Archive for the ‘Airline’ Category

Harnessing the Power of the Hive

Friday, December 4th, 2009

It’s a story about community and collaboration on a scale never seen before. -Lev Grossman, Time Magazine

The Urge to Connect

History shows that that when robust tools serve a powerful human drive, revolutionary changes occur. That’s happening now as social media enable people to satisfy their primal urge to connect with each another. Social media are ubiquitous, cheap, and accessible, and their widespread use is having a profound impact on business.

While the technology is grabbing the headlines, the more interesting story is how people around the world are using social media. They’re fulfilling their desire to connect with each other, forming communities in the process. The communities function like virtual beehives — amorphous, dynamic structures where members coalesce to share information.

Smart companies recognize the commercial value of communities. They treat community members more like stakeholders than consumers. Instead of broadcasting their messages at them, they engage followers in dialogue. In time, followers can be converted to evangelists.  In a hyper-connected world, evangelism carries messages fast and far, boosting the value of the brand.

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Posted in Airline, Business Practices, How Cool?, Social Media, What's Next? (WILD CARD) | Comments

Virgin America Transforms Air Travel

Wednesday, May 27th, 2009

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You never know with these things when you’re trying something new what can happen. This is all experimental. ~Richard Branson

Over the years, there have been surprisingly few breakthroughs in the airline customer experience - until recently. Sir Richard Branson’s venture into the U.S. market, Virgin America, (VX) is redefining air travel by providing passengers with a fresh, distinctive on-board experience. The carrier is less than two years old but it’s quickly becoming a template for what’s possible in the future.

The choices VX is making demonstrate a “customer experience mindset” that’s all too rare in the industry. It’s evident that the VX team devoted their attention to passenger comfort and convenience. Features “baked in” to the customer experience include seats with power-outlets and USB ports. Cabins in their new A320s have soft mood lighting.

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Posted in Airline, Books, Business Model, Business Practices, How Cool?, Innovation, Service design, Sub-Sahara Region, What's Next? (WILD CARD) | Comments

At the Heart of Business

Tuesday, March 17th, 2009

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It is with the heart that one sees rightly; what is essential  is invisible to the eye. ~Antoine De Saint-Exupery, The Little Prince

Business stories about “empathy” are springing up again. BusinessWeek ran one (Empathy = Growth) last week.  Fast Company covers the subject periodically. Authors are urging readers to consider the merits of empathy despite the need to cut operating costs as demand for services declines. It makes sense for businesses to re-evaluate their customer relationships in this environment. I think empathy remains widely misunderstood and its role is undervalued in the business community.

Simply put, empathy is rooted in the capacity to see the world through the eyes of another person.  Empathy enables a provider of service to recognize the buyer’s feelings, needs, and wants in order to fulfill these drivers through various means.

I’m interested in a broad spectrum of “relational competencies,” including empathy, and how they are used in business. Skillful practitioners use these competencies to show their understanding, respect and appreciation for others.  These skills include self-awareness and various social competencies that enable the practitioner to listen to and validate customers which forms the basis of relationships.

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Posted in Airline, Books, Business Practices, Collaboration, N=P, Relational competency, Service design, What's Next? (WILD CARD) | Comments

Airlines’ Troubled Skies

Saturday, May 24th, 2008

As more proof that the U.S. airline industry is in the tank due to the flagging economy and unprecedented fuel costs, American Airlines announced plans to trim service, retire aircraft, cut jobs and institute a $15 charge for checking a piece of luggage.

The other carriers are reeling too. The industry is acting swiftly to remove capacity – cutting routes and frequencies – in anticipation of reduced traffic in the coming months. And the U.S., industry isn’t alone.

Europe’s biggest carrier, Air France-KLM, warned of a profound “reshaping” of the global industry amid record fuel prices.  The European carriers aren’t nearly as exposed as their U.S. counterparts, but they’re certainly feeling the pain.

The International Herald Tribune notes, “With its bleak outlook for the airline industry, Air France-KLM joined American Airlines, the world’s largest carrier, which said Wednesday that it was adding fees, cutting hundreds of flights in the United States, and eliminating thousands of jobs to cope with the crisis.”

Asian carriers are reeling, too. Australian carrier Qantas hiked its fares for the second time in a month while Japan Airlines said it would increase its fuel surcharge along with its competitor, All Nippon.

Among the Middle Eastern carriers, Emirates looks to be in the best shape due to its healthy cash position. In fact, this may be their opportunity to take advantage of the worldwide economic downturn to fortify its position as a global player.

As other carriers cut back, Emirates can accelerate its plan to connect European and Asian traffic through growing Dubai hub. But this begs a question about its hungry rivals, Etihad and Qatar Airways: Can the region sustain three major carriers if there is a worldwide economic downturn?

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Posted in Airline, Economics | Comments

Re-thinking On-Board Services

Thursday, May 22nd, 2008

In an Executive Traveler wiki titled, “Blue Skying It,” Ross Klein, President and CEO of Starwood’s Luxury Brands (including W Hotels), is quoted as saying, “Airlines are in the hospitality industry, although they don’t think they are,” he comments. “Flight is extraordinary, but airlines view it as ordinary.”

Klein says, “When I think of air travel, there is a conditioned response that it is going to be bad,” and adds, “We’ve forgotten it is a social occasion. I can’t think of any acknowledgement of that by the airlines today.”

He’s so right.  He’s probably someone the industry should tap to help redesign on-board service programs.  In fact, bringing experts from analogous fields like hospitality is a great place to start when rethinking services.  Successful restauranteurs can also bring a lot of practical insight.  Of course, we’d have to bring designers and artists to the party.

I like the concept of tapping experts from a variety of fields and disciplines outside the industry – along with customers – to come with distinctive alternatives that make the on-board experience more enjoyable.

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Posted in Airline, How Cool?, Innovation, Service design, What's Next? (WILD CARD) | Comments

Design-minded Virgin America

Sunday, May 11th, 2008

Before launching their operation, Virgin America set out to create a distinctive customer experience to differentiate their brand.  They succeeded by creating a breakthrough on-board service product about which I commented in an earlier post.

VA’s success stems from their attitude that the customer is at the center of their universe.  They relied on service design – the art and science of devising an environment that enables the customer to enjoy a rich, satisfying experience.  Unfortunately, it’s an approach that has been largely ignored by the industry.

Design-minded managers relentlessly ask: Who is the person we’re serving, and how can we make their service experience better?  That thinking encourages listening intently to what the customer says along with what isn’t said, but is felt.

Design-mindedness is uncommon in a traditional, operations-centric industry where running an efficient operation is prized above all other endeavors.  That mindset inhibits innovativeness, and too often, the customer is left out of the equation.

As a result, commercial air travel, with some notable exceptions, is perceived as a commodity, i.e. competitors’ services are virtually indistinguishable from each other, and customers tend to buy on price or schedule-convenience alone.

Historically, the major airlines have viewed their central challenge as getting passengers from point A to B as safely and efficiently as possible.  Their organizing principles arise from a linear manufacturing model which hasn’t changed much over time.

The University of Toronto’s Roger Martin observes, “The dominant attitude in traditional firms is to see constraints as the enemy and budgets as the driver of decisions… The traditionalist belief is, “We can only do what we have the budget to do.”

By contrast, design thinkers view their central challenge as solving ”unsolvable” problems. Design-thinkers venerate the customer, and relentlessly seek novel novel ways of overcoming constraints.

VA’s corporate culture – clearly influenced by Richard Branson’s intense creativity and drive – is customer-driven, encouraging design-inspired choices.  Branson’s mission for the Virgin group is to make flying fun again.

Recognizing that they’d have to look outside the industry – to Silicon Valley – VA hired software engineers rather than airline vendors. The mix of engineers and process owners led to some interesting choices.

For one thing, they came up with the novel idea of using an open-source (Linux) platform, named Red, to power a range of nifty features, like touch-screen food and beverage ordering, on-demand media on a high-resultion monitor, and even in-seat chat. Internet connectivity will be available soon. Moreover, Red affords VA the flexibility to support future low, cost innovation.

There are bugs to be worked out. Customers have reported re-boots and other glitches. But, I think VA is well ahead of the innovation curve, and their service platform gives them a clear competitive edge.

How will the industry respond?  Carriers are taking a beating from record fuel prices and reduced demand, and in this cycle, the carriers will be treading water for some time. Under the circumstances, will the U.S. airlines open the door to design-minded, customer-centric thinking? What’s next is anybody’s guess.

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Posted in Airline, Innovation, Problem solving, Service design | Comments

U.S. airline mergers re-visited

Wednesday, April 23rd, 2008

What follows the Delta-Northwest merger? United Airlines and Continental have been talking, despite Continental’s independent culture.  Whether this deal goes down or not is heard to tell.  But more mergers seem likely if not inevitable.

The forecast for airlines is gloomy and getting darker by the day. Network carriers in the U.S. are facing high costs for aircraft ownership, fuel, labor and maintenance. With rising fixed costs, no pricing power and negligible profit margins, reducing capacity to relieve pricing pressure seems to be mission imperative.  But network carriers are reluctant to reduce their inventories much further.

Due to their low credit ratings, airlines can’t borrow money at reasonable rates to invest in more fuel efficient planes and more efficient facilities.

All this means that the industry will have to consolidate – out of sheer necessity – despite the thorny challenges of integrating large, people-intensive organizations and fragmented legacy systems.

Can consolidation fix the ailing economics of the airline industry?

It’s too early to tell, but it probably won’t be enough.  In the end, new and innovative airline business models are needed to solve the industry’s deep, structural problems.

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Posted in Airline, Business Model, Economics | Comments

Airline disruptions and mergers

Tuesday, April 15th, 2008

While considering the much anticipated Delta-Northwest merger, with many more mergers on the horizon, I recalled Clayton Christensen’s book The Innovator’s Dilemma.

He pointed out how the Southwest Airlines model is “disruptive” because their low-cost strategy targeted customers who had been using trains and buses and or those who used out of the way airports.

But, Christensen believes that low cost carriers have a limited shelf life, because the incumbents can ultimately match them on the cost side, whereas the incumbents can’t climb the value chain.

I wonder what comes next in the evolution of airline service models – few of which are working well in mature markets, particularly in the U.S. and Europe.  Carriers suffer from overcapacity during down cycles like this while customers receive less than stellar service.

Just when we figured there’s nothing new and interesting in the industry comes Virgin America’s innovative business model. Their planes feature custom-designed leather seats, mood-lighting, and the best in-flight entertainment (IFE) system in the industry with on-demand TV and movies, high end games, music and even online chats with other customers.

The IFE is a great example of how the airline got it right.  As a practical matter, customers can plug their devices into USB ports.  The real genius is that the system runs on twin Linux servers–meaning an “open source” platform that is equipped to handle a range of new software and harware add-ons down the road.  This innovation occurred because the company had the wisdom to recruit forward-thinking, Silicon valley engineers – not airline entertainment vendors – to design it.

And, the airline managed all of this using a surprisingly lean, yet scalable operations model.  By allocating costs on non-perishable components that customers value, Virgin has come up with an effective airline model that will alter the way we think about flying.

While the legacy carriers fight it out using conventional warfare, Virgin America is rolling out new, novel features that today’s high value customer desires.  That’s what’s next – along with more mergers among the majors.

P.S. [April 18, 2008], Notice Time magazine’s 4-17 article, “Richard Branson’s Flight Plan”.

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Posted in Airline, Books, Business Model | Comments

Gulf-based Airlines Soar

Monday, March 3rd, 2008

Dubai-based Emirates Airlines continues to capture attention. At the recent (Nov, ’07) Dubai Air Show, the carrier ordered a stunning 245 new wide-body planes, spreading orders among both manufacturers: 120 Airbus A350 XWB jets, 11 more A380 super-jumbos and a dozen Boeing 777-300ERs. The orders, totaling $34.9 billion, bring the value of the airline’s fleet to about $60 billion USD.

The Dubai air show — one of the most prestigious commercial trade shows — is regarded as a bell weather of Gulf region carriers who are racing to expand their fleets, and convert the region into a major global hub. Emirates’ regional rivals are Doha-based Qatar Airways and Abu Dhabi-based Etihad, and three have been reporting record growth.

Emirates Airline, the largest airline in the region, is already the world’s 10th largest carrier, and it’s gaining altitude rapidly. It already serves 99 cities in 62 countries and, on average, is adding a new city every couple months.

Despite its aggressive growth strategy, the carrier says its keeping its focus on delivering a highly differentiated service product.  The company offers customers a 200-channel in-flight entertainment system and a responsive, well-trained customer-facing staff.

Emirates is entirely government owned, but its chairman, Sheik Ahmed Bin Saeed Al Maktoum, said recently that 30 percent of the company may be sold in public markets.

Operationally, Emirates is a sleek machine. Its operating costs are significantly lower than those of its European or U.S. rivals, and the carrier continually seeks business process and supply chain efficiencies.

We’re betting that Emirates, like its regional competitors, will maintain its staffing and service levels, even as competitors outside the region begin tightening their belts. At a time when many carriers are battling both record fuel prices and a declining U.S. dollar, Emirates should realize $1 billion in profit in the fiscal year ending March 31 on total revenue of $8.1 billion, an 18.5 percent increase over the last year.

The carrier is ahead on the currency front because it’s pegged between the UAE’s dirham and the U.S. dollar. (Emirates reports results in dirhams, but a big chunk of its earnings is in euros and pounds sterling, and the dollar’s slide is helping the carrier.)

Emirates is benefiting from the Gulf region’s unprecedented economic growth.  This boom, fueled by high oil prices and a nascent tourism industry, is expected to continue despite a world-wide economic slump on the horizon that is being predicted my many economists.

Dubai is well-situated to capture European customers en route to Asia and about half its traffic moves through Dubai International Airport.  Over the past 15 years Dubai International Airport has developed into one of the largest hubs in world aviation.

A new airport, Dubai World Central Al Maktoum International Airport, the world’s largest, is under construction 12 miles from the city center.  It will be ten times the size of the current airport and will entail a port, hotels, residential areas, as well as a free-trade zone.

The only major ripples in the pond are concerns about regional political instability and, as other carriers acquire longer-range aircraft, Dubai’s draw as a hub may be reduced.  But, for now, the picture looks rosy.  If the carrier makes the same prudent business choices as it has recently, the airline should be a force to reckon with for a long time to come.

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Posted in Airline, Gulf (GCC) Region | Comments