Airlines’ use of data can benefit airlines and passengers
Some three billion passengers flew on 37.5 million flights in 2012, yet the process of linking a passenger to a booking was largely anonymous, resulting in sub-optimal revenues for airlines and a sub-
Some three billion passengers flew on 37.5 million flights in 2012, yet the process of linking a passenger to a booking was largely anonymous, resulting in sub-optimal revenues for airlines and a sub-optimal experience to passengers. Changing that, and addressing the resulting implications, was a theme of IATA’s recent World Passenger Symposium.
“We don’t know the customer,” Air France CEO Alexandre de Juniac said, adding that booking offers are not differentiated or personalised enough. But learning will not come easy. “The fear we have – if you want to personalise, you have to know individually the guys you are trying to deal with,” Mr de Juniac said. “You have to send him various e-mails and it starts to become a nightmare for him.”
JetBlue vice president revenue management Dennis Corrigan wants a convergence – at the passenger’s discretion – of revenue management with customer relationship management. “You need to know who this person is, what their tendency to buy is, what they will buy,” he told the symposium. That will enable a change from today’s mass-market approach where passengers “get the same offers. The price to go from A to B is $200.”
That contrasts to other, more innovative retailers – Amazon is the oft-cited example of smartly offering additional products and discounts for more purchases. “If you self-select to the airlines, say ‘Hey, here I am and here’s my frequent flyer number’,” Corrigan said, airlines can “bundle up an offer.”
Yet that has become a cause célèbre for privacy advocates, which in turn has irked airlines. Symposium attendees pointed out the irony of Disney using heavy personalisation and personal data use at theme parks without igniting backlash. Some argue the public is not aware of Disney’s approach while others say airlines do not cultivate the same trust as the smiling mouse and accompanying princesses.
At the heart of the issue, symposium attendees were told, is the public’s lack of awareness to opt-out of a personalised service. Personalisation can even be favourable as “it’s more likely the customer will have the offers that meet their interests and their criteria [that] the airline is able to uniquely put forward,” PROS senior vice president revenue management solutions Surain Adyanthaya says.
Corrigan sees JetBlue’s challenge as uniting an airline’s offer with passenger demand. “We offer ancillary services. We know customers like them,” he says. JetBlue estimates that in 2013 it will earn US$165 million from its “Even More Space” and “Even More Speed” offers. Unlike bag charges, those are largely new services. The dilemma is “how do we get them in front of [customers] in an easier transaction?”
It is not just hybrid or low-cost carriers that are focused on ancillary revenue. “For us it is absolutely key,” de Juniac said. “Without the ancillaries means that we have a deficit.”
For airlines to analyse and use data in greater volumes, and maximise their benefit from initiatives like IATA’s New Distribution Capability, they need to invest in IT. That may be at a potentially high sum in the tens or hundreds of millions of dollars that many managers – and boards – would shun. “The airline industry has put capital elsewhere,” Aer Lingus CEO Christoph Mueller said.
De Juniac saw the benefit of investing in IT projects with a clear profit boost compared to aircraft purchases that typically fail to generate a return. “It costs, let’s say, $200m, $300m” he said when considering if an airline could achieve such an IT project. “$200m is two widebodies. It’s reachable.”
With more data projects – at potentially unprecedented levels – there could be more calls for regulation. Yet European commission aviation director Matthew Baldwin favours market-driven solutions that do not involve regulators such as himself. But he issued a warning: “There are cases where regulators are driven into action…We didn’t want to jump into air passenger rights, but, if I may say, the industry was slow to pick up the concern.”
Baldwin will be pleased to hear the thinking from Swiss general revenue management strategy Karl Isler. “Customers get different value from the service. All we say is we want to participate at least a little bit in these different values,” Isler said. “It’s a question to what degree do you that. We don’t want to do that in an abusive way. We want to do that in a fair way. If we manage to do so, I think everybody profits. If the airlines can provide better service, there are more customers who are able to fly. It’s essential to what’s been going on since de-regulation.”