contracts where, for monthly instalments, a device typically worth €500–600 is included in the package. Conversely, service companies are increasingly trying to package their intellectual property to produce repeatable ‘products’ that they can sell.
He explained how the business software sector has also metamorphosed from being a product typically installed and managed on site by the customer to an ‘as-a-service’ cloud experience where the customer carries out little of the work.
“The interesting thing with the cloud is that the overhead of running systems, fixing bugs and responding to change is moved away from you and on to us as vendors,” Turner said. “Responsibility for security, quality and everything else moves on to the seller rather than the user, freeing up a lot of capital, time, people and resources for innovation.”