SOA: Improving Ties to Business Partners

 
 
By David F. Carr  |  Posted 2007-07-12
 
 
 

Born as the frequent-flier plan for Air Canada in 1984, Aeroplan has worked to redefine itself as a loyalty marketing program for hotels, merchants and product manufacturers as well as airlines.

Aeroplan, spun off as a separate company in 2005, sells mileage credits to 60 partners, including credit card issuers. In turn, these partners dole out credits as customer loyalty rewards, which may be used to secure an airline ticket, book a hotel room or buy merchandise. In fact, Aeroplan last year issued 69.7 billion mileage credits and redeemed 49.3 billion.

It's a business where every penny—or mileage credit—counts. In the first three months of 2007, Aeroplan sold more than 18 billion miles to its marketing partners at an average price of 1.239 cents per mile, up slightly from 1.22 cents last year.

As member account balances swelled, Aeroplan needed to provide alternative ways of allowing members to use mileage credits beyond the limited number of flights available from Air Canada. Otherwise, there would be too many miles chasing too few seats—a common complaint about frequent-flier programs —and way too many frustrated members. Hence, it established loyalty-reward partnerships.

To integrate its systems with those of its partners, Aeroplan turned to Web services technology. Its goal: Make it as easy for consumers to trade in mileage credits for a box of chocolates, car rental or a hotel room as it is to redeem miles for a plane flight.

In doing so, Aeroplan aimed to increase the percentage of miles redeemed for non-flight rewards to 25% a year, up from 11.2% in 2006 and 8.2% in 2005.

"If you look at the Aeroplan Web site today, it's like a combination of Expedia and a retail store Web site," says André Hébert, Aeroplan's vice president of technology and e-business, "so it's very complex."

Technologically, this required an evolution from the mainframe-based system Air Canada had created, designed solely to handle flight rewards, to a new architecture that retained the mainframe as a back-end transaction engine but layered on capabilities for interacting with business partners and consumers more flexibly. In the process, Aeroplan leveraged eXtensible Markup Language (XML) Web services technology and the related concept of service-oriented architecture (SOA), as well as open-source technologies such as Linux, the Apache Web server and the MySQL database.

Aeroplan's experience shows the value to any business of the SOA approach, now widely embraced as a more flexible and adaptable way to build complex enterprise systems. SOA discourages the creation of monolithic systems in favor of smaller units of functionality that can be recombined in different ways. Rather than build components around one particular software technology, such as Java, the SOA approach allows software written in any language to advertise the services it offers on the network and tap into other software services—either within the enterprise or between business partners. And the standard way of accomplishing that, using Internet technologies, is with Web services—the family of standards and specifications for invoking functions on remote computers with messages formatted in XML.

Traditionally, Air Canada set aside 8% of the seats on each flight to be available for rewards redemption at a flat rate in miles. Under a contract, Aeroplan is guaranteed access to those seats.

Aeroplan has its own mainframe-based system for compiling possible itineraries from that limited pool of seats and booking them on behalf of its members, at which point Aeroplan accesses Air Canada's mainframe and stores an industry-standard Passenger Name Record reserving a given seat. But since those flat-rate "Classic" reward flights tend to be snapped up quickly on popular routes, Aeroplan now offers "ClassicPlus" itineraries for which the price in miles rises as flights fill up. To do that required layering on another system for pricing flights at an appropriate price in miles to make up for the money Aeroplan would have to spend to buy additional tickets.

In addition, Aeroplan built what it calls "direct connect" interfaces to the reservations systems of three rental car partners (Hertz, Avis and National) and one hotel chain (Best Western), based on XML Web services. That means members can shop for non-air-travel products on the Aeroplan Web site and have the booking and payment details handled entirely online and behind the scenes.

This process is managed by a pair of Java software products, xDistributor and xRez, from OpenJaw Technologies of Dublin, Ireland. Their role is to handle the distribution and aggregation of travel products from different companies as well as the shopping cart of purchases that Aeroplan members are considering.

Before creating the ability to tap into the systems of its partners via Web services, Aeroplan provided a way for partners to tap into its own services that way. That capability, which went live in early 2004, took advantage of an appliance from Reactivity (recently acquired by Cisco) that provides security for Web services transactions, along with filtering and translation of XML documents, according to Rémi Lafrance, Aeroplan's director of technology architecture, strategy and operations.

At the time, Aeroplan was already making some use of XML internally to exchange data between its mainframe and other applications, such as the Web site and an interactive voice response system. Rather than rewrite those XML messages and disrupt the applications that already depended on them, Aeroplan used the Reactivity appliance to automatically translate them into a standardized format for Web services transactions with partners. The Reactivity Gateway also translated between the IBM MQSeries protocol, used to transmit data between internal applications, and the Web-standard HTTPS protocol (the secure version of the HyperText Transfer Protocol—thus the "s" after HTTP—commonly used for functions like credit card transactions).

"The success of the Reactivity project really set our whole mind-set," Lafrance says. "It gave us the confidence to open ourselves up to a whole slew of new partners."

In effect, the project gave Aeroplan a head start on transforming its early projects with XML into more generally useful Web services and started the company on the road toward SOA.

The Reactivity appliance provided a secure means of allowing partners to query Aeroplan's systems for information such as the mileage point balance of a member. For example, to book an ocean cruise in exchange for Aeroplan miles, Air Canada Vacations—an Aeroplan partner—uses the Web services connection to verify that the member has the required number of miles available. Aeroplan then deducts those miles from the member's account and follows up with a payment in dollars to the partner.

When the system went live in early 2004, Aeroplan wanted to offer non-travel rewards but didn't have its own catalog of merchandise to offer. For that, it partnered with the Canadian division of Maritz, the Fenton, Mo.-based specialist in employee incentives and other rewards programs. Aeroplan members would be directed to go to a Maritz Web site and pick rewards that they could pay for with miles. That meant Aeroplan had to provide Maritz with a way of verifying account balances and deducting miles in exchange for rewards purchases.

To drive more of that business through its own Web site instead of Maritz's, Aeroplan needed a more capable Web site and a more sophisticated level of Web services integration with its partners.

E-commerce software vendor Elastic Path provided software to manage the catalog of merchandise Aeroplan would be offering as an alternative to flight rewards. Lafrance says he was attracted to the product because of its emphasis on leveraging open-source technologies, which Aeroplan wanted to use where practical to hold down expenses. Although Elastic Path itself is not open source in the sense of making its source code freely available, it shares source code with its clients under a commercial license, and it incorporates a variety of open-source technologies such as the Apache Lucene search engine. Aeroplan also takes advantage of Elastic Path's support for the open-source MySQL database to store catalog content.

"We would probably end up paying a few million more in software licenses if not for our use of open source," Hébert says. Aeroplan also takes advantage of Apache Tomcat to execute Java code running on its Web servers, rather than use a commercial application server on the Web front end. Heavy-duty processing for Java applications, including the Elastic Path and OpenJaw software, is managed within the integration framework provided by BEA Systems' WebLogic platform.

OpenJaw's first contract with Aeroplan, back in 2005, was to allow Aeroplan members to book cars from its rental car partners. In January 2007, Best Western became the first hotel chain to support that direct-connect XML interface to its reservations systems, and Lafrance hopes other hotel partners will follow. "For us to add another hotel is no big deal, and most hotels are implementing the OTA standards anyway," he says, referring to the OpenTravel Alliance, an industry standards group.

In the absence of direct-connect support, Aeroplan members must request a coupon to redeem for their stay at a partner hotel.

"This is much more consumer-friendly," says Dorothy Dowling, senior vice president of marketing for Best Western International, noting that it's consistent with the trend toward paperless transactions across the travel industry. Although Best Western has loyalty marketing partnerships with 18 frequent-flier plans, Aeroplan is one of the top three and the first to have forged this kind of tight integration with the hotel chain.

Next page: Still Flying

Still Flying

For all of Aeroplan's efforts to expand into other types of loyalty marketing, at heart it's still a frequent-flier plan.

Active members who have done the math tend not to be very tempted by the option of buying merchandise such as electronics. Karine Pépin, a member who frequently flies between San Francisco and Ottawa and blogs her travel tips, says she once calculated that the same number of Aeroplan miles it would cost her to obtain a flat-screen TV worth $2,000 would secure her two flights to Sydney worth $4,000. "It's all about the dollar/point value," she says.

So, members still judge Aeroplan largely by how easily they can trade their miles for airline tickets. In this vein, Aeroplan introduced its ClassicPlus program, where Aeroplan buys additional seats from Air Canada on behalf of members who agree to pay a premium in miles. In a May conference call with financial analysts, Aeroplan CEO Rupert Duchesne said a key metric, the percentage of members who reported being able to secure tickets "for the destination and date of their choice is now in the low 80s, and it's never before in our history been higher than the mid-70s." And that should mean good things for Aeroplan's business, according to Duchesne: "We know that once you have a satisfied member who has had a good redemption, then their rate of accumulation increases."

Lafrance acknowledges there's a shortcoming in the current flight selection process on the Web site, which he is working to correct.

Aeroplan and Air Canada are both migrating to a reservations system from ITA Software, which supplies technology to Orbitz and several other airline Web sites. Lafrance says that will give travelers the flexibility to do "directional" shopping—they can choose their outbound and return flights separately, the way it's done on most travel Web sites.

Currently, Aeroplan displays only a pre-calculated list of round trips between any two cities because that's the way Classic reward flights were traditionally offered, and that's the way the company's mainframe reservations system works. Aeroplan already taps into ITA's more flexible reservations system to search for ClassicPlus flights. But to provide a common shopping experience for both types of flights, the ClassicPlus options are still presented on the Web site in the round-trip format—a common denominator dictated by the legacy reservations system.

But that's a transitional solution, Lafrance says: "We've broken the model. We just need for the technology to catch up."

Next page: Aeroplan: SOA Takes Off

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Aeroplan: SOA Takes Off
Aeroplan "sells" mileage credits to partners, such as credit card issuers—who then offer them as rewards to customers. These customers can trade credits for air travel, car rentals and merchandise. SOA enables Aeroplan and its partners to exchange customer and other data in legacy systems to make the rewards program work.