Geoff Dixon, CEO, Qantas Airways James Hogan, President and CEO
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A MAGAZINE FOR AIRLINE EXECUTIVES 2004 Issue No. 21 T a k i n g y o u r a i r l i n e t o n e w h e i g h t s ANON ALLIEDTHE ROUTE FRON TOT RECOVE R Y A conversation wAi tconversationh … with … Geoff DixoJamesn, CEO, Qantas AirwaysHogan, President and CEO, Gulf Air INSID E Industry Showing 19 Signs of INSIDRecoveryE Low-CostAir France Carrier and KLM Mode forlm 384 ContinuesEurope’s Largest to Evolv Airline e Recent Breakthroughs 1879 Thein Revenue Evolution Managemen of Alliancets A Conversation with oneworld, SkyTeam 26 and Star Alliance © 2009 Sabre Inc. All rights reserved. [email protected] industry industry Although CRM and frequent flyer customers’ issues and to differentiate itself by CRM initiatives and to justify their expense. programs are interrelated, CRM with its person- implementing better services that offer a new Given the scope of most CRM investments, alized and holistic approach can do much more level of personalized service, especially com- an airline should take a holistic approach and for an airline than a loyalty program by itself. pared with low-cost carriers. consolidate results in various areas to deter- The Long Night’s Journey into Day That’s not to say that low-cost carriers mine the effectiveness of the CRM program. In a Time of Cost Cutting, does don’t have a need for a CRM strategy. Rather than focusing narrowly on specific Investment in CRM Make Sense? Southwest Airlines, for example, a low-cost areas such as revenue optimization or pricing The current challenging economic environ- carrier with few extra amenities, justifiably where there doesn’t appear to be a direct ben- With traffic, profits and demand on the rise, the world’s airline ment and the continued growth of low-cost views itself as customer-service focused. efit from CRM, but instead looking at the over- industry appears to be on its way to brighter days. carriers has put competitive pressure on the Southwest Airlines has repeatedly finished at all performance of the airline, the effective- traditional network airlines, which have the top of airline customer satisfaction ratings. ness of the program can be gauged. responded by focusing almost exclusively on Its strategy is based on a customer-service Customer focus holds the key to cost-cutting measures in order it remain com- approach, maximizing the “people aspect” increased profitability but also presents chal- By B. Scott Hunt and Stephani Hawkins | Ascend Editors petitive. And in a challenging economy, many and making sure issues with travelers are lenges. The promise is clear — better treat- strategic initiatives such as CRM get pushed solved quickly. Southwest is also working to ment of customers will lead to higher prof- f it is truly darkest before the dawn, then acutely, there are rays of hope. According to of course. It’s not like everything is perfect. to the side, and some airlines question collect more customer data and share it itability. A McKinsey investigation of 17 airlines the airline industry certainly stands on the the Air Transport Association of America, an But there’s improvement.” whether the time is right for a CRM initiative. among touch points, creating a single view of in 2003 indicated CRM can improve revenues I cusp of a spectacular sunrise. industry trade group, the U.S. industry’s loss- The improving global economy and Even in the current climate, a CRM the customer in order to offer better service. by between 0.9 percent and 2.4 percent. After After a prolonged period of darkness in es decreased from US$11.3 billion in 2002 to pent-up demand for travel have helped airlines strategy is critical to recovery and future “Customer service causes loyalty that deducting the costs, this still leaves large airlines the industry, many industry experts say that US$5 billion last year. around the world regain their footing. The low- growth because it helps set an airline apart can’t be explained by low prices alone,” said with an annual improvement of US$100 million to they see the first rays of the recovery dawn on “We’re heading in the right direction,” cost segment, which was not impacted to the from its competition. An airline’s price structure, Donna Conover, vice president of customer US$250 million or, for smaller airlines, a US$15 the horizon, with increases in metrics such as said James C. May, chief executive of the ATA degree of some of the network carriers, contin- schedule and product can be duplicated by service at Southwest Airlines. million to US$50 million annual improvement. passenger traffic, load factors and revenue per earlier this year. ues to grow and stim- competitors, but customer data and customer Airlines have struggled with how to However, achieving those results kilometer. In January, the ulate traffic with low insight will allow an airline to understand its effectively measure the returns from their requires more than just additional data and “Positive growth is expected in 2004, ATA reported that rev- Market growth rates are back on fares and by tapping analysis. It requires that the information be with a bounce back of 7 percent to 8 percent enue from passengers “track, load factors are recovering, underserved markets. used to change the way of selling, marketing in international RPKs,” said Giovanni Bisignani, carried was up 5.4 per- and there’s general improvement. Although the recov- Keeping Passengers Happy and serving customers as well as the way the director general and chief executive officer of cent year-over-year, ery appears to be We still need to be cautious, of Reasons for customers’ airline interacts with the customer. The prima- the International Air Transport Association. exceeding analysts’ worldwide, it is pro- downward migration1 (percent) ry reason some CRM efforts don’t deliver the “Our agenda for 2004 is designed to turn this expectations. Most of course. It’s not like everything is gressing at different expected benefits is that the customer-facing positive trend into sustained growth and to the gains came from rates in the three 60–70 30–40 perfect. But there’s improvement. employee is overlooked during the CRM help the industry repair damaged balance international travel, ” regions most dramati- implementation. Having more customer data by sheets.” the ATA said. cally affected by the itself achieves nothing. To be successful, an The International Civil Aviation “We see improvements across the events of the past three years. airline must have an effective strategy and imple- Organization also predicts that traffic, after board comparatively speaking against the pre- Structural Nonstructural factors factors ment the strategy throughout the enterprise. two flat years, will grow this year. The ICAO vious two years,” said Emre Serpen, a senior Asia/Pacific projects traffic will reach 3.1 billion passenger partner with Sabre Airline Solutions As the region least impacted by the industry’s such as change in: Related to Possible issues CRM2 actions A Comprehensive Strategy kilometers performed in 2004, surpassing Consulting. “I would say the recovery hap- downturn, Asia/Pacific has also been the CRM is more than IT or a frequent flyer pro- 2000 levels of 3.017 billion PKPs. The ICAO pened faster than expected. In terms of prof- quickest to begin recovering. • Job • Service • Delays, lost • Identify and proactively luggage apologize to high-value gram. It is a strategy that enables airlines to projects traffic will further increase to 3.3 bil- itability, European and Asian carriers are doing Because the low-cost carrier segment is • Location customers remain competitive today and in the future. lion passenger kilometers performed in 2005. well. Market growth rates are back on track, less developed in Asia/Pacific, the industry is •Personal •Frequent-flyer • Failure to redeem •Provide high-priority Many carriers have already experienced the Even in North America, where impacts load factors are recovering, and there’s gener- more regulated, the region’s economy is doing circumstance program frequent-flyer frequent-flyer points redemption certificates benefits of their CRM initiatives and have of the industry downturn have been felt most al improvement. We still need to be cautious, relatively well and the carriers receive more received a return, understanding that CRM •Product • Dissatisfaction • Initiate changes in with seat design future product design should be considered an investment with •Competitors’ • Sales promotion in •Predict which customers short- and long-term results that follow the offers specific market may defect; offer overall corporate strategic plan. THE HIGH LEVEL appropriate discount The CRM trend will continue to evolve. • Flight •Availability of high- • Ensure sufficient timing, The later airlines start CRM initiatives, the big- demand routes frequency of scheduled News Briefs from Around the Globe flights preferred by ger the gap will be with their competition. 1 high-value customers vıew Choosing fewer or less expensive products or discontinuing use of products. Addressing CRM issues today positions carri- 2 Customer relationship management Source: 2001 McKinsey survey of nine European, five North American and three ers to capitalize on the ongoing recovery and Asia-pacific airlines Who Web. Through the agreement, Why will help airlines manage customers effectively in the future. a American Airlines, Northwest Airlines, Travelocity provides links to By driving people who book their Several issues, according to the McKinsey Quarterly, lead customers to downgrade their Alaska Airlines and Midwest Airlines online check-in from its Web travel on Travelocity to check in via use of an airline’s products. Such downgrading — choosing fewer or less expensive prod- Nadja Killisly manages airline CRM What site as well as in an e-mail the Web, airlines help reduce their ucts or discontinuing using the carrier altogether — can be addressed through an effective strategy and customer relations at customer relationship management program.