23rd March, 2020
The entire travel sector has been shaken by the acceleration of the Coronavirus outbreak. As the leaders of this wonderful industry deal with financial implications and attempt to stay afloat, they must exemplify empathy and just not look at layoffs, writes Ai’s Ritesh Gupta
The travel industry is evaluating financial actions including cost containment, adjusting guidance, and gearing up for scenario planning and financial modeling for potential consequences owing to the COVID-19 outbreak.
From an airline’s perspective, the immediate calculation is about staying afloat and meeting their debt obligation. Focus is on curtailing operating expenses and capacity cuts to compensate for plunging demand. Evaluating where Southwest Airlines stands, an airline with robust balance sheet, it had a cash stockpile of $6.2 billion post recent additional financing. Analysis by The Motley Fool indicated that the airline is projected to face a quarterly operating loss of less than $3 billion next quarter.
And technology companies belonging to this sector are in the process of removing cash costs from the business. Sabre has started working on several immediate actions with regard to its workforce and other costs, totaling over $200 million in cash costs.
“We believe Sabre is well positioned to navigate this challenging environment,” Sean Menke, President and CEO, Sabre. He attributed the same to significant aspects of the business’ cost structure being variable. Other than workforce-related cut, the group is also looking at $250 million semi-variable technology hosting costs.
Airlines are also on lookout for support from the government. For instance, Virgin Atlantic recently appealed to the UK government for clear, decisive and unwavering support for the UK aviation sector, comprising emergency credit facilities to a value of £5-7.5bn, to bolster confidence in the industry, and to prevent credit card processors from withholding customer payments, and slot alleviation for the full summer 2020 season.
Don’t rush, evaluate all the options
The longer-lasting effects of the outbreak on consumer habits are difficult to predict. As Menke admits, the global travel industry is facing challenges beyond what has been experienced before.
"The speed of the demand fall-off is unlike anything we've seen," Delta chief executive Ed Bastian said late last week reportedly in a note to staff.
So what does it mean for travel industry’s workforce? Does it make layoffs inevitable?
In this context, The Harvard Business Review suggests rather than over-reacting and or being too slow, leaders must demonstrate the ability to “keep your cool in a critical situation. Few recommendations:
The article ends up with a positive message: “Going through a downturn and making tough decisions to keep your company afloat is hard. However, if you lead with compassion you will touch the lives of your employees in an extraordinary way and come out of this potential slowdown stronger than ever before, enhancing the shared values of your staff”.
17th March, 2020
How to get my money back? Leisure travelers, who don’t intend to go ahead with their scheduled trips owing to the spread of the coronavirus, are going through a harrowing phase as they try to get their money back. Travel restrictions, flight cancellations, change in policies…all of it is only adding to the misery.
Being on a call for hours only to get disappointed or even worse repeating the same without any positive result - is it worth the time? Cancellations and updates have understandably left travelers baffled. Even though travel companies are increasingly being more flexible over cancellations and booking changes in response to the growing coronavirus pandemic, the situation is extremely painful.
How to react?
It is being pointed out that in certain cases, it would be better to playing the waiting game. For instance, in case travel is more than 3-4 months away, then better to hold on rather than accepting a voucher or travel credit from the travel supplier at this stage. Also, even if a flight isn’t getting cancelled, then also better to see how the policy change is evolving.
Continue to explore options. Depending upon the market one hails from, dig into following areas:
Trade organizations such as Airlines for America (A4A), the industry trade organization for the leading U.S. airlines, are also sharing how its carrier members are taking action to help contain and stop the spread of COVID-19.
Extremely precarious situation
Meanwhile, A4A, has stressed that carriers have seen a dramatic decline in demand, which is getting worse by the day. It stated: “U.S. carriers are in need of immediate assistance as the current economic environment is simply not sustainable. This is compounded by the fact that the crisis does not appear to have an end in sight. In order to combat this unprecedented economic downfall, A4A is recommending the following combination of programs to provide immediate and medium to long-term assistance to the U.S. airline industry and protect their employees: 1) grants; 2) loans; and 3) tax relief.”
By Ritesh Gupta
30th January, 2020
A range of KPIs are being explored when it comes to emotional engagement with a loyalty program.
Some areas that are being explored are:
Ai's Ritesh Gupta recently spoke to Piotr Kozlowski, Vice President Consulting, Services Sector, Airline/Travel Loyalty at Comarch about the same.
14th January, 2020
Exclusive rewards, personalized access, a distinguished experience... such initiatives, as indicated by studies, are driving customer loyalty.
It is vital for airlines to focus on the human and digital moments that matter most along the customer journey, rather than just the transactional aspect in order to sustain loyalty.
Scott Robinson, VP of Loyalty Design and Strategy, Bond Brand Loyalty spoke about the same.
By Ritesh Gupta
Ai’s new 2020 conference dates:
23rd December, 2019
Airlines have embraced a number of models over the years to run their respective FFPs - right from being in control internally to forming a subsidiary to opting for a spin-off.
A number of internal and external factors are assessed before finalizing the model and the structure.
It is time for airlines to look beyond a binary discussion around a model for their respective FFPs - one that is generally centred around whether to go for a carve-out option or not.
Ai’s new 2020 conference dates:
17th December, 2019
Ai Editorial: Superapps are now extremely popular in various markets of Asia. Be it for refining their own apps in order to thrive in the data economy or being part of a 3rd party superapp, airlines need to dig deeper to capitalize on the flourishing trend, writes Ai’s Ritesh Gupta
The frequency with which Meituan, a Chinese superapp, or Southeast Asia's highly-used daily services app, Grab, are used for transactions makes them stand out.
In case of Meituan, the total number of annual transacting users on its platform grew to over 435 million by September this year. Companies like Meituan are already eliciting over 25 transactions per user annually on an average basis. Grab has had over 150 million downloads. These apps have already garnered the attention of established travel e-commerce players, including Booking and even airlines such as Lufthansa Group. Such companies have been exploring the superapp model. By being more utilitarian, the likes of Meituan, Paytm, WeChat , Grab, Gojek and others are now described as everyday superapps, with most of them operating at the intersection of hyper-local delivery, commerce, payments etc. And being in the business for five years or so, these apps have also found their way into a relatively low-frequency buy like hotel accommodation or flights.
In its Online Travel 2020 Report, Travelport has accentuated on the fact that OTAs need to deliver immersive experiences by being where the customer is at every point in the journey. It states that a key threat for OTAs comes from the risk of disintermediation from their customers, as the experience with super apps will likely be better.
Learning from superapps
"Our understanding of travel and mobility is no longer linear and transactional," Gleb Tritus, Managing Director, Lufthansa Innovation Hub (LIH) told me in an interaction in August this year. Other than shaping the product, LIH is also evaluating how customers are getting into superapps/ ecosystems and how they end up using it. It is important for airlines to learn from such companies as rolling out omnichannel capabilities into legacy systems isn’t a straightforward task. Learning from superapps would help considering that the fact airlines are evaluating possibilities within the mobility space. They are looking at offering a truly interconnected experience via their own digital assets covering all of the transportation requirements. A key lies in comprehending how a superapp typically tends to improve the traffic for low frequency products, be it for working on entry points for them on the app interface or via cross-selling.
Another critical aspect is constantly learning about users and evaluating the quality of recommendations and at the same time ensuring all of such experimentation isn’t a complicated and expensive process. How to set up a viable recommendation engine that not only entail preferences of different users but also trending recommendations or habitual behaviour? At the same time, how to run high-performance, low-latency operations. For its part, Grab has worked out a microservices architecture set up on data streaming with Apache Kafka. This powers the business as well as paves way for a critical source of intelligence.
Travelport underlines that superapps “are well positioned to continuously engage those who are already part of its ecosystem by introducing new features and functions that make the app stickier”. Also, such apps are leveraging “their data to better target products to customers, at the exact time they need them, and OTAs need to combat this”.
For airlines from their distribution perspective, too, the superapps are a welcome development considering that fact they need to support fragmented distribution, rather than continuously drifting and ending up with a precarious situation where one player in Google ends up controlling the whole travel value chain.
It also remains to be seen how the trend of superapps shapes up outside Asia and lends a new dimension to customer acquisition in the travel e-commerce sector in 2020. A player to watch out for is Airbnb. It is definitely one of those brands that the entire fraternity believes can provide a better answer to the fragmented travel shopping experience. The way Airbnb goes about uniting its staff/ teams across product disciplines, making the most of “creative hacks” or managing complexities associated with product designing, it can provide an answer to when to travel, where to go, and what to do on trips.
Keen on exploring topics related to digital commerce? Ai has planned #AncillaryRevenue Conferences in Berlin, Bangkok and San Antonio in 2020:
12th December, 2019
Airlines are looking at ways to curb illegitimate access to a member's loyalty account and resulting imbalance in a member’s spending or reward activity owing to hacking.
Considering the fact that demand for stolen loyalty currency among the fraudsters or in marketplaces on the dark web is on the rise, the role of machine learning in monitoring high-risk behaviour at account access, purchase and redemption of points/ miles is coming to the fore.
Important aspects that are being explored:
• How to leverage data from the entire loyalty platform ecosystem?
• How to define an apt fraud score limit that points out unusual behaviour?
• How to prepare to identify unrecognised anomalies in transactions?
• How to cut down on the rate of false-positive cases that require manual reviews?
Binay Warrier, Head of Business Development, Loyalty and CRM at IBS Software, spoke about the role of machine learning in keeping a vigil on loyalty fraud.
6th December, 2019
Airlines are evaluating ways to sharpen their respective loyalty cycles, i. e. letting a member earn and burn faster. What makes the game interesting today is how airlines are looking at including members with relatively lower spend or loyalty currency in this cycle.
As airlines dig deeper, they are evaluating a couple of areas for redemption -
27th November, 2019
How are U. S. carriers looking at making their respective loyalty programs more attractive?
Full-service airlines are not only looking at strengthening their ties with their most frequent traveller base, but they are also evaluating ways to make the entire earn and burn cycle luring for the rest of the members, too.
20th November, 2019
Various companies in the travel sector, including airlines, are looking at a subscription-based offering.
Be it for the idea to the development process to managing a subscription product, its technical complexity and above all, the passenger experience, airlines are working on every aspect to excel in this arena. It is heartening to hear that airlines, too, intend to let passenger finalise their own subscription service in the future.
A critical aspect is to not only interact and recommend products for a personalized experience, but consider the delivery of unexpected and unadvertised rewards to look at loyalty in a new way. Experienced loyalty executive Dave Canty shared his viewpoint about the same.
Ai’s new 2020 conference dates: http://www.airlineinformation.org/upcoming-events2/370-2020-conference-dates.html