Even before the whole world woke up to understand what globalization even meant...the airlines industry was knee deep in it and to some extent was the major causal for it. Airline routes were already criss-crossing across the continents connecting business and leisure flyers alike to their choice of destination, no matter how far it was and at a fraction of the total time taken by other known modes of transport.
Over the years their routes have become increasingly widespread...creating a web like structure across the globe connecting the smallest towns to the biggest cities. It started off being a playing ground for a few major airlines then it became increasingly competitive with smaller feeder airlines coming into play. To complicate matters even more, the era of travel portals came in which allowed flyers to compare the prices across airlines and push down airline margins. Margins decreased twofold..firstly with the price sensitive buyer moving to a lower cost airline that would give them the same destination at a fraction of the cost and then because these travel portals demanded a commission from the airlines for the seats booked over their portal. Not to say that this was received well by all...as it led to some airlines pulling the plug off the travel portals only to come back to increase their seat utilization and reduce the risk of not being available at a global marketplace which was now being dictated by the price sensitive buyer.
To complicate matters, there has been a gradual shift in focus on the regions which deliver the maximum revenue with China becoming a major hub for air travel. Considering that the Chinese government is putting its weight behind making their country connected by new airports at even the smallest cities, airlines started looking east. More and more airlines are getting into code sharing agreements to increase their presence in routes which are otherwise non-profitable to them. This shift to Asia for maximum revenues is also due to the increase in air travel as an option as a country's per capita income has grown. Given this statistic, more of Indians and Chinese would prefer to travel by air but then the infrastructure required is still lacking in India and a lot of political influence is keeping big airlines away.
So the most obvious question is what can the traditional airlines do with so many competitors and options available to the valued flyer? How can they make sure that the customer stays loyal to them and not move to a cheaper no frills airline? How do they decrease their cost of operations? And most importantly, how do they still adhere to the regulatory norms set for them?
At the face of it, these are very traditional and often faced issues across all industries but what makes it unique is how it is handled in each vertical based on their business.
a) Increase Customer Revenue:- Like it is said that the business of business is to make profits, airlines have been fighting across the globe on increasing their revenues over the routes they operate on. Customers on the other hand have been more demanding in terms of service provided at the least possible cost. With the problem of plenty for the customer, a bad trip might result in the passenger churn...whereas a good trip doesn't always translate into another one with the same airline.
Airlines over the years have been the first to try and nurture loyal customers by providing them best in class experience...from lounges to in flight entertainment to gourmet food.....and in turn rewarding their loyalty with points that were redeemable. They were also the first to segment customers based on their flying habits and uniquely provide them services that suited them. The problem again is the commoditization of the above and it being no longer a differentiator. So airlines now need to think of changing their loyalty to advocacy and increase the customer value for themselves.
Different airlines have thus used different ways to move customers to their channel and be more proactive in trying to understand and predict their behavior given the vast amount of data they have about the customer's profile.
Starting with Japan's ANA giving it's crew iPads to be able to understand customer's profile and make note of their in-flight choices to serve them better to Qantas giving way to iPad docks on their flights which would allow flyers to subscribe to an app and then finish viewing the movie when they board off the plane (this incidentally also cuts down their fuel costs as iPads are lighter than traditional in flight entertainment systems.....oh and it is locked iPad so don't think stealing one would be a good idea either...).
Airlines have traditionally used analytic platforms to understand the customer behavior but that does not seem to be enough nowadays. Airlines need to go a step further and be able predict their customer's behavior and provide them options to fulfill the same in real time and across all channels. Would it be too difficult to suggest a package to a family that has traditionally taken vacations during a particular part of the year? And would it be difficult to pre-book and fulfill all their requirements based on their last few trips with you?
Airlines and travel agencies are increasingly allowing users to complete their booking through FB or LinkedIn credentials to allow them a different set of services like choosing their neighbor for a selected journey. This not only allows the airlines to provide a more customized experience to the passenger but also gives them access to loads of customer information based on their FB or LinkedIn profiles. This could further be made profitable by allowing this service only on the airline's own website and thus bring in more flyers to their website rather than booking from an aggregator who in turn demands revenues.
Airlines also need to understand that they could add on to their customer's experience and increase their revenue by partnering with 3rd party vendors who would then help in fulfilling all requirements that the flyer has. for eg in it's simplest sense you could provide a cab service and/or hotel reservation options to passengers and then they need to worry about them. But also, more creative airlines could do better by understanding passenger behaviors on different routes and segregate them based on their profiles and then present a more unique experience combining all of the above. Another example is that a price sensitive buyer will anyway go to 3-4 different sites and airlines before he/she makes a booking so would it be a good idea to show the comparison on your own site?
Airlines now need to move to a smarter re-bundling of services to provide customers with the choice to pick what they need for the trip and thus allow them greater freedom and decreasing airline costs at the same time. Each service, if broken down, and showcased to the flyer to pick and choose for the journey would greatly help in moving passengers closer to the airlines.(Given that Airlines now offer customer specific IFE (In Flight Entertainment) options to their choice of beer to be served on-board, so the level of personalization to allow kids to check in their teddy bears to providing free baby strollers at the airport...there is a lot that can be offered at an extra price). Air Asia even offers the passenger an option of buying the seat next to them for 100RMB, which would be re-imbursed in case the flight is full. But in case there isn't anyone on the seat next to the passenger, he gets to stretch as much as he wants and AirAsia makes another 100RMB on an empty seat.
New trends are also emerging around “Customer Service”. The challenge now is: Is your airline ready to match up to the evolving play and the new standards that an intricately connected world demands?
Airlines also need to listen in more intently to the passengers tweets and comments on FB and LinkedIn and use that voice profitably by resolving issues in real time and using their experience as a platform for the next wave of social marketing.
b) Decrease Operational Costs :- Airlines' operating margins have traditionally been one of the lowest across verticals with their margin sinking to 0.5% for the current year as the world GDP has plummeted with one crisis after another. Add to that the new Emission Trading Scheme (ETS) being mulled over by EU that would make airlines susceptible to even lower margins for plying on routes across Europe.
Airlines have traditionally tried to decrease their costs by using various measures like code-sharing and outsourcing of certain services to decrease their operational costs.
Whereas, code-sharing have given them access to routes to ferry connecting passengers that were otherwise not profitable and hence decreased cost and increased traffic it has a flip side in that it doesn't provide a customer with a unified experience for the entire trip (and hence AirAsia X thinks is a thing of 20th century).
Outsourcing of maintenance and catering besides other activities have been around for some time. SOme airlines have further tweaked it by outsourcing maintenance only on certain routes where it would have otherwise meant a high input cost for low returns.Wherever maintenance is taken care by the airline itself, it needs a sophisticated system to plan the right inventory levels and plan for the parts required in the complex repair and maintenance of the fleet.
Airlines have further decreased costs on areas like check in counters (eg Singapore Airlines) by analyzing customer behavior and rewarding them for booking and checking in using their mobile devices. This also increases their efficiency as it takes about 4 minutes to do a mobile check-in as against 8-10 minutes over a manned counter.
SouthWest airlines has been a leader in the field of decreasing operating costs by looking at smallest of things like removing their logo from garbage bags to removing olives from martinis served in-flight, a one size fits all approach will definitely not work given the different geographies the airlines travel in and their respective USPs in that region. But that should not deter the airlines from encouraging their crew to take ownership of the airline service and suggest ways to decrease cost and increase efficiency.
SouthWest also uses an OLAP engine in face of changing customer plans and volatile fuel prices to project cash flows over the long and medium term and thus plan their operations more effectively.
Moving to a self-service mode of customer care would also decrease the costs of maintaining expensive call-centers (which customers anyway hate for the long queues) and moving to a social platform based interaction model would provide customers more choice while giving marketers a more targeted campaign execution option.
c) Adherence to Regulatory Norms:- Airlines have to adhere to very strict regulatory norms for crew training as well as financial reporting.
A well designed employee HRMS system and an integrated learning application would help in providing the required trainings to the employees as per standards set in the industry.
At the same time, a financial application should be able to provide finance department with the ability to confirm to the reporting requirements in the countries they fly in and then at the same time be able to consolidate all the details to one single ledger in HQ. And then be able to use this unified statement in the required standards as prescribed. And as above, the application should also allow the airline to predict and plan their capital usage and accordingly manage their operations better.
Airlines have traditionally been used to turbulent business weather but the landscape for reaching out and surviving is rapidly changing. There has been a flurry of new airlines from the Mid-East Asia region which do not have the labor unions that other airlines have to contend with and are cash rich with Govt backing. This further tilts the balance against the traditional airlines.
Add to that the pending delivery of new aircraft in the coming years (which has been delayed for sometime due to aircraft manufacturer issues), and we have lot of empty seats in aircrafts and with no-frills airlines further eroding the customer base, it surely is going to be a period when old models will drastically die away and surprisingly new ones will emerge.
Over the years their routes have become increasingly widespread...creating a web like structure across the globe connecting the smallest towns to the biggest cities. It started off being a playing ground for a few major airlines then it became increasingly competitive with smaller feeder airlines coming into play. To complicate matters even more, the era of travel portals came in which allowed flyers to compare the prices across airlines and push down airline margins. Margins decreased twofold..firstly with the price sensitive buyer moving to a lower cost airline that would give them the same destination at a fraction of the cost and then because these travel portals demanded a commission from the airlines for the seats booked over their portal. Not to say that this was received well by all...as it led to some airlines pulling the plug off the travel portals only to come back to increase their seat utilization and reduce the risk of not being available at a global marketplace which was now being dictated by the price sensitive buyer.
To complicate matters, there has been a gradual shift in focus on the regions which deliver the maximum revenue with China becoming a major hub for air travel. Considering that the Chinese government is putting its weight behind making their country connected by new airports at even the smallest cities, airlines started looking east. More and more airlines are getting into code sharing agreements to increase their presence in routes which are otherwise non-profitable to them. This shift to Asia for maximum revenues is also due to the increase in air travel as an option as a country's per capita income has grown. Given this statistic, more of Indians and Chinese would prefer to travel by air but then the infrastructure required is still lacking in India and a lot of political influence is keeping big airlines away.
So the most obvious question is what can the traditional airlines do with so many competitors and options available to the valued flyer? How can they make sure that the customer stays loyal to them and not move to a cheaper no frills airline? How do they decrease their cost of operations? And most importantly, how do they still adhere to the regulatory norms set for them?
At the face of it, these are very traditional and often faced issues across all industries but what makes it unique is how it is handled in each vertical based on their business.
a) Increase Customer Revenue:- Like it is said that the business of business is to make profits, airlines have been fighting across the globe on increasing their revenues over the routes they operate on. Customers on the other hand have been more demanding in terms of service provided at the least possible cost. With the problem of plenty for the customer, a bad trip might result in the passenger churn...whereas a good trip doesn't always translate into another one with the same airline.
Airlines over the years have been the first to try and nurture loyal customers by providing them best in class experience...from lounges to in flight entertainment to gourmet food.....and in turn rewarding their loyalty with points that were redeemable. They were also the first to segment customers based on their flying habits and uniquely provide them services that suited them. The problem again is the commoditization of the above and it being no longer a differentiator. So airlines now need to think of changing their loyalty to advocacy and increase the customer value for themselves.
Different airlines have thus used different ways to move customers to their channel and be more proactive in trying to understand and predict their behavior given the vast amount of data they have about the customer's profile.
Starting with Japan's ANA giving it's crew iPads to be able to understand customer's profile and make note of their in-flight choices to serve them better to Qantas giving way to iPad docks on their flights which would allow flyers to subscribe to an app and then finish viewing the movie when they board off the plane (this incidentally also cuts down their fuel costs as iPads are lighter than traditional in flight entertainment systems.....oh and it is locked iPad so don't think stealing one would be a good idea either...).
Airlines have traditionally used analytic platforms to understand the customer behavior but that does not seem to be enough nowadays. Airlines need to go a step further and be able predict their customer's behavior and provide them options to fulfill the same in real time and across all channels. Would it be too difficult to suggest a package to a family that has traditionally taken vacations during a particular part of the year? And would it be difficult to pre-book and fulfill all their requirements based on their last few trips with you?
Airlines and travel agencies are increasingly allowing users to complete their booking through FB or LinkedIn credentials to allow them a different set of services like choosing their neighbor for a selected journey. This not only allows the airlines to provide a more customized experience to the passenger but also gives them access to loads of customer information based on their FB or LinkedIn profiles. This could further be made profitable by allowing this service only on the airline's own website and thus bring in more flyers to their website rather than booking from an aggregator who in turn demands revenues.
Airlines also need to understand that they could add on to their customer's experience and increase their revenue by partnering with 3rd party vendors who would then help in fulfilling all requirements that the flyer has. for eg in it's simplest sense you could provide a cab service and/or hotel reservation options to passengers and then they need to worry about them. But also, more creative airlines could do better by understanding passenger behaviors on different routes and segregate them based on their profiles and then present a more unique experience combining all of the above. Another example is that a price sensitive buyer will anyway go to 3-4 different sites and airlines before he/she makes a booking so would it be a good idea to show the comparison on your own site?
Airlines now need to move to a smarter re-bundling of services to provide customers with the choice to pick what they need for the trip and thus allow them greater freedom and decreasing airline costs at the same time. Each service, if broken down, and showcased to the flyer to pick and choose for the journey would greatly help in moving passengers closer to the airlines.(Given that Airlines now offer customer specific IFE (In Flight Entertainment) options to their choice of beer to be served on-board, so the level of personalization to allow kids to check in their teddy bears to providing free baby strollers at the airport...there is a lot that can be offered at an extra price). Air Asia even offers the passenger an option of buying the seat next to them for 100RMB, which would be re-imbursed in case the flight is full. But in case there isn't anyone on the seat next to the passenger, he gets to stretch as much as he wants and AirAsia makes another 100RMB on an empty seat.
New trends are also emerging around “Customer Service”. The challenge now is: Is your airline ready to match up to the evolving play and the new standards that an intricately connected world demands?
- 71.4% consumers tweet airlines on customer service issues.
- 11 minutes is how long @Deltaassist takes on average to respond to tweets.
- Voice calls into customer service centers are projected to decline this year.
Airlines also need to listen in more intently to the passengers tweets and comments on FB and LinkedIn and use that voice profitably by resolving issues in real time and using their experience as a platform for the next wave of social marketing.
b) Decrease Operational Costs :- Airlines' operating margins have traditionally been one of the lowest across verticals with their margin sinking to 0.5% for the current year as the world GDP has plummeted with one crisis after another. Add to that the new Emission Trading Scheme (ETS) being mulled over by EU that would make airlines susceptible to even lower margins for plying on routes across Europe.
Airlines have traditionally tried to decrease their costs by using various measures like code-sharing and outsourcing of certain services to decrease their operational costs.
Whereas, code-sharing have given them access to routes to ferry connecting passengers that were otherwise not profitable and hence decreased cost and increased traffic it has a flip side in that it doesn't provide a customer with a unified experience for the entire trip (and hence AirAsia X thinks is a thing of 20th century).
Outsourcing of maintenance and catering besides other activities have been around for some time. SOme airlines have further tweaked it by outsourcing maintenance only on certain routes where it would have otherwise meant a high input cost for low returns.Wherever maintenance is taken care by the airline itself, it needs a sophisticated system to plan the right inventory levels and plan for the parts required in the complex repair and maintenance of the fleet.
Airlines have further decreased costs on areas like check in counters (eg Singapore Airlines) by analyzing customer behavior and rewarding them for booking and checking in using their mobile devices. This also increases their efficiency as it takes about 4 minutes to do a mobile check-in as against 8-10 minutes over a manned counter.
SouthWest airlines has been a leader in the field of decreasing operating costs by looking at smallest of things like removing their logo from garbage bags to removing olives from martinis served in-flight, a one size fits all approach will definitely not work given the different geographies the airlines travel in and their respective USPs in that region. But that should not deter the airlines from encouraging their crew to take ownership of the airline service and suggest ways to decrease cost and increase efficiency.
SouthWest also uses an OLAP engine in face of changing customer plans and volatile fuel prices to project cash flows over the long and medium term and thus plan their operations more effectively.
Moving to a self-service mode of customer care would also decrease the costs of maintaining expensive call-centers (which customers anyway hate for the long queues) and moving to a social platform based interaction model would provide customers more choice while giving marketers a more targeted campaign execution option.
c) Adherence to Regulatory Norms:- Airlines have to adhere to very strict regulatory norms for crew training as well as financial reporting.
A well designed employee HRMS system and an integrated learning application would help in providing the required trainings to the employees as per standards set in the industry.
At the same time, a financial application should be able to provide finance department with the ability to confirm to the reporting requirements in the countries they fly in and then at the same time be able to consolidate all the details to one single ledger in HQ. And then be able to use this unified statement in the required standards as prescribed. And as above, the application should also allow the airline to predict and plan their capital usage and accordingly manage their operations better.
Airlines have traditionally been used to turbulent business weather but the landscape for reaching out and surviving is rapidly changing. There has been a flurry of new airlines from the Mid-East Asia region which do not have the labor unions that other airlines have to contend with and are cash rich with Govt backing. This further tilts the balance against the traditional airlines.
Add to that the pending delivery of new aircraft in the coming years (which has been delayed for sometime due to aircraft manufacturer issues), and we have lot of empty seats in aircrafts and with no-frills airlines further eroding the customer base, it surely is going to be a period when old models will drastically die away and surprisingly new ones will emerge.