Airlines: Are You Conflicted?

According to the Sabre Airline Study - you just very well might be.

Sabre has released a study In the study highlights there are a number of key findings. I will pick out the ones I think are relevant and while cherry picking is the name of the game here - I think it is important to recognize that while airlines think they know what they are doing - there is an underlying trend that shows they are conflicted. So what do you want - Revenue or Brand Value?

According to the study it is "customer loyalty and retention efforts that are viewed by an overwhelming majority of survey respondents (86 percent) as having the most positive impact on their business."

The study goes on to note the conflict the airlines face: "The importance of developing customer loyalty is part of the unwieldy crisis airlines face today as charging additional fees is viewed by them as one of the top tactics to increase revenues."

Overall customer satisfaction with airlines was down this year, at at time when the fewer passengers on planes should have improved the service. The recent passenger imprisonment examples can't have done a lot for their overall image. But if you look at the recent annual Power's survey, Airline customer satisfaction has fallen to its lowest level in four years.

The decline in satisfaction in this year's survey largely was driven by unfavorable customer perceptions on in-flight services, flight crew and costs and fees, according to the survey of nearly 13,000 passengers who flew on a North American airline between April 2008 and May 2009. Both leisure and business traveler respondents reported overall declines in customer service.In its annual survey, JDP measures customer satisfaction in seven categories: cost and fees, flight crew, inflight services, aircraft, boarding/deplaning/baggage, and check-in and reservations. It awarded Alaska Airlines its highest US airline ranking.

"Unfortunately, any improvements in customer satisfaction are being offset by passenger displeasure with cutbacks on inflight services, increases in fees and issues with the helpfulness and courtesy of flight crews" said Dale Haines, senior director of JDP's travel practice.

Going back to the Sabre study, according to 58 percent of those (airlines) surveyed, merchandising and ancillary revenue will help airlines’ bottom line results. Baggage fees, travel insurance, and vacation packaging were rated among the highest in the survey to generate revenue.

And herein lies the conundrum. Revenue or Brand Value.

The Professor thinks that there is a clear case for the "Brandless" brand such as the LCCs leader Ryanair. Michael O'Leary and his crew don't give a toffee for brand. For them the issue of revenue and thence profit is paramount. For legacy airlines in survival mode - as the Head of IATA constantly reminds us - one would have thought that was also the case. But the legacy airlines tend to revert to type. For example one would have thought that it was a little weird that Qantas in the middle of a recession and in the middle of one of their heaviest periods of losses in recent memory - would be running a very expensive strategic branding campaign.

So let's count the ways the airlines are undermining their brand value:

- Confusing fees
- Unbundling the product IE charging for things that were previously included
- Debasing the currency by "selling" differentiators that the high value frequent flyers have paid for with their loyalty
- Moving ancillaries to the point of departure and not making them available at the point of sale
- Selling frequent flyer miles for cash

I could go on but you get the point. The numbers don't lie. Airlines are surviving because of ancillary revenue not because of the long term brand value.

Other interesting Sabre survey findings:

o Increasing revenue and reducing costs is among the most significant challenges in managing airline profits over the next 18 months, according to 67 percent of those surveyed

o Managing revenues (44 percent) and distribution mix (12 percent) are the top two tactics survey respondents plan to use to increase revenues. Ancillary revenues followed closely behind with 11 percent of those surveyed planning to employ this tactic.

It is the last one that I find most perplexing. Given the sponsorship by Sabre of the study - one would expect it to be brought out. However if the legacy airlines REALLY don't regard distribution as important - then they are missing both the opportunity in lowering costs and increasing revenue by doing the one thing they seem to be failing to do... IE leveraging the value of their relationship with the majority of their distribution namely agents. The obvious way to solve that conundrum is through the deployment of new technology and breaking the Gordian knot of the GDS cost model. But then I guess Sabre is none too keen to bring out that point.

Still there is food for thought here. Are the airlines mortgaging their future value for revenue today? Does that future value of the brand actually matter? Perhaps more to the point are the airlines going to have to finally admit that they really are not in control of their brand. Social Media seems to have done a number on several airline brands - both good and bad?

Ah this is good stuff

Enjoy

Cheers