Changing Roles

As many of the readers of this blog know, I am somewhat personally attached to that little airport in Central Germany, Erfurt-Weimar.

Last week I was taken into a discussion by Thuringia’s Minister President Bodo Ramelow, about how to stop the down-spiral of emigrating Thuringians. Which reminded me about the likewise discussion we had in 2009 shortly before I joined Erfurt Airport with the task to stop their downward-spiral on their passengers.

Real Life Example

What I was faced with was an extremely negative image of the airport within the region. And a lot of demands on how to do business from amateurs in the industry, politicians, tourist offices, etc.

First day at work, the GM of Tourism Thuringia, Bärbel Grönegres was quoted in the local newspaper (TA, 02Mar09), having visited the United Arab Emirates to promote medical tourism to Thuringia. Having a Munich-Erfurt flight by Lufthansa-Partner Cirrus Airlines at the time, she recommended the Arabs to take a flight to Frankfurt, to be picked up with a bus for a +3 hour tour to Thuringia. Tourism material did not contain reference to the airport. Questioned about the reason, her reply was “Who knows, how much longer we will have that flight”. Ever since, that became a prime example I use for “negative thinking” or “calling for disaster”.

The next winter, the Thuringian Olympic athletes brought home a record number of medals. But at the following ITB, it was more important to promote Franz Liszt, who lived a dozen years in Weimar. The fact that the Russian-Orthodox chapel, Grand Dutchess Maria Pavlovna who’s invitation brought him to Weimar has built and got buried in is under direct protectorate of the Russion Orthodox “pope”, the Patriarch, such making it a pilgrimage site for the Russian Orthodox church has completely failed to trigger any support by Weimar or Thuringia Tourism. Air Berlin reported it to be a “known reason” for a substantial part of their Russian Berlin-passengers to add Weimar to their travel plans.

In order to promote the government-funded route, after fierce discussions, Cirrus Airlines agreed to offer a low-cost ticket at 99€ return, having only about 6€ after the high taxes on the ticket. That offer was made available especially to the Thuringian government offices and the state development agency (LEG). Nevertheless, LEG planned and executed delegations traveling with the train to Berlin to take flights from Berlin, instead of promoting the route. The same also for the ministries and ministers. Even the responsible minister taking flights from Frankfurt and Munich instead of using the PSO-route he signed responsible for. During the months we’ve actively promoted that 99€-fare also to the industry and the travel agencies and also had it largely available, not one of the flights used up the 99€ tickets allocated to them. Being at the verge of a bankruptcy, Cirrus Airlines finally ceased to operate that route in December 2010.

By the time, working with the local industry associations, political parties I have been able to increase the passenger numbers by about 20 percent. In fact, to date, the airport is far from the 320 thousand passengers I left them with. With Weimar being the neighboring but historically better known city internationally, I pushed forward the renaming to Erfurt-Weimar with the attempt to improve the incoming for the airport. Paid almost completely from the limited marketing budget. A strategic decision executed after our parting-of-ways in December 2010 after my two-year contract was not extended in the wake of the retreat of Cirrus Airlines. A strategic decision though made obsolete by the “political” decision by traffic minister Christian Carius to not replace the route as I recommended with an Amsterdam-service. Sad decision indeed, as with our parting ways, the discussions with KLM were simply discontinued (KLM calling my number reached someone speaking German only, I was gone) and despite their interest in a PSO (public service obligation) financial route support, we had discussed flights based on mere startup incentives and marketing support.

Opposing myself ongoing subsidies, to demand a route but to leave the (substantial) risk completely with the airline is neither the answer. Whereas comparing the CheckIn.com-data about airport catchment areas with the data provided by airports we found that data to be completely off-set in a majority of cases. It caused us to make basic data available for free. But if the data provided by the airport is not hard, but guesstimates or outright lies, when the airline starts a flight based on that data, the airline takes the risk. To not only does the airport sneak out of the responsibility, they increase the airlines’ risk – is that a game? Or serious business?

Fraport Bulgaria’s more than doubled “population within two hours” can not result from the “drive time off-sets implied by Fraport Bulgaria investigating the discrepancy.

Changing Roles

Now since I started in aviation 30 years ago, the market has drastically changed. In the good old days, there were (often highly subsidized) “national airlines”, used to promote the country. Back in my early days, the airlines were the executive for the tourist offices and also worked closely with commercial development agencies. But ever since, those national airlines have either adapted or went out of business. The emerging “low cost” airlines virtually evaporated the income of the airlines, competition becoming fierce.

As I keep emphasizing with my updated image of Purchasing Power and Airports, there is a relation between a strong airport and the regional purchasing power. It is indeed a hen/egg issue, but if you are a small airport in a weak region, maybe it makes sense to consider how to attract travel (tourism, commerce) to your region. Not how to drain your region of the money by sending the population to the Mediterranean for vacation, but by having incoming, scheduled services, by adding point-to-point routes and to attract low cost airlines.

If we do not talk about PSO (Public Service Obligation) where the government pays for basic flight services, if you build an airport and wait for airlines to find you, keep on sleeping (and burning money). So if you are a small airport and you have little to no money, what can you do?

Having an airport is not enough any more.

The airport is part of the region’s infrastructure. As such, it needs to be integrated into a political and commercial strategy. Whereas in the example of Erfurt-Weimar, the airport is being kept as a scapegoat, being challenged in one sentence for the aviation noise (a good joke with so few flights) and for not having flights. A political punch-ball.

Other, successful airports like Memmingen in Southern Germany are integrated into and understood as a strategic value for the regional development. In fact, Memmingen is not politico-owned but owned by more than 60 co-owners from the region’s industry. Such, instead of being a scapegoat for political power games, everyone in the region understands the need to actively support the airport. Anyone harassing the airport confronts everyone in the region. A political suicide!

At Erfurt, I was asked to establish flights to Moscow. One company. 10 employees. Even with a small (expensive) 50-seat aircraft and weekly flights only (which are usually not sufficient for commercial demand), we talk about 40 seats by 52 weeks in two directions or 4.160 tickets to sell every year. But for a decent offer that is useful to the industry, you need at least twice weekly flights.

Leaving that task to attract airlines to the airport alone, at the same time running blame games and scapegoating, the airport cannot justify such flight. But what if the state development agency and the chambers of commerce, on demand by the political PTBs (powers-that-be) qualify the demand from all those small and midsized companies? Not on a low-cost, but with reasonable ticket prices. Not at prime time at the maximum risk for the airline. Maybe instead of a weekly, can the region sustain a double or even triple-weekly flight making it interesting for the companies in the region? Are those companies willing to support the launch period by committing to use the flight, even if slightly more expensive than a flight from Frankfurt or Berlin? Keep in mind, the people have to get there, you also pay for gasoline/parking or rail. Transport to those hubs is not free either. And the longer check-in times make them even less attractive, right?

Interesting approach. I’ve talked to several smaller airports where they agreed that their chamber of commerce and regional development agencies “pre-purchased” tickets at the cost of the average ticket price needed to cover the operational cost. Then they to sell it to their members. Not covering the full cost of operations, but simply taking their share of the risk! Why should they not, if they believe in the numbers and data they provide to the airline to promote their business case?

Then talk about Tourism. Given such flight, are the local tourism PTBs ready to promote such flight in the outlying region? What about other promotion? Don’t leave it to the airport! Is there a joint concept by the political PTBs, the state development and commerce PTBs, the tourism PTBs on what flight they want, how they will promote the flights?

“We have an airport”. That’s nice. But not enough.

And for a Minister President even only on a state level? You better think about a strategy. Or close down the airport. Having flight to summer vacation is not enough. It drains money from your region into those destinations. What’s in it for you? Why do you fund an airport? No scheduled services? No incoming? Do your homework.

Changing Roles

It’s no longer the job of the airline to promote your region! They simply don’t have the funds to do that. It’s not their business case.

It is the job of the political, commercial and tourism PTBs to qualify what they finance an airport for and come up with ideas and business cases for airlines to take the risk to fly there. And no, a “business case” is not necessarily paying subsidies. If you have a good business case that the airline will make money on the route by flying paying passengers, I can rest assure you that the airline will prefer that over subsidies that are usually associated to political nightmares.

Compiling sound numbers is a good start… And yeah, I might be willing to help you with that.

Food for Thought!
Feedback welcome…

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Carolyn McCall + easyJet Vienna

Three news this week I find noteworthy about easyJet.

Where I have learned early to have the greatest respect for Dame Carolyn McCall, she now resigned at easyJet to join the TV industry. And the same time, easyJet is in the process to acquire an Austrian AOC (air operators certificate) to prepare for a post-Brexit world. Third, they celebrated their delivery of the first A320neo (new engine option) and converted A320-orders to A321.

While the first may be a career move for Dame Carolyn McCall (and that is all that counts from any employee view), it is a tragic loss to our industry. And I might be wrong, but I believe this will be similar to the loss of Steve Jobs at Apple.
Carolyn McCall has understood that “service” and “behavior” are not that expensive but important difference-makers. easyJet customers’ loyalty is substantially stronger than Ryanair’s or British Airways’. How you treat your customer not only if legally required (Ryanair continually failing even on that) makes a difference. I learned back in my early days with American, that friendliness and a smile are the spoonful of sugar the traveler needs. And they understand things can go wrong, even more than our industry pretends.
Her successor is rumored to be likely easyJet Christine Browne, the management remains to keep it’s female touch. But does she understand, live and provide the role model for “her” airline about “customer focus”? Or will she fall into the trap American did in the days when Bob Crandall left, to focus on money, money, money?

easyJet on the Move?

About the process to obtain an Austrian AOC, there are several pitfalls and hurdles I see in that decision.
Austria is not truly a “low cost country”. Which is similar true for the U.K. or Switzerland, but where the U.K. enjoys two strong source and destination market with London, Switzerland enjoys a very strong economy. And they are rather flexible on taxes (Wizzair is in Geneva for good reason).

If and how the Brexit impacts the U.K. market remains to be seen. But Austria and Vienna do not have that strong a market. And while Basel has been underserved by classic airlines, at Vienna easyJet will face potentially fierce competition from Lufthansa group, whereas they might hope to benefit from the retreat of Niki from the Vienna scheduled flights market.

The flying part though is not the issue of my concerns, I’m sure easyJet will do okay on that end. But establishing a “sub-HQ” in town comes with a price tag. And there are other European cities that might have been cheaper and bureaucratically more efficient than Austria.

A320/321neo. A Change-Maker?

The third news that “hit the media” was about the delivery of the latest Airbus A320neo, as well that they convert A320-orders to A321s. Such they upscale the fleet to the 250-seat A321s, I have concerns.

While the A320neo comes with 12% better performance, by 2022, when all orders are delivered, the aircraft will reflect about 1/3rd of the easyJet fleet. And as Airbus changed the structure, the “old” ones can not simply be “upgraded”. So on a fleet level, that will account for a 4% benefit. Or to give a common example: For a 100 Euro ticket, you then might pay 96 Euro. Though I happen to believe that this will be simply accumulated to improve the ROI of the airline.

Further, on the “work horse” A320, it’s only 25%, the others are A321neo’s. Whereas I believe the A321 will simply cannibalize routes that are currently operated by A320s. Whereas, will larger aircraft and the “better economics” per seat equal the lower possible frequency? And frequency is something business travelers like. Is the cost advantage that high that it will exceed the advantages of a higher frequency? I have my doubts.

Quo Vadis easyJet?

How will those two decisions impact on easyJet?

Get me right. I love easyJet for many years. Their inflight product is as good as their overall friendliness and efficiencies. They focus on business case but keep customer-centric in mind. But as Ryanair, they try to sell aircraft they ordered, finding it hard to place the large aircraft in Europe. Now they face a Brexit and size-up the aircraft, cannibalizing their existing routes at that.

For Carolyn McCall it is a good time to leave the company at the peak of “her” success. The successor will phase some repercussions out of his/her control, as well as some tough decisions to make.

Food for Thought!
Comments welcome

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Hamburg Aviation Conference 2017

As I attended to be interviewed about the stuff we do at CheckIn.com, you can click the image to view the video on Facebook.

Reviewing the recent Hamburg Aviation Conference, the aviation conference addressing new developments and ideas, it boils down to a “known issue” for the future of the aviation industry:

To tear down the walls.

Data Silos … and it’s not new.

As outlined here in Food for Thought and have been asked to address at Passenger Terminal Expo, there were a lot of very fancy ideas and outlooks where we want to go. About any session addressed the “data silos”. There are a lot and I mean a lot of good ideas and developments taking place as we speak. But all of them are isolated ideas and developments. Look at what airline X does. See here airport Y.

Just one of the many statements at Hamburg Aviation Conference on the topic:

“The check-in process is a totally disjointed process” [Peter Parkes]

Remember my posts about Checkin 2015 and the follow up Check-in 2020?

The underlying line I hear, though not really addressed, just mentioned, is the data silos. Even when being mentioned, it was mentioned as something that “naturally” has to happen. But without it, all or most of those wonderful developments remain what they are. Silos. Be it an(other) airport-silo, an(other) airline-silo, silos being disconnected from the other silos within the same company.

But. This. Is. Not. New! Together with Richard Eastman, from 1996 I emphasized the conversion from a whole sale model to a consumer driven model and the disintermediation in aviation distribution: Everyone deals with everyone. The example Yesterday / Today to the left is from my presentation at ITB in 2000.

On the floor, there were many discussions that there is a need in “change managers”, as there are all those fancy solutions and understanding of the need. That again reminded me of my question, why after 20 years only 20 airports implemented A-CDM – in my opinion for the very same reason. Everyone talks about it, nobody really knows how to do it, everyone thinks everyone else is doing it, so everyone claims they are doing it…

There were quite some discussions about the data silo issue and airports and tech companies telling about those very new and fancy solutions they develop. But when I look across to other airports, airlines or tech companies, I find they just build new Data Silos.

It’s not about Data Silos …
… but about Silo Thinking

Data Silos are simply the result of the real problem.

It’s about “who’s data is it?”. It is about the decision makers and stakeholders unwillingness, inability and misconception about a collaborative approach: “Give me your data but don’t date touch mine”… The very same as on the A-CDM side of our business.

The point when the aviation industry reinvented itself and evolved into e-Commerce was back in the 60s t0 80s, when the rise of the CRSs required standardized messages to exchange through the aviations teletype (telex) network. The birth of what today is AIRIMP. Nowadays, IATA works on “New Distribution Capabilities“, though there are fundamental issues when you compare airline sales to Amazon. Where Amazon works with warehouses and even opens own shops, the airline seat is one of the most perishable goods – something Amazon for good reason touches very differently.

The second large move was again forced, when in the mid 90s to 2000 the Internet forced the players to “get online”. Since 1994, I preached the need for airline sales to embrace that change.

I mentioned A-CDM and TAM as a starting point to tear down those walls, but I see a lot of not invented here responses.

Else … The Passenger Journey

Some of the really good ideas in the dead lock of silo thinking, where about one of the new hypes: The Passenger Journey.

When talking about the customer, how do we identify that very customer? By e-Mail? I just happen to change my employer at times. And I get a new address. I currently run three “main addresses” and use different ones for the various social networks. If you identify me by e-Mail, I use a different one when I travel for business than what I do personally. I’m two customers. Data Silos.

There was quite some talk about the need of the “passenger journey”, but also how fragmented that journey is. No wonder, the passenger being split to “airport customer”, “border control/security”, “airline” and the exchange of the traveler from one to the other complicated by Data Silos.

Around 2000, I mentioned in my annual presentation about Airline Sales & e-Commerce for the Airline Sales Representatives Association, that Google was said to identify a unique person within 20 searches, based on IP geographic area, typical questions, etc. That was what … 17 years ago? And we don’t even have a single source of truth for a passenger in aviation. Very often we have separate profiles even within an airline – for GDS/CRS (old legacy tools), check-in and operational processes, but separate for social network contacts. A customer contacting via Twitter or Facebook is (in my experience) usually not associated to the passenger profile! Some examples to the contrary, usually on the large and newer players (i.e. Norwegian, easyJet). Is this a premium customer on the social network or is it a first traveler? Is it someone enroute or at home? Data Silos.

At lunch we talked about another example. I may be a prime customer (“frequent flyer platinum”) at airline A, but I have trouble, getting recognition at airline B. Because it is not about being a frequent traveler, it’s solely about revenue. You are not with us, we don’t want youThat a good treatment of the frequent flyer on your competition might entice him/her to your own product is beyond the decision makers in most if not all airlines. Data Silos? Silo Thinking!

Else … Global WiFi access

On the “customer journey”, every stakeholder forces the customer to change Wifi on the way, use an app for the airport, the airline, the other airport, etc., etc. I mentioned that back in my Check-in 2020 blog.

Whooops. And my friend Stephan Uhrenbacher has to tell me he had an app developed that does it all: FLIO. But… Unfortunately the providers don’t want this, they oppose it and fight to not make this happen. And the airport WiFi is hardly in the control of the airport, but of “some provider” the airport just pays. So they want their log-in processes and pages and have no interest in “usability”. That being true especially on the U.S. market, where in addition the “free WiFi” very commonly fails and then the users complain about FLIO and not about the free WiFi provider of the particular airport. Stephan promised me, the idea is not dead, but yes, the task is not as easy as it might sound. Thanks to Data Silos.

Else … Ryanair, Air Berlin & Lufthansa

Kenny Jacobs in his very interesting interview announced they complained legally about the Lufthansa/Air Berlin merger, saying that is what it is, being called a “lease” business or whatever. As such, Germany remains a protected market with Lufthansa dominating 62% of the domestic travel.
Side note: That also goes in line with the trade press reporting the remaining Air Berlin being not sustainable. Questioning if Air Berlin is now simply bled dry, leaving the commercially loss making parts in the remaining company, accepting the bankruptcy as a logical end to it. I happen to agree with that assessment.

He also  announced they will feed to Aer Lingus and Norwegian on an “interline light” model but with baggage thru-check. Another step from Low Cost to classic operations model. As I kept emphasizing in my Airlines Sales & e-Commmerce presentations. Low Cost will only need a business case to provide “classic” services. Also nice to remember that ANNA.aero article a year ago (right).

Ryanair develops inhouse, for speed and prioritization of development. Ryanair decided to stop looking at other airlines what they do on their digital strategy, but they look at digital pacemakers, Amazon, Facebook, etc. to learn what they can do to attract the customer.

WiFi onboard? Consumers want to use their own devices on board. But the bandwidth inflight is not sufficient for mass communications. He believes the speed to come up in two years, but then the bandwidth demand will also increase. Yes, for long haul, but on regional flights not a real issue he believes.

User Centric Design

Konsta Hansson of Reaktor.aero had an interesting look into user centric design, not to decide for the user what he needs, but find out what the user needs and leave out the rest. He questioned if a check-in is a given need – or just a legacy process. Using RFID and e-Passports, I strongly agree with him.

Question I’d have and could not answer is based on the assumption that “check-in” is obsolete, how would you really refresh processes from the existing legacy processes to a completely digital process? And how do you manage the necessary change management with stake-holders like government bodies? Data Silos.

Who’s Customer is it? A Revenue Issue

Shall the passenger be shopping in the airport or in the airplane?

My three friends Stefan, Daniel and Marjan were on stage, discussing the different models the airports have to decide upon about their revenue stream for the passenger, called “ancillary revenues”. Daniel emphasized that within 20 years, the revenue for the airports no longer comes from the airlines. But (declining) from the in airport shops and (increasingly) the aerotropolis.

With Ryanair talking about “free tickets”, keep in mind, there is nothing such as a free meal. Someone will have to pay the air ticket somewhere in the process.

Summary: Start Moving

There was a lot of visionary ideas about where to go, but rather little about how to get there. The above concerns were quickly voiced but not identified as concerns. Steps taken are taken by individual stake holders (technology companies) and less on a development of common standards. So we have fantastic ideas, but we all keep develop our own individual standards = Data Silos. And worse: Silo Thinking!

We talk about “passenger journey” but the solutions are neither user centric nor easy to use. There was recently a story on LinkedIn titled Brand suicide case study: British Airways I strongly recommend… It is a good example about Data Silos, Silo Thinking and not specific to the named airlines. The same story unfortunately is true for most airlines. What we need is a management effort to Tear Down the Walls!

Food for Thought!
Comments welcome

… and if you happen to have a job for me looking after this, please keep in mind I am a job seeker!

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Unique Selling Propositions

USPDuring my initial business education, more than 30 years ago, the General Manager of the company hosting me for the practical part told me: “Someone else always can sell cheaper”. At the time, concepts like “USPs” (Unique Selling Propositions) had not been “common”, but it practically was about how to position for success.

You Get What You Pay For
You Get What You Pay For

The mantra in the aviation industry is to be always the cheapest. The mantra in procurement / purchasing is to buy the cheapest. In Germany, we have two different words for “cheap”. Billig and preiswert: Billig is cheap. Preiswert is “worth the price”.

Another old saying is “You get, what you pay for”. And yet another saying I heard in procurement is: “Save money, no matter the cost”.

But my friend Richard told me some 15 years ago that there is a psychological price. He also told me that IT (what we both worked in and now work again in) is the first thing that procurement “saves” upon, as they don’t understand its value.

So if it is not the price, what could it be?

HAM: Hamburg Airport Marketing
HAM: Hamburg Airport Marketing

A unique identity could be one. For airlines: When I started in the industry, I could distinguish airline crews by their uniform. Today, the differences in the uniforms are so minor that flight attendants of different airlines standing in one group can not be distinguished any more.

For conferences, I keep refering to Hamburg Airport Marketing. From afar they can be identified. And even promoting Hamburg big on the shirts, it doesn’t look “cheap”, but gives identity! It can be even worn at the “business casual evening event”. And believe me, if you look for the Hamburg team, you do find them!

Though for some reason inexplicable to me, many sales managers deny to wear uniform, much less some easily identifiable wardrobe as that. They seemingly prefer to blend in with all the other black ties. Though why you want your company and products and yourself to “blend in” instead of standing out, is simply beyond me 🙂

If you can establish a unique identity, your customers associate intuively with your product, you increase your reseller base, as they will remember you when opportunity arises. If your reputation is bad, all you can do is to undercut your competitors in price. If that is your USP, I’d say you may have the problem with the fact that always, someone else can produce cheaper.

Quality is a good USP. And quality comes in many aspects. Part of quality can be friendliness – in the beginning of my career, at the time with American Airlines, we got “beaten in” that we always have to smile when interacting with other people. Not just customers, but also our own colleagues. As the saying goes “Formal courtesy between husband and wife is even more important than it is between strangers.” [Lazarus Long] – I found this especially true in companies. If you treat your own people bad, you will treat your customers likewise. Unfortunately, service is something that button sorters (accountants) don’t understand. Friendly Service does not have a price tag. Just if you don’t have it, you will pay the price. In lost customers.

BethuneQuote

Service is also how you manage with problems. Can you truly afford your customer(s) to be upset, just to save some money? Even if you do not pay, you got to talk to the customer and explain. Do not write. And don’t “outsource” your customer communication or you will loose them.

Time is also an essential difference maker. Why else would airlines reduce the prices if you connect making a detour through their hub (connecting airport), compared to a nonstop flight? In IT, time to delivery is of essence. Too many companies succeed by selling you dreams, but failing to deliver. Leading to the next Soft USP:

erf_you_dont_have_to_be_the_presidentHonesty. I was tought early in my life to never lie if possible. Bend the truth, better tell some truth that makes the people believe you lie (and proof them better later). When Obama visited Erfurt, press asked. All I communicated was “The Pilots’ Union said that Obama’s 747 cannot land in Erfurt”. What I did not tell them, that the Union’s “experts” had missed the fact that Air Force One is usually not “fully loaded” and has the advantage of some (so public sources say) 20% higher engine power. When it came to Erfurt, I had never lied. And ever since had a good standing with them. Honesty creates trust. If you lie once, you’ll have a hard time to recover.

These are sure just examples. But it strikes me odd, how many companies, especially in aviation, do not have an understanding of their business culture and their USPs. But if you don’t communicate that to your own, how do you think your customers will learn about them?

Samsung-S5-vs.-iPhone6A final example for this article today shall be Apple. I loved Apple. Past tense. They made the first smart phones. All others copied them. Now they struggle and their answer is “me too”-products. What was their USP?

I took the iPhone6 into my hand and decided: Too big. My iPhone 4S does all I need. Intuitively and without some double tab on home to be able to access the upper screen.
If I want to watch video, I use my tablet (did I mention I shunned the iPad and got a Windows-Hybrid?).

So Apple lost a customer. Because they evolved from the pioneers to the ones limping behind. It would be time for them to reassess their USPs, their business propositions and their strategy. Then maybe they might find that they left frustrated customers behind with their “bigger is better” and instead made their phones expensive Samsung-clones, just without a “Mini”.

Sell, sell, sell. But if you do not know what you sell, all you do is lower the price until someone buys. I predict that fate even for Apple. But if you can explain the differences, if you can explain the quality, you hardly need to sell. The people buy. Though that requires management to understand and support that, to drive, not being driven.

Hmm… None of the business plans and their revisions I worked on took less than several weeks to come from an idea or product to a sales strategy for the different “customers”. Capital investors, buyers, suppliers, partners. And to answer the main three questions (beyond the idea) that all business plans contain:

  1. What is the business case?
  2. What is the USP?
  3. What is the risk and opportunity (so-called SWOT-analysis)?

Once you can answer these three questions, you have your sales strategies, your elevator pitches, you understand. Then all you still need to do is: Communicate it to your people! Spread the word.

Food for Thought
Comments welcome

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What is ‘Low Cost’?

An interview in ATN with Girma Wake, Chairman, RwandAir triggered a question that spooks around for quite a while now.

Wake-GirmaATN: Are you afraid that this new environment will bring more low-cost carriers or do you believe that this model does not fit into the African environment?
GW: I personally believe that low-cost carriers in the African sense will be very difficult to achieve. First, because the cost of fuel in Africa is high, second there are limited  secondary airports in Africa, we all fly from the same airports, and third there are few countries where the traffic density is large enough. If you are paying more for everything, handling, fueling, overflying etc, how can you be a low cost carrier?
So the question will have to be modified, may be not so much on the low-cost aspect of it but considers the issue of flying smaller airplanes to smaller airports covering smaller destinations bringing passengers to the major hubs. Such a model will probably work but the low-cost model as it works in Europe and America will take some time to develop in most parts of Africa.

Can a regional carrier with small airlines operate low cost? Can a long haul carrier operate low cost? Why can’t the big ones operate low cost?

InterskyJust my idea on that: I truly believe that a small carrier can operate a low cost model. In the beginning the carriers operated large narrow-body like 737-800 or A320 with some 185 seats. More and more, they also operate smaller aircraft like the 737-700 or the A319. And the time the prices were really low are gone as well. In the end you have to cover cost of operations as well as secondary cost like marketing, call center, claims and refunds, taxes and the likes. Not to forget the kerosene as a main cost block, forcing the models to slowly converge. Did I mention Intersky’s regional low-cost operations?

German DLR recently made a study on the fare levels. Comparable flights turned out i.e. an average fare incl. taxes/fees (selected days) like

Ryanair (FR) 78,78
Easyjet (U2) 97,44
Germanwings (4U) 144,33
Air Berlin (AB) 158,64
Wizz (W6) 69,99

With “low cost” and “traditional” airlines offering about the same price levels, it is about cost of operations and you got to cover your cost – low cost or “old model”.

IHS actually reports on the importance of low cost carriers for the smaller regional airports. With cost savings programs reducing services (and service), the “old carriers” loose quickly ground to the ever-expanding, young and hungry competitors. Where Lufthansa services about any German airport in the past, today Turkish Airlines offers more services to German Airports from Istanbul than Lufthansa from Frankfurt! easyJet (with a large base in Berlin) today operates more aircraft (199) than Air Berlin Group (153). And easyJet has 166 aircraft on order plus 100 options (Air Berlin Group 55 orders).

But easyJet can be booked in the GDS. There website even supports to book multiple flights connecting, which I did myself to the U.K. lately (via LGW). As I keep saying: The difference between Lufthansa or Air Berlin and easyJet is NOT that they are only bookable on the Internet (which is simply not true), but that easyJet doesn’t have legacy systems and processes – for easyJet, they focus on the business case! Where “airline sales” often gives special rates to portals and travel agency chains, easyJet does not see a benefit to sell low. They focus to sell high. So if you negotiate with them, you don’t negotiate competing the cheap fares. Also repeating myself: Anyone can sell “cheap”, you need no sales manager to do that.

And two remarks closing: Carolyn McCall, CEO of easyJet is known to understand and promote “service” as a unique selling proposition (USP). And WestJet with its Christmas Miracle had clearly a promotion for the WestJet trade mark in mind. While the “established” airlines keep diluting their own trade marks: What again has “Lufthansa” to do with “Germanwings” (Swiss, Austrian, …)? Ain’t they competitors?

Post Scriptum: ANNA.aero just announced axing of Ryanair, mostly of regional routes.

Ryanair_Cuts__2013-14

You should not rely on Ryanair for anything more than a door opener to make your airport known… And as an airport and region, you should have a strategy to sustainably place your airport on the “road map” of the global aviation network. That requires a strategy, incoming, route feasibility studies and all that common homework.

Food for Thought
Comments welcome

In memoriam: Airline Sales Representatives Association Frankfurt e.V

asra

Having addressed “Airline Sales & e-Commerce” in presentations between 1994 and 2007, I became honorary member in 1999. I have tried to raise awareness for the changes our industry faces but now regretfully have to accept the official disbanding of the association effective August 1st, 2014.

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My American Airlines Story

As many of you know, I started my career with American Airlines. That I left due to a mobbing supervisor was one of the “mistakes” I do happen to regret in my career. Though looking at American today, I am not so sure if I’d be a happy employee either.

As Air Transport News summarized World Low Cost Airline 2013 congress: “In the current cut-throat market conditions with the so-called legacy carriers cutting jobs, renegotiating staff contracts, the concept of customer loyalty to a brand is becoming obsolete as the lines between full service carriers and low cost ones are getting blurry and price has become the key factor for customers when it comes to choosing a short haul flight.”, they make a common mistake, as I strongly believe that brand is not becoming obsolete, just neglected.

AA-logohistory
AA logos during the times
AA. No question.
AA. No question.

When I started with American, it was the world’s largest airline. We were Proud to be American, we received frequent training to always smile at the customer and “customer first”. We also received monthly video updates from the senior management about strategic plans and news, we were a big family. Reminder: That was the World’s largest airline. In all those years, in fact in the past 80 years, the American aircraft was easily distinguishable by the eAAgle on the tail with it’s double A. In many movies, AA aircraft could be identified simply by the silver body with the blue/white/red stripe, even without the logo or the name on the body not being visible. From far away and even in bad weather, the aircraft was easily distinguishable by its prominent AA on the tail.

blank nose
blank nose

The new aircraft at that is a greyish color, reminded me on my first encounter too much of the U.S. Military Airlift Command, with bright colors being the name on the side of the body and the colors of the American flag on the tail, very similar to U.S. Airways and with very little profile. And the main identifier, the “AA” is gone for good…

American (new) - US Airways - American (traditional)
American (new) – US Airways – American (traditional)

The staff is “just another airline”, I did not receive much of a smile at all, neither on the ground, nor in the air. Having been the pacemaker in aviation technology, inventing SABRE, enabling global bookings long before Internet, Frequent Flyer Program and Yield Management, technical problems found me at a loss. British Airways, partner of AA in the Oneworld Alliance was unable to issue the Boarding Pass for the connecting AA-flight – all being booked under AA flight number. Baggage being checked through to Vancouver, I received one boarding pass for HAJLHR, then in London the next one for LHRDFW and because the onward flight was beyond 24 hours (I made a 23hr-stop to meet friAAnds), I only got my third boarding pass to Vancouver in DFW. My baggage they could handle, but to issue the boarding passes for the entire trip was a technical problem? I’m at a loss, find that even questionable on a legal level…

Robert "Bob" Crandall
Robert “Bob” Crandall

Discussing my experience with friAAnds and stAAf I met during my trip, I found that the AA-spirit is gone. Ever since Bob Crandall left, the button-counters took over, who had no vision, but claimed they’d know how to make money. Trashing the high values I encountered in my time when Bob Crandall was in charge, staff is an expensive and expendable resource, service is a theoretical concept of questionable value, people just fear for their jobs and working for American competes with working for anyone else. And now AA is under Chapter 11, “restructuring”. Well, a good result to turn the world leader in aviation to a patient under Chapter 11, right?

Image by Wirtschaftswoche
Goodbye Lufthansa

What is my personal lesson about this? I believe that brand is underestimated. Be it American to drop a recognized, gradually developed brand of 80+ years, dropping the “AA” which was a core in 40+ years of AAdvertising, or be it Lufthansa, “outsourcing” European flights to “Germanwings”, with no visible relation to its mother. And wondering, why passengers show no longer any brand loyalty flying within Europe.

And it confirms lessons that I learned many years ago. My “boss” during business education in a large whole sale business told me: “There is always someone who can do it cheaper”. So price is not a differentiator for a sustainable business.

Richard Eastman
Richard Eastman

And my friend Richard taught me: “Price is psychological”. It is about what is the buyer willing to pay for what reasons. And “cheap” is mostly not the main value. Brand, service, loyalty, identification are very important drivers. Why would one buy an Apple iPad? There are cheaper tablets out there, some of them possibly even better. Why do I buy a Windows-based Ultrabook convertible replacing my Laptop and my iPad? Why do I choose brand X over brand Y? Believe me, I could by “the same” for half the price, but my experience with the brand is good, why should I go “cheap” on something as important as my IT?

Airline Managers focused on the Return-of-Investment and the Shareholder Value but without a vision are followers, they do not make good managers.

Any good business started with someone believing in an idea and taking a risk. Once you loose that entrepeneural spirit, you become a follower and start loosing.

Food for Thought
(comments welcome)
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