1. Korean Air 2. British Airways 3. Delta Air Lines

4. KLM 5. TAM 6. Qatar Airways

7. Virgin America 8. airBaltic 9. AirAsia 10. ANA

At airlinetrends.com we are continuously on the The airlines on our innovative airlines ranking do not lookout for innovative products and services launched necessarily feature on the various ‘the world’s best by airlines around the world as they respond to airlines’ surveys. Instead, we aimed to select those changing customer needs and industry developments. airlines that have come up with interesting innovations Once a year, we wrap up our findings and select 10 that are an indication of the direction the airline airlines from around the world that in our view have passenger experience is heading in. Or in the words of launched a wide range of innovative products and sci-fi writer William Gibson: “The future is already here, services in the past year – be it as part of a company it’s just unevenly distributed.” culture of continuous innovation, a strategy to challenge the industry status quo, or as part of efforts to catch up after years of underinvestment.

1. Korean Air

Korean Air tops airlinetrends.com’s 2012 ranking of than even Tokyo Narita, which is Japan’s main the world’s most innovative airlines. The flag carrier of international airport. Furthermore, Korean Air is taking the ‘Land of the Morning Calm’ has established itself advantage of South Korea’s open skies policies with the as a major hub carrier for passengers travelling US, Canada and China to target travellers flying between Asia and North America; its A380 flagships between East Asia and North America (where it serves have the lowest seat density of any A380 operator 13 destinations). The airline’s short-haul route network and feature bars and lounges branded by Absolut spans 22 cities in China and 15 destinations in Japan and Vodka, as well as a duty free shop. the airline for example has a market share of around 25 percent in the Chinese – North American market. The airline also operates its own organic farm and offers attentive service amenities such as a coat Well-positioned storage service and a women-only lounge at Seoul’s Because of high oil prices, a weak Korean won and the Incheon Airport, which itself has been voted best slow recovery of cargo traffic (Korean Air is the second airport in the world for the past six years. largest cargo airline in the world after Cathay Pacific), Korean Air made a net loss in 2011. Analysts, however, Incheon hub are optimistic about the airline’s future prospects, Sandwiched between the world’s second and third noting that “it will benefit from a solid increase in largest economies of China and Japan, Seoul’s Incheon inbound/transit passenger demand especially from Airport has become a key North East Asia hub, Chinese tourists, and increasing exports of consumer offering more direct flights to Japanese cities electronics and automobile components.”

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Furthermore – similar to Delta Air Lines’ recent Lowest seat-density purchase of an oil refinery –Korean Air in 2007 bought With 12 First Class suites, 94 full-flat seats in Business a 28-percent stake in South Korean oil company S-Oil and 301 seats in Economy (which offers a very generous in order to secure a stable supply of jet fuel. 34” pitch), Korean Air’s A380 accommodates only 407 passengers – the fewest among A380 operators. The Additionally, while many airlines across Asia are airline is also the first A380 operator to dedicate the currently busy establishing their own low-cost carriers entire upper deck of the superjumbo to Business Class, (LCC’s), Korean Air in 2008 launched a low-cost creating a business jet-like atmosphere. subsidiary – Jin Air – in order to compete with Korea’s high-speed rail network, the growth of domestic According to Keehong Woo – head of Korean Air’s budget air travel, and the entry of Chinese and passenger business division – the airline hopes to better Southeast Asian LCCs. As LCCs in South Korea today market itself to international corporations seeking account for over 40 percent of passengers on connections to Asia and other markets with the A380 domestic routes, Jin Air is rapidly expanding its business-only upper deck. “We think that in some international operations. markets like Los Angeles and New York—or big cities in European countries—we can build up our business,” The carrier was the first South Korean LCC to offer says Woo. “Korean corporations such as Samsung are services to mainland China and has launched a raft of our biggest customers now. We are tying to diversify new international routes in recent months. As it our customer base in the United States, in Europe and spreads its wings across Asia, Jin Air will also benefit in China.” from having a first-mover advantage compared with the relative youth of Japanese LCC’s, while Korean Air Onboard bars and lounges may also use its LCC unit more strategically in the With fewer seats than any other airline flying the future. double-decker aircraft, Korean Air has used the extra available space to install three onboard bars – co- Fleet and cabin upgrades designed in partnership with Absolut Vodka. The bars With regard to its mainline operations, Korean Air in sport minimal Absolut branding with no visible logos, 2011 completed an aggressive fleet expansion and but feature three Korean Air signature Absolut cocktail cabin refurbishment program, which saw the airline drinks and a display tower. upgrade the interiors of 49 long-haul aircraft and take delivery of 19 new aircraft. Korean Air’s B777s and One self-service bar is located in First Class at the front A380 feature Kosmo ‘Sleeper Suites’ (based on end of the main deck, while at the front of the upper Contour’s Venus seat and customised by design firm deck there is another self-service bar and a four-person Acumen) in First Class, while all wide-body aircraft lounge area with built-in side tables and a magazine have full-flat Prestige Sleepers from B/E Aerospace display. The aft lounge, appropriately called the installed in Business Class. Celestial Bar, is staffed full time with a bartender and incorporates a two-person sofa with reading lamps, a Korean Air was one of the first airlines to receive trio of lean-to cushions, and a flat-panel LCD on top of a Boeing’s new 737 Sky Interior which also feature magazine display. AVOD in all seats. Furthermore, besides Lufthansa, Korean Air is the only airline to have ordered Boeing’s Duty free display new 747-800 passenger jet, and the carrier will be the Generating USD 201 million in duty free sales in 2011, launch customer in Asia for Bombardier’s new CSeries Korean Air is seen as the world’s most successful in- jet. flight retailer. As Koreans, together with the Chinese, top the list of duty free spenders in Asia Pacific, Korean A380 flagship Air is the first airline in the world to feature an onboard The Airbus A380 in particular has given Korean Air an duty-free store, which is located in the rear part of the unequivocal image boost. In June 2011, the airline A380’s lower deck, just in front of the stairs leading to became the world’s sixth airline to receive the the upper deck. superjumbo and currently operates five A380s on routes to Hong Kong, Paris, Frankfurt, New York and Los Angeles.

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Designed by beauty brand L’Oréal’s travel-retail Service touches division Scental, the main function of the duty-free In addition to the innovations featured on its flagship area is to showcase the airline’s duty-free offerings so A380s and its local and organic food options, Korean Air passengers can get their hands on the best-selling offers passengers some other thoughtful amenities. items before making a purchase. The kiosk complements the regular duty free cart service and is Catering to the growing number of female passengers staffed by a full-time sales assistant. who make up 45 percent of its passengers, the airline recently refurbished its Prestige Lounge at Incheon The bottles on display have a strong magnet on the Airport. Among the lounge’s new features is a dedicated bottom to prevent them from sliding in the event of area for female travellers, which includes a restroom, turbulence. First Class passengers are invited to sleeping room and powder room. Korean Air is also one browse the shop and make purchases before anyone of the few airlines in the world to dedicate bathrooms else, followed by Business Class and then other onboard for use by female passengers only. The airline’s passengers. The orders placed by passengers are ‘ladies-only’ lavatory is decorated with pink coloured delivered to their seats later. wallpapers, has a diaper board for babies and provides extra cosmetics. Catering Korean Air is an active proponent of Korean-style At Incheon Airport, Korean Air also offers a coat storage meals and organic produce. For example, passengers service during the winter season where passengers in all classes can choose to sample South Korea’s travelling to sunnier destinations can leave their winter national dish – bibimbab – which is served with an coat. After a five-day complimentary storage, a fee of instruction leaflet and ‘gochujang’ hot pepper paste. KRW2,500 (USD 2.25, EUR 1,65) per day applies. First class passengers can also opt for a lavish ‘hanjeongsik’ course. Another sympathetic initiative is Korean Air’s ‘Draw Your Own Plane’ campaign, which asked kids in Organic farm elementary schools across South Korea to make a Besides serving passengers local dishes, Korean Air drawing inspired by South Korea’s heritage. The winning also operates its own organic farm through its creations were featured on the livery of a Korean Air subsidiary Korea Airport Service. The airline’s Jedong B747-400 that operates between Seoul’s Gimpo airport Ranch is located 400 meters above sea level on the and South Korea’s port city of Busan. mid-slopes of Mt. Halla on Jeju, a volcanic island located off the south coast of South Korea. Here, the airline grows organic produce and raises organic ‘Jedong Han Woo’ beef and chicken for its in-flight meals.

The organic beef and chicken are part of meals served in First Class, while passengers in Business Class can enjoy organic vegetables, salads, bread and cereals. The bottled water also comes from a volcanic mineral water spring at Jeju that is owned by Korean Air.

Responding to the growing demand for a healthy food option on long-haul flights, Korean Air since June 2011 has offered a low-calorie salmon salad or noodles dish to Economy Class passengers. The packaging of the dishes prominently features the calorie-count of the dishes.

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2. British Airways

For the past several years, there was a sense that if as a more personal service and more flavoursome things could go wrong for British Airways (BA), they catering. usually did: A global financial crisis set against BA’s high exposure to the premium business travel market To Fly. To Serve. which resulted in large losses. Endless merger talks Central to this effort is BA’s GBP 20 million branding with Iberia. Labor disputes that forced flight campaign, which kicked off in September of last year. cancellations and fleet groundings. And who can The ‘To Fly. To Serve.’ advertisement campaign has the forget the rocky debut of London Heathrow’s state-of- goal of re-igniting passion and belief in the BA brand the-art Terminal 5 in 2008. With those difficult days among its customers and staff. The ‘To Fly. To Serve’ largely behind it, BA appears to have regained its motto itself is found on the BA coat of arms and on the footing with several key innovative programs and uniforms of its crew members. The campaign is meant plans now in motion. to reflect British Airways’ “long, storied history as genuine pioneers of commercial aviation from its GBP 5 billion investment earliest days to the modern era, and to evoke a trusted Announced in September 2011, British Airways’ five- image of a distinctly British brand emphasizing year GBP 5 billion investment program encompasses quintessential British traits of quiet confidence, several key areas of focus. Overall, it will see BA’s competence, professionalism, and devotion to service.“ customers benefitting from new aircraft, updated World Traveller (economy) and World Traveller Plus Created by Bartle Bogle Hegarty, the campaign was (premium economy) cabins, a revamped First class, launched with a 90-second commercial that premiered and an array of improvements to in-flight service, such on the airline’s official Facebook page. The supporting

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press and outdoor campaign includes different ads Following a highly successful initial trial, BA provided as highlighting the experience and skill of British Airways many as 2,000 senior cabin crew across its long and staff. For example, one print ad features an infant short-haul network with an iPad. Loading each iPad with swaddled in a BA jacket, to highlight the fact that staff details of the in-flight menu – including photos of the are trained to deliver babies if necessary, while foods and notes on its source – is also on the roadmap. another ad features a blown-glass human heart to This content is also expected to make its way onto the show that the airline carries precious cargo such as BA website to showcase the food and wine offered on donor organs. each flight. Bloomberg reports that the devices will also be issued to BA ground staff at London’s Gatwick Fleet and cabin upgrades airport. In the sky, British Airways intends to keep pace with rivals thanks to orders of 12 Airbus A380s and 24 B787 Additionally, BA is trialling a program on a handful of Dreamliners, the first of which are expected to enter long-haul routes where a crew member is designated as service in 2013. BA has also refitted 18 Boeing 777- an on-board travel advisor. Equipped with an iPad 200s to match the new cabins that are installed in its containing pre-loaded content about the arrival new 777-300ER aircraft. The updated cabins boast a destination, the cabin crew is able to dispense travel new Thales IFE system with larger screens and more advice and recommendations to passengers, however, choices, and more comfortable seating in both because no in-flight Wi-Fi exists on these flights, Economy and Premium Economy. reservations or other transactions cannot be made directly from the aircraft. On BA’s longhaul 767s, the Club World seats are refurbished with new seat foams and covers, similar Golden ticket to those onboard the airline’s A318 London City – BA also looks to boost cabin crew morale and reward New York JFK business-only service. The upgrade outstanding customer service with the trial of a ‘golden project began in October 2011 and is expected to ticket’ scheme. The initiative sees 3,000 of BA’s top UK complete during the first half of 2013. customers given two golden tickets to recognise cabin crew at any time. BA managers will then be able to BA’s next new cabin product is scheduled for 2013, thank cabin crew individuals personally for their with the arrival of its first A380s and B787. The carrier contribution in delivering exceptional service. is also refining its catering and in October 2011 began offering Business Class meals in its Premium Economy Height Cuisine cabin. As part of a larger initiative by the airline, called ‘Height Cuisine’, BA last year partnered with English celebrity Onboard service innovation chef Huston Blumenthal to come up with new, Another central tenet of BA’s business plan is to revamped menus and innovative culinary approaches to deliver outstanding passenger service for all simply make meals served on airplanes taste better. passengers with special recognition of its top-tier Instead of using more sugars and salts to maintain customers. This goal had been significantly hampered flavor at high altitudes, BA’s catering department – by more than two years of contentious relations with along with partner Gate Gourmet – were persuaded to BA’s cabin-crew unions that had led to costly strikes. use more umami-rich ingredients. In his own dishes and An agreement was finally reached last year with the restaurants, Blumenthal has long used umami, a savory unions. Moving forward from that, BA is investing in flavor known as the ‘fifth taste’, which occurs naturally additional training of its flight attendants and has in many foods. equipped many of them with the iPad 2. Best of British iPads Looking for unique British brands to offer in its ‘Club BA’s crew iPads feature the ‘Enhanced Services Kitchen’ – a self-service galley in the Business Class Platform’, which consists of several apps that allow cabin where passengers can help themselves to drinks flight attendants to store and receive relevant and light snacks during the course of the flight – BA has passenger details in real-time, such as itineraries, recently started offering passengers popular products meal preferences and other data items that allow for from upmarket UK supermarket Waitrose, as well as a a more tailored approach to in-flight service.

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selection of smaller artisan British brands such as The Mobile’ portal, and the IFE consists of an iPad preloaded Ice Cream Union, Teonis and Beckleberry’s. with movies and other content. And, as no other beverage is more uniquely British than tea, BA offers passengers in First an ‘Afternoon BA subsidiary openskies, meanwhile, provides a niche, Tea by the Dorchester’ service. Consisting of finely boutique flying experience on its route between Paris prepared sandwiches, scones and pastries (and of Orly and New York’s Newark Airport. The airline has just course the finest tea) BA has embraced an elegant added an Economy cabin to its premium-only cabin and piece of British heritage to differentiate the passenger every passenger has access to an iPad. experience. The airline also recently entered into a partnership with British tea purveyor Twinings to be New growth opportunities the exclusive supplier of teas on all flights. Formed in January 2011 by the merger of British Airways and Iberia, International Airlines Group is well London 2012 Summer Olympics positioned to benefit from further industry In anticipation of the upcoming Games, British consolidation and attract and capitalize on synergies Airways kicked off the ‘BA Great Britons’ programme with new partners. The company acquired loss-making in May 2011, in which top British talent were invited BMI from Lufthansa in late 2011 and will use the slots at to submit entries in three categories: A bold British Heathrow gained from the transaction to significantly menu to be served aboard flights, an artful aircraft increase its service to key emerging markets (especially livery and a short-film to be shown on BA flights and in Asia and South America) where it is underweight at the pre-opening of the Games. In the food relative to its European rivals. category, professional chef Simon Hulstone took top honors with a menu inspired by the 1948 London Emerging markets Olympics. Designer Pascal Anson submitted the BA, for example, will resume flights to Seoul in winning entry to have his artwork that creates an December and is widely expected to re-enter Kuala illusion of a dove painted on the exterior of nine BA Lumpur with Malaysian Airlines set to join the oneworld aircraft. In the film category, Prasanna Puwanarajah’s alliance later this year. BA is also likely to deploy its short-film starring English actor Timothy Spall upcoming A380s on its higher-density routes between garnered first place. London and destinations such as Hong Kong, Beijing and Singapore, with the 787 Dreamliners slated for potential BA also launched an airline themed pop-up venue – new expansion into high-growth Asian markets. called ‘Flight BA2012’ – in the run up to the Games. Currently serving three destinations in China, BA has Open for two weeks during April, the three-in-one art also expressed a desire to ramp up its presence there. gallery, cinema and dining lounge showcased the works of the three winners. Deriving maximum value and yields from the slots at Heathrow are of critical importance for BA given that Premium Services the airport typically operates at 99 percent capacity and Thanks to London’s status as a global financial hub, BA there are no plans to accommodate more flights has a very high percentage of business travellers. In through construction of an additional runway. recent years the airline has upgraded its lounges at Heathrow and launched a new First Class cabin Other potential growth opportunities for BA parent alongside two other niche premium concepts. company IAG could include an acquisition of TAP Portugal and the valuable market share stake in Brazil With a GBP 100 million investment in its new First such a deal could bring. IAG had taken a serious look at cabin, BA has sought to close the gap to the standards TAP in the fall of 2011, but at present, action on any of luxury set by competitors in the Middle East and deal for TAP appears to hinge on the merger of Brazilian Asia, while its all-business ‘Club World London City’ carrier TAM and LAN Chile that is expected to happen in service from London City Airport to New York JFK June 2012 and which global alliance the new combined targets corporate travellers working in London’s airline (called LATAM) chooses to join. IAG CEO Willie Canary Wharf financial district. The business-only Walsh also recently said the company’s enthusiasm for A318shave just 32 Business Class seats and offer in- buying TAP has “significantly waned” as the European flight connectivity provided by OnAir, a wireless ‘Club debt crisis damps travel demand and the appeal of carriers in the region.

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3. Delta Air Lines

Delta Air Lines has again earned a top 5 finish on our comes in light of Delta’s poor customer satisfaction ranking of most innovative airlines, thanks to a scores in industry surveys in recent years. number of ongoing and innovative investments that, in Delta’s words, have the aim of “building a better Responding to passenger feedback for a more personal airline, not just a bigger one.” On the heels of its 2008 touch on the ground, Delta has already revived its ‘Red acquisition of Northwest, Delta’s consumer rankings Coats’ service agents. In their role as a ‘super’ suffered as passenger complaints increased. Airline passenger service agent, the Red Coats’ primary mission mergers and their associated integration activities is to fix customer problems. Easy to spot in busy typically impact negatively customer satisfaction. airports thanks to their trademark red blazers, the Delta Red Coats carry hand-held computers that allow them However, Delta’s response to that in the form a USD 2 to handle an array of issues on the spot, such as helping billion dollar investment program (which runs through customers make flight connections, issuing new 2013) put in place to improve the quality of its boarding passes or providing food vouchers when products and services deserve particular attention in necessary. Over 800 agents are currently deployed our view. airside at airports across the US, as well as at Delta’s Asian hub at Tokyo Narita. Customer Service As part of the multi-billion quality improvement Expanding on its customer service footprint in the social program, Delta is focusing significant attention on the networking space, Delta became the first airline to offer training of its customer-facing staff. The enhanced dedicated customer support via Facebook, as it brought training programs and seminars are being targeted to the ‘Delta Assist’ Twitter service to the social network in the roughly 11,000 Delta passenger service agents and March 2011, providing real-time travel assistance. To supervisors who are the day-to-day face of the airline better serve its Spanish language customers, it also to the travelling public. It has been over a decade launched the @deltaassist_ES Twitter channel in the fall since Delta undertook such a large-scale training of 2011. effort, and the renewed focus on service standards

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Innovative services In-flight connectivity Delta was also the first airline to roll out mobile bag On the in-flight Wi-Fi front, Delta emerged as the tracking capabilities via its Delta app for smartphones, leader, with 100 percent of its mainline aircraft now allowing passengers to track their checked baggage in equipped with Gogo’s Internet service. Delta has also real-time. been a pioneer in rolling out this service to its regional jet (RJ) fleet, with virtually all RJs now outfitted with Wi- The airline also quietly introduced a premium service Fi. in partnership with the German automaker Porsche at its Atlanta hub for its highest-tier Diamond Medallion For those passengers that don’t want to pay for customers. Selected arriving passengers are escorted onboard Internet, Gogo and Delta in October 2011 also from the plane to a waiting Porsche luxury vehicle for introduced a wireless IFE system on Delta’s domestic a ride to their cars in the parking lot or another fleet. Called ‘Delta Connect’, passengers can access the terminal for a connecting flight. Porsche has provided portal for free with their own devices to learn the the vehicles to Delta free of charge, but has placed flight’s arrival gate number, access weather information about the car models in the vehicles and information, get help with missing baggage, order food, in Delta Sky Lounges at the airport. book a restaurant via OpenTable, or rent a car.

Onboard experience Fleet upgrade In late 2009, Delta embarked on a program to upgrade Delta in August 2011 announced that it intended to its international long-haul business class (Business purchase 100 Boeing 737-900ER aircraft for delivery Elite) with full lie-flat beds. At present approximately between 2013 and 2018 as it retires older mainline jets 35 percent of its transoceanic fleet has been equipped such as the 757 and upgrades its fleet. The new 737s with the new beds, including all B777s and 767- will also be Delta’s first aircraft equipped with the new 400ERs in service. More than 50 percent of widebody Boeing ‘Sky Interior’, which boasts larger overhead international seats will be complete by the end of storage bins and a roomier cabin with enhanced 2012 and flat-bed seats will be installed on Delta’s ambient lighting. entire international fleet by summer 2014. Airport experience Of particular interest will be the rate of progress in the Besides installing numerous free-standing charging modifications to its older and larger 767-300ER fleet stations throughout its terminals at 18 airports in the (currently 14 percent are converted) through 2012 U.S, Delta in early 2011 placed ‘wireless powerpads’ in and beyond, as the 300ER carries a significant portion the seating areas of 19 Delta SkyClub lounges across the of Delta’s highly-valued transoceanic business fliers. US. Up to 8 devices can be charged simultaneously and Delta recently announced that it would begin the wireless power transfer works through a metal on upgrading its 747-400 fleet with the new Business metal contact between the pad’s surface and an Elite cabins. It expects to have all 18 747 aircraft adapter connected to the personal device, which is completed by October 2012. available from Delta staff in the lounge.

Economy Comfort Minneapolis-St Paul Following the introduction of a new Economy Comfort As part of Delta’s redesign of its terminal at class in early 2011, which offers passengers priority Minneapolis-St. Paul International (MSP) airport (which boarding, 4 inches of additional legroom, and 50 began in January 2012), the airline and airport percent more recline, Delta is expanding this premium restaurateur OTG Management are upgrading the economy ‘light’ product – which is also offered by current food and beverages offerings with 12 new local United and KLM – to both domestic and short-haul restaurants and several fresh food markets. Similar to international routes. Economy passengers can Delta’s New York JFK and La Guardia terminals, seating upgrade to these seats for a fee that ranges from USD will be also equipped with iPads which passengers can 80 to 160 one-way for long-haul flights and USD 19 to use to order their food and beverages to have it 99 on domestic routes, while higher-tier members of delivered to their seat by a server in less than 10 Delta’s frequent flier program SkyMiles have minutes. complimentary or discounted access.

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Delta and OTG will also introduce a new concept, was “hostile” to customers (Delta earned nearly USD 1 called the ‘OTG Media Bar’ in the fall of 2012. The billion from checked baggage fees in 2010), the airline OTG Media Bar is a virtual newsstand where Delta says it aims to evolve from just imposing new fees for passengers can rent an Apple iPad loaded with the what once was free — checked baggage and meals — content of their choice. Passengers can flip through toward selling improved services such as premium the iPads to see what publications, movies, and music economy seats and eventually selling customized or they like, download the content of their choice, and bundled offerings. then rent the device for their trip. Once the passenger Some examples of Delta’s efforts in the ancillary reaches his or her final destination, a pre-paid postage revenues space are its re-launched Delta Sky Store box received at time of rental is used to return the website, which now also includes a ‘Delta Picks’ section, iPad. which is a selection of the best travel products by Delta’s flight attendants. Delta has also partnered with The Big Apple LivingSocial to create date and destination-specific From an operational standpoint, Delta announced at deals for passengers who have booked itineraries on the end of last year ambitious plans to expand and delta.com, and sells access to its lounges via deal-site cement its New York City presence at the expense of Groupon. competitors like American Airlines and US Airways in what is the world’s largest travel market. Delta is Jet Fuel Refinery Investment turning New York’s LaGuardia airport into a new In what is a first in the airline industry, Delta announced domestic hub, and by summer 2012 will operate 264 last month the purchase of a refinery near Philadelphia, daily flights between LaGuardia and over 60 cities, PA for USD 180 million. The Commonwealth of more than any other airline. Pennsylvania contributed USD 30 million towards the purchase, and Delta intends to invest an additional USD Additionally, Delta will invest USD 100 million to 100 million which will go towards increasing jet fuel expand and renovate two terminal facilities at the production at the facility. Jet fuel is the single largest airport. At JFK, Delta’s international hub in the NYC cost (approximately 40 percent at Delta) for the airline, area, a USD 1.2 billion renovation project to upgrade and by taking a direct role into managing a critical piece Terminal 4 is underway, which is expected to of the supply chain, Delta hopes to better control these complete in 2013. costs moving forward. The refinery is expected to be fully online by September 2012 and able to provide Ancillary revenues Delta with up to 80 percent of its jet fuel demands for At its annual investor day in December 2011, Delta US operations. unveiled plans to radically grow its ancillary revenues. The airline currently makes around USD 600 million in Delta is partnering with BP and Phillips 66 to provide revenue from sources such as preferred seats, crude oil to the plant and has hired a management upgrades, lounge access and in-flight Wi-Fi, and is team with experience in the energy industry to oversee targeting to grow annual ancillary revenues to USD 1 the refinery’s operations. While Delta is counting on the billion by 2013 through new products and enhanced acquisition to result in jet fuel cost savings to the tune e-commerce platforms. According to Tim Mapes, of USD 300 million per year, skeptics of the deal point Delta’s SVP of marketing, “there are a lot of ways to out that upward pressure on global crude oil prices make money beyond the basic sale of a seat between could end up magnifying the risk exposure to the airline. two points.” Whether Delta’s bet will pay off is of course still to be determined, but the bold step that the airline has taken A key pillar of the strategy is to aggressively leverage will certainly be watched very closely by the airline technology through delta.com, smartphone app industry and Wall Street. capabilities and Delta kiosks to allow for a more differentiated level of service and product offerings (e.g. preferred seating and other up-sells) that impose little or no marginal cost to the airline. To that end, Delta is in the process of finalizing a new e-commerce platform it expects to unveil in the summer of 2012. Acknowledging that its imposition of baggage fees

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4. KLM

In 4th place on our 2012 ranking of innovative airlines Marcel Wanders and Viktor&Rolf for the creation of its is KLM Royal Dutch Airlines. Part of Air France since onboard amenities. Marcel Wanders (of Droog Design 2004, the Dutch airline is the seventh largest airline in fame) has designed the airline’s Business Class the world in terms of international kilometers flown, tableware on short- and long-haul flights in his and serves 135 destinations with a fleet of 157 signature style, while Viktor&Rolf have created the aircraft. Having a small homebase, KLM’s strength lies airline’s amenity kits. in a tightly-knit, worldwide network, as the majority of its 25 million passengers transfers through its KLM also recently teamed with Dutch designer Hella Amsterdam Schiphol hub, which is widely regarded as Jongerius – known for her industrial textile and colour one of the best airports in the world. skills – to revitalise its Business Class cabin interior across the fleet. The new Business Class will also feature KLM has been an early adopter of self-service options BE Aerospace-produced ‘Diamond’ full-flat beds, which such as DIY luggage check-in, has a strong focus on will replace the airline’s current angled lie-flat seats. sustainability (e.g, catering, biofuel), is rapidly KLM’s fleet of 22 B747-400s will be the first to be expanding in China, aims to differentiate the retrofitted with the new seats and further details of the passenger experience by adding local Dutch touches, design will be announced in the second half of 2012. and is a frontrunner in the adoption of social media. Delft Blue Dutch heritage Delft Blue porcelain is also part of KLM’s Dutch-inspired According to KLM, customers have indicated that they branding. Since the 1950s, the airline has handed out appreciate KLM’s typically Dutch character, and one of small ceramic replicas of historical Dutch houses filled the ways the airline is emphasizing its Dutch origins is with ‘genever’ (a Dutch style of gin) to passengers in by partnering with contemporary Dutch designers Business Class, that are still a popular souvenir item for

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many passengers. Furthermore, last year KLM Chinese high-end restaurant chain South Beauty to offer launched a ‘Tile & Inspire’ campaign which invited passengers the choice of a Chinese menu, and a local Facebook users to convert their profile picture into a meal with jasmine tea is also served in Economy. Delft Blue tile and add their own message. 4,000 of the most inspiring tiles were placed on the body of a Social media KLM ‘Delft Blue’ Boeing 777-200. KLM, which has over 1.5 million Facebook fans and nearly 300,000 followers on Twitter, has developed a Local food reputation when it comes to launching innovative social Besides serving meals created by Michelin-starred media campaigns. Besides the Delft Blue tiles livery, the Dutch chefs, KLM once a year organizes a ‘From airline randomly surprised passengers with a personal Holland’ food and wine festival. For two months the gift based on a tweet or Facebook profile, airline serves Business Class passengers on long-haul ‘crowdsourced’ a commercial flight via Twitter, and asks flights out of Amsterdam meals based on seasonal Facebook fans to share their ideas to improve KLM’s home-grown ingredients from a Dutch Michelin star products and services – to name a few recent initiatives. restaurant, as well as wines from Dutch vineyards and typical Dutch snacks. Social seating KLM’s most ambitious ‘social’ initiative, however, is the For the packaging of its sandwiches served on airline’s ‘Meet & Seat’ social seating scheme which was European flights, KLM earlier this year challenged launched in February 2012. The service allows design students to come up with a design that passengers to pick seatmates with similar interests reflected KLM’s distinct Dutch character. Three of the before their flight by linking their Facebook and most original designs were chosen by the airline’s LinkedIn profiles to their seat number. Passengers must Facebook fans and KLM will serve a total of five opt in for the service, and can adjust their privacy million sets of sandwiches in the ‘crowdsourced’ settings to reveal as much or as little information as packaging during the second half of 2012. they wish. ‘Meet & Seat’ is currently available for 13 destinations and CNN reports that in the first 3 months China 2,200 people have shared their profiles. KLM has also China’s rapid economic growth has resulted in a just supplemented its ‘social seating’ service with a new growing number of business travellers to and from ‘social booking’ platform called ‘Trip Planner’, which China, as well as an emerging Chinese middle class allows travellers who are friends on Facebook to that is eager to travel. KLM has made expansion in coordinate and book their journey via Facebook. China the centerpiece of its Asia focus and is the only airline to operate direct flights from Europe to Marketing landscape second-tier cities in China such as Chengdu, Hangzhou Martijn van der Zee, senior VP of eCommerce at KLM, and Xiamen. As China is home of no less than 160 tells social media agency SimpliFlying that the response cities with a population of more than 1 million, KLM generated by the Meet & Seat programme is indicative expects to start more direct flights to second-tier of the radical change that the marketing landscape is cities in the future in order to maintain its first-mover undergoing. advantage. Engaging customers in a modern way doesn’t have to Route-dedicated service involve a lot of money, he says. “What we’re seeing is In order to make Chinese passengers feel at home, that people want real experiences, genuine messages KLM has localized elements of the onboard and real actions from companies, which by definition do experience on flights to and from China. Each flight not cost a lot of money but require more effort.” […] has three Chinese-speaking cabin crew onboard, announcements are also made in Mandarin and “We’re open to failures and mistakes for the simple Cantonese, while language assistants are available to reason that if you don’t dare, you will never be able to assist passengers upon departure and arrival. The IFE create things that customers want.” […] “We have many programming contains several Chinese movies, as well people who literally say to us, ‘We buy tickets with you as subtitles in Mandarin, and on flights out of China because of your actions in the social space. If you are KLM hands out maps of Schiphol Airport written in able to do this the right way, you can reach millions of Mandarin. In Business Class, KLM has teamed up with people and they’ll promote the airline for you,” says van

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der Zee. “It’s the strongest marketing message you increasingly rare due to the increased deployment of can have.” self-service kiosks.

Social media hub As part of the same ‘pilot’, KLM also equipped 50 pilots Beyond merely engaging campaigns, the core of KLM’s with iPads, providing them with an extra tool during social media activities is formed by the airline’s ‘Social flight operations that is more efficient than the large Media Hub’ – a 40-member multi-disciplinary team volume of forms, briefing documentation and manuals comprised of channel managers, over 25 service they usually take along. KLM also just announced it will agents, communications experts, copywriters, and a trial Panasonic’s inflight Internet on board an B777-300 reputation manager. in early 2013.

According to KLM, the real-time and public nature of For passengers, KLM has developed a series of specific social media requires an internal organization that is apps, such as a ‘Passport’ app, which lets users record equipped to handle every kind of question – from their journeys with their mobile phone and share their simple information requests to rebooking a flight or experiences via Facebook. The ‘KLM’s Houses’ app lists selecting a seat – as well as “speak with one voice,” all KLM houses, so passengers no longer have to bring especially in crisis situations where acting quickly and crumpled notes with them in order to pick their consistently is paramount. favourite house, while the airline’s ‘Movies & More’ app provides a real-time listing of the IFE programming Screens in the social media hub feature colorful charts onboard long-haul flights. that show the real-time sentiment about KLM and other relevant topics. KLM has deployed Ancillaries Salesforce.com’s Service Cloud to collect, track, and KLM is looking to generate an additional EUR 400 trace all social conversations in one place and to million in the next few years through ancillary revenues, measure its brand sentiment on the Web. for example by offering Economy passengers more ways DestinationCRM reports that about 50 KLM to customize their travel experience. KLM passengers employees use the system to review, on average, on long-haul flights can already opt to upgrade to a seat 1,800 tweets and 400 Facebook comments per day. in the Economy Comfort zone – which offers up to 10 All of these interactions are automatically loaded into cm more legroom and twice the recline of a standard Service Cloud, so KLM personnel can respond, as well seat – for a one-way fee ranging from EUR 60 to 150. as see earlier interactions. For EUR12 to 15 passengers can also pre-order a premium ‘a la carte’ meal, instead of the usual free KLM’s social media hub has set high targets for itself, meal service. and strives to answer every customer message via Twitter and Facebook personally within an hour, on a KLM has also been one of the first airlines to implement 24×7 basis a day, seven days a week, in Dutch, English, Amadeus Ancillary Services tool which allows travel German or Spanish. To promote the launch of the new agencies in the Netherlands to book ancillary products 24-hour social media service, the airline in September via the global distribution system, instead of via the 2011 ran a ‘KLM Live Reply’ campaign in which tweets airline’s website. sent to @KLM could receive a ‘live’ reply made by 140 KLM employees, who lined up and held letters, giving Another innovative ancillary product is KLM’s ‘Time to a ‘living alphabet’ response. Think’ option, which is also offered by Air France. For a non-refundable fee of EUR 10 to 15 passengers can hold iPads, apps a reservation at the same fare for up to 14 days. Besides its social media initiatives, KLM has also embraced other digital media. In late 2011, the airline provideda group of 50 senior pursers with iPads as part of a 6-month trial. According to the airline, it feels it is essential that cabin crew have easy access to the latest information in the air, as personal contact with passengers on the ground is becoming

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5. TAM

Established in 1976 as a regional carrier, TAM has continue with 7 to 9 percent in 2012. TAM is also quickly become the flag-carrying airline of Brazil after expected to benefit from the world cup soccer and the the demise of Varig in 2006. TAM is currently in the Olympic Games, which will be held in Brazil in process of merging with LAN from Chile to create one respectively 2014 and 2016. Following a 22 percent of the largest airline groups worldwide, called LATAM revenue increase of its international operations in 2011, Airlines Group. The merger between LAN and TAM is a the airline will take delivery of 8 B777s during 2012 and response to the consolidation of the airline industry in 2013. the USA and Europe, as well as the rise of ‘Gulf Gullivers’ such as Emirates, who are increasing their Besides its rapid expansion, TAM aims to differentiate presence in Latin America due to the region’s high itself with innovative products and services, such as growth perspective. offering passengers a 1970s-style retro experience onboard or letting kids help distribute candies before Based at São Paulo’s two overburdoned airports, the flight takes off. The airline has also been the first Guarulhos International Airport and Congonhas carrier in Latin America to introduce onboard (domestic flights), TAM carried 37.7 million connectivity, operate biofuel-powered flights and will passengers in 2011 and today flies to 42 destinations unveil an entirely redesigned cabin interior in the in Brazil and 19 destinations internationally, with a second half of 2012. fleet of 156 aircraft. The airline has been growing rapidly in recent years, taking advantage of Brazil’s Interior redesign expanding middle class, many of whom are In 2009, TAM hired Priestmangoode to completely abandoning intercity buses and flying for the first redesign the entire passenger experience for the airline time. In 2011, demand for domestic flights in Brazil – from cabin architecture, seats, galleys and lavatories increased by 16 percent and growth is expected to to staff uniforms and in-flight service provisions, such as

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meals. Priestmangoode has also been responsible for Compared with the colourful Economy interior, the the design of the graphic user interface (GUI) of the Business Class cabin will have a more corporate look Panasonic IFE system, so the look and feel of the and feel with the aim of offering passengers a “home system would be an extension of the new cabin office in the sky.” The cabin colours in Business will be interior. The new interior will make its debut on neutral with some brighter background colours TAM’s Boeing 777-300ERs which will be forthcoming accenting the storage compartments. The new Business from August 2012 onwards, and TAM’s existing fleet Class seats will be available from August 2013 onwards, of narrow- and widebody aircraft will also be and TAM is planning to offer an intermediate solution retrofitted with the new cabins. to replace its current recliner seats.

Says Priestmangoode Director Luke Hawes: “Our work First for TAM is crucial to their brand development, giving Looking to provide passengers in First Class with a them the customer experience they need as they “home away from home” experience, TAM’s new First move up to become a major international carrier. Our cabin looks to resemble a living room and emphasizes experience of flying with TAM is that their service is the social element. Consisting of just four seats – exceptional. But their brand presentation currently developed by B/E Aerospace – the ottomans of the two just doesn’t match it. The designs we will roll out middle seats can be combined into a sofa, so parents across their entire fleet will present them as an can for example invite their kids to join them for dinner. important international player and give them the tools For this reason, the foldable table has been made extra they need to compete with the world’s other major large. Ambient light on the floor is used to create a international carriers.” lightweight, elevated look of the seats, while the lack of overhead bins provides passengers with a roomier In an exclusive preview for airlinetrends.com, TAM cabin. A nice design touch that reflects the ‘living room’ Brand Manager Ricardo Cruz and Priestmangoode concept is a bookshelf built into the front wall of the Director Luke Hawes share more details about TAM’s cabin. The First Class cabin features neutral, natural cabin interior program, which in their words aims “to colours that are accentuated with soft-green touches. put TAM on the map” and is “inspired by everything Brazil has got to offer.” Passengers in Business and First will also be served freshly brewed Nespresso coffee. To reflect Brazil’s Economy coffee culture, Priestmangoode initially planned to TAM’s new Economy cabin has received a colourful include a coffee corner in the galley between Business makeover and features rows of seats – manufactured and First, but dropped the idea because such a social by Weber – in various bright colours that reflect the zone would create too much noise for other passengers. carrier’s Brazilian origin: lime green, aqua blue and a brighter shade of TAM’s corporate red. TAM will also Innovative services introduce a new Economy ‘Plus’ product, which offers TAM was the first airline in Latin America to let similar seats as in Economy, but with a larger seat passengers use their mobile phones for calls, sms and pitch and recline, as well as a different seat colour. Internet. Provided by OnAir, the service is currently This type of service class is also offered by airlines available on 31 aircraft and TAM is also the first airline such as United, Delta and KLM. to introduce a 50 percent cheaper rate for onboard cellphone use than the commonly used international Business Class roaming rates. Last year, the airline also announced it TAM’s new Business Class will feature full-flat seats would equip its long-haul fleet with OnAir’s mobile and that are designed by Priestmangoode and wi-fi service. manufactured by Recaro. The 48 seats will have a new type of staggered design, allowing them to be placed QR-code TAM in a 2:4:2 configuration, but making it relatively easy At the end of 2011, TAM unveiled what it calls “a new for passengers in the middle seats to have aisle media platform,” which consists of a ‘QR Code TAM’ access. The two seats in the middle are placed slightly augmented reality app and QR (quick response) code ahead of the adjacent seatsand are meant for stickers. The QR code stickers can be placed on any passengers travelling together, while on each side the surface, and when a passenger aims the camera of his ‘individual’ seat provides direct access to the aisle. or her mobile device to the sticker, a virtual animation

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appears. TAM used the technology for the first time travelled by air and still travels long distances by bus, as during the 2011 Christmas season, placing QR stickers a lot of people in Brazil work outside their home state. on the windows of its aircraft which were linked to a In an effort to make air travel more accessible to the virtual Santa Claus animation. The app doesn’t general Brazilian population, counter growing requires onboard connectivity as all content is pre- competition from low-cost airlines such as GOL and loaded when the user downloads the app or updates Azul, and increase the volume of passengers at off-peak it. hours, TAM in 2010 launched an innovative ‘new retail project’ which is aimed at reaching the new ‘mass class’. TAM Kids A very sympathetic concept launched by TAM is its Says Líbano Barroso, CEO of TAM, “The strengthening of ‘Comandante Kid’ initiative, which is part of the the Brazilian economy over the past few years airline’s TAM Kids program. With parental consent, increased the consuming power in the country. It is children up to 12 years of age can sign up for TAM necessary to prove to this new middle class that the Kids and receive an official ‘Comandante Kid’ badge. privilege of flying no longer is limited to just a few.” Children flying with TAM and wearing the badge are invited to help the crew aboard by welcoming High-traffic locations passengers over the plane’s PA system or distributing TAM is targeting the emerging middle class with novel candies before the flight departs. Kids can also visit sales channels. For example, the airline sells tickets via the cockpit after the aircraft has landed. discount retail chain Casas Bahia in Sao Paulo, which caters primarily to low-income customers and most of TAM Vintage its outlets are located in poor neighbourhoods. Whereas most airlines paint one of their aircraft in a Customers can buy air tickets at the stores and have the retro livery to showcase their aviation heritage, TAM option to pay for them through a maximum of 12 has gone several steps further and for an 18-month interest-free installments, with the minimum period offered an immersive retro in-flight experience installment being R$ 20 (USD12; EUR9). Rival carriers on two A319 aircraft flying between Sao Paulo and Rio Gol and Azul also offer similar payment plan options. de Janeiro. According to TAM, the goal of the ‘TAM Vintage’ project was to strengthen its roots in a time Since August 2011, TAM operates 5 staffed subway the airline is growing rapidly. Highlighting two station kiosks in Sao Paulo and Rio de Janeiro, and has important moments of the airline’s history, one also signed an agreement with Princesa do Agreste – a aircraft was painted in TAM’s livery dating from the bus company that serves 29 north-eastern cities – to 1970’s, when the company launched its regional sell the bus company’s tickets at TAM stores in return operations, while the other aircraft was painted in a for selling air tickets at the bus stations. Says TAM’s 1990’s colour scheme, a time of great expansion and Marketing Director Manoela Amaro, “We can’t expect national level recognition. the passenger to come to the airport or one of our stores to buy a ticket. We have to be where they are.” The interiors on both aircraft also received a retro makeover, with seat covers, carpets and curtains Travel advice refurbished in the fabric and pattern of the Seventies TAM staff at the kiosks also help novice flyers in and Nineties. Cabin crew and pilots wore retro choosing the best travel options, flight hours and uniforms, meals were served on old-fashioned financing at the point of sale. They also explain air travel disposable tableware, while the onboard safety video procedures, such as advanced arrival to the airport, and safety leaflet were also done in a style that check-in options, rules for luggage dispatch, etc. echoed therespective eras. Additionally, customers receive a printed booklet with useful information when flying for the first time. The Emerging middle class airline also launched a microsite ‘Como Viajar’ (“How to According to TAM, the middle class in Brazil has grown Travel”) where people can familiarize themselves with three times as fast as the overall population in the air travel, as well as the English terminology commonly past decade and an estimated 10.7 million Brazilians used. At the airports, both the check-in staff and flight hit the skies for the first time in 2011 – 8.7 million of crew are trained to help those new to flying. whom belong to the ‘emerging classes’. However, 53 percent of the Brazilian middle class has never

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6. Qatar Airways

With the Gulf Region having firmly anchored itself as a We provide an experience, not sell a commodity.” global aviation crossroads, it comes with little surprise Continues Al Baker, “Although our premium seats offer that Qatar Airways is on our list of airlines to watch in a high degree of comfort and privacy we do not see the 2012. The national carrier of Qatar has experienced a need to feature gimmicks such as walls or doors in any rapid ascent to become one of the few ‘5-Star Airlines’ of our designs.” in the sky and was named “Airline of the Year 2011” by Skytrax – which cited its roomy Economy cabin and Onboard Experience Business Class product – including the Premium Qatar Airways’ fleet of widebody aircraft offer a Terminal at its Doha hub – as key drivers for the Business Class product that features 180 degree flat bed ranking. seats in a 2-2-2 configuration, a seat pitch of 78 inches, 15 inch IFE screens (17”on its B777s) with over 1,000 Compared with Gulf-based competitors Emirates and entertainment options, and a-la-carte dining with all Etihad, Qatar Airways takes a more low-key approach meals prepared at time of order. in designing its passenger experience. Says the airline’s CEO Akbar Al Baker in an emailed statement In Economy, the standard seat pitch is up to 34 inches to airlinetrends.com, “We believe that our key (significantly more than on other airlines). Passengers innovation is not so much one particular product or also receive a complimentary toiletry pouch and the service, but rather our commitment to blending the airline has teamed up with wellbeing guru Deepak latest technologies, trends and styles with the best Chopra to produce a ‘Tips to Fly Healthy’ guide that can aspects of air travel as it used to be, including plenty be found in the seat-back pocket. All seats also offer in- of space, inspiring cuisine and a warm, personal seat power and a 10.6 inch IFE screen. service.

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B787 Dreamliner airlines to add new features. The 787 will also be Qatar Qatar Airways expects delivery of its first Boeing 787 Airways’ first wide-body to offer full wi-fi and cellphone in Summer 2012 (it plans to have five 787s in service connectivity, although the carrier said voice calls will be by the end of the year) and the airline will be the “disabled to minimise passenger disruption.” launch customer in the Middle East for the aircraft. Qatar will initially operate the 787 on intra-Gulf routes Narrowbodies to provide flight crew with training hours before it will While rival ‘Gulf Gulliver’ Emirates moves in on new deploy the aircraft on the Doha–London Heathrow routes with widebody B777 aircraft – and even operates route in late August. Bloomberg reports that Qatar an A380 between Dubai and Manchester – Qatar also plans to start flights to Atlanta, Chicago, Boston Airways tends to take a more cautious approach when and Detroit within the next year as it begins receiving adding a new destination to its network. For example, its 787s. the airline has extensively deployed narrow-body aircraft – which makes up 40 percent of its fleet – on Business Class new routes to Eastern and Northern Europe. The Qatar’s 787 Dreamliner will seat 254 passengers in a airline’s A320s feature 12 angled lie-flat seats in two-class configuration with 22 seats in business class Business Class, 132 seats in Economy, and personal IFE and 232 in economy. In Business, a generous 1–2–1 screens in all seats. Qatar has also equipped several of configuration provides each passenger with direct its A320s with OnAir‘s cellphone connectivity. aisle access. The airline has also opted to remove the overhead luggage bins from the middle of the Ground experience Business Class cabin, providing an even more spacious Qatar Airways’ USD90 million stand-alone Premium feel. Terminal in Doha, which opened in 2006, features a restaurant area, a delicatessen, cocktail bar, spa, and a The flat-bed Business seats are made by B/E business centre. The airline has just also opened its first Aerospace and are placed in a reversed herringbone airport lounge outside Doha at London Heathrow’s formation, which angles the two middle seats towards Terminal 4, as it operates five flights per day to London. each other, while the solo window seats offer a high The 750m2 facility is designed to resemble a private degree of privacy. Armrests of the seat can be member’s club rather than a conventional airport adjusted to different heights and passengers can dine lounge, and Qatar recruited lounge staff from five star and work on large, wood-trimmed sliding tables – and hotels and restaurants to work in the theatre-style when dining begins, passengers have room to rest brasserie kitchen and delicatessen. their laptops on side tables. IFE screens have a size of no less than 17 inch. New Doha International Airport As an efficient and high-quality hub is key to Qatar Economy Airways’ network strategy, the airline is a key Seats in Economy are configured 3–3–3, which stakeholder in the construction of the New Doha surprisingly is one extra seat per row than the 2-4-2 International Airport (NDIA), which is scheduled to open setting offered by other B787 operators such as ANA in December 2012. Doha’s current crowded airport and JAL. Seat pitch of the Recaro CL3620 light-weight currently handles over 18 million passengers a year, seats is 32 inches and – in what is one of the first while NDIA will initially have a capacity of 28 million integrated IFE-seat deployments – all IFE providion is passengers a year – and 50 million by the time the installed in the seats by Recaro before they go to the airport is fully operational beyond 2015. The new airframes. USD15.5 billion airport is being constructed four kilometres from the existing facility and Qatar Airways TouchPMU expects to start operating from NDIA in early 2013. Qatar Airways’ new 787 will be the first aircraft to feature Thales’ new ‘TouchPMU’ handheld, an iPhone- Expansion like device that allows passengers to multitask and for Opening 24 new routes in the past two years, Qatar example watch a movie on the seatback screen while Airways currently operates a fleet of over 100 using the handheld to check the current flight position passenger aircraft (up from 57 in 2007) to more than or local weather. The Android-based TouchPMU can 100 destinations. Receiving a new aircraft every 2 to 3 also store a wide range of apps, making it easy for weeks on average during 2012, the airline is continuing

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its expansion in 2012 with 13 new routes and by 2016 Says Al Baker, “Chongqing is a prime example of a city, plans to serve 170 destinations with a fleet of 170 with its large industrial base and population of almost aircraft. Furthermore, the airline’s outspoken CEO 30 million people, not having sufficient international air expects the Gulf region to only have two dominant access that it so well deserves. Qatar Airways looks airlines, suggesting that Abu Dhabi-based Etihad will forward to developing our network further in China, not be on that list. with particular focus on inland Chinese cities where demand for air travel is just as high as the traditional In total, Qatar Airways has over 250 aircraft on order – coastal gateways.” worth more than USD50 billion at list prices – which Qatar Airways also states it will not stop its expansion include 10 A380s (first aircraft to arrive in 2013, but worldwide, despite the effect the debt crises in the U.S possibly delayed because of the superjumbo’s wing and the eurozone are having on the global aviation cracks issue), 30 B787s, 80 A350s (of which Qatar will industry. “Some weak airlines will not exist, but airlines, be the launch customer) and 50 A320neos. The state- like us, with strong financial capability, can still grow owned airline has delayed its earlier planned IPO with during an economic downturn,” said Al Baker, adding at least 5 to 8 years, saying it feels “it will take a very that international trade is still continuing and the long time to recover from the economic situation that demand in some markets, including China and countries the world is in today.” in Africa, is still increasing.

Niche markets Acquisitions A hallmark of Qatar’s growth strategy has been its Furthermore, part of Qatar Airways’ growth may also focus on niche and second-tier destinations. In Europe come from the acquisition of troubled European the airline already flies to 30 destinations, including carriers – witness Etihad’s recent purchase of a 29 Eastern European cities such as Budapest, Bucharest, percent stake in airberlin. In recent years, Qatar Airways Sofia, and the Scandinavian capitals of Copenhagen, has been linked as a strategic investor in the likes of Oslo and Stockholm. As these second-tier destinations Olympic Airways (Greece), TAP (Portugal) and SAS, and have limited direct long-haul flights, passengers have the airline in early 2012 pulled out of advanced talks to make at least one stop-over to reach their final with now-bankrupt Spanair after Spanish regulators said destination, which could be just as well in the Gulf state aid given to the loss-making carrier had to be instead of in Europe. repaid.

Speaking at last year’s Dubai Air Show, CEO Al Baker Although any acquisition is ruled out in the near term said that the airline’s mission “…has been to operate by CEO Al Baker, Qatar Airways is also interested in to key business and leisure destinations around the investing in India when current foreign ownership world, but also to underserved markets where others limitations are lifted by the Indian government. dare not venture into. We take bold decisions to serve certain markets because we believe it makes strong business sense.” 2012 route launches by Qatar Airways will include Baku (Azerbaijan), Tblisi (Georgia), Benghazi (Libya), Kigali (Rwanda) and Mombasa (Kenya), while Latin America and “underserved” Africa are targeted for future expansion.

China Qatar Airways has also been very public about its intentions to expand in China, which is home of no less than 160 cities with a population of more than 1 million. The airline plans to double the number of flights to China from the current 35 to 70 a week by 2013 and in December 2011 launched its fifth Chinese destination to Chongqing.

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7. Virgin America

Number 7 on 2012 our list of the world’s most experience from something that often is a ‘mass- innovative airlines is ‘no-frills chic’ carrier Virgin produced’ purely functional experience into something America. Easy to recognize thanks to its iconic cabin much more evocative and stylish. Starting with the lighting and hip and forward-looking approach to check-in areas at many Virgin America terminals (such airline travel, Virgin America has firmly established as at LAX), one immediately notices the soft beat of club itself as a favoured choice among the urban, tech music and distinct lighting that set the tone for a unique savvy flying demographic. travel experience.

The ‘un-official airline of Silicon Valley’ is also the only Quality instead of size U.S. carrier to install power and USB outlets in all Virgin America continued to drive significant growth in seats, and was the first U.S. airline to offer in-flight 2011, expanding its fleet from 34 A320s in January 2011 Wi-Fi on all aircraft in the fleet. True to its brand to 51 aircraft in May 2012. The airline has not turned in image, one of the aircraft in the fleet pays homage to a profitable year since beginning operations in 2007 and the late Steve Jobs by painting his famous quote “Stay experienced a net loss of USD30.8 million for the fourth Hungry, Stay Foolish” on the side, while another quarter of 2011 in which revenues rose 45 percent to aircraft is named #nerdbird, thanks to the large USD276.8 million. number of Wi-Fi users travelling on the San Francisco- Boston route. Nevertheless, Virgin America has aggressive expansion plans in mind and is targeting a number of new Based out of San Francisco International Airport, destinations in key US metropolitan areas. According to Virgin America has expanded from its initial focus on the airline’s CEO, David Cush, Virgin America was domestic long-haul point to point service to now designed to be an airline for business travelers and, as include intermediate routes as it adds more such, wants to be present in the primary and dominant destinations in the US. It also now flies to three US business markets. Cush cited the influence of popular holiday destinations in Mexico. The privately- frequent flyer programmes and corporate sales held airline (an IPO is planned in 2013) airline has programs as being the two greatest hurdles for a strived to transform the standard domestic air travel growing company like Virgin, but stated that, despite a

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tight economy and stiff competition, he believes that travellers more options instead of fewer, including the Virgin will prosper because of its unique services and ability to multitask across platforms – just as they do in amenities. their lives on the ground,” he said.

Virgin America currently flies to 17 cities – mostly San Francisco T2 from SFO − but is seeking to reach as many as 30 or 40 Virgin America operates its San Francisco hub out of the destinations within the next five years. The airline is airport’s totally renovated Terminal 2, which opened in planning to more than double its fleet to 111 aircraft April 2011. The features of the terminal in many ways by 2019, and in early 2011 announced it had placed a match the airline’s corporate ethos and its goal of 60-plane order which makes it the launch customer remaking the travel experience through innovation, for Airbus’ new A320neo jet, with deliveries scheduled design, and a focus on technology with an eye towards to begin in summer 2013. eco-friendly sustainability.

At the same time, Cush states that a critical Re-built on the site of the old international terminal, T2 component of its approach will be to not outgrow the is the first LEED Gold-certified airport terminal in the US airline’s current business model, and therefore and re-used about 90 percent of the materials from the perhaps limit the carrier to a fleet probably no larger original building, including terrazzo flooring made from than 150 aircraft. recycled glass chips. Other sustainable building techniques include walls of windows that makes most In-flight entertainment daytime artificial lighting unnecessary, a dedicated A key service differentiator for Virgin America is its water bottle refilling station, and a new ventilation sophisticated in-flight entertainment and system that requires 20 percent less energy. communications (IFEC) platform, known as Red, which may very well be the world’s most feature-rich IFEC Brand partnerships system. The 9-inch high-definition touch screens on Describing its passengers as “influencers, buzz each seatback feature live satellite television, the first generators and trendsetters, who work in innovation- ever seatback digital shopping platform, an open tab oriented industries such as fashion, film, media, service, and interactive Google Maps with terrain view technology, design,” Virgin America has been quick to that tracks the flight’s location. team up with brands for product placement. Following earlier brand partnerships with the likes of eco-friendly Passengers can also use the system to chat with other cleaning products company Method, and lingerie brand passengers, play 3D games such as Doom, offset Victoria’s Secret, Virgin America last year teamed up carbon emissions for their flight, or purchase snacks, with Google to allow passengers to ‘test-fly’ the tech meals, and beverages from their seats via Red. Flight giant’s new Chromebook laptop computers for free. attendants receive the orders via a tablet device and bring the ordered items to the seat Virgin America’s passengers could use the computers onboard their flight and at select airport gates from July Hybrid platform 2011 through January 2012. Flyers who borrowed a Further upping the ante, Virgin America has selected Chromebook also received a free Wi-Fi session onboard. Lufthansa Systems’ new BoardConnect platform for The machines had to be returned at the arrival gate and the next iteration of its Red system. Besides offering Google staff was available to assist passengers at the entertainment via larger high-definition touchscreen Google Chrome Zone at SFO. seat-centric monitors, the ‘hybrid IFE&C platform’ – which is slated for a late 2012 release – will also offer In December 2011, Virgin America and Banana Republic passengers wi-fi connectivity through their seatback held a holiday surprise for passengers waiting for their system and their own personal devices, as well as luggage at SFO airport. Inspired by a similar promotion offer wireless access to content stored on an onboard done by Spanair, gift boxes with Banana Republic server. apparel arrived on the luggage belt passengers of flight VX837. Virgin America’s CEO David Cush says the new Red system will allow the airline to offer passengers “the best of both worlds.” […] “We want to give our

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Social media Virgin America has also been a frontrunner in the digital and social media arena and often one of the first to experiment with new social media tools and platforms.

Twin Tested In September of last year, a promotional campaign from Virgin America used identical twins to reveal the benefits of its service over other airlines. Called “Twin Tested,” each twin was asked to travel alone on different flights; one person travelled with Virgin America and the other with an undisclosed competitor. A video diary was made for each journey and the twins reconvened afterwards to discuss their individual experiences. The videos are part of the promotional website called “Switch to Virgin America” which also features games and coupons for consumers.

Groupon In February 2011, Virgin America was the first airline in the U.S. to initiate a campaign on Groupon to promote its new Chicago to San Francisco and Chicago to Los Angeles services. The offer was a USD 77 discount on the USD 350 fare for those that spent USD 7 on the coupon. In typical Groupon fashion the offer sold out in just 8 minutes in Chicago and in 45 minutes in San Francisco and Los Angeles. Spurred by the popularity of its Chicago offer, Virgin America offered another deal in early March for flights out of Dallas Forth Worth. Nearly 3,000 people signed up for this deal.

Gilt City In November 2011, Virgin America partnered with luxury deal site Gilt City to offer the public a roundtrip charter flight anywhere Virgin America flies in the US for USD 60,000. In addition to the flight, the purchaser would get to name the airplane for the Virgin America fleet.

Additional trailblazing efforts in the airline social media space have included offering free tickets to higher-profile Twitter ‘influencers’ via a partnership with Klout, Twitter scavenger hunts that offered the reward of discounted fares and other special hashtag sales events that have donated certain proceeds to charity.

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8. airBaltic

Latvia-based airBaltic stands out as an airline whose Restructuring innovations have been featured many times on AirBaltic has been growing its network quickly in recent airlinetrends.com. In recent years, the carrier has years and currently serves over 60 destinations from transformed from a point-to-point low-cost carrier Riga. The airline carried around 3.3 million passengers into a hybrid LCC, turning its Riga ‘North Hub’ into a in 2011, compared with 1.4 million in 2006. However, transit point for travellers between Northern Europe, airBaltic’s ambitious hub strategy (50 percent of Eastern Europe, Southern Europe and Central Asia. passengers transits at Riga) has not yet materialized into a profitable operation for the airline. According to AirBaltic offers passengers connecting through Riga airBaltic’s new CEO Martin Gauss, 2011 losses hit more 25-minute connection times, while other ‘hybrid’ than EUR 85 million. features of the airline include services that are staple of mainline carriers, such as a separate Business Class In particular, airBaltic’s relatively older, fuel-inefficient cabin, an airport lounge and a frequent flyer program. fleet of B737-3/500s and Fokker 50s (the latter will be AirBaltic further boasts a cost per-average seat phased out at the end of 2012) are are a drain on the kilometer that is on par with the likes of Easyjet and airline’s operational cost performance. Furthermore, Norwegian and 30 to 40 percent lower than Finnair the financial situation of the airline led to a public fight and SAS. last year between airBaltic’s two shareholders, former CEO Bertolt Flick (who owned 47 percent of airBaltic) and the Latvian government (52 percent share) for control of the airline.

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After a long-running saga, Flick resigned from the flights using the service will launch at the end of June airline in October 2011 as part of an agreement to 2012. increase the company’s share capital by the Latvian government, which also used the bankruptcy of one of Ancillary revenues Latvia’s banks to take full control of the airline. In recent years, airBaltic has rapidly grown its ancillary AirBaltic’s new CEO, former Malev boss Martin Gauss, revenues. According to airBaltic’s Vice President of has just launched a restructuring plan, which will cut Communications Janis Vanags, extra revenue per costs by reducing the number of aircraft and passenger exceeded EUR 12 last year – compared with modernising the carrier’s fleet. AirBaltic will also move as little as EUR 2 in 2007 – and the airline‘s percentage away from a stringent focus on transfer traffic over its of ancillary revenue as part of total revenues is ‘North Hub Riga’ to a more point-to-point approach. approaching 15 percent. The main sources of ancillary income for airBaltic are checked bag fees, payment A delegation from Latvia has also recently visited the fees, add-on products (insurances, warrantys, hotels), Gulf Region as part of an investor roadshow to and buy-on-board products. present the airline to potential investors, which included Etihad and Qatar Airways. Other airlines Travel Megastore rumoured to be interested in the airline are Turkish According to Vanags, airBaltic’s approach towards Airlines and Hainan Airlines from China. ancillary revenues is to operate as a ‘travel megastore’, where customers can buy everything necessary for the Innovations journey before the flight, during the flight, and after the Despite all internal turmoil, airBaltic continues to flight. Says Vanags, “As a customer you can buy churn out attention-grabbing innovations. Along with everything you want in our Travel Megastore. You start differentiating its Business Class by serving passengers with a ticket, then add a hotel booking, car rental and a 3-course meal based on organic, seasonal products go on to buy sunglasses for your beach holiday, a travel from local Latvian farmers, freshly brewed Nespresso bag or add flowers for your girlfriend 11 km up in the coffee, and complimentary iPads onboard and in its sky.” […] “People can pick up their sunglasses on the Riga lounge, airBaltic has come up with a host of plane, as they would in a shop. The flight ticket is just innovative ancillary products, creative marketing the entrance to the megastore – and the cheaper the campaigns, and the airline is one of the first carriers to ticket is, the easier it is for them to come in and the launch a ‘social seating’ service. more they can buy.”

Social seating airBalticBag Following earlier initiatives by KLM and Malaysia A prime example of an innovative ancillary product is Airlines, airBaltic has just launched its own the airline’s airBalticBag. AirBaltic normally charges ‘SeatBuddy’ social seating service, allowing like- passengers in Economy a fee of EUR20 to 30 per minded flyers to sit next to each other. On the airline’s checked bag per one-way flight. However, instead of website, passengers can opt to choose from their just another mundane transaction, regular flyers with ‘flight mood’ – social (business talk, easy chat) or non- the airline can purchase an airBaltic-branded Samsonite social (work, relax) – and whether they’d like their suitcase that comes in two sizes (EUR169 and EUR181 seat neighbour to be like them or different. The respectively), and carry it as free checked luggage on an concept uses Facebook, LinkedIn and Twitter to find unlimited number of airBaltic flights for twelve months. the best matches, assigns seats and passengers get a Passengers are required to register for airBaltic’s message saying what they have in common with their BalticMiles frequent flyer program in order to receive a seat pal. personalised ‘free baggage tag’ with their full name and BalticMiles number, which must be attached to the Customer information is collected in a secure Samsonite suitcase and correspond with the name on database and the closest match available on the same the flight ticket. flight is identified automatically without disclosing passenger identity or any personal data. For now, BalticTaxi social seating servie is free of charge, and airBaltic SVP Stretching the airBaltic service to journeys both to and sales and marketing Michael Grimme said “future from the airport, the airline in 2010 established its own commercial potential” is being explored. The first test taxi company, BalticTAXI, as taxi drivers in Riga often

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charge foreign visitors too much for rides and airBaltic promotion dubbed ‘Castles in the Sky’. Says airBaltic’s felt this was harming the image of its hub. BalticTAXI’s Vanigs, “These products add a lot to our visibility and fleet of Toyota Corolla vehicles are staffed by expand the brand. It’s often not the technology, but professional uniformed drivers, and a fixed price is creative limitations that restrict new ancillary revenue charged for the journey from the airport to any generation. We are not afraid to experiment, despite location in Riga. Passengers can purchase pre-paid taxi the fact that success is not guaranteed.” vouchers onboard airBaltic, and members of the airline’s BalticMiles loyalty program receive a 10 Experiental marketing percent discount. To promote the taxi service, ads for AirBaltic’s creative streak can also be seen in its BalticTAXI can be found in airBaltic’s in-flight promotional activities, where the airlines seems to have magazine and a cabin crew announcement is made a preference for 3-dimensional, moving concepts. after landing in Riga. Shoevertising iPad rental Last year, airBaltic launched a new advertising AirBaltic also rents iPads to passengers travelling in campaign that featured several airline-themed shoe Economy on flights longer than 2 hours and 30 designs branded in the airline’s colours. The shoes were minutes for a fee of EUR 9. Up to 10 iPads are meant to illustrate the various reasons behind a available on each flight, which airBaltic rents from consumer’s decision to take advantage of a promotional catering company LSG under a profit-sharing fare and were featured in print ads, outdoor billboards agreement. and online banners.

Upgrade option, delayed arrival warranty The shoes themselves created such an amount of Two other innovative ancillary products launched by interest by the general public that people began asking airBaltic both include an element of gambling and airBaltic via Facebook and Twitter where they could buy chance. For an EUR3 fee, passengers in Economy can the shoes. AirBaltic was quick to embrace this participate in an OptionTown ‘lottery’ to qualify for a marketing opportunity to gain some free exposure and cheap last-minute upgrade to Business Class. turned one of the designs into an actual limited edition AirBaltic’s ‘Delayed Arrival Warranty’ meanwhile lets shoe, which for EUR55 can be purchased at the airline’s passengers bet against a late arrival of their flight. For online shop and in duty free stores at Riga Airport. a non-refundable fee of EUR24 per one-way journey, passengers receive a double refund of their ticket BalticBike price if the airline arrives one hour behind schedule at In 2010, airBaltic launched a BalticBike bike sharing their destination. scheme in Riga and in the seaside resort of Jurmala to promote an inexpensive and eco-friendly way for Discounted tikets, TV sets, cars, holiday houses visitors to get around town. Registered members can Taking its ‘travel megastore’ concept quite literally, pick up one of the 150 bicycles at 19 locations in Riga airBaltic in the past two years has held several and 3 in Jurmala for LVL0.70 (EUR1.00) per hour with a onboard retail campaigns in which it offered maximum of LVL8 (EUR11.40) a day and EUR 100 a passengers the option to buy discounted flight tickets, month. To rent a bike, members call the phone number flat screen tv sets and even a custom-designed Mini printed on the bicycle to receive a code that unlocks the Cooper car in airBaltic colors and sporting the text “I bike. Bikes can be returned to any station and another Love Flyin.” call completes the rental. Says airBaltic’s Vanags: “BalticBike makes a marginal profit, but it is hugely So far, results of the onboard retail campaigns have popular among the city residents and tourists, and generally been mixed. The airline noted that the direct hugely visible, and so irreplaceable in advertising.” sales of TV sets on board were lower than anticipated, though several people have bought a EUR50 voucher that gives them the option to purchase a Mini Cooper. Despite the modest sales results, the deals have created significant buzz for the airline. The next campaign may offer passengers the chance to buy a Latvian manor house or beach villa onboard, in a

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9 . AirAsia

At In 2001, when CEO Tony Fernandes bought AirAsia for a token MYR1 plus MYR40 million (USD 12.5mln) an economic level at which budget airline flights are debt, it was a failing state-owned regional carrier with affordable. only two aircraft. In just a decade, the Kuala Lumpur- based low-cost carrier (LCC) has become a pan-Asian Positioning airline group serving over 75 destinations with a fleet AirAsia’s stated goal is to be “the lowest cost airline in of over 100 aircraft. every market they serve” and its rigorous focus on expenses saw the airline charging a fee for passengers In June 2011 the airline signed an USD 18bn deal with who want to use check-in desks at airports. While this Airbus for the delivery of 200 A320s over 15 years. now only applies to domestic passengers, it’s just one Besides owning a stake in its long-haul sister airline example that has led AirAsia to operate with the world’s AirAsiaX, AirAsia has local subsidiaries in Thailand and lowest unit costs (in terms of available seat kilometres), Indonesia, joint ventures in the Philippines and which are lower than both Southwest Airlines in the US Vietnam, while an agreement with All Nippon Airways – who invented the low-cost model – and Europe’s ultra will see AirAsia Japan take to the skies in August 2012. low-cost carrier Ryanair.

One of AirAsia’s key advantages lies in being in the In the air, AirAsia is a classic LCC that offers few right place at the right time. The airline’s pace of additional frills. AirAsia’s fleet of more than 100 A320 growth – which has made it Asia’s largest LCC with a aircraft all have 186 leather seats and passengers pay market capitalization of USD 3 billion – is underpinned for checked bags, can reserve their seat for a fee and by emerging regional Asian economies, whose buy their food and beverages onboard. average annual growth rates of around 7 percent are continually lifting millions more people every year to

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On the ground at its hub at Kuala Lumpur free to passengers. The system, provided by Tune Box – International Airport, however, AirAsia has added which is part of AirAsia’s parent Tune Group – will more hybrid features such as a ‘Fly-Thru’ transit employ Samsung’s Galaxy Tablets. service for connecting passengers with flight transfers Ancillary revenues of at least 90 minutes. In March 2011, the airline At USD41.60 per passenger, AirAsia X boasts the launched a ‘Red Carpet’ service at 8 airports, including industry’s highest ancillary revenue per passenger. Its Kuala Lumpur, Singapore and Jakarta, where for a fee latest product is what it calls an ‘empty seat option’, of approximately USD35 passengers can make use of developed for the airline by a company called priority check-in, fast track through security, lounge Optiontown. The empty seat option promises access, as well as priority boarding and luggage arrival. passengers a chance to reserve one or two empty seats Additionally, in 2011, AirAsia launched its own next to them for a nominal fee when they sign up and frequent flyer program and is also trialling one of the pay a small fee (ranging from USD 10 to 16). AirAsia X world’s first onboard immigration processes. will email the status of empty seat(s) availability to the customer between four and 72 hours before flight Like many LCCs, ancillary revenue is a big cash- departure. If empty seat(s) are ultimately booked by generator for AirAsia. In 2010, the airline recorded other passengers, the fee will be refunded 18.7 percent of total revenues coming from ancillary automatically to the customer. sources, making them some of the higher percentages in the LCC space. Not only do unused seats generally make the travel experience more comfortable for passengers, but they Long-haul, low-cost give the airline an opportunity to generate some Launched in November 2007, AirAsia X has been one revenue on seats that are normally non-productive of the pioneers of the long-haul low-cost concept. The assets once the airplane doors are closed. The airline airline, which is owned by several investors – including estimates earnings of up to USD 1 million in 2012 with AirAsia, its founder Tony Fernandes and Richard its empty seat option. Branson’s Virgin Group – currently operates a a fleet of 11 Airbus A330s and A340s with 20 A330s and 10 Social media A350-900s on order. AirAsia is also one of the most active airlines on the social web, with an extensive presence across the In recent years, AirAsia X has opened routes to standard platforms of Twitter (over 350,000 followers) Europe, Australia, China and India, but over the past and Facebook (over 1.4 million fans), as well as China’s year has scaled its network back. Citing high fuel costs Sina and RenRen. Social media rating agency Eezeer has and increasing airport charges as two main reasons, consistently rated AirAsia as one of the most actively AirAsia X has suspended its London, Paris, tweeting airline accounts and perhaps more Christchurch, Abu Dhabi, New Delhi and Mumbai importantly, one of the most active ‘listeners’ to services. customer opinions on the social web.

According to AirAsia X CEO Azran Osman-Rani, the Another big part of AirAsia’s social strategy is the airline will refocus on core markets in Asia-Pacific implementation of the industry’s first social CRM where it has sufficient scale and can be profitable. As platform – called ‘Ask AirAsia’ and accessible via part of its renewed focus on the high-growth Asian AirAsia’s website and Facebook page – where customer region, AirAsia X plans to add flights to Japan and service is provided via live chat, webmail, twitter and open routes to Adelaide, Fukuoka, and Busan. intelligent automated responses. The airline recently has closed its telephone-based service channel, Onboard experience redirecting all customers to the Ask AirAsia online AirAsia X offers passengers in its premium cabin an channels instead. angled lie-flat business class seat – a better product than rival long-haul LCC Jetstar’s ‘Premium Economy’- AirAsia x Malaysia Airlines style recliners – and an unbundled long-haul economy In August 2011, AirAsia’s parent Tune Air took the product with, among other features, paid catering. unprecedented move of acquiring 20.5 percent of The airline also announced it will trial a wireless IFE Malaysia’s national carrier, Malaysia Airlines (MAS) in system in 2012, with some of the content available for return for a 10 percent holding in both AirAsia and

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AirAsia X by Khazanah, Malaysia’s sovereign wealth fund and the majority shareholder of MAS.

The share swap was aimed at helping the carriers compete against multibrand competitors such as Scoot/Tiger Airways/Singapore Airlines and Jetstar/Qantas once the Southeast Asian open-sky policy comes into effect in 2015. Furthermore, many of Malaysia Airlines’ domestic and regional routes would be picked up by AirAsia, while MAS itself will be left to focus on the premium long-haul markets, which would reduce overlap and allow MAS to cut expenses and shore up its balance sheet.

However, the cross-ownership agreement between the two airlines has recently been cancelled because of strong opposition to the deal from the 15,000- member Malaysia Airlines Employees’ Union on concerns about job losses and the dominant influence of AirAsia. Both airlines now plan to collaborate in key operational areas such as ground handling, training and MRO.

Entrepreneurial Tony Fernandes In addition to founding AirAsia and AirAsia X, AirAsia CEO Tony Fernandes also runs Tune Group, AirAsia’s parent company, which, like Richard Branson’s Virgin Group, has ventured into businesses as diverse as hotels, an online travel agency (Expedia Asia, courier services, a cell phone company (Tune Talk), financial services (Tune Money), entertainment (Tune Tones) and sports (Tune Sports).

Fernandes has also been dubbed the ‘Asian equivalent’ of Donald Trump and Sir Alan Sugar, with appearances in the first edition of The Apprentice Asia, which will air later in 2012.

Furthermore, Fernandes is rumoured to be setting up a new premium regional airline, likely to be called Caterham Jet. The name comes from last year’s purchase by Fernandes of British sports car manufacturer Caterham Cars, which has lent its name to a rebrand of Fernandes’ Formula 1 racing team Lotus to Caterham Racing.

Caterham Jets – which has yet to be granted an operating licence by the Malaysian government – is expected to fly out of Subang Airport, Kuala Lumpur’s former international airport, which is located considerably closer to the city centre than the current KLIA airport in Sepang.

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10. All Nippon Airways

Last year’s 2011 Innovative Airlines ranking awarded Boeing 787 Dreamliner All Nippon Airways (ANA) with a second place thanks The first airline to receive the B787 Dreamliner in to its ‘Inspiration of Japan’ cabin and service concept, September 2011, ANA so far has received the first six the opening of a new international terminal at its aircraft of 55 B787s on order, which it says is key to its Tokyo Haneda hub, its business-class only ANA expansion in Asia and Europe. The 787 is a twin-aisle Business Jet service, the MyChoice ancillary revenues airplane that can accommodate up to 250 passengers program, as well as passenger-friendly amenities such on flights up to 8,200 miles (15,200 km). As the first as women-only toilets onboard, sleep support kits on large passenger jet to have more than half its structure late night departures, and wireless mobile phone made of lightweight composite material instead of chargers in its domestic lounges. aluminum, the fuel-efficitnet 787 is the only mid-size airplane capable of long-range routes, making so-called Bold strategic moves ‘thin routes’ economically viable. Aiming to fill the void left by the restructuring of Japan Airlines, ANA – which is currently the ninth The interior of the 787 Dreamliner provides passengers largest airline in the world by revenues and the largest with a more spacious experience than on other twin- in Japan by passenger numbers – seeks to become aisle planes, because of a ‘vaulted’ 8-foot ceiling, large one of the major airlines in Asia. Cornerstones of this windows with electronic shades, while passenger ambitious strategy are plans to expand international comfort is improved by higher levels of humidity and capacity by 22 percent in the next two years by maintaining air pressure at the equivalent of an altitude capitalizing on its new Boeing 787 Dreamliners, of of 6,000 feet (1,800 meters) in comparison to 8,000 feet which it will have 20 in operation by March 2013. on other aircraft. Furthermore, the airline is targetting new customer segments by launching two low-cost carriers in 2012.

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Inspiration of Japan rail network has also made profits for ANA’s domestic ANA’s 787s feature the airline’s ‘Inspiration of Japan’ operations hard to achieve. cabin (launched in early 2011) and have two classes – To cut costs, ANA in 2010 introduced paid catering Business and Economy. The capacity ranges from 158 (which includes fresh-tapped beer and Starbucks coffee) seats (46 full-flat Sicma Skylounge business seats, 112 on domestic flights, but in order to make air travel a a Sicma AIRgonomic FX seats in economy) for aircraft competitive alternative, as well as to attract a new flying long-haul routes to 222 (42 Sicma cradle seats in customer segment, ANA has just launched a low-cost business, 180 economy) on short-haul routes. operation in Osaka and will launch another low-cost carrier in Tokyo later this year. On ANA’s long-haul routes the full-flat beds in Business Class are configured in a staggered layout (1- Peach 2-1 and 1-1-1) that allows aisle access from every seat. ANA in March 2012 launched a new low-cost subsidiary, In the Economy cabin, passengers are seated in fixed- called ‘Peach’ – which happens to be an anagram of shell seats that recline inwards. All classes feature ‘cheap’ – in partnership with Hong Kong-based First AVOD LCD screens, in-seat power, and USB ports. Eastern Investment Group. Peach currently operates ANA’s 787s also sport a self-service bar, as well as a flights between Osaka’s Kansai International Airport and Toto ‘washlet’ toilet in each class, which are Fukuoka, Sapporo, Nagasaki and Kagoshima, with Seoul commonplace in Japanese homes. and Tapei to follow later in 2012. With fares that are some 50 percent lower than those offered by ANA’s ANA currently operates its 787s on domestic routes in mainline operation, Peach aims to stimulate additional Japan and in January 2012 deployed the aircraft on its demand for air service. first long-haul service from Tokyo Haneda to Frankfurt, and just launched a new service from Tokyo Peach’s fleet will consist of 10 A320s by the end of Narita to Seattle. ANA will deploy its Dreamliners 2012, and the airline aims to carry 6 million passengers mostly to cities that are served by a limited number of annually within 5 years of operation. Operating direct long-haul flights, because they don’t have independently from ANA, Peach has started on a good enough demand to support large aircraft. In the note: the carrier enjoyed an average load factor in its second half of 2012, the airline will start services to first month of operation of 83 percent, exceeding its San Jose in California, while in Europe, ANA has also own 75 percent forecast. indicated it plans to start direct service to second-tier airports such as Brussels in April 2013, with Dusseldorf Peach’s A320s accommodate 180 passengers and and Barcelona on the radar as well. feature leather seats with covers in two colours: purple and black. Peach’s offers a simple two-tiered fare Peach, AirAsia Japan structure: The ‘Happy Peach’ fare includes only the Competition in Japan’s air travel market has long been basic seat and one piece of carry-on luggage, while the restricted by a lack of landing slots at major airports, ‘Happy Peach Plus’ fare includes checked luggage, high landing fees and, until deregulation in 2008, selection of basic seat, no fees to change flights and restrictions on the amount of discounting allowed. reduced cancellation fees. Furthermore, the focus on high service has been used as an excuse for why low-cost carriers (LCC’s) could Buy-on-board catering is also available – but no not gain a standing in the country, which is the third (portable) IFE – and extra-legroom seats can be booked largest aviation market in the world and where for an additional fee of around USD10. Commenting on market share of LCC’s is less than 10 percent. the proposition offered by Peach, aviation consultancy CAPA said, “While Peach’s offerings may be As a growing number of South-Korean and Chinese underwhelming for those versed in LCC commercial LCC’s – as well as long-haul low-cost carriers such as strategy, they will still come as a shock to the Japanese, Jetstar (routes from Australia and Singapore) and who have broadly not experienced a home-grown LCC.” AirAsia X (routes from Kuala Lumpur) – are taking advantage of the liberalization of the market in Japan, AirAsia Japan ANA and Japan Airlines are entering the LCC segment ANA has also teamed up with AirAsia to form AirAsia as well. Furthermore, Japan’s extensive high-speed Japan, a new low-cost carrier that will be based at Tokyo’s Narita International Airport. It will start flights

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to Fukuoka, Okinawa and Sapporo when commencing operations in August 2012, with international flights Authors to Busan and Seoul to follow in October. AirAsia Japan Raymond Kollau | Founder of airlinetrends.com is counting on AirAsia’s pan-Asian operations and and a regular contributor to Airline Passenger marketing to help it carry 10 million passengers Experience and Onboard Hospitality magazines. annually within five years. Raymond has also been quoted as an industry expert by media such as CNN, MSNBC and The Said Shinichiro Ito, CEO of ANA, “We decided that the New York Times. fastest way for us to establish a LCC was by utilising AirAsia’s know-how and brand. By combining AirAsia’s Brian Pillsbury | Brian is a commercial aviation business model and brand with ANA’s depth of enthusiast and a veteran business traveler knowledge of the Japanese market, we aim to bring based in Los Angeles. His contributions for new value to our customers […] and generate new airlinetrends.com focus on trends and demand.” Adds AirAsia Japan CEO Kazuyuki Iwakata, innovations at airports around the world, as well “We’re aiming at families who want to enjoy the as airlines from North America. weekend or people who play Pachinko and we want them to be able to think about taking a flight as easily Vivek Mayasandra | Vivek is an airline as they would hop on a bus.” […] “The introduction of enthusiast and industry professional with low-cost service will give people another option for experience in marketing, branding and the weekends.” operations. In addition to his writing at airlinetrends.com, Vivek created the Take Flight AirAsia Japan also plans long-haul services to Thailand, Project to bring together stories of inspiring Singapore, Indonesia, Hawaii, Guam, Australia and people who’ve taken flights to change their New Zealand once it introduces A330 widebody world. aircraft to the fleet from 2013 on. AirAsia CEO Tony Fernandes has also indicated that the AirAsia Japan hub at Narita may serve as a connecting point About airlinetrends.com between Southeast Asia and the United States for AirAsia. Airlinetrends.com is an independent industry and consumer trends research agency that is Multibrand strategy monitoring the global aviation industry for Commenting on the launch of two LCC brands, instead commercial innovations launched by airlines of one, ANA said that it has been seeking and airport in response to industry trends and opportunities to launch a new low-cost business changing consumer behavior. based at Tokyo Narita and, after analysis, has We report our findings via a free monthly concluded that partnering with an existing low-cost newsletter and public speaking engagements, carrier was the best option. Furthermore, with a as well as in-house trend sessions and population of 20 million, the Kansai region around commissioned trend reports. Osaka is large enough to accommodate another LCC (Peach). For more information, please visit www.airlinetrends.com Following its entry into LCC business, ANA will also or contact us at [email protected] adopt a new corporate structure by April 2013 to reflect its position as both a full-service airline and a low-cost carrier. ANA, AirAsia Japan and Peach brands will operate under the holding company, which ANA believes is a more optimal organizational structure for building a multi-brand strategy between the existing ANA brand and the new LCC brands. For a more elaborate take on what the launch of two LCC’s will mean for ANA, see this article by CAPA.

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