Feds To Crackdown On Airline Cheats.

Scott McCartney of the WSJ's Middle Seat column did a great piece this week on the Government finally tracking down on Airlines who fail to adequately compensate passengers for service failures.

Many airlines think that the rules do not apply to them. Customer service (now there is an oxymoron) departments of airlines are actively engaged in campaigns of disinformation on the subject.

I believe that this may be an effort by the Obama Administration to forestall legislation on a passenger bill of rights. At least to get them to smarten up the act of the airlines.

Delta - I hope you read the article because I am still mad at you for

A) Failing to get me to my destination as contracted (not to mention the screwed up alleged recovery)
B) Failing to recognize that you screwed up 3 times in one O&D
C) For being downright insulting in the responses to my perfectly valid requests for legal compensation.

Cheers

Behavioural Targeting - Good or Bad?

I think many of us believe we are being tracked in one way or another on our web activity. Is this a good thing or a bad thing? How are attitudes differing in the USA vs the Rest of the World.

Privacy laws vary dramatically from country to country. The ability to track behavior either for commercial, social or government reasons has been radically enhanced over the past 20 years via the explosion of web tools and services.

We have had a number of studies pointed at us at how effective Behavioural Targeting (BT) is. Personally (living in the USA but traveling frequently across countries - spending a lot of time in Europe) I find that attitudes to this are pretty polarized. In countries with strong privacy laws (e.g. EU stalwarts like Germany) the attitude is negative. In the USA its pretty laissez faire.

Finally some independent studies are beginning to appear.

eMarketer has just put together a little piece which is based on an independent study (when are studies not independent!!!).

It appears that actually many Americans don't like it. Frankly I don't like it and I really think that its bad enough being spammed with a lot of stuff but I find BT somewhat creepy.

I was chatting to an Australian friend of mine this week and he explained how annoying he felt getting "targeted" emails which then when he wants to use them he is told - US residents only.

So this is the other part - BT that is sloppy and the spill goes out to completely non-possible respondents.

So BT should indeed be more careful. You cant have it both ways - IE deliver BT tightly to a group and then not check basic things like their email addresses or any other items that would clearly identify them as "foreigners".

But at the end of the day - I think that BT is here to stay. I just hope the metrics and the use thereof are better than the somewhat poor implementations today. This is definitely a version 1.0 product category.

Cheers

Shock Horror - WN Loses Money - AGAIN!

Using the opportunity to have another bad quarter along with everyone else - WN lost $16 million. Itself an improvement on the $120 million loss from last year's numbers.

It is interesting to note that WN has become more and more like a legacy carrier and less and less like a LCC carrier. Perhaps its profitability is tracking that behavior.

Hmmm that's an interesting thought

Cheers

Air New Zealand's IT "Melt Down" vs Ryanair's "Planned Outage"

Air New Zealand is one of those airlines that has had its fair share of ups and downs. Nearly brought down by the Ansett Failure and a disastrous set of relationships, the carrier in recent years has operated shall we say a more realistic business model.

On Sunday (October 11th) an airline's worst operations nightmare was realized. Their IT systems crashed - specifically check-in went down. Interestingly it happened on the quietest day of the week in a relatively light weekend. The total number of passengers impacted was estimated at 10,000. The outage did not meet the threshold of compensation as the actual outage was less than the mandatory period. So in reality it was not such a huge deal.

The next day the staff of NZ were treated to a blistering memo from CEO Rob Fife. Here is one link from Computerworld which was probably the most prosaic of all the commentaries.

Now this was interesting in two ways and this is the point of my post here.

The press over Ryanair's planned outage during its cutover from OpenSkies to NewSkies was quite moderate in comparison. And the system was actually down for days not a few hours with operational impact that lasted for several weeks after. Even more recently there have been issues reported at Stansted with check-in systems going down. Remember FR is now 100% web or kiosk check in. Ryanair typically moves more than a million passengers per week.

So the setting of expectations and managing the message becomes quite clear. However perhaps more important it illustrates the love hate relationship that Airlines have with IT.

A final point is a demonstration of why I think Ryanair is actually actually behind the scenes a model for a lot of other airlines. The fact that the airline (FR) can revert to running essentially on paper is nothing short of miraculous. The fact that today they are one of the top 5 airlines for branded passenger operations shows that perhaps there is a lot of stuff that other airlines have that is really useless.

Now that is what I call food for thought.

Cheers

Mesa and Mokulele Kiss and Make Up- Competition to Suffer

The giant battle for second place in the Hawaiian intra-island market took a remarkable turn yesterday with the two challengers agreeing to back off and cooperate.

From here on in - Republic - the controlling shareholder of Mokulele will bring its 3 E170s back to the mainland and instead it will become 25% owner of the local lift of the JV.

The two apparently will mix and match routes. Republic, for example, will pull three E-170s it had allocated to Mokulele back to the US mainland to be operated by one of a number of carriers the company owns. Go! will take over the routes that Mokulele operated with those aircraft.

As with all deals - this one is probably an unnatural act. The real winner here is going to stay Hawaiian Airlines the 80% dominant carrier. And of course the big loser (drum roll please) - the consumer.

Cheers

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

JAL Pulls Back. Sees Salvation At Home

JAL seems to have gone cold on its need for external support and has slowed the discussions with the OneWorld and the Skyteam opposing teams.

After a certain dance between itself and the new government, it seems that one of them blinked and while the new Japanese government is not promising to fork over large amounts of cash - it does seem that the local financial markets will once again shore up the ailing carrier's balance sheet and cash position, at least for the short term. With the US carriers having taken advantage of the easing credit markets to improve their current positions, the pressure for JAL to do the same thing is becoming acute.

JAL has clearly listened and is starting to cut into the fat. It is pairing routes and frequencies. As the one of the largest 747-400 operators - it can clearly save a lot of money by parking some of those and replacing them with large twins. But the biggest issues remain that the culture within the airline remains a critical obstacle to change and the speed of change.

For that only a new focused management team can actually make the changes necessary for the long term survival of this legacy monolith.

Cheers

Boeing to Scrap first three 787 prototypes

Part of the grand plan with the 787 program was that the development aircraft would be refurbished and put out into the passenger fleet.

It seems that Boeing has had to scrap that idea and indeed it has a $2.5 Billion (in a non cash charge) to write off the first 3 test examples which are not possible to be returned to the pax fleet. Boeing describes the situation that these aircraft are not commercially marketable due to "extensive modification work".

Let's hope that these aircraft don't end up on the scrap heap like these fellows here. I am sure that the Museum of Flight and the Smithsonian Museum will want them