By Alexander v. Bernstorff
Something I worked on in Lufthansa’s corporate strategy department in 2015 is an eerie scenario: Any digital mega-player calls your airline and offers to literally absorb your offered seats for the next year or two on a part of your network, or entirely. Because this company believes it can serve your existing customers better than you can, and because it thinks it can fill your empty seats better than you can. The deal is straightforward: You do operate your fleet. Hands off the customer.
We called it the “Asset Free Airline Scenario” and we thought it is quite likely to happen.
Monty Brewer referred to this scenario twice during a panel discussion at IATA’s 2016 edition of their World Passenger Symposium. The most pressing strategic questions are not often enough raised. Airlines need to figure out how to get closer to the consumer (not only their existing customers).
In the current world and its technical and commercial setup, managing the customer is difficult:
– We have little chance to find out what customer actually prefer, or fancy, or simply expect
– The current distribution model does not let us know what we have offered, and to whom – and hence will not teach us what to offer in the future in order to sell more
– The commercial model with Full Content still being a key element, is interfering with the pressing need of exploring new ways of product design and distribution
– It is difficult or impossible to build proper customer records that help understanding the customer and to build usable customer segments
So what should airlines do?
The key is relevance. Google and the likes build their success on relevance and not the kind of rubbish many other companies throw in your way each and every day. Relevance is the right offer, at the right time and the right place to the right (group of) people. Heard before. But: In a digital, instant, mobile world, place and time become complex. Remember Micro Moments. To the same segment of customers, very different products will be relevant depending on the moment in time and the device used. Omni-Channel means something different today than what it used to some years ago. It will be key to have product engineering capabilities that allow an airline to design a ready-made, customised product (rather than an offer) almost in real time and push it to the most relevant channels, based on market analytics and also creativity – and to test its relevance.
Our Airline Retail Suite incorporates a radical simplification, or even dismissal of existing procedures and therefore allows a completely new perspective on how to interact with consumers in a multitude of channels and with a mass-customisation product design approach. You should talk to us!
Edit 18 November 2016:
In its 2016 „The Future of Airline Distribution“ report, Atmosphere Research vividly described another mutation of the Asset-Free Airline. In the conclusion, they are asking „What would happen to the airline industry if a cruise line or a hotel group were to enter the scheduled airline business, contracting with a thitd-party carrier to provide the aircraft, pilots, maintenance, and insurance?“.