The airline industry may be a low margin business, but should it be? When you consider that airlines lose 8% of their revenues every year due to flight delays, and 6% more through unsatisfied customers, you might conclude that the industry shouldn’t even come close to making money. Particularly when most airlines have little left to invest in delivering a customer experience that will help to retain and win the loyalty of passengers.
So how have we reached this point?
What many would consider a flawed business model takes its origin in the structure of the value chain and especially the airport business process. If we look back 20 or 30 years, the air transport business process was entirely integrated, in that airlines had a full team at nearly every airport they served. This made it much easier to meet the needs of passengers, with a less intense flight schedule and fewer passengers to manage and keep happy.
But as the international footprint of airlines, along with the number of flights and passengers, has grown, more of this work has been subcontracted out to a variety of specialist partners on the ground. Passenger numbers alone have doubled since 2004, putting pressure on all aspects of air operations.
And over the years, these ground suppliers have seen their operating margins gradually squeezed by the airlines, so the system’s capacity to deliver the kind of customer experience that passengers expect and demand, has gradually decreased, resulting in the situation we now face.
Historical underinvestment in IT
Despite the digital demands of today’s passengers, the CEO of a major ground handling network recently told me that he simply doesn’t invest in IT. Why? Because with the company’s contracts consistently reducing in value and duration, he has no interest, capacity or incentive to evolve his technology.
Meanwhile, the daily routine of airport check-in staff, traffic agents, supervisors and dispatchers, consists of trawling through a deluge of emails, telex messages (incredibly these still exist!) and trying to identify his or her relevant instructions in a smog of walkie-talkie conversations. It’s inefficient and counter-productive for three key reasons:
- It often generates or worsens delays
- It limits the capacity of frontline staff to interact effectively with the customer
- It’s stressful and frustrating for all the individuals concerned
And there is no doubt that passengers notice it.
Airline managers don’t tend to face this situation every day since their main bases are usually better equipped. But their perspective is only half of the journey and outstation managers will all know what I’m talking about.
Interoperability is nearly impossible
Ground assistants typically have to deal with a whole spectrum of IT platforms across numerous airlines, and simply can’t feed or keep track of them all. The structural conditions are simply not in place for airlines and grounds partners to maximize their performance at the airport, resulting in delays and a poor customer experience.
So, on one side, you have a digitally-savvy customer with a smartphone, waiting for instant notifications about any change, disruption or additional services. Then on the other, you have a bored operational member of staff, who’s producing 80 per cent of the critical data by talking on a walkie-talkie, on the phone or corresponding via email, absolutely unable to produce the real time structured data required for that to happen.
Customer experience can’t be looked at from a one-dimensional perspective, or solved with superficial solutions, because the problem goes to the root of the air transport ecosystem. The challenge is how to bridge the gap between the airport ground teams, their airline partners and ultimately the passenger.
And the solution is right under our noses, as digital platforms, such as social media, have been proven in their capacity to connect millions of users in a limited period of time, providing huge capabilities for interacting and sharing information with other users. This kind of technology is therefore one way to synchronise all the airport stakeholders, to give them back efficiency, enjoyment of what they do and pleasure to serve the customer with the right information at the right time.
Social media style tools are also ideal for tackling the huge need for structured data production in air transport, to prepare for an increasingly digital future. Without a holistic view of events from across the passenger journey, you can have all the funky front-end technology you like, but it still won’t have anything useful to say.
The ability to see who holds what data and who needs to access it should also shift the balance of power between airlines and their ground partners, in the interest of all stakeholders: the customer, airline, ground handlers, airport, travel agencies, transfer companies, and the wider ecosystem.
Following many years talking about joining the dots in the customer journey, digital platforms are the natural and relatively simple solution to this problem – and the technology already exists now. But it requires more than just change management (I can guarantee that the agents on the check-in desk will jump straight into digital), it also requires a drive on the part of airline leaders to disrupt the years’ old business model.
But, when passenger numbers are set to double by 2035 and you’re talking about improving margins by 10% or more, it should really be a no-brainer.