Bangkok Airways: - Sabre Airline Solutions

A MA GA Z INE F OR A IRL INE E X E CUT IV E S
2015 Issue No. 2
Taki ng
your
ai r l i ne
t o
2015 Issue No. 2
ne w
h e i g h t s
ascendforairlines.com
Bangkok Airways:
Asia’s Boutique Airline
A Conversation
With … Capt. Puttipong
Prasarttong-Osoth, President
and CEO, Bangkok Airways
sa br eai rline sol utions.com
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Follow us on Twitter at twitter.com/SabreAS
4
South African Airways Increased
Corporate Accounts By 300 Percent
73 Delivering A Differentiated Customer Experience In The Age Of Airline Retailing
77 The New Innovative
Airline-Retailing Solution
T a king
your
airline
to
new
height s
2015 Issue No. 2
Editor in Chief
Stephani Hawkins
Art Direction/Design
Charles Urich
making
contact
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Associate Editor
Lauren Lovelady
Freedom To
Market
The Way You Want
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of solutions, we give you the freedom to
better market, sell, serve and operate
the way you want. Partner with us and
benefit from the expertise and flexible
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Set Your Business Free
sabreairlinesolutions.com/Ascend
perspective ... with Hugh Jones
blogging and tweeting in every
possible channel to make sure
their story is far reaching.
Naturally, there will be unsatisfied customers, but with some
level of attention and compassion, a negative outcome can be
avoided. In fact, if handled with
care, an unsatisfied customer
can be turned around, which
could potentially generate positive publicity for the airline as
opposed to the negative publicity it could expect by not
properly handling an unfortunate situation.
In general, there appears to
be some disconnect between
airlines and their customers.
Part of the problem, as I mentioned, is that customers have
come accustomed to specific
service levels they receive from
other industries. So they expect
the same from their airline of
President, Sabre Airline Solutions
choice. Another aspect is that
airlines don’t always use customer data to their advantage. They aren’t
properly mining the data to determine
exactly what appeals to customers on
hether business-to-business or an individual level or understand or know
business-to-consumer, customers always the interactions or experiences with that
come first. Why? Because giving customers particular customer.
The crux of the customer-experience
the best possible experience promotes cusproblem, however, is that many airlines
tomer loyalty, and thereby, drives revenue.
That’s pretty fundamental, but today, don’t have a sound customer-experience
customers expect more than ever before strategy in place and haven’t made subbecause they have become accustomed stantial investments in this area. But they
to companies knowing who they are; should, and here’s one of many reasons
what they like; and when, where and why.
A recent study by 3IBM revealed that
how they want to be served. That’s a
result of advanced technology such as with an investment of US$34 million in
smartphones and tablets, as well as all the a customer-experience strategy, a large
available customer data that helps edu- carrier can expect full return on investcate companies about their customers’ ment within 16 months. After five years,
behaviors. Therefore, putting customers the approximate total benefit would be
at the forefront is essential to any suc- US$582 million.
At Sabre Airline Solutions ® , we strive
cessful business.
In the era of social media, negative to help airlines raise the bar in customercustomer experiences have a far greater experience excellence. We work closely
adverse effect on an airline because peo- with them to devise a sound customerple have access to numerous avenues for experience strategy. We research other
sharing their stories, and they are eager customer-driven industries so we can help
to go public. Unhappy customers are airlines incorporate best practices and
W
principles into their strategy. We develop
technology that enables them to boost
customer experience at every touchpoint.
Bottom line … we strive to bring advancements to the industry so you can give your
customers the best possible end-to-end
travel experience.
I hope you enjoy this issue of Ascend,
and I look forward to working with you as,
together, we introduce new developments
that keep your customers coming back
time and time again. a
ASCEND I TABLE OF CONTENTS
8
PROFILE
4 THE CORPORATE
CUSTOMER
South African Airways
Increased Corporate
Accounts By 300 Percent
By Lauren Lovelady
8 AVIANCA’S MAIN
TERRITORY
Managing A Hub At Bogota’s
El Dorado Airport
By Peter Berdy and Ana Marie
Escobar
12 BANGKOK AIRWAYS:
ASIA’S BOUTIQUE
AIRLINE
A Conversation With Capt.
Puttipong Prasarttong-Osoth,
President and CEO, Bangkok
Airways
By Stephani Hawkins
ascend
INDUSTRY
18 NETWORK PLANNING 28 SMART COMMERCIAL 44 THE SKY KEEPER
INNOVATIONS
Next Generation Of Route
Forecasting And Optimization
By Sam Shulka
22 LOYAL FOLLOWERS
Why Frequent Flyer Programs
Are Not Loyalty Programs
By Jonathan P. Ewbank
25 REDEFINING OPTIMAL
Achieving Optimal Airline
Results
By Tom Bertram and Manolo
Centeno
PLANNING
Staying Agile And Innovative
Requires Vision, Intuition and
Enhanced Analytics
By Nawal Taneja
34 CONFIDENCE AMID
THE CHAOS
Revenue Management Analysts Must Have Confidence
And Proper Training
By Terry McClintock
38 AIRPORT REIMAGINED
The Ongoing Airport Evolution
By Mike Gerra
SESAR Between Bureaucracy
And Innovation
By Felix Hackl
48 WHAT COLOR IS MY
TAIL?
Discovering True Airline
Identity And Deciphering Its
Perpetual Transformation
By Bijan Fazal
ASCEND I TABLE OF CONTENTS
28
28
73
47
12
50
54
38
SPECIAL SECTION
54 CUSTOMER BONDING
Why Customer-Centric Airlines Will Lead The Industry
By Derek Birdsong
62 FRONTLINE ALL-STARS
Turning Satisfied Customers
Into Happy, Loyal Ones
By Saleema Khan
66 AGE OF THE
CUSTOMER
Customer Experience At
The Forefront Of Successful
Airlines
SOLUTIONS
70 DIFFERENTIATION
THROUGH DATA
77 DYNAMIC RETAILER
DEBUT
Strategic Planning For Pricing
And Revenue Management
The New Innovative AirlineRetailing Solution
By Megan Nieves
By Katie Freeman and
Kathy Turney
73 THE RACE IS ON
Delivering A Differentiated
Customer Experience In The
Age Of Airline Retailing
By Katie Freeman and
Kathy Turney
By Megan Nieves and
Jayme B. Porkolab
ascend
The
Corporate
Customer
South African Airways Increased Corporate Accounts
By 300 Percent
One of the world’s oldest airlines, South African Airways, is anything
but old. It has a track record of continually evolving to remain modern
and competitive. Aiming to build its corporate customer base, in
2009, the airline implemented PRISM technology. As a result, it has
experienced a 300 percent increase in corporate accounts.
By Lauren Lovelady | Ascend Staff
ASCEND I PROFILE
S
outh African Airways, which
celebrated its 80th birthday
in February 2014, is one of
the oldest airlines in the
world. However, it would
be a mistake to refer to
the airline or any part of
its operation as outdated. In fact, the
Johannesburg-based carrier operates one
of the most technologically advanced
fleets in the world and offers customers
premium, award-winning service.
Among its numerous honors, the national
flag carrier of Africa was recently awarded
the 4-Star Airline ranking by Skytrax, a
leading independent global airline rating
organization, for the 12th consecutive
time.
Truly a global airline, South African
Airways flies to 42 destinations on every
continent, including 26 within Africa and
prominent business centers such as
New York; Washington, D.C.; Sao Paulo;
Frankfurt; Munich; London; Hong Kong;
Beijing and Perth. The airline has access to
an additional 1,900 destinations worldwide
through its membership in the Star Alliance.
This global reach, as well as its vision to be
Africa’s leading airline, necessitated the carrier to find a way to increase its high-yield
customers, such as corporations.
“We were looking for an opportunity
to grow our corporate business, and we
really didn’t have a tool to do so,” explained
Dave DeFossey, director of sales development for global accounts at South African
Airways.
“We had difficulty tracing our corporate revenue. We were using OSI [Other
Supplementary Information] fields and
inputting certain codes. When we ran
reports, we would look for the codes. The
problem was we could only see flown
revenue data and not the data we really
wanted to see: how we were doing compared with our competitors, corporate
client travel spend and the preference of
those clients for one airline over another.”
Based
on
previous
experience
with PRISM, now part of Sabre Airline
Solutions ®, at another global carrier a few
years earlier, DeFossey suggested that a
corporate-customer-management solution
might also prove advantageous for use at
South African Airways. His team evaluated
a number of third-party systems — some
quite comprehensive — but found PRISM
was the only solution able to truly capture
backroom travel management company
data.
“Almost immediately we saw an
increase in the number of global accounts
we handled because PRISM gave us the
ability to look across wide ranges of points
of sale,” said DeFossey. “PRISM helped us
capture data that we never had before.
“We had the ability to see corporate
contracted revenue and where our customers were flying. Before, when we looked at
a corporation, we may have thought it was
very small based on the data we received.
With PRISM, we could see it was actually quite large and encompassing and had
points of origin from all over the world. It
More Than 160 Awards 81-year-old South African Airways’ slogan, “Africa’s Most Award Winning
Airline,” holds credence. Since the turn of the century, the airline has earned more than 160 awards,
and for 12 consecutive years, it’s earned the 4-star ranking from Skytrax.
6 ascend
really helped us examine and understand
the true value of a corporation and what we
could do, working with that corporation, to
move it forward and enhance our portfolio
as well.”
Since the implementation of the PRISM
solution in 2009, South African Airways has
experienced a 300 percent increase in corporate accounts, most of which are global
and have two or more points of sale. The
average price also increased, indicating a
rise in valuable higher-yield passengers.
“PRISM helps us make adjustments to
our portfolio on a regular basis,” explained
DeFossey. “We can analyze account performance and use the insights to target
underperformers to increase their business
or continue to increase business with our
top performers.
“It has enabled us to walk away from
accounts that were not performing well
and bring in other ones that we initially
thought weren’t advantageous.”
The dramatic growth in corporate
accounts generated a significant increase
in sales, client and contract data and the
need for a tool to efficiently track and
effectively maintain account information.
“PRISM works much like a customerrelationship-management system for us,”
DeFossey said. “For the first time, we
know all the corporate accounts we are
handling, who is handling each one, their
contact names and ways to contact them.
It’s helped us with content management.
“That was a component we really hadn’t
expected. In any case where we must transition an account from one key account manager
to another, the transition is quite simple
because we are using PRISM not only for data
collection, but to track the number and types
of accounts we have in our portfolio.”
South African Airways’ implementation of
PRISM also created some unexpected synergies between the airline and its customers,
especially in the area of account reviews.
“Our largest customer uses PRISM for its
accumulation of data,” explained DeFossey.
“It’s always nice to be able to sit down with
that customer and find that we are on the
same page. We feel confident that the decisions we’re making and the discounts we’re
offering are coherent with the data they see
as well.
“It helps us start up a conversation and then
move forward to single out specific markets
where there is potential for the customer
to not only save more money, but for us to
grow our business. PRISM has enabled us to
not just be an airline, but also a consultant to
customers, showing them why they should fly
with us versus our competitors.”
The
corporate-customer-management
tool is also instrumental in supporting
South African Airways’ competitive efforts,
ASCEND I PROFILE
300 Percent Increase In Corporate Accounts South Africa Airways’ use of PRISM solutions to grow its corporate customer base has paid off. Since implementing PRISM in 2009, the airline’s corporate accounts increased by 300 percent. Most of these accounts are global and have two or more points of sale.
especially with pressure from low-cost carriers mounting.
“Competition has really increased in South
Africa,” noted DeFossey. “Many airlines flying from the Middle East and Europe have
never flown to the region before, so we use
the solution to keep a step ahead to identify
where the corporate customer is flying and
enhance our product and frequencies. Having
all of this data at our fingertips is paramount
Additional 1,900 Worldwide Destinations Through its Star Alliance membership, South African
Airways has access to an additional 1,900 destinations worldwide. In April 2006, Star Alliance welcomed the airline as its 18th member. Star Alliance was the first global aviation alliance to include an
African airline, and South African Airways was the first airline from Africa to join a global alliance. South
African Airways Chief Executive Officer Khaya Ngqula (left) was welcomed by Star Alliance CEO Jaan
Albrecht (center) and Deutsche Lufthansa AG CEO Christoph Franz (right).
to be able to move market share toward our
airline.”
Because PRISM is a Web-based tool, the
airline benefits from its flexibility and secure
features.
“Security is very important to us,” DeFossey
said. “We have the ability to use PRISM around
the world, any time, on any computer, and we
don’t have to download software onto our work
computers, which is against company policy.”
South African Airways’ use of PRISM has
helped the airline drive new business and
enhance existing business, generating more highyield revenue.
“PRISM has assisted us in our markets
in Washington and New York, but also in farreaching African countries,” DeFossey said. “We
use the system when we’re entering a market
to identify where our customers are flying and
their business mix. It has given our key account
managers another tool in their tool boxes to
bring in new business, improve existing business
and move forward in pursuing more high-yield
revenue than ever before.
“I can’t picture doing corporate business without PRISM by my side.” a
Lauren Lovelady can be contacted
at [email protected].
ascend 7
Avianca’s Main Territory
Managing A Hub At Bogotá’s El Dorado Airport
How Avianca, Colombia’s flag carrier, manages its main hub in Bogotá with
airport infrastructure, capacity and traffic growth, as well as geographic challenges.
By Peter Berdy and Ana Maria Escobar | Ascend Contributors
ASCEND I PROFILE
T
he airport in Bogotá, Colombia,
is important not only for this
extremely significant country in
northern South America, situated at the juncture of South and
Central America, but also for the airlines of
the world that fly there.
Geographically, Bogotá’s size and location
make it an important transportation link
along the spine of South America’s beautifully rugged Andes Mountains. There are 8
million people living around Bogotá, making
it one of South America’s largest cities and
an attractive location for a hub.
Colombian commercial air traffic has
grown rapidly, a reflection of the country’s strong economic growth, which has
exceeded 5 percent during the past few
years. Scheduled air service has surged and,
additionally, traffic has been stimulated by
low-cost carriers. Bogotá’s average annual
passenger traffic growth during the past five
years is an impressive 13 percent.
Bogotá has only one commercial airport,
El Dorado International Airport. The airport
takes its name, El Dorado, from a myth about
a tribal chief who covered himself in gold
dust, which then grew to a legend of a lost
city teeming with gold and precious stones.
As the stories grew, it enticed European
explorers to come to South America for two
centuries.
In 2012, El Dorado International Airport
inaugurated a new international passenger
terminal. This was followed by a domestic
terminal that opened in 2013. These two
terminals replaced outdated facilities built in
the 1950s. The US$1.26 billion investment
took more than seven years to complete.
The modernization and expansion of the
airport generated a substantial improvement
in airport services compared to the previous
situation in Bogotá. However, even with this
large investment, the airport still faces major
challenges since its design capacity was
under-planned.
The new facilities at El Dorado
International Airport were not built to handle
the surge in volume that has taken place.
Passenger and capacity growth resulted in
the airport exceeding its capacity design by
a wide margin. The airport was designed to
handle an estimated 15 million passengers
by 2015. Actual traffic at the airport is
currently in excess of 25 million. Even with
the new terminal, airlines must park their
aircraft in remote parts of the airport and bus
passengers to the terminal.
Other challenges the airport faces include
its high altitude, mountainous terrain,
weather and lack of modern technology to
manage airspace. Due to the combination of
high altitude and runway length, there are
limitations on how far certain airplane types
can fly from El Dorado International Airport.
We recently visited with Santiago Pinzon,
Avianca’s director of hub control, to learn
how Colombia’s largest airline manages its
hub in Bogotá in the context of these
challenges.
El Dorado Airport
There are two passenger terminals at El
Dorado. The main terminal, T1, has two concourses to handle international and domestic
arrivals. It has 33 jet bridges, 18 parking positions, 128 passenger check-in positions and 51
immigration counters. The other terminal, T2, is
called Puente Aéreo (Air Bridge). Avianca is currently the only carrier operating from T2, which
is used for domestic flights only.
Avianca is in the process of moving some of
its domestic operations from Puente Aéreo to
Terminal 1 to facilitate transferring domestic and
international passengers. This will open space
in Puente Aéreo to move regional carriers that
serve domestic markets to operate from there.
El Dorado International Airport accounts for
half the total air traffic in the entire country.
Twenty-seven airlines serve Bogotá, of which
six are domestic.
The airport ranks first among all airports in
Latin America in terms of cargo transported,
second in departures performed and third in
passengers carried. According to airport statistics, the airport moved more than 27 million
passengers in 2014, and it transported over
622,000 metric tons of cargo.
The domestic market is substantial. Of the 27
million passengers, 8 million were international
and 19 million were domestic, in a country with
a population of more than 45 million.
El Dorado’s Multiple Adverse
Factors
Challenges for the airport begin with
the high altitude of Bogotá, one of the
highest-elevation national capitals in the
world, being situated on a heavily frequented trade route in South America’s
gargantuan (both in elevation and geography) Andes Mountains. The Andes are
one of the largest mountainous regions
on the face of the earth (north to south,
the world’s longest continental mountain
range). At an elevation of more than 8,300
feet (2,600 meters), not all destinations
can be served nonstop due to airplane
performance limitations.
In addition to the thin-air, high altitude and terrain, weather conditions in
the northern portion of South America
can be notoriously difficult to predict.
The airport often experiences adverse
weather including foggy conditions that,
as a consequence, can cascade flight delays
in a domino effect.
Furthermore, El Dorado lacks some of the
latest cutting-edge technology to manage air
traffic and airspace efficiently.
ascend 9
ASCEND I PROFILE
Another major challenge is the airport control tower. The new tower has been delayed by
a year, and costs have also increased.
The master plan for Bogotá indicated that
due to continuing passenger growth, another
airport will have to be built. In fact, in January,
Colombia President Juan Manuel Santos
announced plans to complete the construction
of a second airport in Bogotá known as El
Dorado II, within the next five years. The new
airport will be built east of Bogotá, a distance
from the existing airport.
National Carrier Avianca
Avianca’s network is one of the largest
in Latin America. The airline serves 98
Eldorado International Airport Bogotá’s new US$1.26 billion airport replaces outdated facilities built in
the 1950s. It has two terminals. T1 has two concourses that handle international and domestic arrivals.
Colombia’s flag carrier, Avianca, is the only airline operating from Puente Aéreo (or T2), which is used
for domestic flights only.
Traffic Growth At Bogatá’s El Dorado Airport
30
Millions Of Passengers
25
20
15
10
5
Overcoming Obstacles
0
2008
2009
2010
2011
2012
2013
Extreme Passenger Growth El Dorado International Airport has experienced significant passenger
growth during the past several years, growing from less than 15 million passengers a year in 2008 to
more than 27 million annual passengers in 2014. Of those, 8 million represented international travel
while 19 million were domestic.
10 ascend
destinations in the Americas and Europe
and 26 countries worldwide.
Avianca operates its main hub at Bogotá,
operating approximately 214 flights per day
from El Dorado International Airport. Nearly
75 percent of the airlines’ daily flights operate from Puente Aéreo and the remainder
from Terminal 1. Avianca is the airport’s
dominant carrier and offers more than 60
percent of the airport’s departures.
Flights from Bogotá to Colombia’s major
cities Barranquilla, Cali, Cartagena, Medellin
and Pereira account for 56 percent of all
domestic flights operated by Avianca and
61 percent of the domestic traffic carried
by the airline.
According to a January 2013 article in
Colombia Reports, Avianca President Fabio
Villegas Ramirez indicated the airport is already
overflowing. He said the new terminals are
insufficient for the number of passengers, and
they create problems for connecting flights and
baggage handling. He also stated that the new
international terminal has almost the same
number of gates as the old terminal, while
demand grew much faster than expected.
According to Santiago Pinzon, Avianca
dedicates time and resources to manage and
resolve changes that arise in El Dorado’s
day-to-day operations with the aim of mitigating the impact on Avianca’s operations and
the service to passengers due to last-minute
changes, closures or operational constraints.
Under normal operations, the airline manages its assigned gates and positions according
to the types of aircraft and routes. However,
when external factors such as bad weather
affect the normal course of operations, and
compliance with flight departure and arrival
times is affected, Avianca assigns positions to
minimize delays.
Avianca leverages advanced technology to
plan and manage gates at El Dorado airport.
Sabre AirCentre® Gate Planner, an automated
planning tool, is used prior to the day of operation to optimize the number of flights that can
operate from an allotted number of gates at
an airport.
Sabre AirCentre® Gate Manager, an automated system that evaluates real-time flight
data, is used to analyze changing conditions
at the airport and detect potential problems
to automatically allocate gates on the day of
operation.
According to Avianca’s Pinzon, “expansion is not sufficient, and we need a greater
number of boarding gates, more space for
parking aircraft, as well as customer-service
areas. The incorporation of new processes
and technology to make the air operation
in Bogotá more efficient is required, which
would allow an increase in the number of
takeoffs and landings per hour at El Dorado.
ASCEND I PROFILE
It should be recognized that the national government and the director of the Colombian
Civil Aviation Authority have been advancing
important actions in order to overcome the
obstacles on both fronts and continue to
do so.”
Avianca works in partnership with Aerocivil
and OPAIN (Operadora Aeroportuaria
Internacional), seeking optimal solutions
to the constraints resulting from operating
within a limited structure and to service the
growing number of travelers.
Aerocivil is a government agency under
Colombia’s Ministry of Transport. It is headquartered on the property of El Dorado
International Airport and ensures the orderly
development of civil aviation, the airline industry and the use of Colombian airspace.
The airport is managed by OPAIN, a consortium consisting of Colombian construction
and engineering firms and Swiss Flughafen
Zurich A.G.
Parking positions and gates are managed
by OPAIN based on volume parameters,
routes, aircraft type and available resources.
Gates are assigned on a rotating basis and are
non-exclusive.
Developing Solutions For An Even
Busier Future
Bogotá Flight Challenges Bogotá, surrounded by the Andes Mountains with adjacent peaks reaching
nearly 12,000 feet (3,760 meters), is one of the highest-elevation national capitals in the world. The
thin-air, high altitude and vast terrain naturally create challenges for airlines flying in and out of the city.
In addition, the area often experiences adverse weather conditions such as fog, causing additional problems like frequent flight delays.
Percent of Bogota Total Operations
Following the announcement of El Dorado
II, Colombia’s government is now tasked
with creating a new master plan to develop
long-term solutions that address the current
operating and growth challenges. With this
announcement, the industry expects to have
an airport with optimal size and conditions to
adequately respond to the terminal-projected
traffic for at least the next 30 years.
In the meantime, as Avianca grows and
further develops its hub at Bogotá, the airline must continue to work with Colombian
government agencies and airport entities to
determine ways to minimize customer impact
and ensure that the airline’s growth plans
are not jeopardized in the long run by airport
constraints.
As Latin America’s award-winning airline
(“Best in Business” for 2014 according to
Business Traveler magazine), Avianca appears
to embrace its salient position as a South
American thought leader in the greater world
of transportation.
Avianca’s ongoing level of success in dealing with the special challenges of being the
dominant carrier in Bogotá is likely to be
watched closely by aviation analysts and
other airlines worldwide. a
Satena Copa 4%
6%
Others
11%
LAN
18%
Avianca
61%
Avianca’s Home Base Avianca is the dominant airline for El Dorado International Airport, operating 61
percent of the airport’s departures, which is approximately 214 flights a day.
Peter Berdy is a consultant and Ana
Maria Escobar covers Latin America
as a sales partner for Sabre Airline
Solutions ®. They can be contacted
at [email protected] and
[email protected].
ascend 11
ASCEND I PROFILE
Bangkok Airways:
Asia’s Boutique Airline
A Conversation ... With Capt. Puttipong
Prasarttong-Osoth, President and CEO,
Bangkok Airways
By Stephani Hawkins I Ascend Editor
I
n the late 1960s, a number of companies
were engaged in oil and natural gas exploration in the Gulf of Thailand. To support
this development, Sahakol Air launched
charter service in 1968, using two-engine,
nine-seat Trade Wind aircraft. During the
next two decades, the Kingdom of Thailand
experienced significant growth in tourism
and business investments, contributing to
the need for increased air transportation.
To more efficiently transport the
Kingdom’s several million overseas visitors
a year, in 1986, charter carrier Sahakol Air
became Bangkok Airways, the country’s first
privately owned domestic airline.
Today, the airline operates scheduled
flights to nine major domestic routes, as well
as international routes to Myanmar, Laos,
Cambodia, Vietnam, Malaysia, Singapore,
China and Japan. It has also invested in
building and maintaining its own privately
operated airports at Samui, Sukhothai and
Trat, providing Thailand with more air transportation hubs to facilitate increasing air
traffic volumes.
During the celebration of the airline’s 36th
anniversary in 2004, Bangkok Airways introduced a new campaign, “Asia’s Boutique
Airline: Exclusive Service To Exotic Gems,”
to strengthen its brand and further position
it as a credible, trustworthy airline while
maintaining a modern, trendy boutique-like
character. The airline’s objective was to offer
the best personalized service to passengers,
as well as develop more exotic and cultural
destinations.
In addition, when the government of
Thailand implemented the open-skies policy,
an influx of airlines entered the market.
To effectively compete and secure a firm
12 ascend
foothold in the markets it served, Bangkok
Airways had to differentiate itself from the
competition.
To do so, Bangkok Airways established
five distinguishable pillars: boutique lounges;
boutique airports; appetizing menus; friendly,
exclusive service; and new, modern aircraft.
Boutique Lounges
The airline’s clean, comfortable boutique
lounges are similar to business-class lounges
offered by other airlines. However, Bangkok
Airways’ lounges are available to all passengers with no extra charge or hidden fees.
Each lounge has a courtesy corner where
passengers can treat themselves to a variety
of free snacks and hot or cold drinks. Free
Internet access is available at several computer booths, and a kids’ corner is designed
to entertain and satisfy the needs of young
children.
The airline also offers exclusive Blue
Ribbon Club Lounges for passengers flying
its new business-class service (Blue Ribbon
Club) or as part of its Boutique Premium
Service for passengers who are FlyerBonus
premier members.
Blue Ribbon Club Lounges differ from
current boutique lounges, offering a more
extravagant design with hanging crystal
chandeliers and a cozier atmosphere,
as well as greater personalized service.
Additional amenities, such as hot meals
and a personal shower room, provide a
high-quality experience. A quiet, intimate
library, which can be used as a personal
meeting room, offers passengers more
privacy. In the near future, the Blue
Ribbon Club Lounges will be equipped
with massage services.
ASCEND I PROFILE
A
O
Every airline needs sales, and
so do we. But our principle has
always been ‘people.’
— Capt. Puttipong Prasarttong-Osoth
ascend 13
“
Simply put, we will maintain our
exclusive services and expand
our codeshare partner list.
Boutique Airports
Bangkok Airways owns and operates three
boutique airports — Samui, Sukhothai and
Trat. Each airport’s unique architecture blends
with the natural and cultural surroundings of
the province in which it is located.
Samui Airport’s open-air, thatched terminal
buildings blend seamlessly with the tropical
gardens and coconut groves of Koh Samui.
Sukhothai Airport, situated among the calm
rice paddies, reflects traditional Thai architecture. Trat Airport highlights the essence of the
province’s surrounding natural environment.
Variety Of Food
From lounge snacks to in-flight meals,
passengers flying on Bangkok Airways don’t
have to be concerned with food choices.
Full-course meals served onboard are prepared and delivered with the highest level of
food-safety standards. Special dietary menus,
such as vegetarian or Halal, are also available.
And on longer flights, passengers are given
different meal choices.
New Aircraft
Ensuring passengers arrive safely at their
destination is Bangkok Airways’ primary
14 ascend
concern, which is why the airline maintains
a modern aircraft fleet. Each aircraft’s service
time in the airline’s fleet never exceeds five
years before it is returned and replaced with
a new one.
Bangkok Airways’ aircraft, which comprises eight ATR 72-500s, 10 Airbus A319s
and five Airbus A320s, are also decorated
with colorful liveries of its various exotic and
cultural destinations, enhancing the airline’s
trendy boutique feel.
Exclusive Services
Bangkok Airways wraps up its boutique
experience with hospitality and personal
touches that accompany passengers from
the time they book their tickets to their safe
arrival at their destinations. “Friendly service
with a smile” describes the airline’s unique
personality that optimizes the joy of flying
and brings a sense of humanity back to air
travel.
To succeed in today’s competitive aviation industry, Bangkok Airways has outlined
numerous key goals and objectives to ensure
its customers receive a superior experience
that differentiates it from competitors. In
a recent interview with Ascend, Bangkok
Airways CEO Capt. Puttipong PrasarttongOsoth discusses his airline’s unique
characteristics and how differentiation is
essential for long-term success.
Question: Why was your “Asia’s Boutique
Airline: Exclusive Service To Exotic Gems”
campaign important for the growth and
stability of your airline? What results has it
achieved?
Answer: Bangkok Airways has been a
credible, trustworthy airline for a number
of years. However, in 2004, we felt that we
needed to reposition it as a clear contender
in the markets it serves. So we launched the
campaign to foster that goal. We provide
exceptional services that include free lounge
access to all of our passengers, in-flight
meals in every sector and so on. We needed
to reiterate to the traveling people what we
do, who we are and how we treat our passengers. The campaign really strengthened
and rejuvenated Bangkok Airways, as well as
positioned it as a strong competitor.
Q: Customer retention is essential to
a successful airline, especially in today’s
competitive environment. What assets set
your airline apart from competitors and drive
customer loyalty?
ASCEND I PROFILE
Q: Bangkok Airways maintains a fleet of
new, modern aircraft. How do you offset the
cost of continuously adding new aircraft to your
fleet?
A: We work with leasing companies to
manage our fleet’s age, which enables us to
control the age of our aircraft, whereas buying
new aircraft requires substantial investment.
Q: Bangkok Airways offers its customers
“friendly, exclusive service.” What do you
mean by “exclusive”? How does your level
of service give your airline a competitive
advantage?
A: By “exclusive,” we mean providing
extra services, such as free lounge access
and in-flight meals, without charging fees.
We go that extra mile. We want to focus on
our passengers’ convenience and experience
rather than pure revenue. Every airline needs
sales, and so do we. But our principle has
always been “people.” This makes us different from others, and this is, and always has
been, the passion of Dr. Prasert PrasarttongOsoth, the founder of Bangkok Airways. This
is what makes us Asia’s Boutique Airline.
Q: Technology is a major necessity for the
modern, competitive airline. In which areas
of your airline is technology most crucial for a
profitable, efficient operation?
A: Bangkok Airways has offered mobile
applications for a number of years, enabling
passengers to check schedules, as well as
book and pay for tickets, using their mobile
devices. We also recently introduced iPad
applications for our Blue Ribbon Class passengers. In addition, our reservations system
enables us to manage internal and codeshare
A: It has to be our exclusive services, which
our employees in every sector do their best
to provide with true passion. Also, Bangkok
Airways’ fares are not that different from other
airlines, even low-cost carriers, but our passengers receive an array of standard amenities.
Q: One of your key objectives is to invest
in and foster the growth, development and
commitment of your employees. Why is this
important to the success of your airline? What
strategy have you put in place to support this
objective?
A: Bangkok Airways has achieved great
success and has become the airline it is today
because it believes in giving its best to passengers. To do so, we need good, efficient
employees. Last year, we launched a new
campaign that shows our passion in every area
across our business. This was a core-branding
campaign for 2014 that promoted our awardwinning and well-respected service by the
public.
Q: You aim to achieve a targeted, sustainable profit margin that will surpass all other
Asia-Pacific airlines. What are some of the
ways you plan to achieve this goal?
A: Simply put, we will maintain our exclusive
services and expand our codeshare partner list.
data swiftly and efficiently. So those are all
key areas where technology supports and
helps drive success.
Q: During the last 10 years, what are some
of the most significant changes your airline
has made to effectively compete?
A: We have focused more on domestic
passengers, new uniforms and new aircraft
livery, as well as introducing Bangkok Airways
mascots and expanding domestic routes. The
introduction of Bangkok Airways mascots is
intended to attract young travelers. As far as
domestic expansion, we have been focusing on Thailand’s domestic routes since the
Hamburger crisis and the following crisis in
the European Union, which made us realize
the unstable number of international tourists
and the importance of the Thai market. Then
we started to expand and add frequency to
our domestic routes.
Q: Bangkok Airways has received an array
of esteemed industry awards during the last
several years, including Asia’s Best Regional
Airline from Skytrax World Airline Awards and
the United Kingdom’s Travel Agents Choice
Award. What are the biggest contributing
factors to these honors, and what will you do
going forward to ensure your airline continues
winning?
A: We offer exclusive services and
provide more complementary products
and services than most airlines do. We
will do all we can to maintain these qualities and make improvements where
necessary. We continually put our customers first, which earns us this level of
recognition. a
Bangkok Airways’ Trat Airport Trat Airport, which was built by Bangkok Airways, has a single runway
and an open-air terminal that highlights the spirit of the province’s surrounding natural environment.
ascend 15
ASCEND I PROFILE
More Seats Returned
Bangkok Airways Improves Revenue
Integrity Through Robust Technology
By Anthony Mills I Ascend Contributor
To address this shortcoming, Bangkok
Airways’ leadership team spearheaded an
initiative to find robust technology that would
improve the revenue integrity function and
salvage a good portion of the revenue lost
from spurious bookings blocking inventory. In
2012, after an exhaustive search, the airline
implemented an advanced real-time revenue
integrity solution — Sabre® AirVision™ Revenue
Integrity — that could substantially improve
this part of its operation.
One of the foremost contributors of
Bangkok Airways’ success is its ability to
recognize areas of improvement that will make
significant impacts to its bottom line. For
example, the airline realized that its current
revenue integrity system was not returning
near as many seats back for resale as it
needed to. Therefore, aircraft were departing
with a substantial number of empty seats, and
inventory was not as clean as possible all of
the time.
Caption
Moving from its previous daily batch robotic
system, the clear expectation was to realize
additional revenue from more seats returned.
Based on a before and after analysis conducted by Bangkok Airways and Sabre Airline
Solutions® , the upgrade to more advanced
technology proved successful.
Comparable Seats Returned Count And Trending
160,000
140,000
120,000
100,000
Previous provider
Sabre AirVision Revenue Integrity
80,000
Trend previous provider
60,000
Trend Sabre AirVision Revenue Integrity
40,000
20,000
1
2
“Our new revenue integrity solution presents us with more than 40 percent more seats
released back to sales year over year on average,” said Peter Wiesner, senior vice president
of network management for Bangkok Airways.
“We expected to see some improvement.
However, this level of success surpassed our
expectations.”
16 ascend
3
4
5
6
7
8
9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
Returning seats back to sales does not create additional value for an airline unless some
of these seats are resold to paying customers.
It is common that the resale percentage (the
likelihood of reselling the returned seats) is
estimated in the range of 5 percent to 10
percent. Using an average seat value in a
straightforward formula — Estimated Value =
Seats Returned x Average Seat Value x Resale
% — results in more than US$250,000 per
month in additional value over and above what
Bangkok Airways realized with its previous
revenue integrity system.
ASCEND I PROFILE
Comparable Message Counts By Agent Sign And Trending
4,500,000
4,000,000
3,500,000
3,000,000
Previous provider
2,500,000
Sabre AirVision Revenue Integrity
2,000,000
Trend previous provider
Trend Sabre AirVision Revenue Integrity
1,500,000
1,000,000
500,000
1
2
3
4 5
6
7
8
9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
“Sabre AirVision Revenue Integrity is really
helping our bottom line,” continued Wiesner.
Ensuring the inventory is as clean as possible and seats are available to customers
who genuinely want to fly is one of the main
benefits of using real-time Sabre AirVision
Revenue Integrity. However, additional before
and after analysis revealed another important
aspect for airlines to consider in terms of
revenue integrity — hits by the revenue integrity system in terms of SSRs, actions (cancel
name, cancel segment) and screen scraping on
the reservations system.
Because Sabre AirVision Revenue Integrity
absorbs both real-time booking and ticket feeds
for airlines using SabreSonic® Customer Sales
& Service (CSS), it is not searching for speculative bookings by screen scraping SabreSonic
CSS (as a number of other revenue integrity
robots do). Instead, the solution receives all
new and changed bookings and only takes
action back when suspicious bookings are
found. The thought was that the message
counts by agent sign hitting SabreSonic CSS
(transactions by a particular agent sign) would
actually drop versus the screen-scraping
robotic systems, and this was also realized in
the before and after analysis as can be seen in
the graph above.
“We highly recommend that airlines using
SabreSonic CSS and not using Sabre AirVision
Revenue Integrity seriously consider making
the switch,” Wiesner said. “It certainly benefited Bangkok Airways.”
Moving to the solution includes the additional benefit of improved airline control. Using
a sophisticated Web user interface enables
revenue integrity analysts to better control and
change their business rules and processes
themselves instead of contacting an external
vendor or IT department to make changes.
This means faster time to market for rule
changing and no delay in adapting revenue
integrity business rules to rapidly changing
airline policies or sales promotions.
In the modern fast-paced airline world,
control and speed of business rules change
with technical solutions like Sabre AirVision
Revenue Integrity, enabling an airline to react
quickly to combat fraud. a
Anthony Mills is solutions marketing
manager for Sabre AirVision Revenue
Integrity. He can be contacted at
[email protected].
ascend 17
PASSENGER
DEMAND
Network
Planning
Innovations
Next Generation Of Route Forecasting And Optimization
By Sam Shukla I Ascend Contributor
Airline network planning departments face several market
problems such as lacking quality industry data and technology,
proactively and accurately informing network planners about
which markets to serve, and determining the right markets for
which to codeshare. In the near future, new innovations will
solve these and many other problems in network planning,
bringing significant benefits to an airline’s bottom line.
CODESHARE
REVENUE
REDUCE
REVENUE
SPILL
ONLINE
REVENUE
ASCEND I INDUSTRY
T
he commercial airline industry is
continuing to grow at a healthy
rate. IATA predicts global passenger traffic to grow by more
than 2.5 percent per year for the
next several years, with some
regions such as Southeast Asia
growing in excess of more than 3.5 percent
annually.
During the three-year period of 2012 through
2014, more than 9,600 new commercial aircraft
have been ordered by airlines in all categories
(traditional, low-cost carriers, hybrid, regional
and start-ups). The three-year period represents
the highest aircraft order backlog during the past
20 years.
While some of these aircraft are for fleet
replacement, many present significant network
opportunities, as well as high risks and financial
challenges for an airline’s balance sheet. The
new-growth aircraft can provide an airline with
opportunities to fly new routes, linking new cities
into connecting hubs and/or up-gauging existing
markets being served, as well as expanding
codeshare markets with alliance partners.
The risks and financial challenges include
higher fixed operating costs (stemming from
the lease of aircraft) without potential passenger
revenue to offset, along with misidentification of
network strategies driven by inaccurate industry
data and antiquated forecasting/optimization
technology.
There are several important market problems
in network planning departments today.
The first is not having top-quality industry data
and technology to create a network plan with
insight at the cabin level (first, business, premium economy and economy) to unlock additional
revenue that may be spilling to competitors,
while also influencing aircraft re-configuration
initiatives.
Having flight-level forecasts and extrapolating
down to cabin level manually can lead to forecast
inaccuracies. Compounding this is the fact that
many leading airlines have evolved from operating just IATA winter/summer schedules, to four
major schedules and now monthly schedules
with day-of-week network adjustments. Hence,
increasing pressure is placed on network-planning teams to design and deliver maximum
profit-generating networks and schedules.
The second major market problem is the
network planning solutions’ ability to proactively
and correctively inform network planners about
which markets to commence services, which
markets to exit and which markets to add
frequencies to at the best times.
The third large market problem is determining which markets an airline should codeshare
on with its partners for maximum revenue
opportunity.
Current network-planning business processes
to manage these three market problems is time
consuming and labor intensive, causing slower
market-reaction times and errors in analysis,
ultimately resulting in lost revenue. However,
during the past 10 years, data improvements
and technical advancements have been made
toward more automation.
Network planning data, technology and processes have clearly evolved during the past
30 years, moving from strictly manual network
planning to automated network planning. The
ever-increasing competitive industry is forcing
data and technology to move toward responsive
network planning.
In this environment, airlines have fully adopted
industry-leading data and technology to be more
Network Planning Continuum
Network Planning Innovations Network-planning data, technology and processes have progressed
during the past 30 years from a strictly manual network planning process in quadrant 1 to reactive network planning in quadrant 3. The ever-increasing competitive industry is forcing data and technology to
transition to responsive network planning as shown in quadrant 4.
20 ascend
responsive to industry trends and sudden market
and competitor changes, with a far higher degree
of network-financial-performance predictability.
Sabre Airline Solutions® has invested in its
network planning and scheduling technology
to solve the three problems previously identified so airlines can achieve responsive network
planning. These next-generation forecasting and
optimization innovations in industry data sets and
technology fully unlock and optimize an airline’s
online and codeshare revenue and couple it
with the speed and accuracy for timely strategic
network decisions.
In addition, manual adjustments and analysis
performed for cabin-level forecasting used to
consume hours for each forecast. With the
latest technology, available in August 2015,
they can be performed in minutes, with a much
higher degree of accuracy and insight at all four
main cabin classes. Benefits of cabin-level forecasting include selecting new markets through
comparative route forecasts with first-, business-, premium economy- and economy-class
passenger demand, as well as making more
informed fleet re-configuration decisions to
reduce revenue spill.
This merely scratches the surface of these
new innovations.
The historical high-level codeshare market
evaluations are soon to be an automated process, driven by specific codeshare agreements
based on bi-laterals that an airline analyst inputs.
Algorithms will identify the top codeshare
O&Ds based on passenger demand, fares and
incremental revenue opportunity. This industryleading capability will be available in June and is
designed to aid in strategic codeshare decisions.
In the near future, new market-identification
and frequency optimization for an entire network
will be an automated and a proactive process
based on a combination of the operating airline’s
schedule, competing itineraries, total passenger
demand, fares, available aircraft and operating
costs. Airlines can expect the advanced capabilities for market-identification and frequency
optimization in 2017. This ground-breaking
capability will greatly reduce time-consuming
planning cycles, while making the best market
and frequency trade-off decisions, holistically
across a network.
These new innovations are what traditional,
low-cost, hybrid, regional and start-up airline
planners across the globe have needed for years
to make their work day more productive, generate more analyses and create forecasts with a
much higher level of detail. All of these innovations directly impact network decisions, as well
as generate higher passenger revenues and
profitability. a
Sam Shukla is director of Sabre
AirVision® Planning & Scheduling for
Sabre Airline Solutions. He can be
contacted at [email protected].
THE EVOLUTION OF CUSTOMER DATA
HOW DATA-DRIVEN PERSONALIZATION WILL CHANGE THE GAME FOR AIRLINES
Shifting consumer expectations in all industries have created
unique technology and brand loyalty challenges for airlines.
Those airlines that invest in delivering a personalized, highly
differentiated experience to their customers will have a
competitive advantage if the technology is available to
empower this strategy.
Sabre Airline Solutions® is excited to release a whitepaper
detailing the challenges that airlines face with the unification
and utilization of their full-journey customer data that is needed
to personalize the customer experience and boost retailing
capabilities. Learn more about how data and technology will
power the future of the airline retailing and customer experience.
Read the whitepaper here:
www.sabreairlinesolution.com/CC15
Sabre Airline Solutions and the Sabre Airline Solutions logo are trademarks and / or service marks of
an affiliate of Sabre.©2015 Sabre Inc. All rights reserved. 10140 0915
Why Frequent Flyer Programs Are Not
Loyalty Programs
By Jonathan P. Ewbank I Ascend Contributor
Many people believe frequent flyer programs (FFPs) and customer
loyalty programs are basically the same. However, they are not
interchangeable. In fact, research shows that 66 percent of business
travelers are open to switching to another airline’s FFP, even if they carry
elite status with their current carriers. Therefore, airlines should not rely on
FFPs alone to retain customers. Rather, they need to implement customer
loyalty strategies that include FFPs to create return customers.
ASCEND I INDUSTRY
O
ften within the airline industry,
the terms “frequent flyer program” and “loyalty program”
are considered synonymous. Are
frequent flyer programs really
loyalty programs? Can an FFP
actually build loyalty?
Before answering that question, let’s
discuss the topic of loyalty and why it is
important. In business, loyalty drives sustained
revenue growth and long-term profits. During
the past decade, airlines with the highest consumer loyalty (as measured by Net Promoter
Score® ) have averaged revenue growth three
to five times greater than the competition.
Why does consumer loyalty translate to
increased long-term profits?
Research shows that loyal consumers
reduce costs by:
Developing long-lasting relationships with
the company, thereby spreading out customer acquisition costs,
Complaining less, lowering resolution costs,
Using self-service offerings such as Web
check-in and kiosks.
Loyal customers also increase revenue
because they:
Are less sensitive to price changes,
Refer other customers through word-ofmouth,
Spend more than the average consumer.
The net result is that every customer is
worth more, or less, than what he or she
actually spends. This, of course, is why it is
important to assess and segment customers
based on their total worth to the company,
known as customer value. There are several
methods for and varying opinions about how
to measure customer value, but the core
intent of all customer valuation models is to
capture:
How much the consumer spends (on an
annual basis or over the projected life of the
relationship),
How frequently he or she purchases from
the company,
The last time he or she made a purchase.
A more robust model would also estimate
the net effect of word-of-mouth, acquisition
costs and operating costs associated with
servicing the customer. But for argument’s
sake, a basic customer value model is used; in
this case the recency, frequency and monetary
value (RFM) model, in which:
Recency = How recently did the customer
purchase?
Frequency = How often does he or she
purchase?
Monetary Value = How much does he or
she spend?
In analyzing customer value (via the RFM
model) it becomes evident that FFPs do not
accurately or effectively measure loyalty. FFPs
do not necessarily measure “recency,” but
they reward and punish it. For example, a
customer will lose his or her status if he or she
does not use the product.
The term “frequent flyer program”
suggests that a customer is rewarded for
“frequent” purchases, but in reality, most
programs provide incentives for miles flown
and not how often a ticket is purchased.
Based on this model, “passenger A,” who
flies first class with the same airline from
Chicago to Dallas eight times a year, will
be deemed less loyal than “passenger B,”
who purchased a bargain economy ticket one
time to go from Los Angeles to Hong Kong,
because the distance between Los Angeles
and Hong Kong and back is longer than the
eight Chicago/Dallas trips combined.
Finally, assessing and rewarding
loyalty based on miles does not attach
monetary value to a passenger’s worth. In
the example above, “passenger A” may
spend US$10,000 per year, compared to
“passenger B,” who may have only spent
US$2,000.
As a result, Delta Air Lines and United
Airlines have recently announced that they
will begin rewarding miles based on the
price paid rather than distance traveled.
If the two airlines are the originators
of an industry trend, as some analysts
have speculated, FFPs will certainly become
more effective in measuring customer value
and rewarding loyalty accordingly.
Money Versus Miles Airlines have traditionally rewarded their customers for miles flown as opposed to
the amount of money they have spent on airfare and ancillary products and services. Delta Air Lines and
United Airlines, however, have recently shifted their frequent flyer model to reward miles based on price
paid rather than distance traveled.
ascend 23
ASCEND I INDUSTRY
Deloitte Frequent Flyer Program Study
Airline promoter
Belongs to more than
one FFP
75%
66%
Prepared to switch to
another FFP
Belongs to at least
two FFPs
38%
72%
Frequent Flyer Versus Loyal Customer Contrary to popular belief, frequent flyer program members
aren’t always loyal to a particular airline or brand advocates. Based on a recent study by Deloitte, only 38
percent of FFP members are inclined to promote an airline’s products or services, 75 percent of frequent
travelers belong to more than one FFP, 66 percent of business travelers are prepared to switch to another
airline’s FFP, 72 percent of business customers who travel 50,000 or more miles a year belong to at least
two FFPs.
In doing so, airlines will be better aligned
with segmenting passengers based on the
80/20 rule (80 percent of airline revenue is
generated by 20 percent of the passengers),
according to the International Journal of
Marketing Studies.
When further dividing the referenced
20 percent, according to Harvard Business
Review, 2 percent of passengers generate
25 percent or more of the revenue, and 18
percent generate approximately 55 percent of
the revenue.
This point raises another issue. If enrolled in
an airline’s FFP, the 2 percenters are afforded
all the benefits of “elite” status, but what
about the other 18 percent? Certainly some of
these passengers would hold silver or gold status (assuming they are enrolled in an airline’s
FFP), but the airline is not building the same
type of relationships with them that “elite”
customers garner, despite their contribution to
the majority of the airline’s revenue.
The preceding points assume that those
who use an airline’s product most frequently
and are most loyal are also members of its
FFP. However, only 20 to 30 percent of an
airline’s passengers are enrolled in its FFP,
according to Airline Business. This might be
fine if 100 percent of the airline’s top revenuegenerating customers (the aforementioned
20 percent) are FFP members. However, in
24 ascend
reality, 8 percent to 42 percent (based on Sabre
Airline Solutions® research) are not, depending
on the type of program offered. Therefore, every
airline has thousands (sometimes millions) of
loyal, high-value customers with whom they are
not fostering relationships with and who are not
afforded a single benefit and, unfortunately, are
treated as first-time consumers each time they fly.
For many airlines, customer relationship
management as a strategy relies heavily on
data collected within the FFP. As a result,
these airlines create customer-centric strategies and make organizational decisions based
on a small subset of their customer base, as
well as incomplete information.
This approach might work if an airline is
guiding the organization based on the preferences of its most loyal customers. And, one
might assume that FFP members are loyal
brand advocates, correct?
Research suggests otherwise. According to
a recent Deloitte study:
Only 38 percent of FFP members said they
would be willing to promote an airline’s
products or services,
75 percent of regular travelers belong to
more than one FFP,
66 percent of business travelers are open
to switching to another airline’s FFP, even
if they hold elite status with their current
carriers,
72 percent of business customers who
travel 50,000 or more miles a year belong
to at least two FFPs.
This is not to say FFPs are bad for airlines;
quite the contrary. FFPs are one of the most
valuable aspects of an airline’s loyalty program
in the competitive market, with more than 120
million members worldwide. For the majority
of airlines, FFPs generate a significant amount
of revenue at substantially lower costs. FFPs
also increase yields. Research cited in the
Journal of Revenue and Pricing Management
shows that elite customers will pay a 2 percent to 12 percent price premium for similar
itineraries.
However, FFPs should be viewed and
treated as what they are … a separate business function from the airline. A customer
who is loyal to an FFP is not necessarily loyal
to the airline and vice versa. As such, there is
an inherent flaw in building an organizational
strategy for customer loyalty on the foundation
of an FFP, as many airlines have done. For an
airline, FFP members are only a piece of the
puzzle, one small segment of insight, and
they do not represent a 360-degree view of
customer needs and preferences.
Rather, a customer loyalty strategy should
encompass measures that will ultimately build
product loyalty and brand advocacy. It should
not simply be based on FFP benefits that may
increase membership. Airline leaders should
reassess their organization’s loyalty strategy
by asking:
How loyal are all your customers?
How is customer loyalty affecting revenue,
costs and resultant profitability, and what
drives customer loyalty?
What service gaps are creating disloyalty,
and what can be done to close those gaps?
Is all customer feedback being harnessed?
How is customer feedback shared throughout the organization?
Is there a 360-degree view of the customer?
How effectively is customer data used to
drive customer-centric actions and continuous improvement (Lean Six Sigma)?
Long-term, sustained, customer-centered
profit growth is possible for airlines that effectively answer these questions and build
strategies that promote true customer loyalty. a
Jonathan P. Ewbank is a principal
consultant for Sabre Airline
Solutions. He can be contacted at
[email protected].
By Tom Bertram and Manolo Centeno I Ascend Contributors
Achieving Optimal Airline Results
Airline departments focus on optimizing their work within each of
their areas, but achieving “optimal” across the entire airline must
be done through a holistic approach rather than focusing on each
of the individual parts.
ASCEND I INDUSTRY
W
ebster’s Dictionary defines
the word “optimal” as “most
desirable or satisfactory.” In
the context of the business
structures of airlines around
the world, the word “optimal”
is used frequently.
Airlines are complex enterprises, built to
deal continuously with highly complex business
problems. Over time, many airlines have either
developed or purchased technology systems to
solve their business problems. But because each
area within an airline has its own set of business
problems, the airline’s technology systems have
generally been individually purpose-built for a
specific department.
The network planning and scheduling department, for example, uses its automation to create
an optimal network and schedule that produces
the most profitability, and crew management
systems create rosters that minimize unproductive hours among crews.
When each of these departments works
within its own individual silo, the departments are
missing opportunities by not working together.
Such potential synergy would be especially important between the scheduling and operations
departments.
The Schedule’s Central Role
The schedule is the greatest revenue generator for an airline. It also has the biggest
impact on costs.
Generally, the schedule is developed and
optimized first, then passed down to the operating groups. This order of doing things puts a
constraint on the operating groups. Therefore,
the schedule inherently limits the ability of
crew, group ops and other departments in
attempting to optimize their performance.
In practice, over time, this style and tradition of one-way communication can adversely
affect profitability.
Not many airlines have a good understanding of the marginal costs associated with
changing a given schedule, especially if their
individual departments are working in silos,
independently of one another.
For example, an airline might add flights
that cause a marginal cost increase of 9
percent, yet may still be profitable. However,
somewhere along that work cycle, adding
further flights will start reducing the profitgrowth rate.
If airlines don’t have two-way communications between the scheduling and the
operations teams, the airline’s options are
limited. It can only plan to maximize revenue.
In this case, the revenue maximum point is
not the one at which profitability is optimal,
but rather at some point before revenue
maximization is achieved. This is a simple
example; however, in reality, the decisions are
not simple due to factors such as competition,
regulation and labor-cost pressures.
Another example might show the opposite
behavior. Say a North American airline wants
to improve its on-time performance without
addressing its operations challenges. For the
sake of this scenario, the scheduling department is forced to use high-scheduled block
times, which preclude the ability to produce
additional revenue. Furthermore, this example
entails high crew costs.
Flight Activity Where Profit Is Maximized
Adjusted RASM
Adjusted CASM
Profit
Instead of having a one-way process, an airline
should look at an iterative process to make the
entire flow of events (and the result) optimal.
The Problem Of Compartmentalized
Optimization
Working and optimizing within a department,
an airline can actually create down-line impacts
that hurt the process. Compartmentalization also
allows (and even invites) local optimization, which
is always suboptimal when compared to global
optimization.
Some examples of down-line adverse impacts
include:
The scheduling department chops five minutes
off the block time to make a legal connection
for a competitive origin and destination, but the
flight will be arriving late more frequently.
To theoretically minimize crew penalty, crew
scheduling builds a line with a shorter crew
connection, but it is dependent on the flight
being on time every day.
Scheduling puts a new aircraft type into a city,
which necessitates new equipment and training of the local staff.
An airline has different country registration
numbers that minimize the cost of ownership,
but this, in turn, adds complexity to the operation due to licensing requirements for any given
new country, which also adds training costs.
An airline does not include the operations
teams on schedule planning. Then, when the
schedule is shared with operations, the schedule is not feasible — such as proper time for
maintenance transit checks or no available
gates at an airport. This, in turn, translates into
schedule cancellations, which adversely affects
the annual plan and presents problems for passengers.
Considering these adverse results, how does
an airline redefine optimal between the scheduling and operating departments? It should:
Develop robust processes across the constituent areas,
Increase communications among all relevant
departments,
Ensure all involved departments share data,
Incorporate performance metrics.
Robust Processes
Blocking Additional Revenue A North American airline wanted to improve its on-time performance
without addressing its operations challenges. In this scenario, the scheduling department is forced to
use high-scheduled block times, which preclude the ability to produce additional revenue. It also drives
up crew costs.
26 ascend
Building robust processes is more than just a
series of steps along a one-way path. It is a series
of multiple functions to achieve a common goal.
Each of the functions within the process have
unique mechanisms (such as people involved and
systems and technology used within the process),
as well as controls and constraints (corporate policies, government regulations, information, etc.).
For example, looking at the mechanisms and
controls within a process function can identify
gaps within a process, which, in turn, can improve
the process.
In addition, a robust process involves loops
and feedback mechanisms. This encourages the
various departments to see the entire process,
ASCEND I INDUSTRY
City
Frequency
Dates
Flight
Departs Arrives
Carrier
Equipment Capacity
Two-way Communications While the schedule is an airline’s greatest revenue generator, it’s imperative that there are constant communications between
the scheduling department and the operations departments to ensure they are aligned and one area’s actions don’t negatively impact the others.
not just their individual process piece. It also
helps to have all stakeholders understand the
challenges outside of their own department.
between operations planning groups more
effective.
Increased Communications
Just as verbal communication supports a holistic focus, systems and data need to communicate
between departments and technology as well.
For example, does an airline’s scheduling tool
integrate with the crew scheduling system? That
integration is absolutely essential. If there is integration between the two systems, data can be
exchanged to increase the velocity of analysis and
decision making.
The scheduling systems should have all
information about airport constraints. The more
data integrated into the stakeholder departments
effectively enables all departments to see the
bigger picture, not to simply have the view of one
department.
For example, a U.S.-based airline shares the
proposed schedule electronically with the airport
team to validate the gating requirements and to get
full buy-in from the airport team. If the schedule is
not feasible, both groups look for solutions.
A Latin American carrier uses technology and
strong business processes to validate the maintenance constraints that are built into the schedule
and ensure that all aircraft receive the correct level
of maintenance, which, in turn, helps increase
aircraft availability while reducing maintenance
delays, as well as cancellations. If changes are
required, they can be sent back to the scheduling
system.
Communication is the key to making processes work efficiently. Communication, therefore,
is absolutely critical. Once all stakeholders in
the process have the proposed schedule, they
should look it over thoroughly to see if there are
any compromises that can be made.
For example, if crew scheduling has a tight
connection, it should contact scheduling to see
if the flight can be adjusted by a few minutes
to make a better crew connection with minimal
schedule impact.
At all times, departments should communicate with one another to ensure a holistic focus.
This must occur and be constant during the
various planning phases (the long-term/strategic
phase, midterm phase and tactical phase). In
fact, communication should also be continuous
during the operational control window because
there are high probabilities that the operations
disturb the schedule and its original optimal level.
As such, regular meetings should be
conducted between the scheduling and operations teams in which information is shared.
It’s always better to over-communicate than to
under-communicate.
It is also good practice to assume that the
other stakeholders might not be aware of the
potential impacts to their own business or other
areas. So communication and collaboration
among scheduling and the operational groups
will help raise awareness of potential issues.
The article “Fostering Collaboration,” published in Ascend, 2014, Issue No. 4 (www.
ascendforairlines.com), discusses different ways
to break the silos and make the communication
Data Exchange
Performance Metrics
In the end, results count. Each department has
its own set of metrics used to measure performance. In addition, there needs to be a complete
review of performance around the scheduling/
operating groups.
At least once each month, the scheduling and
operations teams should review performance for
each individual team and for the overall scheduling
and operations processes, thus allowing all departments to identify areas of improvement that can
serve to more fully optimize the scheduling and
operations processes.
Subpar turn performance, less-than-satisfactory
on-time performance and poor block performance
are strong indicators that the network is not robust.
In a previous Ascend article (2013, Issue No. 2)
entitled “Airline Doctor,” the author discussed how
the health and robustness of a schedule can be
determined through key performance indicators.
There is a North American carrier that spends
an entire day reviewing its operational performance
for the previous month and provides much-needed
feedback to the scheduling department if the schedule is affecting the operation.
So when thinking about “optimal” for a department or an entire airline, it’s wise to think in much
broader terms.
The chances are quite likely that if an airline is
optimizing a single variable or business challenge,
that action is affecting another group within the
airline and following through with the original departmental optimization might not be a good decision.
Having a sound, valid understanding of the potential impacts will lead to better decisions. And those
better decisions help lead to achievement of a true
optimal level. a
Tom Bertram is the practice leader for
airline planning consulting and Manolo
Centeno is senior principal and practice
leader for operations consulting for
Sabre Airline Solutions®. They can be
contacted at thomas.bertram@sabre.
com and [email protected].
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ASCEND I INDUSTRY
Staying Agile And Innovative Requires Vision, Intuition And Enhanced Analytics
By Nawal Taneja I Ascend Contributor
A perspective on different approaches to commercial planning, coming from within and outside the airline industry, can help airlines compete more effectively in a hyper-competitive 21st-century marketplace
where tech-savvy customers are demanding and receiving a greater number of options not just in price
and service, but in ways to quickly and conveniently generate and access their full range of choices.
ASCEND I INDUSTRY
D
ue
to the sheer
complexity
of
the
airline
business
a n d
uncertainties
that naturally arise in this always-hectic
business environment, commercial planning within the airline industry has always
presented a substantial challenge.
But in recent years the challenge has grown
even more severe, largely because of essential factors including increases in government
regulations and intervention, as well as the
state of economies and developments in the
political sphere.
To cite a few examples, there has been:
An increase in competition involving
new and powerful airlines, but also involving
new players in the distribution space;
An increasingly commoditized
marketplace;
A changing makeup of customers (for example, the millennials
and “digital natives” who have a
tendency toward attitudes of impatience and intolerance of mistakes
and technological defects, as
well as the new middle classes
in emerging markets) and those
customers’ expectations in relation to customer experience,
brand, loyalty schemes, ease of
shopping and transparency with
regard to marketing offers;
An upheaval brought about
by the ubiquitous presence
of the Internet, social media
platforms and personalization
apps.
On the flip side of the
equation, however, new opportunities in commercial planning
have also come into play.
These opportunities tie
directly to new technologies
involving greater realms of
information, communication and
integration, in addition to airlines’
expanding experience in:
Merchandizing to grow revenue, differentiate businesses and
products (to retain existing customers
and acquire new customers), and build
loyalty to develop pricing power and
increase market share;
Establishing increasingly successful virtual networks, as exemplified in
international operations by Virgin Australia’s
partnerships with Air New Zealand, Delta Air
Lines, Singapore Airlines and Etihad Airways;
Developing dual brands such as those
introduced into the marketplace by Qantas
Airways, Singapore Airlines, Virgin Australia and
Air Canada.
In light of both severe challenges and
exciting opportunities, success in commercial
planning now requires much more innovation
and agility.
For example, innovation is necessary to
develop new products and services (surrounding
the core product) that provide a higher profit
margin for an airline while at the same time
enhance the travel experience for customers. It
also enables an airline to remain agile in the ability to adapt quickly with regard to the dynamics
of the marketplace.
This new mandate in commercial planning,
incorporating innovation and agility, requires
sophisticated and integrated real-time planning
systems, processes, techniques, analytics and
metrics, accompanied by a vision and a shift in
the mindset:
From operations, product and process centricity to customer centricity;
Toward strategic partnerships with technology providers to implement and distribute
customer-centric products effectively;
Creating a balance in focus between analytics- and intuition-based planning, based
largely on the realization that many areas
of competitive behavior are new, with little
historical information to analyze.
All these items point to the need for a different mindset. And this mindset must incorporate
vision-focused commercial planning, systems
and processes that can provide a complete
view of targeted customers, as well as a suite
of comprehensive, integrated planning techniques that enable planning in real time.
Real-World Insights from Other
Businesses
Good examples can be found in the marketing streams of various industries.
In the rapidly moving, ever-changing fashion
industry, think about these principles in relation
to Zara’s innovative Spanish-based, internationally acclaimed supply chain management, with
its agile planning processes and its incredibly
insightful understanding of targeted customers,
bringing new styles and “fast-fashion” items
to its stores while that specific fashion trend
remains at or near its peak.
Netflix, an entertainment business, through
streaming, enables customers to see ondemand movies and TV shows, commercial
free, on Internet-connected screens (televisions, computers or mobile devices), including
personalized, rank-ordered recommendations.
And when further contemplating effective
incorporation of innovation and customer centricity in the planning process, another excellent
example comes from Amazon, with its strategic
thinking and logistical philosophizing around the
idea of using drones to offer a realistic sameday-delivery option to its customers.
Let’s begin the airline discussion with two
critical components of airline commercial planning that impact all other areas: networks and
schedules.
The Network/Schedule Equation
While past network- and schedule-planning
exercises have relied more heavily on the
rigorous application of sophisticated analytical
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ASCEND I INDUSTRY
models, operations-research techniques and
forecasting processes (such as Quality of
Service Index, or QSI) and less on intuition, it’s
essential to bear in mind that all viable solutions could change in the future as uncertainty
intensifies in the areas of regulatory policies
and the state of economies.
Having taken due note of that caution, then,
it’s useful to observe the intuitive lessons that
Turkish Airlines implemented a strategy to
offer service from its hub in Istanbul to approximately 40 destinations in Africa.
Norwegian Air Shuttle made the decision to
offer transatlantic service between the United
Kingdom and the United States, competing not
just on lower fares, but also using marketing
initiatives through social network platforms.
WestJet initiated a strategy to offer one-
Residence Butlers Onboard Last year, Etihad Airways introduced its new cabin class, “The
Residence,” a separate section of its aircraft with three-room suites for its ultra-first-class customers.
The three-room suites include a living room; bedroom and dining room, equipped with leather and
tweed seats; mood lighting and in-seat massage chairs; hi-definition flat-screen televisions; a double
bed; a mini-bar; and a shower. Guests of The Residence cabins are also assigned a personal butler, in
uniform, throughout the entire flight.
abound from fairly recent airline history. What,
for example, might have been the role played by
sophisticated network and market-share models
as opposed to pure vision and intuition in the
following instances?
Emirates made a strategic decision to offer double-daily service between Dubai and Mauritius,
flying Airbus A380 aircraft in both directions.
30 ascend
stop service between Canada and Ireland.
Vueling Airlines’ investment to develop a
brand that is perceived to offer more premium service features than the other major
European low-cost carriers (LCCs).
These strategic decisions are, of course,
independent of one another, having been
debated and carried out by individual airlines.
And they all illustrate that smart commercial
planning requires not only sophisticated models, but also vision and intuition.
The models must also take into consideration, for example, new dimensions in service,
such as those provided by:
Airlines-within-airlines (Qantas/Jetstar,
Singapore/Scoot and Air Canada/Rouge),
Virtual networks via strategically aligned
partners (Emirates/Qantas),
Virtual networks via strategically aligned
partners in conjunction with possible codeshares in a traditional alliance (Etihad).
Drilling down further within scheduling,
the necessity to decide on the correct balance between capacity and expected demand
has become even more challenging, literally
involving various levels and disparate types of
uncertainty.
For airlines with a mixed fleet, to some
degree it has been possible to adjust capacity 30 to 45 days prior to departure, to either
accommodate extra demand or reduce spoilage through the processes of demand-driven
dispatch and close-in refleeting.
And today, with dynamic merchandizing,
there are even more possibilities to increase
revenue per customer, given that load factors
are already very high. By including ancillary revenue and loyalty in the revenue-optimization
process, the fleet/schedule combination can
be adjusted much closer to departure, to better match capacity to demand.
Again, this aspect of planning requires the
use of close-in-refleeting techniques in addition to a totally integrated revenue optimization
model in which optimization is based not just
on inventory and price, but also on ancillary
revenue and loyalty based on dynamic and
contextual basis.
Then, for the day of departure, smart commercial planning must be based on proactive
service-recovery systems and processes that
are incorporated into an airline’s network
operations center.
Visionary technology will enable an airline
to undertake scenario planning well in advance
of an irregular operation, and produce optimal
solutions for the crew and aircraft movements,
and for the strategic groups of passengers.
All functions and communications within an
airline’s operations department must be fully
integrated to “connect the airline” to deal with
short-term disruptions in real time.
The New Network/Scheduling
Horizon
Clearly, within network and scheduling, on
every flight an airline now competes on price
and service delivered by the brand, as well as
ancillary revenue generated by context-based
offers that enhance the customer experience.
So the network must be optimized to fulfill
the stated and unstated needs of targeted
current (and future) customers.
ASCEND I INDUSTRY
The object within smart commercial planning is to optimize revenue per customer,
not revenue per seat, while building the
brand and loyalty.
Smart commercial planning must therefore enable an airline to adjust price and
service levels to not only meet market
competitive dynamics, but also brand
promises and expectations. Moreover, the
network- and schedule-planning systems
must enable an airline to take into account
the revenue from cargo.
Defining an airline’s network and strategy
lays the foundation for other key strategic
decisions relating to fleet, products, partners (alliance or equity) and distribution.
Distribution And Its Changing
Dynamics
The distribution sphere, as a good example,
has been changing very rapidly.
First of all, LCCs and airlines from emerging
markets have been growing swiftly, and they
are both now aiming for a larger portion of the
corporate market.
Second, new third parties have begun to
synthesize vital information on customers,
insightful information that could be sold to
airlines.
Third, the application and effectiveness of
digital advertising has been steadily increasing.
And fourth, the metasearch landscape has
been migrating from more of a pure marketing
platform toward direct incorporation into the
distribution channel.
Considering the context of all these developments, it might well be effectively argued
that the term “distribution” should be changed
to “selling.”
It can quite safely be said that within
the changing “distribution” landscape, some
airlines are developing a tight focus on direct
“selling” by synthesizing capabilities to offer
the right product to the right customer at the
right price at the right time, and in all events
through the right channel.
To achieve such a distribution-strategic goal
requires the capability to engage with customers at different touchpoints through mobile
technology and make situation-based offers
to individual customers, as well as possibly,
targeted on-line and off-line agents.
Further Important Considerations
Then there is the question of the cost of
customer “acquisition” and “retention.”
These efforts require specific and holistic
customer insights that can only come from
knowledge of customer identification and
establishment of comprehensive data profiles
that, in turn, are developed from historical
transactions and dramatically transformed customer relationship management, as well as
dramatically transformed loyalty schemes.
Consequently, the need to create and present a personalized offer is easy to envision
but difficult to execute, as it requires a deep
understanding of customers (that is, of their
preferences, as well as their value scores),
an understanding that changes even for the
Connect The Airline Irregular operations are now almost regular operations. As such, all functions and
communications within an airline’s operations department must be fully integrated to “connect the
airline” to deal with short-term disruptions in real time. It is the elimination of breaks in the connectivity
(the dotted-line in the figure) that will enable an airline to reduce costs and increase revenue through
an increase in customer experience. Keep in mind that creating a demand-driven schedule is one thing.
Executing it in real time is another.
same customers depending on the situation
and context.
This depth of understanding can result only
from robust customer research and analysis
of customer behavior (about pain points and
A/B testing, for example) and customer value
scores by type of value (a good example
involves differentiation among commercial
value, operational value and social value).
Leaving aside the capabilities needed to
truly gain a competitive advantage through
the use of the direct channel, global airlines
should take steps to optimize their channel
mix (through the use of various sub-channels
within direct and indirect channels).
Also, airlines should strive to find innovative
ways and use comprehensive systems to
reach out to their actual customers, as well as
potential customers, while customizing personalized experiences for the higher-yielding
corporate and, in some countries, government
market segments, as well as agents.
In recent years, airlines worldwide have
posted fairly lofty profit levels, resulting primarily from the generation of high revenue
levels through the sale of ancillary products
and services. Although low-cost carriers and
ultra-low-cost carriers have been the leading
beneficiaries, now hybrid airlines and full-service airlines are moving forward aggressively
in the merchandizing arena.
On a global basis, ancillary revenue rose in
2014 to an annual total of around US$50 billion.
And that astonishing 2014 level could easily
double in the next five years.
But while airlines have done a good job
of optimizing revenue from the sale of flight
inventory (using standard revenue-management techniques encompassing inventory and
price), carriers are just now beginning to
improve their strategies and tactics relating to
merchandizing, although on a static rather than
a dynamic basis.
Airlines recognize that they transport millions of passengers, representing a broad
spectrum of the population. They also envision
that they should be able to craft powerful
strategies and tactics to go much deeper into
merchandizing.
However, developing new products for
sale on a dynamic basis requires significant
investments in merchandizing. And these are
investments in “non-core” initiatives that are
not related to such essential activities as buying aircraft and building maintenance facilities.
On such non-core initiatives, airlines need to
show a positive return on investment. And this
is where the vision comes in — again, coupled
with data, technologies and analytical tools
and techniques, as well as investments to gain
access to customers.
Assume, for example, that the vision is to
improve the travel experience through the
entire journey. Precisely what must an airline
do to make this vision become a reality?
ascend 31
Photos: Shutterstock
ASCEND I INDUSTRY
Future Mobile Travel Experience Wearable technology, such as the Apple Watch and Google Glass,
is the latest in mobile technology that can be worn rather than carried. This advanced technology is
expected to enhance the travel experience with its real-time interactive communication capabilities.
One likely possibility: The facilitating technology could be mobile devices.
Keep in mind that mobile devices provide
more than just mobility, as well as more than
just a channel for pushing out information.
Mobile devices keep people constantly connected (some to share information with and
from people they trust). And those mobile
devices can be used to pull in exactly the
32 ascend
information they need, in the format they need
and at the time they need.
What is needed, then, is an investment to
improve the mobile travel experience.
The Greater Future Mobile Travel
Experience
There is, therefore, a need to develop travel
services that work across the spectrum of
smartphones of today, to wearable technology and computing of tomorrow (such as
Apple Watch and Google Glass) to improve
the on-the-go travel experience by enabling
interactive communication in real time when
the time element is very important.
Features must include not only visible messages, such as critical real-time flight alerts, but
also voice command with information based
on location. A customer, for example, might
say, “Find me the next flight to Amsterdam.”
Or the customer might ask, “What are the visa
requirements for Country X?”
Customers are also likely to demand mobile
payment systems, a capability that must therefore be included in mobile devices.
When it comes to data, smart commercial
planning needs access to data that can lead
to decisions in real time, for true agility. Of
course, airlines gather, analyze and interpret
varying amounts and types of commercial
data to gain profitable insights and to develop
strategies and tactics.
The problem has been that different groups
within different functions work with different
sources (both internal and external) with different degrees of validity of the data. Network
planning, sales and pricing, for example,
work with different data marts. And the
problem escalates when an airline group has
multiple brands — Air France and KLM, British
Airways and Iberia, and the airlines within the
Lufthansa Group.
What continues to be missing is the availability of one source of data, as well as
cross-functional and seamless integration,
within single airlines and within brands, so
executives can devote more time to the proactive development of strategies and timely
tactics and spend less time arguing about the
validity and interpretation of data.
Also missing is a planning system that
provides a sequence of interactive and
enlightening screens to deliver commercial
business intelligence — integrated, realtime information on the performance of the
network, schedules, fares, revenues, profitability, channels and other elements, as well
as the means to drill down to get detailed
information.
New Global Challenges
Smart commercial planning requires
enhanced analytical tools coupled with vision
and strategic insight to both enumerate and
evaluate competitive challenges and strategic
opportunities.
Turkish Airlines, along with the fast-growing “Persian Gulf Three” of Emirates, Etihad
Airways and Qatar Airways, are collectively
presenting monumental challenges for the
older-generation global airlines — challenges
relating to the sharply upward trajectory of
Turkish, Emirates, Etihad and Qatar as new
and powerful competitors.
ASCEND I INDUSTRY
These global players have been able to
quickly and incisively envision tremendous
opportunities to transport the enormous
anticipated traffic to and from emerging markets (traffic based on growing middle classes,
and stimulated largely by LCCs).
And the new global players are achieving
amazing results largely through the development of connectivity. This requires a holistic
approach to network planning — not just
current routes, but routes that have come out
of strategic visions and plans.
Such visions cannot possibly be properly
and fairly evaluated through the use of standard QSI techniques. QSI models, to be truly
effective, must be dramatically transformed
to take into account the quality of the product, as well as the respectability of the brand.
Highly strategic insights are also necessary in relation to other potential competitors,
such as those based in China, to properly
evaluate penetration of the intercontinental
markets or digitally transform offers not just
by recently successful carriers such as Air
Asia X and Jetstar, but also by new types
of LCCs including Norwegian Air Shuttle in
Europe and Brazil-based Azul in South America.
And let’s not overlook the imperative
to decipher the potential vision and longrange-planning prowess of Ryanair jumping
into the transatlantic market, or digitally
transforming its offers. In other words, QSI
methods must also take into account new
product concepts and their accompanying
appropriate price points, rebundling of the
unbundled core product, and inclusion of
experiential options such as those proposed
by Etihad in its premium cabins, particularly
in first class.
A Hypercompetitive Business
The airline business has become hypercompetitive with the entry of powerful
airline competitors and new types of
emerging distributors as “sellers.”
And that business calls for customer
centricity, with customers desiring a higher
level of customer experience and more
personalized services, given that customers
have gone mobile, digital and social.
These factors are leading airlines to
turn to customer-experience innovations
for product differentiation and customer
loyalty.
Designing and implementing a superior
customer experience while competing with
increasingly powerful and brand-attractive
full-service airlines, innovative hybrid airlines and ultra-low-cost airlines must now
be part of smart commercial planning, particularly for passengers in economy class,
which is the growing segment.
Smart commercial planning calls for
embracing new technologies and processes
Extreme In-flight Luxuries Emirates takes customer experience to new levels with its private suites
equipped with shower spas, ambient lighting, personal mini-bar, private cinema, fully flat beds and fine
dining.
(for example, technology to manage the customer experience).
And it also calls for an “outside-in” customer-service view, meaning what customers
want to “buy” on their terms and through their
selected channels, not what airlines want to
“distribute” on their terms and through their
preferred channels.
When a carrier decides to dramatically
change its strategy, it must also consider
redesigning its organizational structure to work
more closely with other members in the travel
chain to provide more personalized service and
an enriched customer experience (the physical
as well as the digital experience).
It’s really a mandate for much greater
innovation and agility in airline commercial
planning, with unwavering commitment to
customer and experience centricity, not process centricity.
And it also requires leveraging inspiration
from other business market leaders who have
not only thought outside the box, but have
been willing to go outside an entirely different
box — Zipcar, Uber and Airbnb, just to name
some examples.
That’s airline commercial planning with a
flair for the future and a flair for success. a
Nawal Taneja is an experienced airline
business strategist and the author
of a series of books for practitioners,
including, Designing Future-Oriented
Airline Businesses (2014). He can be
contacted at [email protected].
ascend 33
By Terry McClintock I
Ascend Contributor
Well-trained Analysts Are Key To Staying Above A
Confidence Crisis In Revenue Management
ASCEND I INDUSTRY
Confidence Crisis Drivers
Though airline passenger demand is
highly seasonal and predictable, assessing any level of RM productiveness (i.e.,
analyst-level influence on flight/market/
origin-and-destination results) across
people and technology is often a murky
and inconsistent activity that can easily
become a primary driver of a confidence
crisis within the department.
Revenue management, in practice,
is quite commonly seen as a “fuzzy”
intersection between academia and business operations, particularly from the
viewpoint of other functional departments
within an airline.
This dynamic leads to fervent daily discussions between departments in terms
of both planning and execution. But in a
practical sense, one of the most significant
outcomes from such discussions is often a
high degree of pressure on RM managers
and analysts to gain and maintain trust
that the primary driver behind inventory
decisions is overall revenue maximization
for the airline.
Whether caused by communication
breakdown, a financial downturn or persistent operational challenges, blame is
quickly assigned. And without well-trained,
diligent and highly confident RM analysts
“owning” their respective markets (i.e.,
demonstrating a clear understanding of passenger demand tendencies), the ugly result
can often be a loss of confidence in the RM
department.
Once this happens, such a crisis can
persist for an extended period, often precipitating a leadership change in middle
management or even somewhere near the
top of the organization.
Every executive team seeks consistent results, and given a general level of
uncertainty about the specifics of how RM
operates, a lack of direct cause-and-effect
business understanding further complicates
things when evaluating performance.
When such a negative environment persists, only large-scale, structural changes
can improve the dynamic and return the
business to normal. As such, there is significant value in preventing the development of
a confidence crisis in the first place.
How, then, does an RM department leader best arm himself or herself to minimize
the risk of lost confidence? By understanding the value of frontline RM analysts and
fully committing to formal, informal and
recurrent training as the airline changes and
people, processes and technology consistently evolve over time.
The Learning Curve
All RM leaders expect top-notch performance from their analysts. In essence,
they want to hire analytically strong and
Revenue Management Analyst Learning Curve
Attributes
High
Analyst Productivity
S
ince the beginning of modern
airline revenue management (RM)
and the subsequent widespread
use of respective technologies
to forecast demand, set inventory and overbook flights, some
degree of contention has naturally existed
between RM and other departments within
an airline, notably operations, sales and
marketing.
Large-scale, cross-departmental dependencies tend to be built on a certain level
of expectation that RM will either “get it
right” (i.e., forecast accurately and set
inventory true to passenger demand) or
otherwise deploy a competent and efficient team to manage risk and, over time,
build and sustain trust.
When trust deteriorates between
departments, confidence at the analyst
level can wane in revenue management.
When left unaddressed, analysts’ confidence can quickly deteriorate, impacting
internal department performance. This is
referred to as a confidence crisis, and an
RM department that is experiencing any
of the following could be in the midst of
one:
An environment of “analysis paralysis,”
or over-thinking business decisions,
High attrition rates,
Inconsistent or slow decision making,
Low staff morale,
Consistently ineffectual results.
Getting to the root of these problems is
key to running a robust RM department.
In addition, building and maintaining the
confidence levels of a team of RM analysts is vital to maintaining a positive work
environment.
Building a confident RM team starts at
the individual level with a focus on the
RM-analyst position. Successful management and consistent fostering of this
employee group is an often-overlooked
but imperative element for maintaining a
high overall confidence curve, as well as
excellent performance.
Dangerous, potentially
risky place with low
absorption: Are analysts
helping or hurting?
Superb skillset and high
productivity drives
analyst market
ownership.
Poor training, skillset,
productivity represents
highest risk.
Likely a personnel issue
in terms of motivation or
commitment to RM work.
Target
Low
Low
High
Analyst Absorption/Skillset
Analyst Learning Curve Every revenue management leader should aim for some measure of highly
skilled, highly productive RM analysts, but how is this achieved? By classifying the RM analyst team
against productivity and ability to learn or absorb information and then reinvigorating a steady training
regime, airlines can achieve a high point (shaded box within green area) in the collective confidence
curve of the department.
ascend 35
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infinitely curious people who can handle
steep learning curves and emerge as highly
productive, effective decision makers and
revenue achievers.
Such edicts look good on paper. But
it’s never that simple because some mix
of the organizational factors — specific
departmental dynamics, as well as analyst
skillset and willingness — collide in a delicate matrix that requires precise attention,
support and confident leadership to successfully navigate.
RM-analyst quality can be measured by
evaluating individual performance according
to his or her ability to absorb information
quickly and efficiently make course corrections in complex technologies amidst the
constant strain of daily business issues that
otherwise distract from the core mission.
The ideal target zone strikes a perfect
balance: an analyst successfully climbs the
inherently steep RM learning curve effectively enough to then be able to combine
his or her knowledge to generate productive
efforts within the department.
Any directional shortfall from that ideal
target zone fundamentally represents an ineffectual situation with regard to the company’s
profit/loss statement, the RM organization, the
analyst or quite possibly all of the above.
Ineffective and less-than-confident RM
departments can range from the innocently
ineffective to being directly harmful to network-level RASK (revenue per available seat
kilometer) depending on leadership’s willingness, ability and commitment to constantly
hedge against falling to the level of any of these
less-than-desirable conditions.
Revenue Management Analyst Learning Curves:
Avoiding An RM Confidence Crisis
}
A
B
C
D
Mild concern
}
Effectiveness
Pace of Learning
Optimal; low
susceptibility
Undesireable; high
susceptibility
Serious concern
Experience
UÊÊ,Êi>À˜ˆ˜}ÊVÕÀÛiʈÃÊÃÌii«ÊLÞʘ>ÌÕÀi
UÊÊi>`iÀÊ>˜`ɜÀÊÌiV…˜œœ}ÞÊV…>˜}iÃÊ>ÀiʜvÌi˜ÊÊÊ
instigators of a confidence crisis
A) Early emphasis on formal training and deployment into
operation with minimal onward recurrent - most common
B) Bona fide entry training with committed, regular recurrent
opportunities tied to professional growth - optimal
C) Buddy system for short period that is informational and not
effectively championed or followed up on - suboptimal
D) Informal document/information dump from new hire with
no onward commitment beyond self-driven improvement
Avoiding A Confidence Crisis Looking at the respective four analyst learning-curve profile descriptions
and noted tendencies, an airline can assess the current position of its revenue management team. Only
by adhering to a consistent business-training process will an airline align to curve B and arrive near optimal with low susceptibility for a confidence crisis evolving within the department.
36 ascend
Shortfalls in ability to absorb or willingness
to participate are typically the leading contributors to lost confidence at the analyst level.
Additionally, a highly productive analyst who
has a less-than-average skillset is equally dangerous, as this situation would lead an outsider
to question how seriously the business is being
impacted from a poorly skilled, albeit highly
productive, person.
Layer in an operational shortcoming or two
(i.e., recurring instances of severely overbooked
flights that lead to over-sale scenarios or perennial spoilage and low load factors on certain
flights), and it doesn’t take long for internal
reputations and trust to be diminished and the
stage to be set for onward conflict.
Training Enters The Equation
Experience validates that RM crises in
confidence are often fostered, if not driven
by, a breakdown in the training and support
paradigm.
As a best practice, airlines should commit to
a strict training regimen, ensuring that analysts
start off on the right foot within their role
under aligned senior analysts and managers,
followed by recurrent training. The learning,
absorption and productivity of a team of RM
analysts are critical elements to get right and
continuously support. However, cost cutting,
lack of resources, change management or
de-prioritization by leadership frequently trump
all in importance, setting the stage for a confidence crisis to develop.
Beyond absorption and productivity, avoiding a confidence crisis in RM (or at least
considerably lessening susceptibility to one)
requires reviewing the analyst learning against
a third dimension: effectiveness.
Only by creating and committing to maintain
a highly effective core of RM analysts does an
RM leader best hedge against a drop in confidence whether at the individual or group level.
The practice of revenue management
demands a keen analytical skillset. From there,
some measure of a steep learning curve is
expected to get analysts quickly into the game.
What happens from this point on will determine all around outcomes, such as productivity,
effectiveness, financial or overall quality, as
well as the level of risk that a confidence crisis
could develop.
Causes Of Subpar Performance
There are a few primary reasons why the
best of training commitments within RM derail
and drive lost confidence:
Higher-than-expected staff attrition and poor
long-range staff planning. Even in a slowerpaced job marketplace or in geographies that
feature lower job mobility overall, a revenue
manager should plan on keeping analysts no
more than two to three years. Although this
type of thinking is often met with skepticism,
the intense and analytical nature of the posi-
ASCEND I INDUSTRY
tion, combined with the dynamic nature of approach is deployed, department leaders
the business from a commercial perspective, should appoint stronger members across the
validate this statistic. More importantly, once team (e.g., lead analysts or managers) to
staff shortages occur, even less of a spotlight serve in the capacity of fulfilling the buddy
or priority is often placed on training, which system with new hires to best foster the
desired outcome.
leads to the second reason.
Given the intersection that RM occupies
Daily RM operations consume too much
time and energy. At the very hint of a crisis, between academia and business, “fresh” ideas
continually emerge
who has the time or
to foster innovative
can afford the committhinking, development for proper trainment of technological
ing or reinforcement
advancements that
when simply meetaddress
recent
ing daily department
market
or
paspriorities frequently
senger trends and,
stretches all employtherefore, present
ees beyond the limit?
new opportunities
A
corporate
culto promote continual
ture that fosters the
learning within the
“blame game.” This
RM group.
type of organization
When it comes to
suffers from a broad
motivating people to
lack of informationlearn, this concept
sharing and breeds an
stands out because
environment in which
it is notoriously diffiindividuals frequently
cult to keep positive
keep their guard up.
momentum going
This is less obvious but
amid great results, as
is often an underlying
opposed to the lesscontributor to lost coner level of difficulty
fidence.
involved in steering
A series of difficult
a team in climbing
cross-department
the learning and perdialogues,
conflicting
formance curve the
decisions that ultimately
first time as part of a
prove less-than-optimal
turnaround or organito the airline, or even
zational restructure.
directional differences
In other words,
across leadership can
committing to recurall lead to a confidence
rent training and
crisis.
motivational pursuits
With or without a
Gordon Bethune —
is as important as
larger corporate commitFormer CEO, Continental Airlines
any new-hire training
ment to training, an RM
within RM.
department must have
In
the
book,
an intensive training
program in place to ensure analysts are well Confidence: How Winning Streaks and Losing
Streaks Begin and End, Rosabeth Moss
qualified to produce optimum results.
Given this, it becomes more of a qualitative Kanter says, “… former Continental Airlines
exercise to align departmental practices with turnaround CEO Gordon Bethune said, ‘It’s a
a standardized path of individual learning to lot harder to keep things going great than to
achieve expected growth and a medium- to get them going great in the first place. People
long-term productive return in pursuit of rev- who have put in long hours willingly during
the crisis can start to relax a little, enjoy the
enue maximization.
Any path short of this level of commitment success, and maybe figure that they’re good
leads to delayed learning, as well as subopti- enough, unless they get more motivation to
mal work effectiveness curves that indicate a keep getting better.’”
With concerted commitments to training
high susceptibility to a loss in confidence at
any level. A lack of recurrent training leads to content and active participation in place, any
staleness and complacency and, therefore, to onward loss in confidence across the RM
organization can be prevented by successful
higher levels of susceptibility to crisis.
Finally, a buddy-oriented training system execution of a well-thought-out training and
is really only as good as the buddies who are support framework.
Such execution could well center on these
assigned and is inherently less formal and
of poorer quality. In other words, when this tenets of success:
People who have put
in long hours willingly
during the crisis can
start to enjoy the success, and maybe figure
that
they’re
good
enough, unless they
get more motivation
to keep getting better.”
Measured — Progress must be measured
against a traditionally steep and technical learning curve or taken in reasonable
steps that are effective to the business
and suitable to skillsets individual new
hires bring with them. Whether by testing
during training or setting individual target
key performance indicators with each analyst, a steady culture of goal attainment,
active thinking, dialogue and a “can-do”
spirit permeates. The best way to accomplish tedious tasks that require consistent
review is via a measured approach.
Mixed: In the end, both formal and informal
training and activities within the department become the best “glue” to ensure
the department never lulls into a less confident state. RM staff members, including
senior analysts and managers, are key to
fulfilling the mixed approach to learning.
Rushed training and information dumps
at the point of hiring are not sufficient. It
becomes incumbent on the mid-lower-tier
level of experienced RM staff to champion
ongoing follow-up training.
Maximized: The obstacles are many on
the path to RASK improvement or revenue
maximization. By maximizing efforts in
hiring, training, motivating and otherwise
fostering confidence in decision making
for an analyst team, a confidence crisis
can be avoided and airline revenue can be
maximized on a consistent basis.
In the end, the revenue management
function requires performance at a high confidence level to deliver excellent results. a
Terry McClintock is manager of
pricing and revenue management
consulting for Sabre Airline
Solutions ®. He can be reached at
[email protected].
ascend 37
The Ongoing Airport Evolution
The airport of the future is
being imagined and designed
from different approaches and
perspectives — both visibly, as
well as behind-the-scenes.
By Mike Gerra I Ascend Contributor
ASCEND I INDUSTRY
M
any of the technological,
social, cultural and economic
foundations and emerging
trends that will coalesce into
the airport of the future are
already in place.
Today, an amazing 150,000 tons of cargo is
shipped and more than 8 million people fly, on
average, every 24 hours from airports worldwide.
And the vast economic engine that is the global
travel and tourism industry will continue to grow,
innovate and adapt to address the burgeoning
human thirst to connect with others, explore new
horizons and bask in new experiences.
A recent 20-year outlook from the
International Air Transport Association (IATA)
has projected that by 2034, passenger numbers will reach 7.3 billion annually. This figure
would more than double the approximately 3.3
billion travelers boarding aircraft in 2014 and
represents 4.1 percent average annual demand
growth.
In addition, the United Nations World
Tourism Organization forecasts close to 2 billion
international tourist arrivals (excluding business
travelers) worldwide by 2030.
Such sustained long-term growth will
continue to pressure all providers within the
transportation value chain to deliver new solutions to improve efficiency, eliminate stresses
and challenges for customers, and significantly
revamp the customer experience.
A key element will be seamless coordination among players in the transportation web:
airlines, airports, ground-service providers and
retailers.
Airports, airlines and other service providers
have, until recently, acted somewhat independently, usually to the detriment of the traveler.
During the air-travel purchasing process, for
example, the traveler may be considered a loyal
customer of the airline. But in transit to the airport,
the traveler becomes just another customer of
the ground-service provider (i.e., a taxi service or
regional rail-transit system).
Upon arrival at the airport, the traveler becomes
its customer, albeit he or she is ultimately the
airline’s customer. And typically, only when the
traveler boards the aircraft does he or she resume
the full role of airline customer.
While all the members of the transportation
value chain have critical roles to play, the airport
plays a central and key role to the traveler, airline
and other service providers.
Airport Analysis
Sabre Airline Solutions® undertook a broad
review of the airport services sector to understand
the business challenges, customer issues, operational models, and ongoing and emerging trends,
as well as opportunities for airport operators,
ground handlers and airline ground services.
The analysis explores the central role played
by airports, examining their evolution from an
operationally efficient transit point serving airlines
to a complex economic engine catering to the local
community and, increasingly, to the traveler.
Stemming from this analysis is a fresh attempt
at reimagining the airport experience (from the
traveler’s perspective) that aims to rekindle the
anticipation and enjoyment of travel, especially
by air.
Drive-Through Check-In In the coming years, airports will make significant changes to reinvent the
ground-based customer experience. The check-in process is one of many areas that will be improved,
in an attempt to make it a more positive, less stressful experience. For example, Palm Springs
International Airport today is conducting customer trials of convenient drive-through check-in to
determine if this is a viable long-term option.
40 ascend
The analysis focuses on three primary areas:
airport, traveler and technology. Resultant findings
address five critical objectives:
Identify service challenges — Map the touchpoints of a traveler’s journey and identify pain
points.
Describe macro-level shifts — Review foundational trends, enablers and disruptors that will
affect the travel sector at the business and passenger levels over the coming decades.
Examine technology trends and solutions —
Identify current and emerging technologies, best
practices and trends that offer immediate and
long-term solutions centered on a traveler’s airport experience.
Characterize potential airport-specific scenarios
— Describe and contrast possible airport operating models that may emerge.
Define new approaches — Highlight new and
emerging approaches to enrich the traveler’s
experience and benefit primary players in the
transportation value chain.
Evolution Of The Airport
The airline and airport sectors are closely intertwined. Success for one usually contributes to the
success of the other.
In some cases, both have followed a similar
strategy in seeking revenue growth. The pursuit
of discretionary ancillary sales by airlines is similar
to the revenue diversification seen at airports from
retailing and other non-traditional services.
But on the cost side, the two sectors have
taken notably differing strategic paths.
During the last 30 years, many airlines have
merged and emerged as global entities, while
others have served specific market segments or
regional niches. This consolidation has led to reduction in costs for carriers and a homogenization and
standardization of the customer experience.
Airports, on the other hand, have remained,
for the most part, independently operated local
businesses. For instance, the five airports serving
London are operated by three independent entities,
and separate airport authorities operate each of the
three airports serving the San Francisco area.
Airport operators have not thoroughly exploited
the economic advantages inherent in scale. Instead,
they have developed and maintained fragmented
approaches to the customer experience.
With high fixed costs, airports are susceptible
to cyclical macro-economic, political and regulatory fluctuations. As global air travel has increased,
fueled in part by accelerating globalization, airports
have faced an array of new challenges requiring
flexibility and adaptability.
Over the last several decades, airports have
tailored their operational models and sought to
adapt their business strategies to the needs of a
changing market.
Therefore, it’s useful to examine how airports
have evolved from basic operational-focused
entities serving airlines to complex horizontal
businesses offering broad capabilities and customer experiences for a wide range of constituents
ASCEND I INDUSTRY
— airports, ground service providers, airlines and
related transportation services businesses. This
evolution can be categorized in three general
phases: from efficient airport, to extended airport,
to experiential airport.
The Efficient Airport: Airlines As
Customers
Historically, airports have focused on providing
the capabilities needed to ensure a safe and efficient operation for their principal tenants — airlines.
Airports offer infrastructure (runways,
taxiways, gates, jet bridges and passenger
concourses) and services (ground control,
baggage processing and security screening) to
airlines to support aircraft takeoff, landing and
other related ground operations.
Typically, an airport leases its space and
infrastructure to airline tenants (and others),
which operate independently, manage customer information separately and offer their
own distinct services to travelers.
Over time, airports grew to provide a base
level of common services to these tenants, such
as check-in processing, baggage handling and
security management. Airports gradually expanded
their offerings through the addition of third-party
retailing and food services. But for the most part,
they remained focused on a reliable and efficient
operation.
Key performance indicators track airport
operations, such as aircraft movements and passenger-processing throughput, rather than traveler
experience and satisfaction.
The Extended Airport: Business
Tenants As Customers
The modern extended airport is generally quite
large and sophisticated. In fact, some large airport
hubs have an employee population and geographic
footprint comparable in size to that of a small town.
In complexity, the modern airport comprises
a wide range of related business systems and
processes.
The extended airport offers common infrastructure, managed services and, increasingly,
information services shared across its multiple
and varied tenants: airlines, retailers, government
agencies and concessions. These tenants also
represent expanding sources of airport revenue.
The primary objective of the extended airport
remains to facilitate the safe and efficient movement of people and goods. However, the increased
use of centralized services and collaborative IT
infrastructure and solutions affords the airport and
its tenants significant benefits, including:
Improved operational efficiency,
Improved adaptability to market conditions,
Enhanced common business processes,
Quicker responsiveness to varied tenants’
changing needs.
The Experiential Airport: Travelers As
Customers
Expediting Customs And Border Processing Australian Customs and Border Protection Service
launched SmartGate, giving eligible travelers the option to self-process through passport control. This
advancement uses data in a traveler’s passport, as well as face recognition technology, to perform the
customs and immigration checks typically conducted by a Customs and Border Protection officer. In
addition, easyJet has launched a mobile app to scan passports, which also expedites customs and
border processing for its customers.
Since the turn of the millennium, airports have
adapted to accommodate growth and globalization of the industry. These drivers have exposed
airports to new traveler segments diverse in
nationality, demographics, social norms and cultural
experiences.
As airlines have adapted their business models
to better serve the needs of these burgeoning segments, airports have followed suit, while keeping
an eye on efficiency and the bottom line.
Airlines have diversified to focus on sprawling
domestic and/or international networks, point-topoint markets or low-cost operations, and airports
have mirrored these immense structural changes.
Airport operators have built new runways to
cope with growth; constructed new terminals
for airline hubs; redesigned existing concourses
for low-cost carriers; and improved gates, jet
bridges and airside operations for high-frequency
origin-and-destination services, as well as for rapid
passenger transfer.
Despite these business pressures, airports have
generally maintained an efficient and effective
ascend 41
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air-transportation system. Yet, the growth and
democratization of air travel means airports now
serve a much broader and more complex array of
constituents.
Whereas once an airport’s key customers might
have been a handful of airlines, today an airport may
have tens or hundreds of additional stakeholders:
scores of diverse caterers, ground handlers, retail
tenants, parking operators, ground-transportation
companies, local and regional feeder businesses,
private and governmental security services and, of
course, millions of travelers.
Airports now recognize that these travelers
constitute a critical constituency not just for the
airline, but likewise for the airport.
And today’s air travelers — while sharing
a common need to transit an airport — have
extremely diverse wants and increasingly high
expectations. In response, airports are redefining and broadening their mission to include
an environment for new and enhanced customer services for their principal users: airline
passengers.
Traveler Experience — Stress And
Intrusion
During the last decade, most traditional measures of traveler satisfaction have remained
relatively stable, including:
Courtesy of flight attendants,
Courtesy of check-in agents,
On-time performance,
Reliability of baggage services.
That said, a recent survey of air travelers by
The Economist Intelligence Unit shows that twothirds of travelers, or 66 percent, rate satisfaction
with airlines the same or lower. Thus, a good portion of travelers are still not necessarily satisfied
with the present-day travel experience. Rather,
they are now more accepting of additional fees
and limited legroom on flights, and they have
grown accustomed to lengthy lines and multiple
security checkpoints, as well as other challenges
at airports.
While perception of air transport has become
generally more favorable during the last decade,
it still ranks substantially lower than in many other
industries, such as home electronics, restaurant
dining, package delivery and banking.
Results of a recent survey by the U.S. Travel
Association (USTA) reveal that travelers still identify a number of key factors as stressful. The
USTA estimates that due to various frustrations
with the flying experience, U.S. travelers avoided
about 38 million domestic air journeys in 2013,
costing the country’s economy an estimated
US$35.7 billion, or around 8 percent of current
air-travel demand.
Lengthy lines for check-in, security and boarding and additional fees for items such as excess
baggage, seat assignment and priority boarding
rank among the most common traveler-complaint
categories.
However, travelers’ primary concerns
revolve around flight cancellations and delays.
About 90 percent of travelers said the cost
of flying is either somewhat or very important
to their purchase behavior. But somewhat
surprisingly, just over half indicated they
would willingly pay slightly more if the added
cost reduced delays and cancellations and
improved the overall airport passenger
experience.
A number of studies highlight passenger
dissatisfaction and frustration with airline and
airport handling of delays and service interruptions, seemingly redundant and duplicate
check-in and boarding control processes, and
lengthy challenges during airport screening,
local security and emigration/immigration.
Many people view airports among the
most stressful places they visit. For example,
research by British-based CPP Group Plc
found that just over 40 percent of U.K. travelers stated that airports generally make them
feel stressed, and nearly a quarter consider
the process of getting on a flight as stressful.
Long-Term Foundational Shifts
Self-Boarding Gates New boarding procedures at airports will speed aircraft loading and eliminate
long passenger lines. For the airport of the future, self-boarding using passenger-token-enabled gates
will become the norm, eliminating separate check-in and additional airport security. Vienna International
Airport is leading the effort by installing self-boarding gates.
42 ascend
Addressing and improving these challenges will center on business solutions enabled
by technology.
In the coming years, processing power
will continue to increase, automated data
and user-generated content will continue to
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multiply exponentially, the speed and size of
communications networks will continue to grow,
and processing and storage costs, as well as
processor size, will continue to decline.
At a macro level, these advances will ensure
that newer, faster and more economically
feasible technology solutions will become increasingly embedded in more systems, services and
processes.
Near-Term Technology Trends
For airports and their customers — airlines, travelers, retailers and ground-service providers — a
number of key technologies are likely to permeate
infrastructure and become critical elements in the
reinvention of existing customer experiences, as
well as the development of entirely new business
processes.
Many of the technologies are not new, but
their adoption within the travel sector is only now
reaching significant levels.
Technology-based solutions for airport operators and tenants are likely to include intelligent
digital signage, digital wayfinding, biometric identity
management, token-based authentication, mobile
tracking and proximity sensing of travelers, RFID
tracking of baggage, near field communications,
geo-fencing, high-touch technology-enabled service, service robots, augmented-reality services,
remote/virtual assistants, and predictive analysis.
Perspective 2030
During the next couple of decades, the airport
ecosystem will evolve significantly.
New operating models will be firmly in place.
New technology-based solutions will redefine airport processes and the entire airport experience.
The airport of 2030 may resemble a thriving metropolis; or a low-frills high-frequency bus
terminal; or even an engaging, sought-out regional
destination. Airport reimagining is already happening, element by element, and the results may be
quite astounding. For example, by 2030:
Check-in will become completely remote or will
be eliminated entirely. In the short-term, homebased and remote check-in will become standard. In a sign of this accelerating trend, Palm
Springs International Airport today is conducting customer trials of convenient drive-through
check-in. Longer-term, airports will not have
check-in desks or self-service kiosks, and the
check-in process itself may disappear as airlines
and airports work to reinvent the entire groundbased experience.
Travelers will not have to go through an emigration procedure at the airport. In the short-term,
improved automation, remote and mobile services will improve the process. For instance,
SmartGate now provides travelers an automated
way to expedite customs and border processing between Australia and New Zealand. Also,
easyJet has launched a mobile app to scan
passports.
Trusted travelers will not undergo airport security. Again, in the short-term, airlines, airports and
government agencies are working to improve
the security process for travelers — making
it less intrusive and less time consuming. For
instance, today at Incheon International Airport,
ePassport verification and biometric-based
authentication solutions are used to expedite
security.
Personal baggage will take a different route to
the traveler’s journey. Hefty fees for checked
bags are changing traveler behavior to the
extent that checked baggage will become the
exception rather than the rule. Carry-on bags
are already replacing hold luggage, and thirdparty shippers are beginning to offer door-todoor concierge baggage services.
New boarding procedures will speed aircraft
loading. Self-boarding via passenger-tokenenabled gates will be the norm — no separate check-in, no additional airport security.
Vienna International Airport is now installing
self-boarding gates.
Drop-ship airport showrooms will replace
most retail. Airports will become functional
and experiential destinations. Showrooms
will allow travelers (and non-travelers) to
select from a wide range of products for
subsequent shipping to a destination of their
choice. The inexorable trend toward online
shopping will extend quite naturally into the
airport.
Traditional immigration processing will give
way to seamless and remote immigration
and border control procedures.
The airport will be functional and fun. Preclearance, remote processing and global
trusted-traveler programs will eliminate
crowding and free up space for revenueenhancing opportunities for airports, as well
as additional entertainment and destination
experiences for travelers.
Travelers will be able to arrive just 45 minutes
before departure and will not need to queue
up for check-in, customs and boarding. Upon
arrival at their destinations, they won’t stand
in line for immigration checks or to claim
their bags, which will already have been dropshipped to their destinations.
Most security and “right-to-board” processing will take place remotely and well in
advance of travel. Any remaining in-airport
processing will utilize non-invasive, stand-off
solutions (such as facial recognition at a distance, requiring nothing of the traveler) that
don’t interfere with travelers’ discretionary
time at the airport.
Airports will offer a wide variety of retail,
dining and experiential services, tailored to
appropriate market segments and traveler
needs. The airport will reflect and showcase
local tastes, customs and culture.
Future Developing Now
Global opportunities, demographic pressures,
ubiquitous connectivity, enabling technologies
(notably mobile), and increasingly demanding
and savvy travelers are combining to drive
airports (and airlines) to reinvent themselves.
Regardless of their business model or operational approach, airports also recognize the need
to deliver an engaging and enjoyable travel
experience.
The historical mission of the airport to simply provide an opportunity for safe and reliable air transport
is now dated. While that mission is still relevant,
many airports today are global gateways — enablers
of the swift, efficient movement of people and
products — to an ever-shrinking world.
Airports have evolved from simple transit points
for travelers and goods into immense economic
engines for entire regions and even nations, anchoring a broad fabric of transportation-dependent
enterprises.
Over the coming decades, airport operators and
their tenants will rise to the challenge by deploying
customer-friendly tools and services at all points of
the airport experience, and by redesigning airport
architecture and infrastructure to make facilities less
sterile and more enjoyable.
In the near term, airports will continue to leverage
their existing business models to better serve all
their constituents. Numerous regional and national
airport authorities are examining, planning or already
constructing passenger facilities to redefine the
future travel experience.
In some cases, redefining the future travel experience may involve customizing the airport terminal
or the entire facility to focus specifically on low-frills,
low-cost travel offered by low-cost carriers. In other
instances, airport operators are pursuing significant
construction projects to realize their visions of the
airport as a haven for travelers or as a broader destination for both travelers and non-traveling visitors.
Looking a bit further to the next 15 to 25 years,
many airports will take broader and more aggressive
steps to redefine their missions and refocus their
business value propositions in concert with airlines,
retail partners, local/regional/national authorities and
other transportation-oriented enterprises.
Airports both nationally and globally must adapt
to political, regulatory and financial conditions — to
focus more clearly on their target markets.
For this reason, each airport must create and
evolve its own vision. In all likelihood, various airport
operating models will gain favor based on regional
requirements, competitive pressures and customer
needs.
As airports reengineer or eliminate entire processes, their original purpose for existence may
practically disappear.
Beyond 2030, this newly reimagined airport will
be both a destination showcase and a super-efficient
ground-transportation interchange.
It will no longer simply be an airport. a
Mike Gerra is a solutions principal for
Sabre Airline Solutions. He can be
contacted at [email protected].
ascend 43
THE SKY
KEEPER
SESAR Between Bureaucracy And Innovation
By Felix Hackl I Ascend Contributor
The Single European Sky ATM Research (SESAR) project is an enormous
agement (ATM) environment during the next several years, with a total investment of more than 2 billion euros (US$2.5 billion). With the
involvement of several leading aviation and ATM industries worldwide,
ASCEND I INDUSTRY
W
ithout doubt, the SESAR
project is a massive,
yet necessary, undertaking. Therefore, it
must be broken down
into smaller pieces. As
such, the SESAR program is split into a
high-level overall concept layer and a workpackage layer. The work-package layer is
divided into an operational and a system
thread that, again, are split into several work
packages. Most work packages are led by
EUROCONTROL, Airbus and air navigation
service providers. The work package for
which airlines can articulate requirements
related to flight operations is called work
package 11.1 (WP 11.1). It is represented by
a consortium called Fly4D, which consists of
Sabre Airline Solutions® , Lufthansa Systems,
Airbus Defense And Space (formerly known
as Cassidian) and Honeywell, and it is led by
Airbus S.A.S.
One of the fundamental concepts of SESAR
is the trajectory. The trajectory is a four-dimensional (4D) entity that allows exchange of flight
path data in much higher detail than the route
defined in the current International Civil Aviation
Organization (ICAO) flight plan format. WP 11.1
is taking a leading role in introducing all ATM
players to the advanced trajectory prediction
capabilities of modern flight planning systems.
A surprisingly common and deep-rooted
misconception in the ATM world is the view that
modern flight planning systems are “pseudo
flight management system” applications that
mimic onboard flight management computers
to calculate flight paths. In the past, the ATM
community widely ignored the essential fact
that only modern flight planning systems have
the ability to actually create trajectories from
scratch and, more importantly, create optimum
trajectories. Highlighting this fact can be seen
as a small first achievement of SESAR in that
ATM stakeholders get a better understanding
of the gaps in trajectory creation and handling
capabilities between modern computerized
flight planning systems and systems used by air
navigation service providers or flight management systems onboard aircraft.
The Fly4D consortium manages WP 11.1,
from operational concept to system specification, prototyping and validation. Participation
in working groups that create or evolve ICAO
and ARINC standards already leads to global
recognition of the SESAR research.
Two examples of the industry-driving
power of SESAR are the changes proposed
to the ARINC 702a standard and the creation
of a new flight plan format called Extended
Flight Plan.
The changes in the ARINC 702a standard will allow a richer temperature data set
for climb and descent wind uplinks, which
enables the flight management system to better predict the top-of-climb and top-of-descent
position during flight execution. While this
may not sound like a mind-blowing evolution,
it is a big step toward flight management systems computing the accurate top-of-descent
position for continuous-descend operations.
The Extended Flight Plan, on the other
hand, is an important enabler for sharing the
high-quality trajectory information of modern flight planning systems with all ATM
stakeholders. Air-navigation service providers
are already showing interest in integrating
this new flight-plan format into their groundtrajectory-prediction tools.
However, there is also a focus on much
tighter integration of the flight operation
center into the ATM decision-making process.
The core concepts here are collaborative decision making and a user-driven prioritization
process.
Collaborative decision making is an already
slightly worn term that describes many different processes during the execution of a flight
in different phases (ground and airborne). A
user-driven prioritization process describes
processes that allow aircraft operators to submit flight prioritization, which will help reduce
costs in irregular situations by implementing
the most efficient departure sequence.
During the execution phase, there is also
great potential for increasing flight efficiency,
if modern flight operations systems (operations control and flight planning) are brought
into the loop of the “reroute” process. In this
context, “reroute” is actually a legacy term
that does not describe the 4D character of
the process, since the “route” is only two
dimensional and the focus is on trajectory
revisions and the trajectory revision process
within SESAR.
As advocates for the airspace users,
the Fly4D consortium fights to prevent
proliferation of multiple time constraints as
a simple, but for airlines costly, means to
overcome conflicts in the execution phase,
as well as the revival of outdated concepts
such as the repetitive flight plan in its new
European incarnation, “nominal preferred
route.” Instead, the Fly4D consortium
uses every opportunity to push for a wider
ascend 45
ASCEND I INDUSTRY
Direct-Route Airspace
High-Resolution Airspace Structure In conventional direct-route airspace, every possible segment is
defined. To achieve a high-resolution airspace structure, this results in a large number of published connections, the maintenance of the published segments and the associated restrictions.
and earlier implementation of real free-route
airspace.
Even then, the challenge remains to avoid
a step back for airspace users. The initial
step to replace the airway route structure
within SESAR is an attempt to introduce
even more published directs (published via
the RAD Appendix 4), a concept called direct
-route airspace within SESAR. The difference
between free-route airspace and direct-route
airspace is not obvious at first.
Free-route airspace describes airspace
where any connection can be used within
the trajectory optimization process considering published constraints. The trajectory
optimization algorithm just needs to follow
well-described rules (e.g. maximum segment
distance) within the airspace. Direct-route
Direct-Route Restrictions In The Route-Availability Document
BULEN TODRO
95
660
NO
23:00-05:00 (22:00-04:00)
PIVAK
TOGMI
95
660
NO
MON-SUN 03:30-21:00 (02:30-20:00)
LIMGO
TOLVU
245
660
YES
DIK
TOLVU
245
660
YES
BAM
TOLVU
245
660
YES
BASUM TOLVU
245
660
YES
245
660
YES
HMM
TOLVU
Not available for traffic
ARRLFP*, LFOB/OK/QA/QB
Between 05,00-07,00 (04-06,00)
23:00-07:00 (22:00-06:00)
23:00-07:00 (22:00-06:00)
FRI 23:00 (22:00)-MON 07.00 (0600)
Only available for traffic
DEP EDDG/LP
With RFL above FL255
Only available for traffic
DEP EDDDH/HI/HL/WB
With RFL above FL255
23:00-07:00 (22:00-06:00)
FRI 23:00 (22:00)-MON 07.00 (0600)
23:00-07:00 (22:00-06:00)
FRI 23:00 (22:00)-MON 07.00 (0600)
23:00-07:00 (22:00-06:00)
Not available for traffic
FRI 23:00 (22:00)-MON 07.00 (0600)
DEP EDDG/GS/FQ/LA/LP/LW,ETOU
Route-Availability Document Airspace users today are already facing a high number of complex
restrictions associated with individual segments of direct-route airspace. Such restrictions are published
in a PDF document called the Route-Availability Document. Navigations officers of airlines or flight planning system providers have to work through that document every 28 days to keep the airspace structure updated.
46 ascend
airspace is an attempt to bring the advantages of “more (unnamed) airways” into
legacy systems.
This might sound like a logical step to take
in evolving ATM. The risk, however, is that the
legacy will be kept alive as opposed to using
the research and development character of
SESAR to drive innovation. With direct-route
airspace, the doors are wide open to expand
the route availability document, which contains the vast majority of airspace restrictions
and constraints in European airspace, since
published directs can be restricted in the
same way as airways today. The data maintenance effort has to be carefully taken into
consideration when validating the direct-route
airspace concept.
Free-route airspace, on the other hand,
demands a completely new way of dealing
with and defining constraints and restrictions.
Such constraints and restrictions would not
be linked to distinct segments within the
airspace but would be defined as a fourdimensional volume of airspace with certain
conditions tied to it that constrain how the
volume can be utilized.
The trajectory optimization algorithm will
still evaluate discreet connections within the
airspace and verify them against such “flowconstraining volumes,” but the maintenance
of such volumes of airspace is significantly
easier compared to thousands of defined segments with distinct conditional restrictions
linked to each of these published directs.
Apart from that, when using flow-constraining
volumes, the intention of the airspace designer is much more transparent, more direct and
published in a clearer way.
Within the SESAR trajectory-management
processes, the so-called shared-business
trajectory (comparable to an early filed flight
plan), the reference-business trajectory and
the flight object are the key elements.
Concepts that involve the shared-business
trajectory include requesting airlines to share
flight plan data even six months before
departure. Shared-business trajectory data
is intended to support the demand- and
capacity-balancing process completed by
the network manager (EUROCONTROL).
Validation will eventually show if a flight plan
produced six months prior to the departure
utilizing, at best, a significant sample size of
historical winds or at least statistical winds is
worth the effort compared to using historic
flight data immediately.
The reference-business trajectory is per
definition the trajectory that a user agrees to
fly and the air navigation service providers and
airport agree to facilitate. It is an attempt to
increase predictability within the highly unpredictable ATM environment. The likelihood that
the agreement will be kept, without any renegotiation, until the flight has landed can be
considered rather low. Hence, predictability
ASCEND I INDUSTRY
Free-Route Airspace
ONLY AVBL FOR TFC
GOING TO EGKK AND
COMING FROM ES*
ONLY AVBL BETWEEN
1800 AND 0600 MON-FRI
OR FOR TRAFFIC TO ES*
FRA:
Max DCT distance:50NM
MinFL:290
MaxFL:UNL
Plannable TT:50-140
FRA Airspace
FRA:
Max DCT distance:50NM
MinFL:310
MaxFL:UNL
Plannable TT:240-300
Direct-Definition Strategy By understanding and defining airspace as a four-dimensional volume,
which is what it actually is, the intention of the airspace designer and the technical description are
brought much closer together, allowing a much more direct-definition strategy. This approach avoids
misunderstandings and brings the maintenance effort down to a manageable level. In free-route
airspace, a volume has a usage rule as opposed to every segment within an airspace having its own
restriction.
is questionable. The reference-business trajectory in SESAR was initially planned to
only exist between air traffic controllers and
aircraft. Changes to the reference-business
trajectory can be done through a referencebusiness-trajectory revision process, which
was initially defined excluding the airline’s
flight operations systems, as well.
The reference-business trajectory revision process is currently designed to be
mainly initiated by air traffic controllers or
flight crews. For several reasons, it is critical
that the airline’s flight operations staff is
involved wherever feasible (e.g. where the
time horizon allows a closed loop with the
airline’s operations control). Fly4D is participating in the SESAR trajectory-management
framework meetings to ensure that the
trajectory-management process is modelled,
including airlines’ flight operations centers.
Thus far, SESAR planned to rely heavily on enhanced ADS-C data to frequently
update the precision-trajectory data residing
in ATM ground systems. However, these
new capabilities won’t be widely available
in aircraft systems for many years. Flight
operations systems are already capable of
processing aircraft-position-report data and
updating the reference-business trajectory for
all stakeholders. In addition, these systems
can generate an optimum solution when a
new constraint is identified and have the
complete data set available to create the
optimum trajectory for the given situation.
Complete data set in this context means an
airline’s network; its cost structure; the most
up-to-date wind, temperature and weather
data; precise aircraft performance data for
regular and aircraft defect situations (such as
gear-down operations); and a holistic view of
flights coming into Europe.
In addition, a few issues remain with
aircraft flight management system optimization capabilities. The biggest challenge is that
certain flight management systems calculate
slightly higher cost-index speeds (up to 1
percent faster) than optimum. This type of
cost-index-speed calculation originated when
fuel was less expensive, flight planning systems were primitive and carbon emissions
were not a factor. Obviously, things have
changed in that respect.
Another group of flight management systems do not allow the execution of speeds,
which are lower than the max-range cruise
speed under no-wind conditions. This implies
that the aircraft cannot fly the optimum speed
under tailwind conditions but rather flies
faster.
This is considered by many airlines as a significant cost penalty that can only be partially
eliminated by entering an incorrect shifted
cost-index value into the flight management
system or by flying the speeds calculated on
the operational flight plan. Unfortunately, the
“on-the-spot” optimization opportunities of
the flight management system, which is still
advantageous in many cases (e.g. when the
actual wind is significantly different compared
to the predicted winds of the operational flight
plan), cannot be utilized in the latter case.
In the SESAR precision-trajectory environment, this is not an option anymore due to
the associated loss of predictive accuracy.
Conversely, turning the flight planning system
into a “pseudo flight management system”
by adopting the same trajectory prediction
model and algorithm should not be considered either.
Undoubtedly, SESAR is large and complex.
But the bottom line is that SESAR is progressing and its first fruits can be harvested in
the near future. For the first time, SESAR
offers flight planning system providers the
opportunity to directly influence development
of new ATM systems on a global scale and
ensure that proposed changes closely follow
the interest of airspace users.
However, there is still plenty of work to do,
and the initial plan seems to have been a bit
too ambitious from both timing aspects and
willingness to accept political change from
the member states and industry.
In addition, due to the gigantic and slowmoving nature of SESAR, all participants and
work packages want to ensure that nothing is
conceptually validated that might potentially
have the smallest negative impact on their
domains. This approach is understandable
since the SESAR implementation timeline
does not realistically allow for a second try.
Unfortunately, the project has reached a
critical stalemate situation where innovation
is stifled. But to make the innovative leap, for
which SESAR is considered to be a fundament, all parties involved must be more open
to significant changes. a
Felix Hackl is a flight planning
solutions manager for Sabre Airline
Solutions. He can be contacted at
[email protected].
ascend 47
Discovering True Airline Identity And Deciphering Its
Perpetual Transformation
When airlines look in the mirror of customer perception, they wonder about
their proverbial self-reflection. Does the painted tail represent the brand, or is
it the employees and their level of service? The self-actualization is based on
what the airline wants to be known for and is willing to stand for it. Airlines
want their customers to visualize and realize their histories, expansive economic contributions, commitments to customer service and safety, and the
prevailing corporate ethos.
By Bijan Fazal I Ascend Contributor
ASCEND I INDUSTRY
hroughout the 1900s, airlines’
identities were influenced
by world affairs, set by
regulation, defined by aircraft
innovation and driven by
global commerce. Airlines’
brands followed their missions. During the
world wars, it was about survival; in regulation,
providing essential air service was the focus;
after deregulation, airlines became beacons of
luxury; and the jet-setting revolution opened
up the world.
In the present day, airlines are constantly
reinventing their brands to strive to remain
different and be the best of the rest. Airlines
flash messages across the electronic marketplace and paint it on their aircraft in an effort
to build a brand image around one or more
key attributes — safety, affordability, comfort,
personalization of customer service, global
networks, airport experience and connectivity.
Time and technology do not stand still, and
they influence the direction of the aviation
industry, resulting in changes to airlines’ operating models and their representative brands.
Mirror, mirror on the wall, who is the best
airline of them all? Does the answer lie in an
airline’s identity or its brand?
An airline changes its business focus to
follow a trail to profitability. As part of its
internal changes, it often changes its outward
appearance in the form of aircraft livery, signs
and symbols. These changes signal customers, employees, stakeholders and competitors
that an airline is altering its brand in pursuit of
a business goal or to remain competitive in
an ever-changing industry. The key difference
is that a brand can be changed many times
over to address the changing business needs,
but an identity evolves gradually because it is
rooted in an airline’s core principles.
There are a multitude of reasons why a
fresh coat of paint can help an airline achieve
the desired outcomes of maintaining the loyalty of its employees; retaining and growing its
loyal, high-value customer base; and sustaining the integrity of its “prized wings” — the
symbol of a tradition of flying and historical
distinction of connecting people and events
of the world through transportation. Some
airlines make brand changes to:
Re-energize the workforce for a turnaround
to profitability and improved benefits,
Symbolize new commitments to customers
after unfulfilled service quality and delivery
promises,
Integrate different histories of peoples, principles and planes during an airline merger,
Introduce a new, younger aircraft fleet that
brings about better operating economics
through cost savings from lower fuel burn,
less weight, decreased maintenance costs,
etc., and improved customer comfort inside
the cabin.
Airline Identities Airlines often suffer identity crisis and they may refresh their brands; however, their
identities remain intact because they are embedded in the history from which airlines derive their
purpose of flying.
50 ascend
Can airlines really change their identities?
Airlines may refresh their brands, however,
their identities remain intact because they are
embedded in the history from which the airline companies derive their purpose for flying.
When it comes to air travel, the dichotomy
of brand and identity is often overlooked and
not easily separable. Through the customers’
eyes, the brand unequivocally represents the
entire airline company and it is associated
with all of the customers’ experiences —
good, bad or indifferent.
On the other hand, airlines often view their
brands as a lens that can be refocused multiple times, allowing customers to always see
sharper representations of their identities in
distinct contrast from other airline companies
sharing the same sky — just as an optometrist changes the lens power as needed for
patients to see the colorful world, clearly and
distinctly. Identity is an airline’s DNA forming
the essence of its physical make up, and
the brand appearance is the outerwear that
changes with the seasons.
As an airline pursues strategies to keep
its brand current and relevant, the customer
is still the deciding factor when it comes to
which airline will receive his or her trust and a
significant share of his or her business.
Are Customers Brand Agnostic?
Customers often measure the worth of an
airline by black and white imperatives (it is
or it is not) — low-fare availability, customerservice quality, loyalty program perks, on-time
arrival consistency, complimentary on-board
amenities, courteous employees and much
more. Deductive reasoning does not point
to customers being color blind, but the true
color of the brand is made invisible by their
experiences on the day of departure. A highimpact brand places emphasis on quality
service delivery and timely service recovery,
which translates into high value for flying
customers.
A customer looks to identify an airline by
its touchpoints (frontline employees, online
accessibility, engagement in social media
platforms) and its offerings (ultra-low fares,
premium products, loyalty rewards).
Creating brand differentiation is necessary
for airlines to invoke brand loyalty from customers. Differentiated fares, seat products,
mileage tiers and class service top the list of
common marketing strategies deployed by
airlines — and they do work. However, they
can be short-lived or require constant comparative brand upgrades, as competitive
advantages are eroded by fast followers
who reach parity or up it a notch.
Identity defines an airline, and when a
brand is based on an unwavering identity,
it will have a long-lasting impact in the
crowded skies and garner long-term loyalty
from its customers.
ASCEND I INDUSTRY
A changing brand should not mean a
change in identity. When branding is based on
time-bound marketing promotions, it dilutes
the identity. Although this strategy may work
when customers are planning their upcoming
family vacations, it will not guarantee repeat
business. The recurring cost of new customer
acquisition outweighs the combined costs of
delivering the promised service the first time
around and retaining loyal customers — a
lesson that certainly applies to other servicebased industries
Airlines display their brands on their airplane
tails, but few customers are aware that airlines
are actually carrying their identities — their
values and their employees who espouse
them. Brand identity is a plausible concept,
if airlines practice the time-tested concept
of consistency of service across all of its
employees, operations, customer policies and
alliance partners.
Technology’s Role
Does technology help paint the identity
picture?
Technology is an enabler of business
processes. Appropriate and improved technologies bring about operational efficiencies,
thus allowing airline staff and systems to
perform effectively, which result in better
handling of customers during all phases of
their trip — from planning and purchasing, to
arriving at their destinations and post-trip.
When painting a picture, brushes and paints
are required for an artist to be able to paint.
However, it is the artist’s hand that does the
painting. Technology is available but inanimate.
It is the human touch that brings about the
brand and gives life to the airline’s identity.
Today, the airline revenue model depends
on the airline’s competitiveness by being available and accessible to its global customers.
Closely tying an airline’s brand to its new
technology deployments, such as on-board
entertainment and mobile booking, is risky
because a single technical failure can result
in brand distortion. A brand should be formed
around the customer services offered as a
result of technology advancements.
Use of better customer-processing and
service technologies can eventually help bolster the identity of an airline, but it will always
be a part of fulfilling the brand promise and
implicit to the customer, who expects his or
her journey to be uneventful after paying an
all-inclusive fare and fees.
Shaping Brand Identity
Do positive images, words and accolades
shape a brand identity?
Cool images, catchy words, celebrity
endorsements and headline-capturing awards
are useful for building an airline’s brand.
However, they are less impactful in defining
its identity. How an airline looks is valuable
for growing the business, but what it provides
sustains its business.
Imagery can benefit a brand by attracting
customers with:
A popular and an accomplished person in
his or her field or an ordinary person who
has accomplished an extraordinary feat to
admire;
Inspiring and enticing pictures of global destinations;
A sense of excitement to fly an airline of
class and caliber as displayed by awards,
high rankings, customer recommendations
and industry achievements;
A sense of belonging to a socially responsible and eco-friendly airline and its employees who have a connection to community
building, making a difference and reducing
the carbon footprint;
An outlet of expression through post-trip
surveys, experience blogs and trip picture
postings on social media.
A recommendation for a brand image could
be “fast,” given that flight is the fastest existing mode of transportation.
Through visuals and colors, a brand creates
excitement and electricity among customers
about flying a certain airline. An identity is the
intended, consequential magnetic field that
draws the same customers to the airline again
and again.
True Colors
Airlines suffer identity crises from time to
time for any number of reasons, including age,
social setting, competitive pressure, growing pains, etc. These may sound like social
problems for humans. In this case, they apply
to both metal and flesh. Airlines are made
up of human employees, many of whom are
passionate about aviation, who want to build
a successful airline and who also want to
partake in its success. It is these employees
who define the identity of their airline based on
their intellectual contributions and in the performance of their service to customers — they
are an important touchpoint for customers
whose experiential memories will serve as
instant feedback to other customers.
Price, schedule, network, aircraft, passenger technology and market presence are brand
enablers that do not necessarily define an airline’s identity. Customers often take pictures
of aircraft and their variety of colorful tail livery,
but does the tail of an aircraft equate to brand
presence or equity? Not really. Customers
associate comfort, safety, reliability and experience with the brand of an airline, and those
experiences — good, bad or indifferent —
certainly leave a lasting brand impression. a
Does Size Matter?
For airline companies, size does matter
because it conveys stability, strength, safety and
support for customers who fly themselves, their
loved ones, their intellectual capital (corporate
employees) and their precious belongings. The
scope of an airline’s network, the scale of its
investments and the safety of its fleet can inspire
customer confidence.
The importance of size in branding is
undeniable. Take, for example, the number of
destinations served by an airline. Most airlines’
ideal goal is to be able to claim that it can take
a traveler from point A to an infinite number of
destinations (through its alliance partners and subsidiaries); and it’s just as elusive as trying to run a
mile in a minute. Some airlines adopt national flag
colors and symbols to create an omni-presence
by representing and promoting their countries,
cultures and people.
Another example is the tangible differentiators
showing the largest variance from the next best
alternative or competitor, such as the lowest price
available, ultra-low-cost airline, most comprehensive schedule and highest number of perks.
Number of countries served, airplanes, daily
flights and passengers flown are quotable statistics that aid an airline’s brand, but they do
little for its identity, for which safety records and
performance metrics are more important. Size
evokes a perception that should be leveraged
to signify brand strength, but it does not provide
credence to identity.
Bijan Fazal is the founder and managing
principal of Orange Skies, a consultancy
that provides foresight in travel and
transportation, as well as, partners
with Sabre Airline Solutions ® on airline
business strategy and travel technology
solutions. He can be contacted at
[email protected].
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SPECIAL SECTION
54
Customer Bonding
Today, there is a bit of a disconnect between airlines and their
customers. Airlines don’t always
appear to have a clear view of
what customers want and when
they want it. However, a unique
customer-experience strategy
can bridge that gap, as well as
grow revenue, reduce costs and
create a bond with customers.
62
Frontline All-Stars
Today’s customers expect nothing less than a superior experience. Therefore, it’s imperative
that customer-facing employees
understand a company’s service expectations, are properly
trained to deliver exceptional
service, and have the personality and passion to do so every
moment they are on the clock.
66
Age Of The Customer
70
The customer experience is, or
should be, a high priority for all
airlines. Delivering a consistent,
quality customer experience is
possible when an airline builds a
solid strategy, as well as establishes an internal culture that empowers employees and provides them
with the necessary tools to care
Passport
To customer.
Freedom
for each and every
The
result: customer retention, revenue growth, reduced costs and
customer advocates.
Differentiation
Through Data
As a consumer in the information
age, the average airline customer
has grown accustomed to personalized, one-to-one marketing and
service in many areas of life. This
is possible because businesses,
such as airlines, collect and retain
significant amounts of data about
their customers. Unfortunately, this
data is often not utilized to the
fullest extent. Customer segmentation and data mining enables
airlines to differentiate themselves
from their competitors by extending personalized offerings to
customers or mitigating common
travel issues when used as part of
a customer-relationship-management strategy.
73
The Race Is On
Airlines around the world are
searching for new ways to
convert and upsell customers from the moment they
begin shopping to post travel
and everywhere in between.
Airlines that have invested in
the necessary technology and
processes to support these
conversion and upselling goals
will outsell carriers that have
not by more than 30 percent.
Customer
Bonding
Why Customer-Centric Airlines Will Lead The Industry
Today, there is a bit of a disconnect between airlines and their customers. Airlines don’t always appear to have a clear view of what
customers want and when they want it. However, a unique customer-experience strategy can help bridge that gap, as well as grow
revenue, reduce costs and create a bond with customers.
By Derek Birdsong | Ascend Contributor
ASCEND I SPECIAL SECTION
D
uring the last 100 years of commercial aviation, the industry
has changed significantly.
Unfortunately, that change has
resulted in some disconnect
between airlines and their customers. The airline customer
experience has become known for its lack
of knowledge and understanding regarding
customer needs and willingness to pay for
what they want.
Despite investments, strategic planning
and good intentions, the airline industry
consistently struggles to meet customers’
expectations of the sales and service experience. Competitive pressures, evolving
business models and volatile market conditions have dictated when and where a carrier
must make trade-off decisions to maintain
both operational execution and profitability. As
such, innovative customer-experience initiatives often drop down on the priority list.
Sabre Airline Solutions® has explored the
deterioration of the customer experience, the
disconnect between airlines and their customers, and the real opportunity that exists
to reverse that trend. To differentiate, gain
market share, optimize profitability and create
long-term loyalty, a carrier must properly invest
in and execute its unique customer-experience
they are important. Carriers today are unable to
access and aggregate data, make insights and
take action within the context of an individual’s
travel journey, using their current technology. It
is costly, and some say logistically impossible,
to sync these data systems in real time into a
single view of the customer.
Sabre Airline Solutions has explored the
complexities and challenges of the airline-data
problem, and it offers possible solutions.
Though the “silver bullet” remains elusive,
industry leaders can agree on one thing: the
carriers that can harness and act on their
customer data will truly understand their
customers and consistently outperform their
competitors in a virtuous cycle of personalization, profit-margin growth and long-term
customer loyalty.
strategy. Investment in strategy execution and
organizational readiness through talent and
technology has proven economically lucrative
in many industries, and the airline industry is
no different.
Because many other service-providing
industries have made the first investments in
the customer experience, customers are now
more informed about what’s possible and,
therefore, have only recently come to expect
more from their airline experience.
Executing a unique, customer-centric strategy is an impossible task if a customer’s
experiences, preferences and behaviors are
not known at an individual level by the airline.
Without the requisite data and a subsequent
complete view of the customer, a personalization initiative is merely an automation of
internal guesswork. Not only do a carrier’s disparate data silos (passenger name record,
electronic ticketing, check-in, shopping analytics, purchase behavior, social media influence,
baggage, in-flight, customer relationship
management, loyalty, etc.) contain a history of
customer touchpoints and a 360-degree view
of activity, new customer data is flowing in all
the time.
Without data-driven personalization, customers are left feeling like the airline doesn’t
know, or care to know, who they are and if
The Airline/Customer Disconnect
A company’s market share and earnings, in
most industries, is directly correlated with the
quality of the overall customer experience.
While research shows that the airline industry
follows a similar metric for success, many
carriers have been unable to cultivate the
organizational prioritization and subsequent
time and capital investment necessary to execute a comprehensive customer-experience
initiative.
Customer Satisfaction With The Air Travel Experience
7%
Strongly
increased
44%
26%
Somewhat
increased
37%
(Figure 1)
(Economist
Intelligence
36%
Stayed
the same
16%
Unit)
Somewhat
decreased
Strongly
decreased
24%
1%
6%
1%
Customers
Executives
Differing Views A recent survey conducted by The Economist Intelligence Unit unveiled that more than 80 percent of airline executives believe that customer satisfaction has increased, while more than 65 percent of customers feel the air travel experience has stayed the same or decreased.
56 ascend
ASCEND I SPECIAL SECTION
Historically, industry profit margins have
been so thin that non-core initiatives became
very challenging to implement. Industry influences such as deregulation and increasing
global competition have pressured airlines to
shift their product to an unbundled, à la carte
offering. Instead, strategic focus has been on
load factor to offset pricing power, operational
efficiency, RASM (revenue per annual seat
mile), fuel burn, staff reduction and other costcutting measures that have slowly deteriorated
the once-prominent focus on the customer.
According to one study, the airline
industry ranks in the bottom 4 percent in
customer satisfaction. The top industries
in customer satisfaction include e-retailers,
automobile manufacturers and smartphone
manufacturers. The industries that customers
are least satisfied with include mortgage lenders, Internet service providers and ... airlines.
The trouble is, many airline executives are disconnected from their customers’ expectations.
The Economist Intelligence Unit and Sabre
Airline Solutions recently released a special
report (Airline Customer Experience: Vital To
Long-term Success at www.acendforairlines.
com) analyzing the results of a comprehensive
airline industry survey on the topic of customer experience. According to the survey,
81 percent of airline executives believe that
customer satisfaction with the air travel experience has somewhat or significantly increased.
However, 66 percent of customers believe it
has stayed the same or decreased.
Airlines do not have full control over certain negative experiences such as disruptions
to airport operations and service. They can,
however, move a step beyond the basic
customer-service and customer-interaction
tactics into a next-generation model of a datadriven customer experience that focuses on
personalizing an airline’s offerings to a specific
individual.
Airline Revenue Opportunity
Customer-experience investment is no
longer a theoretical aspiration created by marketers and consultants, but rather the single
most lucrative and measureable growth investment opportunity in the airline industry today.
Airline leaders are beginning to sit up and take
notice of the success that other industries
have enjoyed in this area.
In recent years, multiple studies have
revealed significant, measureable value with
customer-experience investment in the airline
industry. A recent study by 3IBM states that
with an investment of US$34 million in a
customer-experience project, a large carrier
will be fully paid back within 16 months. After
the first five years, the approximate total
benefit would be US$582 million. This is a
truly staggering figure considering the many
other types of investments the airline industry
has tried in failed attempts for innovation,
differentiation and customer loyalty.
A number of metrics and frameworks can
be used to benchmark a carrier’s gains in the
customer experience. Year-over-year revenue
growth is a great place to start, but customerexperience metrics can be taken a step further.
Measuring aggregate customer sentiment and
its subsequent effect on the profitability of an
airline is more of a science than ever before.
For example, Net Promoter Score® (NPS)
has been proven in many major industries to be
the most accurate and trusted metric globally.
Research conducted by top global consulting
firms rank each major industry in terms of a
customer’s sentiment toward a product or
service experience and its subsequent correlation to revenue growth year over year. NPS is
calculated by surveying a given customer base
and asking one simple question: “Would you
recommend this airline”?
The NPS survey segments customers into
three categories — promoters, passives and
detractors. Promoters are those who respond
with a score of 9 or 10 to the recommendation
question, and are considered loyal enthusiasts.
Would You Recommend This Airline?
Passives
Promoters
Detractors
Net Promoter Score = (% of Promoters)-(% of Detractors)
Not at all
likely
Extremely
likely
Detractors
Passives Promoters
Promoters Versus Detractors Net Promoter Score divides consumers into three different categories — promoters, detractors and passives. Who fits into
these categories is determined by the response to a simple question: “Would you recommend this airline?” Promoters clearly give a strong “yes,” while
detractors respond with a firm “no” and passives are on the fence.
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ASCEND I SPECIAL SECTION
Studies have found that promoters tend to
talk to more people, but conversion rates are
relatively low. This is especially true when
it comes to prospective customers who are
shopping for a flight. Those searching for a
flight tend to be less likely to convert based on
an airline brand recommendation from a friend,
as opposed to a recommendation for another
type of consumer service, such as a bank or
coffee shop.
In contrast, detractors are those who
respond with a score of 0 to 6 and are generally
dissatisfied. They typically talk to less people,
but conversion rates are higher because the
group tends to seek out willing listeners or
those who are more likely to act upon the
information. In other words, those who are
connected socially trust negative information
significantly more than positive, which can be
dangerous for a service-providing industry.
Why is NPS the most accurate metric
for the airline industry? The majority of the
33 industries studied, unsurprisingly, showed
significant correlation of revenue growth to
NPS growth, with most at 0.70 or higher and 1
being a perfect correlation. The airline industry
has one of the highest at an impressive 0.89.
Historically, companies that hold the highest
NPS average revenue growth two-and-a-half
times that of the competition. Airlines with a
growing NPS have seen subsequent top-line
growth of 5 percent to 15 percent during the
last 10 years, outpacing the competition.
Reducing Airline Costs
A customer-experience investment isn’t
undertaken exclusively to grow revenue; it
also reduces costs and creates greater organizational efficiency. Referral economics is the
framework used by NPS to measure the value
of promoters. Airlines can use this framework
to reduce costs by growing the percentage
of promoters and reducing the number of
detractors in their respective customer bases.
Though the classic scenario of a customer
referring a friend to become a customer of
an airline is less prominent than in other
industries, it is still highly lucrative for an airline
to have a high percentage of promoters in its
customer base.
Promoters are great customers to have
for a few reasons. They have higher average
annual spend and retention rates. Across service-providing industries, a 2 percent increase
in customer retention has the same effect as
decreasing costs by 10 percent. Promoters
also tend to complain less and show less
sensitivity to price changes, leading to longerterm loyalty and further reducing customer
acquisition costs. A study by Bain & Company
estimates that it costs six to seven times
more to acquire a new customer than retain
an existing one. This is significant for an
industry that focuses heavily on acquisition
and conversion. Also, new customers gained
as a result of a promoter’s efforts are more
likely to become a promoter themselves, and
the virtuous cycle starts all over again.
Just as promoters are less likely to complain to the airline about issues, detractors
exhibit the opposite behavior. Complaints
directed at airlines on social media are at an
all-time high, forcing labor-cost increases that
are being felt by carriers of all sizes and business models. Call-center and airport staff are,
therefore, less productive when dealing with
a customer base that has a high percentage
of detractors.
As previously stated, the airline industry’s
NPS-to-revenue correlation is nearly perfect.
As such, any point shifts in an individual
Revenue Growth And NPS For US Airlines
Satmetrix study from 2003-2013. Defunct brand shown for accuracy.
% Revenue Growth
15
10
5
0
-5
0
10
20
30
40
50
60
70
Net Promoter Score
Outpacing The Competition On average, companies with the highest Net Promoter Scores achieve revenue growth two-and-a-half times that of the competition. During the last 10 years, airlines with a growing NPS have achieved subsequent topline growth of 5 percent to 15 percent.
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ASCEND I SPECIAL SECTION
customer’s NPS or an airline’s aggregate NPS
have significant revenue and cost implications.
A recent study by the Sabre Airline
Solutions consulting practice shows that a
mid-sized international carrier could improve
total customer worth by US$227 per customer simply by shifting a detractor to
a passive through an improved customer
experience. Passives are customers that
respond to the recommendation question
with a score of 7 or 8, but are not necessarily
enthusiastic about the product. If the airline
carried more than 30 million passengers in
a year and converted just 2 percent of its
detractor customers to passives, it would
realize a US$31.8 million increase in total
customer worth.
A carrier with a low NPS has a customer
base that is not loyal to its brand. At all levels
of value, this leaves customers with a low
brand-switching threshold, again, leading to
higher acquisition costs. A customer could
be one bad experience away from choosing a
competitor and not returning. Improving NPS
has real margin implications for airlines and,
over time, this cross-industry success metric
will become even more significant for airlines
as customer-experience investments become
the single most important airline differentiation
opportunity globally.
Contextual Personalization
Investing in and measuring the customer
experience are key foundational steps to
transforming an airline’s bottom line.
Personalization is the mechanism by which
best-in-class service providers drive an elite
customer experience and promote customer
loyalty. Delivering a personalized experience
to an air traveler throughout his or her journey
is a tricky endeavor. A fine line exists between
making personalized offers and overwhelming the customer with advertisements and
notifications.
A balance must also be struck between
strategically growing ancillary revenue and providing value-added services, such as service
recovery and other reactionary-type activities.
The customer experience is, therefore, the
sum of all experiences and not just ancillary
offers. This includes value-add perks, such
as complimentary services or gifts during a
service recovery, value information about a
destination, and other proactive, personalized offerings. This is unlike the opinion of
airline customers today: offers being viewed
as a penalty for specifying their preferences
to airlines. That is an important distinction that
market-leading carriers must understand.
Best-in-class service-providing industries
offer highly personalized, timely and contextual customer experiences. When a customer
scans a loyalty card at a coffee shop, uses
his mobile banking app or calls his entertainment provider, the respective service providers
immediately know the customer’s name, his
value to the company and his preferences for
the consumption of the particular products.
Product offers and proactive and reactive
service can then be tailored specifically to that
individual. This is the level of personalization
that the modern consumer, and high-value
traveler, expects.
For airlines, this creates a negative return
on expectation, as is highlighted by The
Economist Intelligence Unit. Customers have
begun to prefer and expect these personalized
experiences, and airlines have not kept up
with the trend. They have instead allowed the
pendulum to swing from a high-value, fully
bundled product offering to a stripped-down,
fully unbundled product offering, seemingly
overnight. Customers have reacted with more
frustration and less loyalty.
Mid-Sized International Carrier
Referral Economics
$762
$178
Total
Customer
Worth
Buyer Economics
+39.05%
$548
$321
1 Passenger Shift = $214 Loss
$585
-43.65%
$520
1 Passenger Shift = $227 Gain
-$199
Promoter Average Spend
Average Annual Spend
Detractor Average Spend
From Detractor To Passive A mid-sized international airline could improve total customer worth by US$227 per customer merely by changing a detractor
to a passive through an improved cus¬tomer experience. If the airline carried more than 30 million passengers in a year and converted just 2 percent of its
detractor custom¬ers to passives, it would realize a US$31.8
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ASCEND I SPECIAL SECTION
Personalization, however, is what customers expect, and this increases their loyalty.
Industry leaders are beginning to take notice
of these recent negative trends and adjust
their strategies. In fact, 97 percent of airline
executives will invest in technology during
the next three years to personalize the experience for the customer; and for good reason,
because 92 percent of those airlines plan to
monetize that investment with subsequent
ancillary revenues.
Technology now exists to support these
ambitious, strategic initiatives. These new
initiatives offer ways to create and monetize
value for the customer, increasing loyalty and
expanding the airline’s touch and influence
throughout the traveler’s journey.
An airline’s full-journey dialogue with the
customer will only become more important as
smartphone penetration increases and airports
progress toward a no-touch environment. With
the smartphone mobile channel, airlines now
have a greater ability to create contextual
dialogue with customers, thereby significantly
influencing the revenue potential throughout
the full journey.
Personalization And The Airline Data
Problem
Carriers that are able to provide a fully
personalized experience to their customers
throughout each phase of the travel journey
will have successfully created a differentiated
offering in a generic marketplace. Facilitating a
personalized dialogue with the traveler within
the context of the journey requires seamlessly
integrated technology that operates in near
real time. Mobile is a convenient and effective
avenue that can be used to facilitate that
personalized dialogue.
“Third-party mobile apps are not optimal
due to internal airline systems still speaking a different language,” said David Cush,
president and chief executive officer of Virgin
America.
However, a bigger challenge than system
integration across the extent of the journey
is enabling the carrier to actually see the full
journey. A 360-degree view of the customer
creates a greater degree of intelligence that
allows airlines to offer a unique, personalized experience based on a customer’s past
behaviors, interactions and stated preferences.
These preferences and behaviors can then be
used to predict, and ultimately influence, the
customer’s future buying behavior.
The aggregation, analysis and real-time
actioning of customer data is needed to create
this personalization.
“The challenge is making that data come
alive, so we get a better picture of the individual customer,” said Jeff Foland, United
Airlines’ senior vice president of marketing,
strategy and technology.
Roughly, a terabyte of customer data is
floating around at any given time within a
large carrier’s systems. The velocity, variety
and volume are growing as airlines’ scale and
consumer technology continues to expand and
evolve. Structured data has been increasing
at a significant, but predictable, rate ever
since reservations and check-in systems came
Customer Experience Pendulum
Bundled
Experience
Personalized
Experience
Unbundled
Experience
Customer Loyalty
Ancillary Revenue
Strategic Shift In recent years, many airlines have shifted their business models from a high-value, fully bundled product offering to a stripped-down, fully
unbundled product offering, leaving customers frustrated and less loyal. As a result of this negative trend and the impacts it has on airlines, 97 percent of
airline executives plan to invest in technology to personalize the experience for their customers in the next three years to help swing the pendulum back
toward the right direction.
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ASCEND I SPECIAL SECTION
online decades ago. Conversely, unstructured
data, including campaign responses, customer
relationship management information, agent
interactions, shopping analytics, buying behavior patterns and, of course, social media data,
has grown exponentially in recent years. Even
with this significant growth, the costs of
storing and processing data in the industry
has dropped. A lower-cost barrier effectively
gives the go ahead for airline leaders to begin
aggregating and actioning their customer data.
With at least 20 disparate data sources
within most airlines and some larger carriers
housing 50 sources or more, a single, comprehensive view of the customer is a highly
complex and expensive undertaking for an
in-house project. Most airlines and regions of
the world lack the abundance of talent and skill
sets necessary to build a single system that
compiles all customer data points.
Relatedly, a customer-experience program
architected with disparate technology solutions requires costly integration for setup
and regular recalibration over time to stay
in sync. The ideal solution to this complex
business challenge is a seamless customer
data environment that is fully integrated with
all systems involved in shopping, reservations, check-in and the many other steps of
the customer journey. Seamless technology in a central data hub within an airline’s
reservations system could aggregate these
data-creating systems into a comprehensive view of the customer that can be used
to execute business rules, making airline
system integration a problem of the past.
Opportunities For Differentiation
And Loyalty
Traditional loyalty programs have proven
to be, at minimum, insufficient for creating
customer loyalty to an airline brand. In
reality, customers are more loyal to the loyalty program itself, rather than the airline.
As soon as a more beneficial “spend-topoints” ratio or “fly 15 segments, get
one free” program comes along, most
customers will consider switching. Unlike a
weak loyalty to a particular airline’s unique
ancillary product catalog or a temporary
loyalty to a price advantage, serving the
customer with “right dialogue, right time”
personalization creates true, long-term customer loyalty.
Today, high-value customers are not truly
loyal to any one carrier; they are frustrated and
confused by their airline experiences based on
the expectations set by other industries.
During the next three to five years, the first
movers among airlines in data-driven personalization will quickly become the differentiated
market leaders. Once the high-value, non-loyal
travelers are introduced to their first truly personalized customer experience, their true
loyalty will, for the long term, be secured with
their new airline brand of choice. a
Derek Birdsong is a product
marketing manager for Sabre Airline
Solutions. He can be contacted at
[email protected].
Finis
h
Sta
rt
The Data-Driven Customer Experience
Revervation
Reservation
System
System
Customer
Journey Data
Data Exchange Throughout each step of the customer journey, there is an exchange of data between the traveler and the airline. The reservations system’s
view of each interaction phase, powered by the data input by the traveler, acts in near real time to facilitate con¬textual, multi-channel dialogue to execute
sales and service through the full journey.
ascend 61
FRONTLINE
ALL-STARS
By Saleema Khan I Ascend Contributor
Turning Satisfied Customers Into
Happy, Loyal Ones
Today’s customers expect nothing less than a superior experience. Therefore, it’s imperative that customer-facing ema focus on the entire operation.
ployees understand a company’s service expectations, are
properly trained to deliver exceptional service, and have the
personality and passion to do so every moment they are on
the clock.
ASCEND I SPECIAL SECTION
B
efore airline deregulation in
1978, airlines primarily differentiated themselves with their
customer service.
Today, air travelers routinely
penalize airlines with some
of the lowest customer-service scores.
Collectively, airlines received a score of 69
out of a possible 100 from their passengers
on the American Customer Satisfaction
Index (ACSI), about the same as industries such as subscription TV services and
social-media companies.
Thus, every interaction a customer has
with an airline must be satisfactory, at
least. For airlines, the customer service
on the ground is just as important as the
service at the 30,000-foot level, because
the ground is where the face-to-face contact with the customer begins. It’s the first
impression of an airline’s brand.
Employees should be hired, trained and
empowered to represent the brand in
the best possible way and rewarded for
demonstrating the desired behavior.
What can airlines do to improve customer service?
1. Train The Entire Team
Here’s how customer-service training
happens in most businesses. With the
best of intentions, business leaders
hold a “pep-rally type” meeting about
customer service; in other words, a
meeting to ramp up the initiative and
build enthusiasm and momentum. This
is followed by customer-service training.
As a result, the service improves for a
few weeks. And then, without continued
education, the service levels slowly
decrease. The reminders grow further
apart because business leaders are busy
focusing on critical operational areas. In
addition, management most likely feels
it has adequately explained to front-line
employees what is expected.
Clearly, everyone across the organization needs to understand the exceptional
customer-service expectations. But it can’t
stop there. Managers need to consistently and persistently reinforce those
expectations.
They should also focus on the hiring
process. Look to hire people with engaging
personalities who are excited to work with
the public. Beyond finding people with the
right personalities, focus on a candidate’s
passion for working with people. It is
important to only hire people who truly
believe in the product or service a company is trying to deliver.
The most beneficial step leaders
can take to show every new employee
their commitment to customer service
is to train them about the company’s
customer-service expectations immediately. They should ensure each new employee
receives the same initial customer-service
training that the entire team received.
Basically, good or bad, customer service
is the responsibility of business leaders.
Anything less than exceptional customer
service falls on the hands of leaders. If they
are not committed to exceptional customer
service, the business will never achieve its
potential for profitability or sustainability.
Customer-service discrepancies are most
often due to:
Lack of proper training,
Inconsistent and/or infrequent reinforcement,
Improper or underutilized supporting
technology,
Inadequate methods for gathering and
providing feedback,
Employees in positions for which they
have little or no training and/or aptitude.
Even leaders committed to exceptional
customer service may fall short sometimes,
but if they falter, they know how to get
the operation back on track. In addition,
when customers are accustomed to receiving exceptional customer service, they’ll
be much more likely to forgive in rare
instances when they do not.
The lack of customer complaints does
not mean all customers are satisfied. The
reality is that the majority of customers
who are disappointed with any business
won’t complain to anyone; they just switch
providers. Leaders have to determine the
appropriate definitions for their businesses
of “exceptional” and “good enough,” train
and coach accordingly, and implement systems to help ensure those standards are
met.
Satisfied customers are just that …
satisfied. If someone else has a little better
price or offers a more convenient way to
shop, they’ll switch. If the goal is simply a
satisfied customer, even when customerfacing employees execute perfectly, their
highest expectation can only be a “satisfied” customer.
However, customer satisfaction isn’t
enough. Customer service needs to be
exceptional, and leaders should strive to
create loyal customers.
2. Consistently Reinforce
Expectations Across The
Organization
Truly outstanding businesses committed
to exceptional customer service don’t just
create and internally relay catchy slogans or
vision statements. Rather, they hold their
employees accountable by intentionally
conveying to customers their company’s
customer-service expectations.
First Impressions For airlines, the first impression is made well before a customer boards an aircraft.
The very first encounter a customer has with an airline leaves a lasting impression, good or bad, which
results in retaining a loyal customer or losing a customer for good.
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The company’s website,
Surveys via email or direct mail asking,
“What do you like? What don’t you like?
We’d like to know.”
However, if companies are going to ask
for input from customers, they must act
upon it once it is received. Whether it’s a
good comment or a complaint, every customer who contacts the company should
receive a response.
In addition to improving customer
service, one of the best reasons for sharing customer-service expectations with
employees is to make them aware that
customers may come directly to the leadership team if they feel they haven’t received
the promised level of service. In turn,
leaders will also be more concerned when
customers have a direct path to them,
and they must be involved personally with
service failures.
3. Don’t Mimic Machines
Building Employee Enthusiasm Holding pep-rally type meetings to build enthusiasm and momentum
with customer-facing employees is a good start toward improving customer service. However, this
must be followed by recurrent training and regular meetings to keep the momentum going and reinforce the importance of quality customer service.
As such, leaders should find as many
ways as possible to collect feedback from
customers including:
Recorded messages when customers
are on hold on the telephone,
Signs at an airline’s places of business
(in-flight, airport check-in counters, ticket offices, etc.),
Advertising,
Email communications,
Defining Customer-Service Expectations Ensuring new hires have a clear understanding about an airline’s customer-service expectations is essential. Upon employment, they should be thoroughly trained
on best customer-service practices, and that training should continue throughout their employment
with the airline.
64 ascend
Chances are, most people have experienced the crushing frustration of getting
caught in automated phone-tree circles,
trying to the find the magic combination of
buttons to press to speak with a customerservice representative. Or perhaps they
have struggled with faulty apps that disconnect while trying to live chat with a
representative.
These types of inconveniences should
be avoided when attempting to help customers, who should not have to struggle
with technology to get the help they need.
Digital interactions should be seamless
and transparent. Online customer service
should make processes easier, not harder.
Fortunately, a company can streamline
its online customer-service approach to
reach these ideals and form better human
connections.
Generally, when customers contact customer-service representatives, it’s because
they’ve exhausted all other options.
They’re looking for help. Therefore,
responses should be succinct, informative
and helpful, but they should also reassure
customers on a human, emotional level.
Customer-service
representatives
should avoid scripted or canned language
and strive to empathize with customers’
frustrations. They should try to include
simple statements of acknowledgement
and reassurance, such as, “I understand
that the flight delay is disrupting your
plans. Let me see what I can do to help.”
Showing empathy can help quickly defuse
a customer-service situation.
Companies that rely too heavily on
canned, scripted or even automated
responses run the risk of alienating their
customers. Leaders can reduce these
frustrations by training customer-service
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Hiring The Right People Airline leaders should be involved in the hiring process of frontline employees. They should focus on individuals with engaging
personalities who are passionate about working with the public.
representatives to introduce themselves
by name and use natural, empathetic
language.
4. Know What To Automate
A company’s digital presence makes it
possible to connect with an audience of
thousands. The potential for visibility and
engagement is much higher online compared with brick-and-mortar businesses.
Therefore, a certain level of customerservice automation is necessary to address
as many needs as possible.
For example, a customer who is struggling with the account creation process
might benefit greatly from an automated
email link to a page on the support site.
However, customers should also have
the ability to speak with customer-service
representatives directly via live chat, email
or phone.
Automated responses should never be
treated as a “one-size-fits-all” solution to
all problems. It is likely that customers
will run into issues that automated support
systems cannot address.
5. Be Transparent
Once customers decide to contact
customer-service representatives, their
options should be clearly available. Don’t
try to hide customer-service contact
information, because this leads to greater
frustration. Be transparent about possible
wait times based on resources. Provide
flexible options, such as scheduled callbacks or even video chat, so customers
don’t feel like they have to wait for long
periods in a queue.
Leaders should give employees the
latitude and authority to make snap decisions (given specific guidelines) for the
sake of customer service. The latitude
not only helps with consumer relations
but also empowers employees to rectify situations immediately, promoting
employee engagement, as well as customer and employee retention.
For example, a male passenger
approaches a flight attendant with the
news that he’s going to propose to his
girlfriend in flight. In an effort to make
the moment more memorable for the
couple, the flight attendant decides to
grab a bottle of champagne (at no cost to
the customer) and then teaches the man
to use the intercom system.
That level of empowerment and latitude
not only makes the couple’s experience
much more memorable but also enables
the entire plane of passengers to witness
firsthand the lengths the airline goes to on
behalf of its customers. Certainly, many
customers on the flight will share this
experience with others.
That single act of kindness and exceptional
customer service has great potential to be far
reaching.
Clearly, when employees are given latitude
and authority, they are more satisfied in the
workplace. No doubt, this will be reflected in
their interactions with customers — a winning
situation for customers and employees alike, as
well as the airline. a
Saleema Khan is a senior consultant for
Sabre Airline Solutions ®. She can be
contacted at [email protected].
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Age Of The
Customer
Customer Experience At The Forefront
Of Successful Airlines
By Megan Nieves and Jayme B. Porkolab I Ascend Contributors
The customer experience is, or should be, a high priority for all airlines.
Delivering a consistent, quality customer experience is possible when
an airline builds a solid strategy, as well as establishes an internal culture that empowers employees and provides them with the necessary
tools to care for each and every customer. The result: customer reten-
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T
his is undeniably the “age of the customer.” Consumer’s expectations
are higher than ever, and customers
are demanding accountability from
airlines for products and services
— on their terms. However, it is not
enough to simply provide superior service and
quality products. Consumers expect an excellent overall experience when interacting with
an airline’s brand. It is not just a matter of the
customer asking, “Did I get what I needed?” or
even, “Was it easy to get what I needed?” They
are asking, “Did I enjoy the travel experience?”
Social media has opened new opportunities
for consumers to express their feelings and
share their experiences.
Consider the example of musician Dave
Carroll whose frustration with his damaged
guitar and an unnamed airline’s lack of response
led him to post a video on YouTube in 2010
that went viral (more than 14 million views and
74,000 comments as of August 2014). This
generated a firestorm of negative publicity, and
while the airline ultimately responded and set
matters straight, the damage done to its reputation affected the airline years after the original
social media response was posted.
In this age of the customer, companies live
and die by the relationships they form with
consumers of their products. Deliver on the
brand promise while helping consumers enjoy
the experience, and they will become advocates,
extolling the brand virtues to all whom will listen.
Failure to do so turns them into active detractors
who seek alternate products or providers and
may turn other existing or potential customers
away.
Interestingly, Carroll went on to publish a book
about his experience with the airline and formed
an online consumer advocacy movement that
continues to grow in popularity.
What Is Customer Experience?
It is important to have a clear understanding of the term customer experience. While
the consumer view of customer experience
generally means the sum of all experiences
the customer has had with a supplier over the
duration of his or her relationship, let’s focus
on the supplier view of customer experience,
which is defined as an organization’s delivery
on its brand promise. This does not necessarily mean a supplier should offer the most
luxury or the most extensive selection. In fact,
many customer-experience leaders offer simple
products with limited services relative to their
competitors.
The brand promise is what consumers
expect of an organization based on how it represents itself in the marketplace. It is influenced
directly and indirectly by what that organization
says and does as a brand.
Organizations can easily become lost in their
own brand communications or get too wrapped
up in their marketing slogans. For example, it is
easy for a company to promise an experience
that it may or may not be able to deliver, simply
to entice customers. Consider the slogans: “Fly
the Friendly Skies” or “Something Special in
the Air.” Consumer sentiment for these brand
promises of the past made it clear that some
customers didn’t experience “friendly skies”
nor did they feel particularly “special” after their
experiences.
Rather than making promises that sound
good but aren’t always possible to keep or applicable to all customers, airlines should closely
examine their brand promises and promote and
communicate accordingly to ensure they deliver
the promised experience. The brand promise
must be realistic and achievable, and it should
represent the real vision, strategy and objectives
of the organization.
Southwest Airlines continues to lead all U.S.based airlines in customer-experience scores,
yet its product offerings, as well as its brand
promise are simple, direct and easy to understand. Customers appreciates the airline for this,
and via its blog, the airline enthusiastically extols
its virtues and promotes its services.
The results generated by consumer-centric,
customer-experience-focused organizations
clearly indicate that companies that deliver on
superior customer experiences:
1. Reduce operational costs,
2. Increase recurring revenue,
Customer-Experience
Maturity Model
Source: Sitecore
Customers For Life A customer-experience maturity model records the journey that customers are supposed to take when they engage with a particular
brand. It identifies customers’ needs and expectations and enables airlines to anticipate them. The ultimate goal of a customer-experience model is to acquire
lifetime customers.
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3. Secure a lasting relationship with existing customers,
4. Attract new customers at a higher rate,
5. Have more engaged and committed employees.
The cascading effects of customer-experience
maturity across an organization are tremendously
positive, producing exponential results that touch
every corner of a business. Simply put, the potential returns on customer-experience investments
are enormous, while the penalties for customerexperience failures are equally impactful but with
devastating consequences.
The stark reality is, with the exception of a
few bellwethers, the global airline community
continues to struggle with making real inroads into
customer-experience maturity. Recent Forrester
studies of customer-experience satisfaction among
consumers in the North American marketplace
indicate that the airline industry falls well behind
customer-experience-leading industry segments
such as retailers and hoteliers. And while there
have been clear leaders in the airline segment,
even their top scores were at best average when
compared with the aforementioned top industry
segments.
Why is this? Customer-experience success
appears to be achievable by any organization in any
industry. The airline space seems full of opportunities to excel at providing superior experiences to
consumers. In fact, many airlines claim to put customers first. After all, the airline industry pioneered
loyalty programs designed to secure relationships
with high-value customers. There are customerprofile and customer-relationship-management
systems designed to connect frontline and airline
support staff with customers’ data at multiple
touchpoints. These tools promise to provide such
employees with a “single view of the customer”
and a deeper understanding of the relationship
between a customer and his or her needs.
In addition, airlines have years of experience
managing large volumes of transactional data,
as well as performing research and analytics on
consumer sentiment and demand. In fact, many
organizations spend millions of dollars selecting,
testing, configuring, implementing and operating
customer-experience programs of one sort or
another.
Many factors contribute to customer-experience
success. Three factors are of particular importance
and hold key anchor positions in the overall organizational customer-experience toolbox:
1. Customer-experience strategy,
2. Customer-experience culture,
3. Customer-experience technology.
organization’s customer-experience intentions
and principals so clearly that employees follow
its precepts like sailors navigating toward a
lighthouse that will bring them safely home.
However, defining and communicating the
strategy isn’t enough. Employees are often
bombarded by other communications such as
values, tenants and mission statements. When
combined with multiple performance objectives (company, departmental and individual),
employees can easily become lost in a sea of
confusing organizational flotsam and jetsam. It
is vitally important that airlines reduce complexity and simplify their overarching strategy while
moving the focus from addressing symptoms
of customer-experience failures to driving a
customer-centric philosophy, vision and strategy
deep into the heart of their organizations.
The best way to ensure the strategy meets
the objectives of customer-experience excellence is to engage customers. There is no
substitute for customer engagement. Take every
opportunity to listen when customers speak. But
don’t stop there. Often times, when they are
speaking it is because they are already unhappy.
Find them before they become unhappy. Better
yet, engage them before the experience and
ask them what they need. Airlines should not
assume they know all the answers. They should
ask their customers and continue to ask them.
This means establishing programs and building the skills necessary to engage customers in
dialog about their wants and needs, recording
this information, prioritizing customer requests
and monitoring performance over time. As well,
performance objectives should be tied directly to
customer feedback and shared throughout the
organization. Company, departmental, team and
individual objectives should be directly mapped
to the customer-experience strategy driving the
organization.
Once an airline has intently listened to its customers and clearly understands their needs, the
next step is to define its vision of the customer
experience. The vision should be a simple and
direct statement of the desired customer experience. It should integrate well with the corporate
strategy and should be consistent with brand
values. Employees should clearly understand the
vision and how they can support it.
A key point to consider is the existence
of multiple customer segments. If there are
multiple customer segments with distinctly different customer-experience intentions for each,
then creating an overarching vision with separate
vision statements for each segment is critical.
Once a customer-experience vision has
been established, the next step is to create a
customer-experience strategy. In essence, the
strategy defines how an airline will deliver on
its vision. It’s not meant to address the tactical
details but instead provides an overall guide as
to how the airline will meet customer-experience
expectations.
Again, alignment with the corporate vision
and brand image is the key to success. An airline
must ensure its vision and strategy for customer
experience is clearly and directly aligned with its
organizational objectives.
The customer-experience strategy should be
specific enough to provide business units with
clear direction on where to focus their efforts
01/14/15
$130.00
10 Year
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10.00
Volume
926.12M
771.77
617.42
463.06
308.71
154.35
Customer-Experience Strategy
Successfully establishing and implementing a
customer-experience strategy is the first step to
customer-experience maturity. The right strategy
is direct, simple for employees to understand
and actionable by everyone from senior executives to contract employees working the ramp or
handling luggage. The strategy must define an
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Outperforming The Competition Apple’s strategy to include customer experience as one of the core
focus areas has contributed to the stock’s 10-times growth rate during the last decade.
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and how they will be measured. Therefore,
the strategy must include elements such as
business-unit-level expectations, performance
goals and key performance indicators (KPIs).
Basically, the strategy is a master blueprint that
individual departments and groups within the
organization can reference when planning their
own detailed customer-experience initiatives,
goals and measures.
There is one final point to consider when
building a customer-experience strategy. The
strategy must clearly support incremental revenue growth and/or provide clear cost savings.
If it cannot be directly mapped to either, it
should provide measurable support for efforts
that do. This point is crucial, particularly when an
organization takes its first steps down the path to
customer-experience maturity.
Customer-Experience Culture
The next critical component is the creation
and ongoing support of a strong customer-centric
culture within the organization. The importance
of this cannot be stressed enough. It takes
seven to 12 positive customer interactions to
compensate for one bad experience. While an
airline may establish and communicate a clear
vision and strategy for customer experience, its
employees must take it to heart and deliver in a
consistent, reliable and dependable manner.
Examples of employees taking ownership of a
situation abound. For example, a pilot purchased
pizza for everyone on his aircraft after experiencing
significant delays. Ultimately, an airline’s employees
are, in large part, responsible for the customer
experience. The airline, therefore, must create a customer-centric culture where customer experience is
a priority and all actions taken by the airline and its
employees are measured against the touchstone of
the customer-experience vision and strategy.
Building a customer-centric culture is more than
simply communicating the organizational strategy
and values to employees. They must be actively
engaged in developing the tactical plan that achieves
the strategic objectives. In a recent study, Dell, the
multinational computer technology company, found
that Net Promoter Scores® were twice as high when
the experience was delivered by a “highly engaged”
employee.
Employees should help build the customerexperience strategy. Customer-facing employees
often have a keen understanding of and insight into
customer needs and the organization’s ability to
fulfill them. They can help identify the pain points
for travelers that may be hard to casually detect.
Most importantly, they have ideas about how to
address pain points, which enables the airline
to provide customers with the experience they
desire and expect.
Formally collecting employee feedback can
provide an organization with valuable information
about the customer experience it delivers.
Voice-of-the-employee programs can be
designed and implemented to encourage
and reward employees for contributing to
customer-experience objectives. The purpose
of such programs is to establish a culture that
incentivizes employees to “own” the tactical
delivery of the customer-experience strategy and
act accordingly.
Customer-Experience Technology
The late Steve Jobs, co-founder, chairman
and chief executive officer of Apple Inc., said,
“You’ve got to start with the customer experience and work back toward the technology
— not the other way around.”
When considering Apple’s laser focus on customer experience and the 10-year performance
of its stock, the story is clear. By focusing on customer experience as its core business strategy,
Apple moved from the brink of irrelevance (and
some might even say extinction) to the pinnacle
of success and is now one of the most profitable
businesses in the technology space.
The core components of customer-experience technology have been around for a long
time. Customer and business profiles, customerrelationship management and survey programs
are all examples of tools that can facilitate
customer-experience objectives.
However, many of these tools exist in isolation with little or no interaction. These solutions
must be interconnected and leveraged to help
drive customer-experience objectives.
For example, customer-relationship-management systems (CRMs) should be enriched to:
Contain information such as customer-segment-specific workflows;
Support unique services;
Integrate and utilize customer lifetime value
scores;
Customize offerings specific to customer
interests, preferences, channels and past
activities.
Enriching an existing CRM system can
differentiate the customers’ interaction while
significantly improving employees’ ability to provide excellent service to them.
CRM applications and content should be readily accessible whenever customers interact with
airline staff, and that content should be relevant
for individual customers or customer segments.
For example, in order for gate agents to
understand customers’ value to the airline, they
should be made aware of any recent service
issues that could affect customer sentiments.
Using the information in the CRM tool, a gate
agent can provide targeted attention to a specific
customer at gate check-in to ensure the service
he or she receives affords the opportunity for
relationship building or recovery.
Providing gate agents with a screen full of
information listing purchases made by the customer or detailed call logs to the service center
during the past 24 months actually hinders
gate agents’ ability to provide the best possible service. This information could prove useful
and should be available; however, the primary
presentation of CRM data should be targeted to
the role of an employee and anticipate the most
likely need of that employee and customer at a
particular touchpoint. Therefore role-specific user
interfaces with employee-specific customized
workflows and role profiles should be developed.
Additional customer-experience technology
includes online customer-experience feedback
and ratings (voice of the customer), online
employee feedback and ratings (voice of the
employee), Net Promoter Scores, customerexperience management and customer-value
calculators. Each tool is designed to enhance an
airline’s understanding of the customer and his
or her experience, expectations and perceptions
to help build a strong relationship and promote
long-term loyalty.
The key to customer-experience-technology
success is to provide the right data at the right
time in the right way to deliver the best possible
customer experience.
A New Era
The tide has turned, and the age of the customer is upon us. As such, it’s critical that airlines
embrace their customers and fully commit to
providing the best customer experience possible
while staying true to their brand promise. To
accomplish this, airlines must engage directly
with customers and employees to understand
individual travelers’ desired experiences.
Developing a customer-centric strategy and
culture enables employees to excel at customer
care. This environment, supported by customerexperience technology, empowers employees to
deliver on an airline’s brand promise, resulting in
exceptional customer service, revenue growth,
cost reduction, increased traveler loyalty and
customer advocates who will promote the brand
via a multitude of channels. a
Megan Nieves is senior business
consultant and Jayme B. Porkolab is
director of customer excellence, insights
and strategy for Sabre Airline Solutions®.
They can be contacted at megan.nieves@
sabre.com and [email protected].
ascend 69
Differentiation
Through Data
Strategic Planning For Pricing
And Revenue Management
As a consumer in the information
age, the average airline customer
has grown accustomed to personalized,
one-to-one marketing and service in
many areas of life. This is possible
because businesses, such as airlines,
of data about their customers.
Unfortunately, this data is often
not utilized to the fullest
extent. Customer segmentation
and data mining enables
airlines to differentiate themselves
from their competitors
by extending personalized offerings to
customers or mitigating common travel
issues when used as
part of a customerrelationship-management
strategy.
By Megan Nieves I Ascend Contributor
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I
magine arriving at your favorite coffee shop while running a
little later than planned in your
morning commute. Inside, a
snaking line separates you
from a triple-shot Americano espresso
with two sugars and cream. You join the
line, checking your watch as patrons move
forward to the ordering kiosk and silently
estimate how long it will take for the
barista to prepare each customer’s order,
which determines how late you will be for
your first meeting of the day.
Finally, it’s your turn at the ordering
kiosk. Before you can give your order to
the employee behind the counter, the
employee asks, “Triple-shot Americano
with two sugars and cream?”
Within seconds of paying for your drink,
your name is called, which is odd, because
you don’t remember the employee behind
the cash register asking for your name.
A smiling, apron-wearing barista places
a triple-shot Americano with two sugars
and cream into your hand. You glance at
your watch, and you are back on schedule.
While there are five other coffee shops
along your route to the office, you’ll return
to this one, because the staff knows you,
and they care about your experience.
This is the level of personalization that
will keep customers coming back time and
time again to the establishments that take
extra care to get to know them and make
them feel special.
Personalized marketing, used notably
by Internet companies, such as Amazon,
employs customer data and a one-to-one
strategy to tailor an offering or service
to suit a specific customer’s wants or
needs. Examples of this type of marketing
include an online bookseller suggesting
a title similar to the last several books a
customer purchased, a local big-box superstore sending diaper coupons to the home
of a family who recently used a loyalty card
when purchasing baby food and pacifiers,
or even a “happy birthday” email containing a voucher for free dessert sent by a
restaurant chain to a frequent diner during
his or her birthday month.
This type of marketing fosters a relationship beyond the normal realm of
“business-to-consumer.” In this type of
relationship, the customer receives a
sense of individual care, rather than feeling
like he or she is simply another customer
among millions with a pocketbook full of
dollars to spend.
Recent studies by EPiServer show that
one-third of marketers believe personalized marketing campaigns are effective.
Woodson Martin, chief marketing officer,
ExactTarget Marketing Cloud, recently
stated, “The future of marketing is the
customer journey. Today’s hyper-connected consumer requires companies to create
personalized experiences and deliver value
at each touchpoint to increase brand loyalty and drive sales.”
Customer Personalization There are many actions a company can take to differentiate itself and
heighten a customer’s experience. For example, using data that had been collected on an individual
diner, a restaurant can send a birthday voucher for a free dessert. This level of service increases the
chances of customer loyalty, as well as opens greater opportunities for customers to share their experience with friends, family and colleagues.
Personalization isn’t just effective in
terms of procuring new customers. This
tactic can also be used to retain customers.
In the same way that air travel has evolved
from luxury to commodity, in general,
the average airline customer has become
connected and well-informed. Airline customers can shop via computer, tablet,
smartphone or telephone, while eating dinner or riding a train. They are bombarded
with messages every time they check
email, watch television or browse social
media. For airlines to effectively retain
customer loyalty, they must connect with
customers and differentiate themselves by
offering something that their competitors
can’t or don’t.
In the same way that smartphone
manufacturers, grocery stores and even
coffee-shop chains must persuade the
customer to select them from a sea of
competitors that provide near-identical
service, airlines must differentiate their
service from that of their competitors.
When a customer is perusing fares and
finds two carriers with nearly identical
arrival and departure times and prices,
what drives the customer to select one
airline over the other?
Branding differentiates carriers to an
extent, but recognizable livery and comedic or sentimental television commercials
are only minimally effective when a customer is assessing baggage fees, available
departure times, layovers and overall cost
differences between carriers. Historically,
airlines have used frequent flyer programs
to reward their best customers with
upgrades, special lounges and designated
security lines, among other perks. These
tiered loyalty structures are designed and
communicated in such a way that nonmembers see the rewards and want to
become members, while members reap
the benefits and feel as if they are part of
a truly exclusive club.
The airline industry pioneered this type
of reward system, now replicated by hotels
and credit card companies. However, without personalization, this tiered approach
is not enough to differentiate the airline
from others in the industry and retain
customers.
One North American airline used its
frequent-flyer data to print elite-level flyers’
beverages of choice in the flight attendants’ manifests, so the attendants could
deliver said beverages as a courtesy during
flights. Some airlines provide a bottle of
champagne to elite-level passengers flying
on their birthdays.
Another North American airline took
personalization to an entirely new level
for its 2013 holiday season ad campaign.
In the ads, passengers scanned their
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ASCEND I SPECIAL SECTION
boarding passes for a flight and were
greeted on-screen by Santa Claus. Using
the data collected from the boarding
passes, Santa interviewed the passengers
about their holiday wishes. Employees
collected their responses and expediently
shopped for the requested items while
the passengers were en route to their
destination. When the flight arrived, Santa
delivered the desired gifts as passengers
waited at the baggage carousel.
While this level of personalization is
unrealistic outside of the constraints of an
ad campaign, it certainly provides some
insight into creative uses of data. These
are examples of airlines that not only
effectively retain customer loyalty where
a frequent flyer program might fail to do
so, but also inspire customers who are not
on the receiving end of the personalized
experience to aspire to become elite-level
status so they, too, can receive the same
treatment.
Airlines’ own massive amounts of customer data can be used to personalize
their marketing efforts, as well as the
complete customer journey. However, the
data is often stored in different information systems that do not communicate or
integrate well.
Ideally, though, airlines will not just
use collected data for giving away complimentary cocktails or creating inspiring
television commercials. Passenger data,
currently held across many systems at
most airlines, can be utilized to send
customers special offers based on their
trip histories and frequent destinations.
In addition, logged customer-service
issues, such as previous instances of
lost or delayed baggage and flight cancellations, would be communicated to
check-in agents. Leveraging customer data
and email to proactively notify customers
of delayed baggage or to create rebookings
could alleviate traveler stress. Calling a
passenger by name, knowing that he or
she prefers an aisle seat, or giving seating
priority to a rebooked passenger whose
flight was recently cancelled could create
a brand advocate.
Technology that supports personalized contact with customers is quickly
becoming crucial to customer retention.
SabreSonic ® CSS Customer Experience
Manager is a rules-driven solution that
enables a consistent, automated customer
experience unique to an airline’s brand and
its customers. It uses ticketing, inventory
and customer data to increase revenue by
enabling airlines to offer relevant products
to the right person at the right time in the
customer journey. It also helps increase
loyalty by facilitating unique experiences
for individual customers or customer segments, as well as grows the customer
Brand Advocate Customer data can be used in myriad ways aside from offering complimentary beverages or inspiring television commercials. Calling a passenger by name, recognizing his or her seat
preference or giving seating priority to a rebooked passenger could create a brand advocate.
72 ascend
base by utilizing existing loyal customers
as brand advocates. This type of solution
can help bridge gaps in communication
between data storage systems, as well as
enable airlines to fully personalize communications with their customers.
As consumers grow accustom to Amazon
predicting their next purchases, Netflix introducing them to films they are guaranteed to
love, or their local baristas knowing their names
and beverage preferences before they even
place their orders, they begin to expect this
level of personalized service in all aspects of
their lives. Personalized customer engagement
builds brand loyalty, improves the customer
experience and can lead to incremental sales
through specifically targeted offerings.
Personalization is more than a trend manifesting across numerous industries. As it
becomes increasingly prevalent, customers
are noting its presence, as well as its absence.
Will your airline make a lasting impact that differentiates itself from the rest of the pack?
Incorporating personalization into a customerrelationship-management system may hold
the key. a
Megan Nieves is a senior business
consultant for Sabre Airline
Solutions. She can be contacted
at [email protected].
Delivering A Differentiated Customer Experience In
The Age Of Airline Retailing
Airlines around the world are searching for new ways to convert and upsell customers from
the moment they begin shopping to post travel and everywhere in between. Airlines that have
invested in the necessary technology and processes to support these conversion and upselling
goals will outsell carriers that have not by more than 30 percent.
By Katie Freeman and Kathy Turney I Ascend Contributors
ASCEND I SPECIAL SECTION
a
recent study published by IATA
credits aviation as the industry
that advanced e-commerce.
Faced with decades of crippling
and complex processes and
systems, airlines welcomed the
technology boom of the mid-1990s and began
developing websites as a result of the growth
of the Internet. These early websites became
the first “virtual storefronts” for airlines and
ultimately paved the way for airlines to have
more direct access to their customers.
Having direct access to customers was
significant 20 years ago, but it is even more
critical today when considering that by 2017,
digital travel sales will reach approximately
US$166.4 billion in the United States. An article
published by NASDAQ contends that Mexico,
India, Spain, Italy and Norway are expected
to have the highest shares of digital travel
sales during the next five years, with Brazil,
China, India, Mexico and Italy being the fastest
growers.
This mega-trend has airlines taking notice.
Airlines globally are re-evaluating their distribution and commerce strategies, looking for new
opportunities to convert and upsell customers
from their initial shopping experience through
various touchpoints throughout their journey.
In addition, analysis from Google shows
that the typical traveler uses 22 websites
to research a trip, in multiple shopping sessions, before booking. This is evidence that
traveler characteristics are continually evolving
and consumers today are not only connected,
but are savvy enough to comparison shop for
travel products and services until they find an
option they feel meets their needs.
Because of this, airlines can no longer simply merchandise their seat inventory or other
high-margin ancillary products they would like
to offer to their customer; they must become
sophisticated retailers, ready and able to offer
rich personalization of the right offer to the
right customer at the right time.
These trends — an increase in the amount
of travel purchased online, changes in online
consumer behavior and a growing focus on
the direct channel by airlines — have resulted
in the emergence of airline retailing and an
unprecedented need for well-developed retailing strategies that leverage customer data.
While airlines have an early lead in executing in
the direct channel, holistic strategies will also
need to extend personalization capabilities into
the indirect channels, where demand is also
growing.
Defining An Airline-Retailing
Strategy
Airline retailing can be defined as a focus on
personalization through data-driven customer
insights with the convergence of e-commerce,
merchandising and revenue optimization.
Together, these foundational pillars create
a strong data tapestry from which airlines
can focus on optimization of their product
placement in their distribution channels, while
ensuring that the offer is contextually relevant
at each point in the customer journey.
Each pillar has a unique role to play in creating a robust approach to airline retailing:
Distinct merchandizing plan — A distinct
merchandising plan that informs an overall
airline-retailing strategy ensures airlines will
be able to offer a wide variety of products
and product bundles in a way that stimulates
Shopping Behavior Of Average Traveler
Most popular
travel places
this summer.
Here To Help You
Our Happy Customers
FlightSearch agents sold more
airline tickets last year than any
other flight-booking-related
website.
FlightSearch customers share
their booking experiences and
provide tips for finding the best
flights for the best prices.
Summer
sales starting
now.
Spring
close-out
sale.
Comparison Shopping According to Google, the average traveler conducts research on 22 websites before finally booking a flight. Today’s savvy travelers
spend time comparison shopping for travel products and services until they find a selection that meets their needs.
74 ascend
ASCEND I SPECIAL SECTION
interest and entices customers to make a purchase.
Optimize distribution channels — After considering merchandising, airlines must optimize their distribution channels to be able to
place the right ancillary products or product
bundles in the right channel to increase airline
profitability. Within the direct channel, airlines
should have the flexibility to drive variability — or consistency — across the points of
sale. Carriers should, however, consider their
distribution strategies in both the direct (Web,
mobile, call center and airport) and indirect
(online and offline travel agencies, travel management companies) channels. While airline
websites are still the dominant booking channel globally, the 2014 IATA Global Passenger
survey found that a combined 41 percent still
rely on indirect channels to purchase tickets.
Personalization — Once these pillars are jointly
considered, actionable customer insights from
across the traveler journey enables airlines
to offer personalized à la carte ancillaries and
product bundles at points where the consumer is most likely to purchase them. When
airlines accomplish this, they move from just
selling merchandise to truly becoming sophisticated retailers.
A recent special report published by The
Economist Intelligence Unit and Sabre Airline
Solutions® brings these concepts to life. The
study compares the vastly different offers and
products presented to Pablo Ramos, a fictional
traveler, during one trip as a business traveler
and another as a leisure traveler with his family.
Through the illustrated example at http://www.
ascendforairlines.com/whitepaper/infographic, it
is clear the airline can sense, respond and cater
to Pablo’s unique needs during both of his trips.
Adapting Retailing To The Airline
Business Model
Due to the proliferation of information available to customers via the Internet, there are
substantial opportunities for airlines to influence
the buyer at multiple steps in the retail lifecycle.
While airlines’ core competencies have
traditionally been in service fulfillment and transportation, strategically extending their influence
beyond these phases and across the entire
customer journey can result in a shift from
non-purchase to purchase because customers
are offered something very meaningful at their
particular stage in the journey.
It’s no secret that customer intimacy starts
with influencing the retail lifecycle. Successful
retailers such as CVS Caremark, which was
ranked No. 2 by Forbes among the biggest
retailers of 2014, have taken ownership of the
customer experience from acquisition to optimization and have profited immensely from
the ability to own the full retail experience. A
recent report by Retail Info Systems News (RIS)
credited the retailer’s ability to optimize digital
communication as a key source of improvement
in enhancing the customer experience.
Airlines today should lean in and discover
what the CVS Caremark pharmacies of the world
already know … long-term loyalty and profitability
comes from gaining full control.
Mapping Retailing To The Airline Business Model
Inspiration
Shopping
Purchase
Fullfillment
Analytics
What can airlines do today to begin extending
their reach through the traveler’s journey?
Acquire
Airlines today should focus on widening the
funnel through organic efforts such as search
engine optimization (SEO) to lower the cost
of customer acquisition. According to Ayima,
a leading agency focusing on SEO, traditional
network carriers dominate when it comes to link
authority (derived from the number of backlinks),
but online travel agencies (OTAs) consistently
rank higher based on executing a cohesive SEO
strategy.
“The major brands have huge authority in the
eyes of the search engines but suffer from technical issues relating to aging websites, content
management system platforms and multiple
site migrations over time,” said Dave Burgess
of Ayima. He continued to explain that devising
long-term strategies that address these issues
will “halt the power shift and return a brand to a
market leader.”
Convert
At the 2014 IATA World Passenger
Symposium, senior economists with IATA
presented compelling research that proved a
positive correlation between airlines that had
a high percentage of revenue from ancillaries
and airlines that benefitted from high operating
profits as a percentage of revenue.
This research suggests that airlines should
consider placing an increasing focus not only
on selling their core air products, but also on
upselling and cross-selling of air and non-air
ancillary products to increase share of wallet per
passenger.
Service
Today, airlines have exclusive control of the
passenger from check-in to departure, and it
will become increasingly important for airlines to
continue to explore new retailing opportunities
at the airport. A study by PhoCusWright reports
that the fastest area of growth for ancillary sales
occurs at the airport and in-flight. Retailing strategies of the future should consider innovations
such as digital signage in airports to provide
customizable content through flexible channels
for a range of purposes: location and wayfinding
information, product and service status; news
and weather content; advertising, branding and
infotainment.
Measure And Optimize
From Non-purchase To Purchase For decades, airlines focused primarily on service fulfillment and
transportation. However, many airlines have extended that focus to include ancillaries, as well as discounted and bundled services, across a customer’s entire journey. Often times, this can result in a
shift from non-purchase to purchase because customers are offered something they value at particular
stages of their trip.
Euromonitor believes that this year more
than 80 percent of airlines will invest in business intelligence tools. So, while optimization
has traditionally been left for the airline to work
through from campaign or channel analytics,
airlines will need to be empowered to know
what ancillary products and services are generating revenue so they can continually optimize
for the highest potential yields. Aggressive
ascend 75
ASCEND I INDUSTRY
investment in not only campaign and channel
analytics, but also user experience, traveler
flow and funnel conversion will help airlines
gain a greater understanding of their consumer’s behavior across the entire lifecycle.
Customer Data Profile: Hub For
Personalization
How can airlines successfully realize their
retailing strategy? It begins with a 360-degree
view of customer insights that combines structured and unstructured data from internal and
external sources and triggers actionable insights
across the customer journey. This “master data
profile” will be the backbone and hub of successful retailing strategies by providing the ability to
personalize offers and target customers.
Combining and structuring all customer data
insights (preferences, behaviors, patterns, etc.)
enables airlines to assign value scores for customers based on key attributes so airlines can better
sell and service through targeted personalization.
“The challenge is making the data come alive
so we get a better picture of the individual customer,” Jeff Foland, United Airlines senior vice
president for marketing, strategy and technology
recently told The Economist Intelligence Unit.
With roughly a terabyte of customer data
floating around at any given time within a large
carrier’s system, airlines that use this to create a
seamless customer-data environment will make
airline integration a problem of the past.
Consider the example of a fictional loyalty
customer, Robert Jones. Robert’s master data
profile with his airline contains important information about his history, including attributes such as
the class he normally books, what markets he is
likely to fly, if he is a member of an alliance, if he
recently received service disruption and if he is
likely to buy non-air ancillaries.
Robert is ready to book his next flight and
returns to his preferred airline’s website to buy his
ticket. Once he selects his origin and destination,
a rules engine begins triggering specific personalized offers based on the airline’s particular
preferences. After examining the information in
Robert’s data profile, he is offered a free checked
bag (based on his top-tier status with the airline),
as well as a discounted on-board entertainment
package (due to his propensity to purchase inflight movies or Wi-Fi on previous flights). Robert
is delighted by both the recognition of his affinity,
as well as the discount, and he purchases the
entertainment package.
This is a perfect example of the power of
knowing a customer and presenting him with
the best offer. When integrated with a retailing
platform, airlines can retain their most loyal and
high-value customers.
The Retailing Race Is On
To be successful and deliver on a customercentric approach, airlines are demanding a solution
(see related article on page 77) that has the ability
to leverage the master customer data profile and
offer the right product to the right customer at the
right time in the right channel.
Max Rayner, a partner at travel and technology
firm Hudson Crossing, recently stressed that airlines need a “holistic systems view” of upgrades
and all other upsell opportunities. The incremental
revenue from selling more personalization relies
The Connected Passenger 97 percent of travelers carry a smartphone, tablet or laptop, and one in five
carry all three. This level of passenger connectivity gives airlines significant opportunities for data collection and analysis.
76 ascend
on and is enabled by strategic investment in
IT infrastructure, on both the operations and
customer sides.
The gaming industry was one of the early adopters of making aggressive, strategic investments
in IT and customer data management. Casinos
such as Harrah’s (now Caesar’s Entertainment)
have seen its investment pay off for more than
a decade.
According to information published by The
Economist Intelligence Unit, Harrah’s started to
develop and refine the collection and analysis of
customer information back in 1998 on a level not
seen before in that industry.
By spending more than an estimated
US$100 million in upgrading its loyalty program,
Harrah’s began to collect information on every
customer transaction possible. Data gathered
included not just choices for bet-by-bet gambling, but all purchases made on premise at any
Harrah’s across the country. Harrah’s leveraged
this data to execute A/B testing of promotions
on specific customer segments to determine
what types of incentives and upgrades would
encourage repeat visits.
The resulting return on investment was
impressive. In 1999, Harrah’s revenue increased
over the previous year by 50 percent, according
to the Wall Street Journal.
The example of Harrah’s illustrates the
potential upside for airlines willing to invest in IT
infrastructure and business-process updates to
support an integrated airline-retailing strategy.
With more than 97 percent of airline passengers carrying a smartphone, tablet or laptop
when they travel and one in five carrying all
three, it is clear that the passenger of tomorrow
will be more connected than ever before. This
presents substantial opportunities for airlines to
collect — and analyze — information about the
digital-passenger experience.
Carriers that can harness this analysis,
supplement it with information from past travel
experiences and embrace an airline-retailing
solution that targets the right customer through
the right channel at the right time will ultimately
create a highly differentiated product in a very
generic marketplace.
Penny Gillespie, research director with
Gartner, recently reported that by 2018, organizations that have fully invested in all types of
online personalization will outsell companies
that have not by more than 30 percent.
While this statistic is staggering, it should
prompt airline executives around the world to
ask themselves, “Is my airline positioned to win
the airline-retailing race of the future?” a
Katie Freeman is a solution marketing
partner and Kathy Turney is a solution
manager for Sabre Airline Solutions.
They can be contacted at katie.freeman@
sabre.com and [email protected].
The New Innovative Airline-Retailing Solution
A new state-of-the-art airline-retailing solution helps airlines differentiate themselves and retain customers through more personalized product and service
offerings. Through this innovation, airlines can generate additional revenue by
offering the right ancillaries, as well as discounted and bundled services, to the
right customers when they are most likely to purchase.
By Katie Freeman and Kathy Turney I Ascend Contributors
ASCEND I SOLUTIONS
U
ntil now, airlines have been limited
in their ability to influence travelers
across the entire customer journey.
Siloed data, coupled with decades
of operational cost-saving initiatives
(instead of value creation), has left
travelers around the world feeling disconnected
and underappreciated.
This is not a problem unique to the travel
industry. In fact, a recent study conducted by
BusinessInsider and Timetrade found that at
least 60 percent of retailing executives report a
personalized customer experience as the No. 1
shopping factor missing today.
Fortunately for airlines, the future is not as
grim as it appears. The industry is slowly seeing
these trends reverse, and more airlines than
ever before are focused on truly understanding
what customers need and are willing to pay for.
Airlines are no longer reluctant. They are ready
to harness customer insights and deliver on
differentiated customer experiences across all
points of sale and service.
To help airlines meet these goals, Sabre
Airline Solutions® developed a new solution,
SabreSonic® CSS Dynamic Retailer, which
enables carriers to join customer data (such as
trip history, tier status and social-media value
scores) with their fare and ancillary catalog
Utilize Customer Insights Dynamic Retailer creates customer-driven offers based on profile information obtained through customer insights. Shopping results can be bundled, discounted and personalized
for specific customer segments and upsell opportunities.
to generate flight, branded fare, and ancillary
bundles and discounts that are both relevant and
Generating Relevant Offers
Customer Data
personalized to the individual traveler. This datarich solution is wrapped in an intuitive, flexible
interface that makes it easy to define, manage
and execute targeted offers using dynamic rule
configuration.
How It Works
Products
These personalized offers include a combination
of flight offers, discounted ancillaries and ancillary
bundles, and are made possible through a serviceenabled platform with flexible open technology.
The platform includes a turnkey solution and can
be delivered to different points of sale.
What It Does
Rules Processor
Driving Differentiation Dynamic Retailer delivers a personalized retailing experience for airline customers by generating relevant offers based on customer insights, flight attributes, and product and rule
configurations. Together, this combination allows airlines to create the right offer to the right customer
through the airline’s preferred channels.
78 ascend
The service-enabled platform within Dynamic
Retailer is designed to integrate across both direct
and indirect channels.
It can also be accessed at various points in
the customer journey, allowing airlines to gain an
unobstructed view across all systems throughout
a passenger’s trip so they can effectively personalize and influence customer behaviors and
patterns. Limited visibility of the retail lifecycle
ultimately results in lost revenue opportunities.
Dynamic Retailer has opened up exciting new
merchandising and retailing possibilities for commercial teams. Information in the solution can be
leveraged to:
Offer numerous combinations of unique product bundles that are seamlessly integrated into
the booking flow,
Promote upsell opportunities of higher-margin
brands to customers most likely to convert,
Integrate the full ancillary catalog to discount
and promote ancillary products based on
airline-defined rules and business objectives,
ASCEND I SOLUTIONS
Expanding Personalization Max Rayner, a partner at travel and technology consulting firm Hudson
Crossing, contends that, “There’s an emerging Millennial trend” of customers who are coming into
prime traveling age who “don’t want a chain or a package or two hundred other people getting the
exact same thing.” Dynamic Retailer gives airlines the power of contextual personalization.
Determine the products and services customers are most likely to buy at each phase
in the journey based on time to travel (for
example, a pass for expedited security
during high-volume periods with long wait
times).
While the most advantageous applications
will vary from airline to airline, there are a
couple of common-use cases that demonstrate how Dynamic Retailer can bring retailing
to life.
Personalized Offers
Consumers have come to expect their
daily life to be as customizable as their online
experiences. Advances such as dynamic online
Optimizing Offers Dynamic Retailer enables airlines to personalize and deliver targeted ancillary bundles to specific customer segments in the shopping path. This can be done at the individual flight level,
with or without charge, within or outside of a particular branded fare.
advertisements based on previous browsing sessions and predictive product suggestions based
on purchase history have conditioned consumers
to think that all online interactions should be
tailored to suit their individual preferences.
According to online magazine Forbes, companies such as Target have tackled this issue by
“personalizing” targeted promotions and product
recommendations to groups of similar users
who, based on their profile attributes, would be
likely to purchase specific products. Companies
that have invested in this type of personalization
have seen tangible upticks in customer satisfaction and return on investment.
The good news for airlines is that tools
like Dynamic Retailer finally make insight-driven
personalization feasible throughout the entire
passenger journey. The retail rules engine produces customer-driven offers that are based on
profile information obtained through customer
insights.
Within Dynamic Retailer, offers can be
bundled, discounted and personalized for one
or more customers based on specific attributes.
Current capabilities of the solution also include tier
and flight-based offers and exclusive promotions
driven by airline-specific customer-segmentation
and upsell opportunities.
Flight Offers
Branded fares have become increasingly popular — and profitable — during the last six years.
Air Canada was an early innovator in branded
fares, offering multiple tiers of “bottom-up”
fares for leisure- and business-class travelers.
Leisure travelers could choose from three fares
(Tango, Tango Plus and Latitude) to personalize
their flight experience with varied benefits and
fees.
In 2008, Air Canada reported that 47
percent of its passengers chose a higher
branded fare because of additional attributes.
Since then, ancillary sales have exploded and
other airlines around the world such as Air
New Zealand, KLM and American Airlines
have adopted similar branded-fare strategies
to boost ancillary revenue and offer more
choices to consumers.
Not only has the revenue from ancillaries
increased exponentially since 2007 (nearly
1,200 percent according to IdeaWorks), the
number of airlines globally reporting ancillary
revenue have grown from 23 in 2007 to 59 in
2013. This change is indicative of a growing
trend in the industry and poses urgent need
for a solution that will support airlines as they
look to bundle and unbundle ancillaries to
increase revenue and customer loyalty.
Dynamic Retailer addresses this issue for
carriers by allowing the display of ancillary
offers based on flight or brand attributes.
The solution enables airlines to show ancillary items at a flight level (with or without
charge) and/or include them in a particular
brand. Capabilities include an intuitive, flexible
ascend 79
ASCEND I SOLUTIONS
Travel Experience Preferred Improvements
Strategic Priorities Shift A recent study conducted by the Economist Intelligence Unit on behalf of
Sabre Airline Solutions found that 40 percent of airline executives agreed that improving the passenger
experience would be a top strategic priority over the next 10 year. Dynamic Retailer enhances the customer experience by helping airlines take full control of the customer retail experience.
interface to define and manage retail riles, full
access to the air ancillary catalog and dynamic
rule configuration.
Ancillary Offers
The Massachusetts Institute of Technology
International Center for Air Transportation
(MIT ICAT) recently posed the idea of giving
individuals with higher ancillary revenue better availability, based on actual or expected
ancillary revenue spend. Simulations run by MIT
ICAT suggest there are substantial revenue gains
possible by creating “customized offers.”
Dynamic Retailer supports customized offers
with the bundling of ancillaries for targeted offers
across sales channels using the industry-standard
format through SabreSonic® Merchandising
Manager. Capabilities include product optimization, discounts and branded fares association.
Individual ancillary products can also be discounted to reward loyal customers or retain high-value
customers after service disruptions.
Dynamic Retailer In Action
The value of a solution like Dynamic Retailer
is apparent when you consider joint benefits to
airlines (increased profits and loyalty from valued
passengers) and customers (access to personalized services and products that suit their needs).
Dynamic Retailer can influence known travelers as they shop for their trips.
For example, fictional character, Lucas Celis,
has been a customer of WorldWide Air (WWA)
for many years. WWA is his go-to airline, and
he relies on its efficient, reliable and consistent
service for the many business trips he must
make every quarter. Lucas is a busy executive
and enjoys the occasional perks that his top-tier
loyalty status provides.
80 ascend
A few weeks before his next business trip,
Lucas visits worldwideair.com to shop for a
ticket. WWA recognizes him as an established
loyalty program member and, in the background,
begins assembling individual products and
bundled services he might be likely to buy based
on past travel history.
Lucas enters his travel information and begins
progressing though the booking flow on the
WWA website. He selects his desired departure
time and discovers that there are three branded
fare options for his flight. When he hovers over
the middle fare — AirPlus — he discovers that
for a marginal upcharge he will benefit from a
refundable fare, an in-flight snack and an in-flight
entertainment package.
From here, Lucas has two options: select
the base fare, or upgrade to the AirPlus or
AirPremium fare. Lucas decides to pass on an
upgraded fare and selects the base fare that
is available. At this point, WWA realizes the
missed up-sell opportunity, and triggered rules
instructing the next set of personalized offers
to be presented to Lucas.
On the next booking screen, Lucas is presented with several ancillary bundles intended
to both acknowledge his premium loyalty
status, as well as pique his interest for other
value-added services.
Lucas immediately notices that his normal
checked baggage fee has been flagged as
free. His long-term affinity for WWA is once
again validated, and he feels confident that he
has chosen the right airline.
Further down the page, an ancillary
bundle catches Lucas’s eye. The “Speed &
Convenience Package” that includes in-flight
WiFi, early boarding and a copy of Forbes
magazine looks appealing. He purchased the
package and WWA’s investment of knowing
how to offer the right products to Lucas at
the right time is realized by the incremental
revenue it has gained.
While airlines hope that all trips will be perfect, a mechanical malfunction caused Lucas’s
flight to be delayed for more than three
hours. Triggered rules inside SabreSonic® CSS
Customer Experience Manager, a complementary product to Dynamic Retailer, sent an email
offer to Lucas for 30 percent off his next trip
as soon as he was aboard his re-booked flight.
When Lucas landed at his destination and saw
the email message, his earlier frustrations
were tempered by WWA’s proactive approach
to service recovery.
A few weeks later, Lucas returned to worldwideair.com to book his next trip. With his
discount offer in hand, Lucas once again felt
confident in making WWA his preferred carrier.
Ready, Set, Retail!
A 2014 study by eMarketer found the
relationship between loyalty programs and
customer and sales data to be synergistic.
The study concluded that, “As much as loyalty
programs need data to personalize messages,
they also serve as a key source and connector
of consumer behavior across different sales
channels.”
The same study cited 2013 research by
Forbes Insights that found that more than
three-quarters of U.S. business-to-consumer
customers saw the benefit of trading personal
information for more relevant discounts and
offers, and 62 percent were willing to do so in
return for personalized offers.
The value of a customer-centric retailing
strategy is clear. It’s now up to airlines to find
the personalization “sweet spot” to create and
monetize value for the customer. Like Lucas’s
experience illustrated above, tools like Dynamic
Retailer can help airlines expand their touch
and influence throughout the entire journey.
Doing so not only builds long-term affinity and
results in incremental revenue, it ensures that
customer’s will have the full experience
designed for them every time they fly. a
Katie Freeman is a solution marketing partner
and Kathy Turney is a solution manager for
Dynamic Retailer for Sabre Airline Solutions.
They can be contacted at katie.freeman@
sabre.com and [email protected].