04 April 2009

Comprehending Traveler Disloyalty

I am an avid reader and inhale "stuff" about our business. It is perhaps the old researcher in me.

Yesterday I received a piece from PhocusWright inviting me to participate in their new study: "The Disloyal Traveler: Influencing the Undecided".

This did get me thinking why the Traveller (Traveler) has become "disloyal". At the recent conferences I have attended this was somewhat of a whispered issue. No one wants to admit that indeed the era of branding has radically changed if not died.

The demand for instant metrics, performance and more important delivery (aka bookings) has undermined the traditional notion of a brand. It has also finally exposed the fact that (and humour me here - I am addressing airlines in the main) that the product is a commodity.

Of course this is not a binary factor. But in times of economic disability (I am tired of using GFC) price becomes ascendant over quality even if quality was universally measurable and assured - which we know is not the case.

So PhocusWright is correct in looking at this subject. However will the answers be really truthful? Will we get data that will tell us what the consumer really things and is this applicable to the real world?

One thing is for certain - the destruction of brand value is not just a function of the economic environment, nor is it a result of consumer behavior - nor even the web and the fabric of social media. Rather it is a combination of factors not least of which has been the behavior of the brand owners themselves. When cash is king - then their behavior tends towards survivalist.

Understanding the core value of the brand proposition over the recent years seems to have been lost. For example in the recent past legacy airlines focused on yield rather than on value. The value proposition high ground was grabbed by the Low Cost Carrier segment. To differentiate from the commoditization value offered by the LCCs, the Legacy Airlines actually went further up market. Coming back to compete with the LCCs, has these airlines now fighting in the trenches. Unfortunately to do so has meant undermining the "goodwill" of their brands further commoditizing their products.

Sure if there is an apple to apple comparison then the player with a differentiated brand value wins. However this strikes at a core principal of airline products namely opaque pricing. I am sure by now there will be some readers hunting for the comment or flame button. But hear me out. True airline pricing is all about obfuscating the price in relation to the cost. It is as close to a pure buy and sell model as you can get. But it is only now becoming easier to make that true comparison. The operational inflexibility of an airline means the assets are not actually that flexible. It is not that easy to reposition your 777 from transatlantic to the San Diego/LAX market.

At this point in the evolution of the Travel Market, airlines are forgoing brand value for cash value. When people talk about the life time value of a customer - now is the time to really focus on that and mine that loyalty. Sadly but realistically - the lure of instant gratification of cash now vs brand future value has destroyed that image and the resulting value. Thus the customer is not really being disloyal. It is just the manifestation that never was that loyal to you in the first place. Anyone who made that assumption is seeing that in cold hard cash (or lack thereof). Its like the recent movie title - "He's just not that into you." An All Star cast doesn't guarantee success.

I remember once chatting with a SVP of Marketing for a large airline at a small gathering. He had done his homework on his audience and actually gone to the bother of checking up on who was a "loyal" customer to his brand. He was quite taken aback when he thanked me for my loyalty, I explained that it was not loyalty but other attributes such as schedule that made me come back. Returning visits do not mean someone is loyal. This is a new lesson. I also made him even more comfortable when I explained that I was also at Elite status on 2 other airlines. (Back when that meant something).

So food for thought. I look forward to seeing the results of the study. I hope that there are real lessons and pointers for the future.

Oh and one more thing - Big is not necessarily a positive brand value!


02 April 2009

BA to phase out 757s from the Fleet

BA and Eastern Airlines shared one common heritage item - they launched 2 aircraft - the Boeing 757 and the Lockheed L1011 both with Rolls Royce RB211 engines.

I can almost bet that no one out there can remember why the engines were so labeled RB211. Let's see how many real geeks and anoraks there are in the audience.

So it is with a twinge of nostalgia that the last few B757s are being removed from BA's mainline fleet. Most of the fleet was sold off to DHL. With that contract long fulfilled - the remaining planes will likely go for conversion to Freighters of some sort or another.

Ah Sweet Nostalgia ...

IATA Terminates Aeropostal after IOSA

IATA seems to be getting serious about terminating airlines that fail its safety audits. So when the dreaded IOSA team shows up on your doorstep - you had better get your ducks in a row. So this year Aeropostal has been added to the list. They join the following:

2008: Air Botswana, Air Malawi, Air Tanzania, TAAG, Rwandair Express, Tassili Airlines, Varig Log and Zambian Airways.

In addition Ariana Afghan Airlines, Solomon Airlines and Palestinian Airlines resigned in 2007.

Those terminated in 2006 and 2007 were Aero Asia, Aero California, Air Marshall Islands, AVIATECA, Samara Airlines, Turkmenistan Airlines, Albanian Airways, Iraqi Airways and Lloyd Aero Boliviano.

Good for IATA for making this a matter of principal and finally putting teeth into their programs.


Jetstar Asia's Ownership Sorted!

Finally after years of somewhat complicated ownership in Jetstar Asia and Valuair, the situation has been resolved.

The former partners of Orangestar have effectively been bought out. And now the ownership comprises just 2 ownership players: Qantas Group (with 49%) and Westbrook with 51%. Westbrook is wholly owned by Mr Choo Teck Wong (Mr Dennis Choo). Newstar is the name of the new ownership vehicle.

With this change Tamasek (Singapore Inc) will exit the ownership ending its involvement in the enterprise. This also resolves the conflict between Tiger and Jetstar. The alignment of the Tiger shareholders with SQ is clear and Jetstar with QF. We can now look to more fierce competition between the two LCCs.

The operations of the airline remain the same and the 280 employees are unaffected by the change. Ms Chong Phit-Lian will continue to lead the organisation as Chief Executive Officer. Qantas will continue to provide branding support and integration into the rest of the Jetstar group. The Valuair brand will likely now disappear with a single operating certificate a likely outcome.



01 April 2009

DL+NW Align GDS Abuse Policies

Delta and NW/KLM are aligning their US based GDS policies on abusive practices. As the Transatlantic Alliance between Air France Group and Delta Group slowly comes to fruition we are seeing some aligning of their policies with regard to GDSs, Travel Agencies and ARC/BSP.


What we have yet to see is the alignment for the next generation of activity with the imposition of selective GDS pullouts or penalties as we have seen in Germany with Lufthansa Group against Amadeus and France+Benelux for pure AF Group against Galileo.

Thus it is conceivable for an agent in Amsterdam to book a flight on KLM metal but the booking made on Northwest without incurring the GDS surcharge imposed by KLM there. With Travelport picking up the tab for the near term - we will likely see as in Germany no change in Agent booking behavior. However I do know that many agents are re-thinking their GDS strategies as a result of this new behavior by the airlines.

It sure makes for an interesting marketplace.


Did Open Skies Lower Air Fares?

Some regulators seem to be congratulating themselves for the reduction in Air Fares across the Atlantic after the implementation of Open Skies last year.


However I would caution anyone who thinks that the benefits were immediate.

Yes air fares have been reduced across the Atlantic. But so has capacity - that normally should not happen. Capacity was supposed to increase so was choice.

In fact the reverse happened. Delta has reduced traffic and competition on at least 2 key routes - LAX-LHR (AF-DL) and SEA-LHR (NW) came and went bye-bye pretty quickly.

What we have seen is a significant reduction of Transatlantic service from London Gatwick. AA has pulled all of its services from LGW with significant reductions from DL, NW, and CO to mention just a few. Capacity across the Atlantic has been reduced by most airlines and BA is in a world of hurt with its traffic falling quite precipitously in the key premium markets.

Long term - I remain optimistic - but as negotiations for the next round of Open Skies between the EU open up - don't expect big expansive true Open Skies agreements to occur any time soon. And Air fares - well they are down all round. That means there are some significant bargains around. Too bad about the taxes though!


UK Agents Turn to Technology for Revenue

Everyone is feeling the pinch. So when the going gets tough the tough get creative.

So according to Genesys Consulting's Paul Richer's latest report - some UK agencies are turning to bringing in revenue by selling in house developed technology on the open market.

If we look back in history many of the best add on applications have been developed by users. TRAMS now owned by Sabre is a good example for back office.

However for every successful application there are literally hundreds of failed attempts.

I would caution anyone who thinks this is easy money to consider the requirements of support and becoming a solution provider to someone else whose business model doesn't necessarily match yours and vice versa.

Sometimes if its too good to be true - it probably is


British Newspaper Converts to All Twitter Format

In a stunning reversal of fortunes one of the most respected newspapers in Britain the Grauniad today announced the end of its Print Publication services and a move to all Twitter.


It also revealed that the publication has in fact been Tweeting for many years. Opening up its archives for some critical moments in history - it showed the following messages from its archive:

Highlights from the Guardian's Twitterised news archive

OMG first successful transatlantic air flight wow, pretty cool! Boring day
otherwise *sigh*

W Churchill giving speech NOW - "we shall fight on the beaches ... we shall never surrender" check YouTube later for the rest

Listening 2 new band "The Beatles"

Berlin Wall falls! Majority view of Twitterers = it's a historic moment! What do you think??? Have your say

RT@mohammedalfayed: FYI NeilHamilton, Harrods boss offering £££ 4 questions in House of Commons! Check it out

Travelport Announces Merged GMS Platform

After steadfastly denying that the former GDS platforms would be merged, Galportspan CEO, Jeff Clarke and GMS Division CEO, Gordon Wilson jointly announced the immediate merger of the new platform which will also share the new identity.

"The merged operations under Galportspan reflect the truly global nature of our business which needed to have a common identity and branding" commented Clarke.

"Worldspan, Apollo and Galileo were all fine legacy systems, but we are about the future." "No commedy here" Wilson added.

31 March 2009

Amadeus Announces New Logo, Spokesman

Amadeus, the Global Merchandising Company based in Madrid - has today announced its new corporate identity with a new spokesman.

"Amadeus is a hip company and is breaking with the old model of ladies with blue rinsed hair sitting in small strip malls,". said David Jones, Amadeus CEO who was seen to be smiling as he joked with new spokesman John Stewart of the Comedy Channel's The Daily Show.

"With all the doom and gloom in the Travel Industry, we want to provide our own new Stimulus Package" said Stewart in his trademark deadpan delivery.

"Since we don't have any more money to give away as a result of our new airline deals, we felt that that the best form of Stimulus was humour" added Jones.

Amadeus said that all its products would be re-branded over the coming months. A spokesman denied that the Star Alliance reservation system product was to be renamed the Comedy Idiot Technology Performance.



Sabre Announces Drop in GDS booking Fee

Bowing to pressure from its airline partners, Sabre’s GDS division – Sabre Travel Information Network Group announced at 12:01 CST Wednesday April 1st that effective immediately it is lowering its standard segment booking fee to $1.00 worldwide.

Commenting on the dramatic change in revenue model, Sabre’s new chairman Robert Crandall said: for some time we have avoided pricing our product at a competitive price. The new Sabre management team under my leadership is determined to assert its dominance. “We will not be undersold by anybody period”, he stated categorically. “From this day forward Sabre will be lean mean and a little bit green” he added with a nod to the environmental lobby. As the revenue model is changing so will the cost side. Sabre totally will slim down to less than 500 people down from more than 9000 at the end of 2008.

Commenting on its future, Technology direction, Max Hopper the new CTO Emeritus for Sabre Holdings announced concurrently several major initiatives. Henceforth Sabre will no longer issue any paper from its system. All output formats will be purely electronic. Sabre will move totally to OpenSource software making all of its products immediately available under the OSI contract: http://www.opensource.org/docs/osd

Sabre’s CEO, Sam Gilliland who has shed the Chairman’s position said he will focus the company into 2 divisions and has put its unprofitable Travelocity Division up for sale.

Sabre is a privately held Corporation and is not required to file any statements for future revenue or corporate responsibility.

Southwest Pilot's Deal: No Codeshares

Obviously I dont have access to the fine print but several people are reporting that WN has agreed with its pilots to a new deal that lets them cut hours in 2008 followed by an aggressive ramp up in 2010. By agreeing to no new code shares and knowing that WN has some markets that it is eyeing specifically - there are some things that can be inferred.

1. The international flights with WestJet will likely be flown by Westjet pilots.
2. Ditto with Volaris - although this deal is very nascent.
3. International airlines are probably exempt from this provision.
4. WN is seriously looking at flying to Hawaii nonstop.

Let's be clear. WN has an aircraft that is capable - the 737-700 can easily make it. However as an aircraft it is not rightsized for the market yields. a 737-800 has much better economics. Would WN flood the market say from OAK, LAX, SAN, SEA, PDX to HNL? unlikely. But it is well known that WN covets going back to HNL which it lost as a result of the demise of ATA.

So lets see if WN finally decides to run a long haul operation. I think it is an idea whose time has come.


Will The Airlines REALLY Use Social Media For Consumer Interaction?

Everyone is all a-Twitter these days. Wonderful and wild stories are circulating of Airlines being eagle eyed and capturing and more importantly responding to messages that are dealing with real time issues via Twitter, FB or blogs. Alaska, jetBlue and Southwest are frequently named for doing just that.

OK everyone ...
Stand back.
Get your noses out of the Koolaid trough.
Take a deep breath.

Is there anyone out there who honestly thinks airlines are going to have armies of people who are sitting around waiting to read every Tweet on some little problem? is it just me or is this a completely MAD notion?

This is NOT the right use of Twitter, nor is it an expectation that anyone in their right mind should even think is realistic.

The airlines have never - repeat never - engaged in two way communication with their consumers except at the coal face - boarding gate and onboard.

Don't get me wrong - there are some good uses of Twitter, Facebook and Blogs for the airlines to communicate with their customer base. But let's be realistic, this is not 1:1 it is 1:N where N is many - as in thousands or millions.

Forums and message boards have been managed by airlines and other suppliers for many years - this is not new. Social Media is just a spiffed up version of these tool sets. Just read the blogs put out by the suppliers. Some are refreshingly honest and even helpful. But most are still put out by - well PR Hacks. Even Southwest's efforts in Social Media is managed by their PR department.

I am slamming their efforts - far from it - I think this is a very positive trend. But let's not kid ourselves that this is not an open and frank dialogue and customer interaction tool.

If you believe that this is the case and you disagree with me - then clearly you believe in the tooth fairy and I have some choice ocean front real estate in Nevada you might be interested in.


30 March 2009

Consolidation Comes Slowly To Germany

While LH continues its aggressive expansionism with a long list of acquisitions and mergers, the creation of a strong second force has struggled. Should there be 2 players or 3?

Effectively there can really only be 2. So there if there is to be 3 if would not be efficient. However some still hold on to the belief that 3 is possible in that scenario LH's GermanWings LCC would be required to join forces with another player.

One of those doors just shut. Air Berlin will take over TUIFly's scheduled operations. This has remained a separate legal entity for some time and represents the HLX.com (bright yellow taxi) product. As some background, the TUI Group in Germany owns nearly 50 aircraft, which makes it the third-largest German fleet after Lufthansa and Air Berlin, carrying more than 12.5 million passengers per annum. TUIFly Charter operations will remain separate. TUIFly's other businesses such as the former FirstChoice airlines, Britannia Airways, Corsair etc remain under TUIFly's charter operations and are unaffected by this move.

29 March 2009

GetThere Sets Out To Help Corps

Sabre's GetThere product group has launched this week the Demand Management Suite.

Effectively it is a package of products and processes that Sabre is standing behind with a money back guarantee. (Heck people will do just about anything for cash flow these days!)

Corporate Travel Management is bearing the brunt of the Recession's impact. Travel budgets have been slashed and now we are seeing the huge impact on the bottom line of airlines and corporate travel agencies world wide.

Sabre's tools, in my opinion will help if adopted in their entirety. However you don't need to drink all the Koolaid in one go. Just following common sense and keeping your policies in check will pay off in dividends of lowering cost and improving efficiency.

However there is still no substitute for the ultimate question that is only now being asked. What is the value of the trip and is the expense justifiable. In a metric based world this is almost impossible. Many moons ago, I led a team at PARS that developed such a tool. However no one was willing to accept a tool that actually assessed the trip in a price performance manner. Our design was based on the concept of a notional value that not only assessed the return on value of the trip as a whole but against different options. Set up took time but once implemented would have provided a key manner to operate a corporate travel budget.

For example if the value was positive it would have to have a value over 100. Thus a simple rule would be to say you can take the trip as long as the value proposition was positive to the company. In a financial belt tightening world the value ratio could be increased so that no one was able to take a trip if the value was less than say 120.

This would move away from a budget based world to a performance based world for corporate travel. While revolutionary still in today's world for travel - it is quite normal behavior for other functions - both revenue and cost - inside a corporation.

Sabre's solution is still based on the more conventional world of budget based rather than value/performance based. But it represents a model that both TMCs and Corporations should take a good look at.

Cutting for cutting sake is a downward spiral that leaves no winners. This is why I believe that we should be talking about Value and Performance not just for Corporations but for all the businesses in Travel.

So what do you think?


ARC - A Turning Oil Tanker

As the travel ebusiness world reforms itself, some players are becoming more agile. Some are still mired in old school business models. (And yes you know who you are!)

Which is why it is good to see at least one industry player move with the times. ARC - the former Airline Reporting Corporation, is definitely in change mode. While still continuing to operate the world's largest bank settlement plan - they are branching out into new areas. However they are not losing sight of their core mission. Financial fulfillment is no easy concept to grasp and manage. Evolving with the times and needs of the airlines and the neutral - but now highly fragmented - market is their real goal in my opinion.

ARC is definitely worth watching in the coming months. They have new religion. Let's hope that this translates into new actions.

For a sneak peak at their beta services and to sign up - I highly recommend that you do so, go here: