Route Financing

Discussing Routes conferences, I recently appreciated several discussions about the imbalance of route financing in Europe. In the discussion, we boiled it down to a simple question:

Who Takes the Risk?

Image courtesy The Economist
Image courtesy The Economist

As we all know, airlines struggle to make money. Which I personally believe is a house-made problem. The use of legacy systems, legacy distribution models make the legacy carriers operate on a cost per seat that’s no longer competitive. In the 70s, a cheap return flight Frankfurt-New York was 2.500 German Marks, about 1.300 Euros. That was 40 years ago. Today the cheap flights sell for below 400 Euros. Return! So the revenue melted away. The cost for aircraft and seats got cheaper too with bigger aircraft. The fixed cost of the flight divided by seats. But that’s another story.

So who are the players in the game.

  • The Airline
  • The Airport
  • The Traveler
  • The Region
Image source
Image source

Let us look at my example I keep using consulting airlines and airports about new routes. At Join! we usually start discussing new routes with airports and quickly learn day in / day out: Everyone wants new Routes, the analyses supporting the case are mostly biased, it all looks sunny-shiny, but no, they don’t want to take the risk. In EU-Europe, they are often not even allowed to take the risk. How stupid is that?

So we usually approach the chamber of commerce, state development agencies and such asking for concrete demand for the routes the airport asks for. All we usually get is some wishful thinking. This company wants flights there? How many seats a year? 4-6… You got to be kidding me…? When we tell them the simple maths, they frequently retreat and have no answer.

The Maths?

Alex Simon was the only passenger aboard and loved it...
Alex Simon was the only passenger aboard and sure loved it… (Picture courtesy Welt.de)

An A319 has 124 seats. At 80% average load (which is low nowadays), we talk about 96 seats. Which have to sell out and inbound. At four flight pairs a day (five to six weekdays, two to four on weekends), we talk about eight legs in average (more is better). At 365 days, we talk about 280 thousand passengers the aircraft should fly every year. Let’s take out some maintenance, but we still get to a target of 250 thousand passengers. For each daily return flight, we talk about 200 seats target. For a double daily, double that.

The A320 or 737-800 is around 189 seats, so roughly 50% more.

From Southwest Airlines - Culture, Values & Operating Practices
From Southwest Airlines – Culture, Values & Operating Practices

Keep in mind there are disruptions. Less frequently on the technical side, the aircraft makers understand the cost involved in a technical grounding. But the airline has to have resources to survive such groundings. But we also talk about weather related flight cancellations. Flights remaining empty for the one or other reasons. Days people tend not to fly (religious holidays), fluctuation in demand… We talk about delays made worse by passenger compensations required by law. The disappearance of interline agreements allowing for involuntary rerouting of the passengers, not to talk about regional routes where the flight might be the only choice.

The cost of aircraft, crew, kerosene, insurance, distribution, maintenance etc. pp. being calculated, adding the “taxes and fees” on top, you talk about a cost per seat per leg at 80% load factor as somewhere between 70 and 100 Euro. On a 99 Euro return fare on the Erfurt-Munich flight in 2010, Cirrus Airlines after taxes and fees had less than seven Euros.

Risk Scenarios

The airports are restricted in what they can do, usually to discounts on the local fees. So the classic:

adding some small change...
adding some small change…

The Airline Takes the Risk. The very common approach. Yes, we give you discount on the landing fees. A drop on a (very) hot stone.

Guaranteed Load. Classically the field of tour operators, purchasing a fixed number of seats on the flights. Works very well in high season, but in the past two decades, the number of flights where the tour operator charters the aircraft became negligible. Even in that market, most flights are “set up” by the airline and then marketed to a number of tour operators. Once the shit hits the fan, as recently i.e. in Turkey, the tour operators cancel their seat allocations leaving the airline suddenly with unfilled air planes. But the aircraft is still there, it costs money!
A similar approach is to get such guaranteed seats from corporate clients, though they usually demand “lowest fare” for the guarantee at “last seat guarantee”, adding difficulty on the pricing games the airline can play. So a good airline sales makes sure to keep the flexibility. We discussed the purchase of (virtual) ticket stock at cost per seat + X, but very few of the corporations demanding a specific route then come up and commit. So we’re back to the airline taking the risk.

So in reality, we can (and have to) look at realistic scenarios.

Who Benefits?

“What are the facts? Again and again and again-what are the facts? Shun wishful thinking, ignore divine revelation, forget what “the stars foretell,” avoid opinion, care not what the neighbors think, never mind the unguessable “verdict of history”–what are the facts, and to how many decimal places? You pilot always into an unknown future; facts are your single clue. Get the facts!” [Lazarus Long]

And even with all the facts, navigating the future is a risk. Get what you can in the best quality. The better and unbiased the data, the less your risk!

Permanent Subsidies

If you know me, I am no fan of subsidies. You got to understand who benefits and to what extend. Get the maths down. then invest.

On the other side, there may be reason for permanent “subsidies” by the region flown from and to. As they benefit from better flight connections, from tourists, business travelers, commerce, taxes. Why is it that I keep asking if anyone has some sound research to share about the impact of a new flight to the economy? Why are the state development agencies “in need” but unable to qualify that impact to their economy? I am still convinced airports like Erfurt-Weimar, Lübeck or Kassel need scheduled services to be connected to the global aviation networks. Not to the nearby hubs that they can reach easily with rail or car. But studies exist that confirm that beyond four hours drive time a flight makes sense.

Temporary Investment

Risk Sharing

Who benefits?

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The End of the Airport Passenger Fees?

Inflight Shopping

As I outlined in my summary on the Hamburg Aviation Conference, my friend Daniel expressed his believe that within 20 years, there will be no more passengers fees.
At the same time, Michael O’Leary was recently quoted that he expects in very short time they will offer the flights for free.
But flying costs money, no matter how good the aircraft engines become, terminal construction and maintenance, ground handling, air traffic control, gasoline, pilots, cabin crews, aircraft, insurance, it all needs to be paid. And no matter how effective you calculate …

… someone has to pay the bill.

Airlines lower their ticket prices, covering the “loss” with “ancillary revenues”. While those “ancillaries” have been understood as services previously bundled (inflight meal, baggage, flight insurance), they meanwhile extend quite into “inflight shopping”.

At the same time, traditionally airport landing fees, split into the landing and passengers, covered for the airports’ cost of operations and development. This basic, sensible model is now threatened. It will change. But how. When the airline and airports fight for the revenue of the passenger – I believe both will loose.

Airport Duty Free

So currently it is a fight between airport and airline for the money of the traveler. I hear airlines expressing their anger about the airports increasingly draining the pockets of the passengers pre- and post-flight. And the airports upset about architectural changes enforced by the evaporating aviation income, forcing them to add shopping in arrivals halls and rebuilding terminals for improved shopping, i.e. forcing the passenger through the duty free store. Or how to speed up the check-in process to increase the dwell time of the traveler to spend more money shopping. And the shop owners about the increasing pressure to cash in on the passenger in order to pay the expensive rental deals with the airports. And, and, and…

And no, it does not help to imply that the politicos should provide airports similar to train stations. Yes, it is true, airlines bring business to the regions. Airports are important infrastructure. But in the end … someone has to pay the bill.

Source firewalkeraussies.comWhat we will need is a serious, joint discussion about the future business model in aviation. At the moment there is no discussion. There’s the airlines, the airports and business models that cannot work. And we need to have the politicos and the usually government-controlled ATC (and border control, security, etc.), we have to have the ground handlers, the shops and all other players on the table. You can’t reconstruct all the small airports. We don’t need a fight. We got to work together for a sustainable business model. ERA, AAAE, IATA, ICAO, this is your call.

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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Quo Vadis OBE?

Last week, I had a discussion with one of the companies developing online (travel) booking technology, followed by an exchange with one of the techies at the TMC, the travel management companies. The latter you can still call corporate travel agency, just a new name for old (and useful) business. It triggered some memories. And questions.

Back in 1995/96, I was the GDS expert behind the development of the first corporate web-service allowing to book flights using the Amadeus GDS. Facing the “it’s impossible” from the GDSs. Using screen scraping where today’s players have the luxury of APIs. The pioneering days and I miss them. Back in those days, I had an example I use in my discussions to date talking about “change management”. The technology did not trigger much interest. The break-through was a function I fought for, which my boss and the head developer disqualified as “toy”: The seat map.

seatmap

To be able to select and see “your” seat is to date one of the most used (usually the most used) optional functions travelers use when booking online. As in the example, the “default” often assigns you a seat in the rear of the cabin, while you may (as many business travelers) want to sit up front. But. To date, only very few airlines show the seat map in the process, it’s still mostly a “click here”. And none of those nice tools uses the traveler preference to pre-assign the seat intelligently following the interest of the traveler. My preference is aisle, up front. if possible the seat next to me not being used. If the flight shows full empty like the above example I travel with Yulia, I book A/C, with the kids I book A/C+D/F, so leaving the middle seat intentionally free. If the flight is full, I try the same, as far back as I can. Because if they need to sit in the middle, travelers prefer to do so up front… Logic rules in fact, but not one of the systems implemented such an auto-selection, so I keep using the seat map and keep being upset about the seat I should have swallowed from automatic assignment…

nokidsNow last weekend a post emerged about kids-free zones, just triggering the question, why those systems to date cannot manage prioritized seating. Exit rows and seats meant for baby bassinets or passengers needing extra assistance (for medical, not for financial reasons) are sold at premium charge, where they were blocked to gate assignment in the past (for good reason). Families struggle to be seated together when all the seats have been pre-reserved. Passengers arguing when they loose their early booked “nice” seats in the process, ending up on the least-preferred middle-seats. And none of the airline systems has a process in place to automatically reassign such seats in advance of the flight. So much that could be done to improve the process, but the systems, even the airlines’ own still are down to the pre-Internet management of seats on the GDS/CRS.

October 6th, easyJet promoted:

flight booking max day range

262 days. Triggering my comment “Sometimes I miss the good old days when we argued why flight bookings should be expanded from 330 to 360 days… And wondering why the “newcomers” did never invent a possibility to even “waitlist” beyond. Why not?” Because the brunt of bookings comes in short notice, it’s only a niche, flight plans change, it’s the way it is… Yeah, I know all those meak, user-ignorant reasons. And yeah, I keep asking the question. A “wait list” is no guarantee you get what you want. It’s an expression of interest, if you fly, I want to fly with you…

Another “logical question” is the user-centric implementation of the process. Discussing the issue of “virtual agents” and online support chat, one of the very early discussions I had with my friend Alex was the question to understand, when the virtual agent reached it’s limit and to redirect the discussion to a real agent… Alex is a former colleague I very much like; he was the master mind behind Virtuoz virtual agents (around 2002), speech recognition (2013), which Facebook acquired 2015 and today he’s one of the parents of Facebook M, the artificial intelligence development at Facebook.

virtualagentescalate

Flight bookings are still the core of “online travel booking”, followed by hotels, travel expense, rental cars or rail. But to date, the complexity of air travel limits those tools mostly to be useful for simple bookings like A to B and back. Nevertheless, since my days (~15 years ago), the processes to request more complex flights are there. Fill out a form, the system runs a “best price” and that’s it. 15 years ago, a friend of mine being VP IT at one of the TMCs and I defined over some lunch meetings a process to split the process in such case, create the PNR with the request, the recommended flights and send it to a travel agent for a required review. Because in these cases, any experienced travel agent with their business intelligence can really “do” something, make the booking much better fitting to the need of the traveler. Today, the process exists, but split completely. All bookings go via messaging and are manually processed by a travel agent (I had that at SITA, being one of the global tech-leaders …), or book online. But that’s optimized to the existing corporate and travel agency processes, it is not user centric. 15 years after I moved on.

The only “major” changes are the integrated travel expense reporting we also started already back then and some minor improvements on the part of flexibility in the travel approval process. All else: Minor minor. Very small. In my view simply limping behind on industry developments, forced by increased differentiation, i.e. on airline’s ancillary revenues (ooops… buzz word…). Having a look at what we have today, speaking with the makers of these technologies, I’m sorry, but in my opinion, they stalled. The fun of the pioneering days is over, now changes are very, very little, incremental and it’s mostly fixating the existing processes.

What do you think?

Food for Thought
Comments welcome!

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What’s Your USP??

KeyholeI keep telling people that you have to understand your business model, you got to understand your “Unique Selling Proposition” (USP). But then I fall in the same trap. Implying “initial” understanding…

We recently had a discussion on this with […] on CheckIn.com and found them to have a typical misunderstanding, considering us “competitive”… Say what?

So yes, it brings up the question: What’s our USP… And why are we not competitive to anyone? What makes our dashboard “different” (unique)? And why is it so difficult to make professionals understand…?

It seems simple enough.

It’s not the “MIDT”

Current “solutions” focus on flight data (MIDT, etc.). We focus on passenger potentials. And thinking further down the road; our “route level” will focus on commercial relations between the regions, ethnic traffic (VFR, visiting friends & relatives) as well as Tourism (taking into account the hotelrooms per population). We believe (from own airport and route development experience) that flight data is for established routes, but nevertheless require – other – experts to analyze. As they also relate to frequencies, flight times, air fares, reputation, and other “soft factors”.

But we look on the ground.

Own experience: A low cost carrier “cannibalized” a regional aviation route, the regional carrier was forced out. A year later, the route was dead. For the flight profile was on a double daily, small airplane, business travel. The low cost tried triple weekly, big aircraft, low fares, tourists. Sorry, no tourists that route…

So don’t put us in the box “passenger review”. This is new. Our tools are especially useful on routes without any previous flight operations, without comparable flights from neighboring airports. When “MIDT & Co.” leave you in the blind.

The Isochrones People

It’s not really about Isochrones either (though we call ourselves The Isochrones People). Where common Isochrones usually are results of more or less creative guesswork and simply look at how far you get in 30, 60, 90 minutes driving from the airport, their source data is usually on county level or worse, often the figures do not compute with our own findings – not even close. So what’s the source and do you trust it?

Just some examples from public sources, what we had to deal with:

samples

It took us four years (out of five) to compile our data sources, test, throw away, dig into them, correct them (usually very much) and compile the sources in a way we can reuse them without too much work. Because every year there are changes, communities merging, splitting, renaming, …
Find solutions to calculate mass drive times. Where the commercial services limit to 1 million requests a year (at a fortune), we have that number in a few weeks. So we use commercial “standalone” solutions like the logistics industry uses, but still – running a country takes some days of pure computing time.

The Stuntmen

Still having some bugs, using commercial software for the mapping caused the maps to be close to unusable in Eastern Europe. Not professional for sure. So we had to relaunch. Now we use Open Street Map with a mix of their data and mapping data we receive from the countries. Which differ from what the commercial map providers sold us, but “suddenly” and to our expressed delight fit the statistical sources we use. And the bugs we solve one by one.

Wonder why no-one did our stunt before? Wonder why we think no-one (in his/her right mind) will? Above is your answer. But was that really necessary?

Eyesight for the Blind…

From our experience and that of the experts out there supporting us (airlines, airports, and their consultants), we know there is need for understanding the local customer base. And highly expensive, often outdated analyses of questionable quality at exorbitant prices. So yes, we think our services are needed. And if you don’t use them, you remain blind on one eye.

So what’s our USP again?

We’re not just polishing your Crystal Ball as I keep saying. We expand your vision and understanding to what’s truly important. But wasn’t yet available for no-one dared to address the complexity behind it. So trust the airport they know their market? The best you could do. Now we do better. We qualify their impressions with hard data.

And we make it comparable.

And that’s why we don’t compete with the flight data providers. We do something new. We do the other side of business. The hard one ツ

Seen our demo yet? Three airports. Full analysis. Free to use. But we have almost 600 more: https://www.CheckIn.com/

We’ll debut at Routes and hope to speak to many of you. It’s still “brand new” with cuts and edges. We will smooth them out and improve, we promise. But what we have was simply beyond imagination.

Until now. We launched.
Come. Have a look!

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Airport Development

Discussing Airport Development on a general and global scale lately with some renowned influencers in this industry, there were some thoughts, I would like to share today.

playmobilairportWho’s the Customer?

It was rather fascinating to discuss the “customer” issue with airports recently. Though despite we all know that we compete about the passengers, the airline is just as much a customer of the airport as are ground handling companies. As we published in our case study on Zurich’s new deicing management, one of the main cost savings factors, reflecting millions of savings (Euro, Dollar, …) comes from reduction of delay, faster recovery from overall delays or disruptions. With passengers and airlines alike benefiting from “pre-tactical” information.

Keeping the Status QuoWhich Network???

or why only the dead fish swims with the stream? There is a great tendency in our industry today to wait and see “others” and especially “the big ones” to invest in new technologies and try them. And only with many years of delays implement the investment into the own budget plans and maybe get it year(s) later. Be that the use of (free) WiFi at the airports for all customers or CDM developments to the benefit of airport operations – especially under adverse conditions.

IHS Janes Innovation Award 2014Saving, no matter the cost

A common argument against the investment is that the status quo functions. Airlines are i.e. “used” to have major delays during and after winter events. The throughput is lower, flights must be cancelled, after disruptions, the recovery takes time. Zurich having saved +20 million Euros in one season alone by “managed” deicing is a good counter example. With other airports/airlines stalling the implementation of the tool for their airports/terminals “for cost reasons”. Sorry, I will never get used to burning the amounts of money our industry does. We invest into “customer experience” but don’t bother about reducing flight delays.

ACDMsilosCollaboration vs. Silo

The global Civil Air Navigation Services Organisation (CANSO) and the Airports Council International have declared Airport Collaborative Decision Making (A-CDM) a management matter, joining forces in the promotion of the concept. Now airports and airlines alike keep pointing out that they have no common data. A major U.S. airport disqualifying it with the example that they don’t even get an Estimated Time of Arrival (ETA) or Departure (ETD) from their airlines. They learn of arrivals or departures once the aircraft is on approach or on engine start-up or pushback – thanks to kind information by the tower. The operator of a terminal at one major hub tells us, collaboration won’t work at their airport as the terminal operators strongly competing. Yes, there are workarounds possible (considering the controlled apron/tarmac area “the airport”), but as long as airlines and ground handlers keep up such self-understanding, we are a long way from “effective operations” or even a basic management of delays, disruptions and recovery.

Airport Strategy

Strategic Directions?
Strategic Directions?

In the discussion, we also talked about airport strategy. New airports are being build without giving consideration to A-CDM or TAMS (Total Airport Management, expanding A-CDM into the land side), but focusing on fancy design. (New) Nordic airports having trouble with the positioning of their deicing pads (also called “Central Deicing Facilities” or CDFs). Space for an “Airport Operations Control Center” (APOC) being later taken from existing office space, instead of pre-planning the necessity. Airport Operators like Avialliance, Vinci or even Fraport (a CDM-airport) focus on CDM locally, instead of considering solutions that improve the airport group. Just some thoughts on the issue as we discussed it and I joggled down my notes…

Food for Thought
Comments welcome

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Keeping Face

changeflightsJust screening all those wisdoms my friends keep sharing on LinkedIn and Facebook, here one from own experience…

People do not want to admit mistakes.

Developing online booking tools back in the 90s, when no-one (especially not Amadeus, Sabre, etc) believed in it, I learned that lesson good: Business travelers wanted to make the bookings with their travel department. But they wanted to CHANGE the booking themselves (online). Asked, why that is, it was simply that they considered the need to change a booking a “mistake”. No matter if the change was enforced to them. It also showed how important it was to them to keep face with their travel arrangers.

Food for Thought
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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
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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
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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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The Right Perspective

inside-outNew Airport Insider recently published a blog by one of who they call the “Generation Y”, students, getting ready for the travel and aviation industry. What triggered my attention there was a very basic, though very common misperception, what I call “the inside-out-look”.

What’s wrong with that?

That is rather easy. If you provide flight services, you fly both directions. Worse, if you subsidize any airport, you likely do it to attract commerce to your region (tourism is commerce too). You likely don’t do it to make the people in your region to take their money elsewhere. As such, the focus of airports and politicians alike must be on the outside in, or as we say in the travel industry; the incoming.

In the example, which is very common, the French author considered “rail” a competitor to flight. Which is true on the inside-out-look, or outgoing, but it’s simply missing the point once you look outside-in.

crowdedtrainsAside of Germany, France and a handful other nations, train is usually no issue. Within these countries, train is very competitive on the local market, especially the high speed trains like French TGV or German ICE. But now I go abroad. Into another country. I go into any travel agency, even in France or Germany and ask for international travel. Give me a guess: How often will they offer you train, even i.e. Paris-Frankfurt? All they intuitively look for in phase 1 is “flight”. Is the city the client wants to connect to bookable on the GDS (Global Travel Booking System)? If not, the agent (hopefully without showing you) rolls the eyes, curses you and starts looking up how the f*** to get you to that godforsaken town you ask for…
noflights
Offline Airport

In short: If you have an airport “nearby” with scheduled services that link you into the global aviation networks on the GDSs (connections are important), you are visible. Else, you’re an annoyance. If there is an airport “nearby”, travelers may take train, bus, rental car or taxi for the remainder of the trip.

pickupLikely, not knowing the language, maybe not even the local alphabeth, it’s going to be a taxi or a car from a large (global) rental car company offering navigation system. Or a personal pickup…

Later, the train may become a competitor. But that’s another story. To trigger global commercial interest, an airport is a strategic answer.
But not just the airports, but also the connectivity by scheduled flights, which can be booked in the GDS, connecting the airport to the global aviation networks! Second lesson, most local-minded politicos miss to understand with their inside-out-look…

Food for Thought
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