In an industry as dynamic and transformational as aviation, the notion of a “festival” might seem frivolous. After all, we’re talking about a sector responsible for the safe and efficient transport of millions of people and shipments every day around the globe.
I’m asking the question of mood because my mind is in two places at the same time. On the festive side, you have heard that passenger volumes have recovered pre-Covid levels after three years of crisis, and States have agreed on a net zero CO2 emissions goal by 2050.
At the serious side, we are moving into an era of uncertainty related to energy transition environmental sustainability, and you can hear, especially in Europe, that the public is skeptical about the aviation’s goal to cut their share of CO2 emission, currently at 2% of the world’s total emissions.
While the continuous benefits of aviation and the new developments are worth gathering and celebrating, the pressure on decarbonizing faster is a growing concern.
Reducing aviation’s environmental impact
The big picture of CO2 emissions is that the industrial age, powered by fossil fuel combustion, is generating greenhouse gas (GHG) which contribute to climate change and global warming. The official source for data on this topic is the Intergovernmental Panel on Climate Change[1] (IPCC), which is the “United Nation’s body for assessing the science related to climate change”. Their latest “Summary for Policymakers” provides trends, by type of emission or by region, and solutions, by type of energy, to limit global warming.
For simplicity, according to 2016 figures[2], with global GHG emissions of 50 billion tonnes, see below, the industry roughly represents 24% of GHG emissions, agriculture 18%, buildings 17%, and transport 16%. All sectors have got their respective plans to reduce their emissions. In transport, road (12%), air (2%) and maritime (2%) add up to the 16%. While road has started deploying electric vehicles powered by batteries, the plan for air transport is a new synthetic fuel called SAF (for Sustainable Aviation Fuel).
Air transport needs an energy transition away from fossil fuels. In some regions the transition is driven by the pressure of climate change and global warming forecast, in other regions the end of the supply of fossil fuels in the coming decade will require a similar transition. In the last 12 months, States, collectively under their organization for aviation, ICAO, have adopted a Long-Term Aspirational Goal[3] for net-zero emission by 2050, and the airlines’ association, IATA, has published their plan, called Net Zero Roadmaps[4]. While there is a long way to go, and 2050 sounds far away, it is re-assuring to know that States, airlines and the entire aviation industry has a goal and a roadmap to reduce their CO2 footprint.
The real challenge, for aviation and the world, may be elsewhere, in the geographical differences and geopolitics. If you look at the CO2 emissions in the world in the past 50 years, the world went roughly from 17 Bn tonnes to 37 Bn tonnes, more than double. At a personal level, the CO2 in atmosphere was 332 parts per million when I was born in 1973 and is now 411 ppm. Interestingly, Europe’s emissions have decreased in the past 50 years, from about 4 Bn tonnes per year to 3 Bn, while the rest of the world grew indeed from 13 Bn to 34 Bn. The population in Europe (and the developed world) benefits from a mature economy and from historical infrastructure investments which help reduce emissions, while the rest of the world has a developing economy and growing needs for energy, production and transport.
We’ve almost recovered from COVID
Air traffic has almost fully recovered post-Covid, reaching in June 2023 95% of the same period in 2019[5]. During this year of recovery and mechanically strong growth (traffic was 31% higher than same period in 2022), demand grew faster than supply, as airlines and the supply chain struggled to put aircraft quickly in the sky. The result of the supply / demand profile is higher airline fares and consequently strong profitability.
For example, Emirates reported their most profitable year, at US$ 3 billion profit for 2022-2023. This profit alone however is not big enough to compensate for the Covid losses. Similarly, IAG reported record Q2 profit in 2023 at €1.2 billion[6]. At industry level IATA expects profits $9.8 billion in 2023[7], which is only 1.2% profit margin and not enough to make the industry financially sustainable.
If traffic numbers airlines have recovered from Covid, and airlines have shown profits recently, airlines have not compensated the losses accumulated during the Covid crisis and the entire industry is still fragile.
Benefits of aviation
The suspension of air travel during Covid reminded everyone of the benefits of aviation. We remember the value of something once we miss it. The impossibility to visit friends and family, to go on holidays or to meet clients and partners for business made us travel. The limitations on the cargo supply chain slowed down the entire economy, reducing the food deliveries or availability of consumer electronics. Some countries, like island states, which are highly dependent on aviation, suffered the most from the suspension and isolation from the rest of the world.
The alternative mode of transport often quoted to replace air transport is rail. In mature markets like Europe, where a broad network is available, the operational (environmental) cost of rail is lower than air transport. However in the majority of the world where rail is not available, the (environmental) cost of building the rail infrastructure is very high. Studies show $1m to $2m for 1km of conventional rail, much more for high-speed rail. If we add a tunnel or bridge, the cost is $10m to $100m per kilometre. It means that a developing country has a choice of paying nothing to connect two airports by air over a distance of 1000km or paying $1bn-$10bn to connect the two train stations over the same distance. Whenever the transport infrastructure budget competes with health, education and other budget, the decision to invest billions in railway infrastructure is not obvious. For the same cost, would you build one railway or a thousand schools and hospitals for your country?
Time for gathering but too early for celebrating
Given the climate change issues and the benefits of aviation, the debate may not be so much about the value of air transport, but about the viability if we don’t implement sustainable solutions quickly. The energy transition, away from fossil fuels, at global level, translates for the aviation sector into the production and distribution of new fuels.
The World Aviation Festival is the opportunity for gathering and debating many topics which can make the air travel experience better and the air travel industry more sustainable. The aviation sector has faced major challenges since the inception of the international framework in 1944, including the unprecedented events of 9/11 and Covid-19. The next challenge may be its biggest ever, but it is not a surprise: the need to decarbonize the industry, while dealing with a reduced growth in traffic.
Personally, I will attend the World Aviation Festival in Europe, as I’m in the mood for gathering with passionate people who want to make air travel sustainable. Europe has demonstrated the ability to cap CO2 emissions over decades, and may be able to lead the way to net zero emissions in aviation.
This is our last article before the World Aviation Festival in Amsterdam in a couple of weeks. We will end the series of articles with a reflection on airline payments, like a shopping experience usually ends with a payment transaction. Bref.
Should airline payments come as an after-thought of a retailing strategy, as a cost of doing business? What is the strategic dimension of payment for travel suppliers? As payment costs have grown bigger now than distribution costs for airlines, is there any new capability that could both enhance the customer experience and reduce costs?
The airline payment topic is closely related to the customer confidence topic and to the retailing topic which we discussed earlier. We also highlighted payments in our White Paper in proposal #6 (vouchers & e-money) and in proposal #16 (customer accounts). So what will digital airline payments look like?
A world of credit cards
Credit cards are still the ubiquitous method of payments for travel purchases, both in the leisure and corporate worlds. Notable exceptions, such as payment apps like WeChatPay and AliPay in China, or e-wallets like PayPal in the US or Lydia in France, show what the future of digital will look like.
The concept of linking a bank account to a 16-digit number was revolutionary when it was invented about a century ago… by airlines. Credit cards have improved a lot, for example in the physical card experience with the contactless payment, which became the norm during the pandemic. Mobile wallets, like Apple Pay, add an authentication layer on top of the card and enable contactless payment… without entering a PIN.
In the online world, paying with a credit card stored on a website is relatively seamless (as long as the real-time check on the card mobile app works smoothly). The issue remains when dealing with a new website, entering all the card payment details. The entire payment process, including the authorization, may still result in poor conversation rates.
If credit cards still work well, why change? It is a mix of convenience for customers and cost reduction for merchants (estimated at $20.3bn or 2% of the $1trn sales by McKinsey), with an evolution of technology.
The combined effects of Uber, Fintech and the pandemic
In the past few years, the perception of airline payments evolved from tactical considerations (credit cards work well, why bother?) to strategic thinking (payment options are a key differentiating factor for a travel business).
The Uber “seamless payment” experience, whereby the customer does not need to worry about paying a cab driver, was a catalyst in the change of perception. It became even more relevant and obvious for e-scooters, because users would not enter their credit card details for each ride, as there is no card reader on the e-scooter.
The Hopper “peace of mind” proposal, where customers don’t need worry about finding the cheapest fare or making changes to their bookings, extended the payment discussion to financial services. Indeed airlines imposed those constraints (non modifiable tickets, non refundable tickets, 10x price variation on one route…) with their revenue management practices, and it took the likes of Hopper’s fintech to compensate for the constraints and restore the confidence.
The Covid pandemic added uncertainty to travel planning and to health, with the effect of boosting travel insurance for changes and health. Insurances and other financial services have complemented the simple payment transaction, which would otherwise be definitive and risky from a customer perspective.
A customer-focused roadmap
The last decade has seen consumers opting for a variety of forms of payment (FOP) beyond credit cards. Airlines have faced at least three options: 1) adopt as many FOP as possible 2) steer customers to use cheaper FOP 3) promote their own FOP.
The proliferation of new FOP makes the payment market more fragmented. Airlines willing to reach more customers in every market need to support these FOP, without bearing the cost and complexity. Payment gateways enable airlines to reach customers in all markets.
Payment is not limited to the ticket purchase. It covers all the transactions during the booking process and the journey. What if a passenger could enter a lounge or go through a security fast track like they enter the subway (In London, not Paris)? The FOP should be convenient for customers’ online use as well as for a physical use, like access control.
If some FOP are cheaper for airlines to accept, it should be up to them to incentivize customers in using them. Indeed customers tend to have their preferred methods of payment (e.g. a bank credit card, a neobank card, a mobile app) which come with perks, and the perks are funded in part by merchant fees. Airlines have perks too (e.g. seat selection, priority boarding, loyalty points) which may be attractive to customers.
Promoting the airline’s own FOP may sound ambitious. Retailers like Amazon do it with Amazon Pay, or Alibaba with AliPay. In a corporate sale environment, the adoption of the FOP can be part of the airline’s contract negotiation. However in a leisure world, FOPs are ubiquitous and used by consumers daily, not only for air travel. Unless the airline can propose the same value as online retailers, they won’t be customers’ preferred option.
The future of digital airline payment
Air Asia is a pioneer in building a lifestyle brand, not only an airline. Many airline brands are household names, offering co-branded credit cards and loyalty programs, with the potential of becoming a “wallet”. The airline wallet can be used as a payment method for any type of physical and online purchases, while giving access to airline perks and other special offers.
Going one step further, airlines may reach out to communities that have moved beyond credit cards. For example Web3 communities in the metaverse may use crypto-currencies within their own environment and for the payment of physical goods and services.
While credit cards will continue to serve the airline industry for the coming years, digital payment alternatives pave the way to a more convenient and integrated experience for customers, and to more cost effective and flexible solutions for airlines.
Passengers Volumes are Recovering. Opportunity or Disaster?
After almost two years of pandemic precautions and concern with the future of airline travel, nowadays seems to be the most resourceful time to adopt innovative concepts to increase revenues, provide operational excellence, and at the same time enhance PAX experience.
In 2022, PAXs air travel demand is significantly increased, as well as the enthusiasm to further adopt digital, mobile, and touchless technologies that will make the journey as convenient and seamless as possible.
Indeed, the sudden increase in PAX traffic creates new opportunities to regain revenues that have been diminished over the last two years. At the same time, the huge demand introduces several operational complexities, which in turn generate additional managing costs, whilst decreasing PAXs experience and service levels.
The forecasting figures for the next years illustrate that this air traffic demand will remain high, which makes it essential for airlines and airports to combine digital technologies that will:
Demonstrate operational excellence
Reduce operational costs
Increase income per PAX
Enhance PAX experience
Innovative and Digital Solutions are the Key Factors
As many research studies show, greater technology adoption correlates with more positive emotions at several travel phases, especially on Booking, at dwell time, and on-board. MPASS Ltd provides and customises to your enterprise needs a wealth of innovative technology solutions that allow you to think out of the box. Providing flexible and scalable platforms of secure cloud-enabled technology, airlines and airports can profit in several business aspects.
We’ve never had to adapt so quickly in such a dramatically changing environment, but we’ve also been enough prepared to tackle the new high-demand reality. For instance, virtual assistants (chatbots) are there to provide immediate, generic or personalized information to PAXs. They provide a win-win case for airlines and airports by giving customers a quick way to seek support through a communication medium they are already invested in, such as instant messaging or social media, while driving down service costs. They operate 24/7, they serve unlimited number of requests per hour, and they can switch to human operation when there is a need to handle special cases.
Additionally, transforming customer feedback captured from surveys offered via multiple digital touchpoints into actionable insights and implementing a voice of the customer program is necessary to achieve operational excellence.
Furthermore, info kiosks that are installed on the main terminals could provide valuable information to PAXs, and they can also present aggregated content from many sources of information. Adding Augmented Reality (AR) features to assist on the navigation process to the departure gate improves PAX experience and also minimises flight delay risks. Finally, instant messaging tools can provide real time info to PAX about flights status, leading PAXs to departure gates on time.
The aforementioned services are included in the MPASS Ltd portfolio offered to airlines and airports to help achieve operational excellence, improve the service levels, minimize operational risks such as departure delays, and also reduce operational managing costs.
On the other hand, PAXs expect added value when they are engaged with airlines and airports. Our detailed solutions help airlines and airports to understand their travellers’ needs and creates personalised rewards and extra benefits, promote any new digital services available, and stimulate PAXs purchasing behaviour. Through our digital Engagement platform, travellers are invited through call-to-action tests, quizzes, tasks and games to complete “missions” and goals. In this way, they will collect points and badges which will be redeemed through the platform for discount services and offers. The new upgraded experience is available via mobile phones, a web application, and also from interactive info kiosks. The MPASS innovative digital Engagement platform uniquely combines physical, digital, and virtual actions for PAXs that ideally are combined to address marketing and commercial goals.
MPASS Ltd is providing innovative services in the broad digital transformation space for airlines and airports since 2009, aiming in customers’ long-lasting engagement and loyalty, therefore in increased revenue and profits for our clients. We have extended commercial experience so to identify market trends and needs and we also have in-depth technical know-how that enables us to in-house develop our solutions based on our own sophisticated and innovative platforms.
Article written by: Chrysa Mineta, Account Manager at MPASS
United Airlines Pays $10 million Pre-Delivery Payment for eVTOL Aircrafts
United Airlines’ payment to Archer Aviation has put $10 million of their money where their mouth is. The airline has placed the first pre-delivery payment for the start-up’s eVTOL aircrafts. This money is for 100 of the initial production electric vertical take-off and landing aircrafts (eVTOLs) and signals United’s commitment to achieving sustainability through technology. The start-up’s co-founder Adam Goldstein stated “the team at United share our vision of a more sustainable future” confirming that the companies are working closely to “make sustainable urban air mobility a reality far sooner than people could ever imagine”
The start-up’s ties with the airline giant date back to 2021 when United signed a conditional agreement to purchase 200 of Archer’s aircrafts for $1 billion. The aircraft, known as Midnight, will be capable of transporting a pilot alongside four passengers and together the fleet will connect customers to United’s hub airports. Since 2021 the companies have been working synergistically, with United forming an advisory committee guiding Archer and supplying the innovative start-up with years of operational and maintenance experience.
United Airlines has been public in their push for sustainability and their tangible ties to Archer demonstrate a commitment towards reaching this goal. In 2021, CEO Scott Kirby declared that United would seek to combat global warming by “embracing emerging technologies that decarbonise air travel,” and help fund the next generation of companies developing this tech. United’s financial backing distinguishes Archer from its competitors with the majority of provisional sales for eVTOL aircrafts boasting neither a cash deposit nor a formal payment schedule.
Whilst this represents a step towards a more sustainable future within aviation, eVTOLs face push back from local regions and communities. Sergi Alegre, Director General for the Airport Regional Council will be moderating the panel on “How airports can prepare for the Advanced Air Mobility revolution” at this year’s World Aviation Festival. Furthermore, Lauren Riley the Chief Sustainability Officer at United Airlines will be discussing their path to net-zero carbon emissions and sitting on the panel discussing whether we “have the right level of ambition, collaboration, and investment towards a net-zero future.”
Airports Achieve Three Seconds per Touchpoint with the Digi Yatra App
After years of trialling, the Digi Yatra app was finally launched on 15th August 2022. The app is currently operating at Bangalore International Airport and Delhi International Airport, bringing the pair closer to an entirely contactless passenger journey.
The app utilises facial recognition technology to enable passengers to pass through airport touchpoints seamlessly. Domestic passengers at these airports will no longer be required to present their ID or boarding pass at each touchpoint, minimising contact and maximising efficiency.
All passengers must do is perform a series of simple steps before arriving at the airport. Download the app, type in the required personal details, add proof of Covid-19 vaccination, scan their boarding pass, and take a selfie. Having done this, each touchpoint should last no longer than three seconds and be entirely contactless, facilitating the passenger in a seamless journey through the airport. The potential benefits of this are countless.
Crucially for airports, the integration of this technology should accelerate the time it takes to check-in passengers allowing for less time in queues and more time for leisure in duty-free. The automated system further enables optimisation of staff within the airport as well as providing real-time data on passenger volume and location.
The Digi Yatra app was rolled out in Bangalore International Airport and Delhi International Airport as part of the first phase. The facial recognition technology is set to be further extended to airports in Pune, Vijayawada, Kolkata, and Hyderabad by March 2023 as part of the Government of India’s wider initiative to “transform the nation into a digitally empowered society” (Delhi Aiport CEO, Videh Kumar Jaipuriar).
However, since debuting privacy experts have been split by the app with some voicing their criticisms. At time of writing, India lacks Data Protection Law causing concerns around the use of passenger data. In response, a Digi Yatra spokesperson has assured that the data is “not saved on any central storage or server […] The data is encrypted and stored in the passenger’s own smartphone in the wallet of Digi Yatra App and used only if they give their consent.” The app represents great progress towards a seamless passenger journey, but it also highlights the problems that run alongside the digital transformation of the aviation industry.
George Fanthome, CIO at Bangalore International Airport will be speaking at the World Aviation Festival on “What have recent biometric trials revealed about the future of passenger technology, digital identities, and the airport/passenger relationship?” Additionally, there will be a panel discussion on “Breaking down the roadmap to a contactless, seamless airport security process” during which themes from this article will be debated between leaders in the field.
For aviation to be successful, many complex airport operational tasks must be accomplished efficiently and on time. Given today’s staff shortages, this is even more critical. Equally important are sustainable airport operations to achieve overall aviation sustainability.
The sheer number of tasks and inherent market volatility make this goal extremely challenging. The right resources must be in the right place at the right time. Real-time operational decision-making is paramount when there are unexpected disruptions. The most advanced technologies are needed to make the right decisions while concurrently addressing “what-if” scenarios.
Today, ubiquitous airport systems, the Internet of Things (IoT) and much-increased computing power enable airport processes to be digitalized in detail. Going forward, even more data will become available for analysis and utilization. According to Moore’s law, computing power will continue to increase exponentially over the coming years, while computing costs will decrease significantly.
From an Operations Research (OR) standpoint, this facilitates the simultaneous use of two algorithmic principles, each highly efficient when applied alone. This powerful parallel approach is called “hybrid AI”. It combines the benefits of “data-driven” (AI) and Machine Learning (ML) with “know-how-driven” algorithms such as Mathematical Optimization and Fuzzy Logic.
Hybrid AI supports airline, airport and ground handling operations across broad areas, above and below the wing, for example, in aircraft maintenance or cargo. Hybrid AI allows for better resource management of staff, ground support equipment, bays, and terminal resources, from strategic planning to the day of operations. Furthermore, Hybrid AI provides powerful decision support for managing disruptions.
Optimizing scenario planning and predictive disruption management
The past few years have been game-changing for aviation. We have seen the accelerated adoption of technology. The pandemic also provided a valuable learning lesson. Planning for the unexpected in aviation is more crucial than ever. Balancing “typical” day of operation needs with the ad-hoc resource demand created by unexpected disruptions requires sophisticated planning and decision-making. Gut feelings and repeating “yesterday’s” decisions are no longer suffice.
By applying data-driven AI and the underlying predictive modelling, planners use real-world data to forecast the right staff and ground support equipment demand. They correctly predict expected volumes, passengers, PRM, baggage, or cargo. Furthermore, disruption probabilities are considered.
This data enables them to effectively prioritize staff and equipment resources and physical assets to mitigate disruption impacts. Long-term, mid-term and short-term resource planning scenarios can be developed to enable more stability regarding potential operational changes using what-if analyses. All airport operations benefit from this optimized planning.
For example, if a weather-related disruption, fog, or ice storm occurs, hybrid AI-driven software will support effective staff scheduling by automatically learning from the past and considering previous, similar scenarios. Additionally, rule-based specifications (i.e., qualifications, preferences, SLAs) are applied. IoT helps by providing the real-time context, for example, in monitoring ground support equipment locations. The result is heightened situational awareness and automatic prioritization of tasks and resources. In this way, sophisticated decision-making support tools help planners minimize the effects of such disruptions and mitigate their impacts on flight schedules, operational costs, and passenger experience.
Optimizing cargo operations
The same predictive modelling is also applicable to cargo airline operations, addressing supply chain disruptions and facilitating the best decisions. With optimization software, integrating data from multiple sources (i.e., flight, truck, cargo, staff, GSE locations) and applying Hybrid AI, cargo airlines can identify the best plans and real-time tactics to maximize efficiency, customers’ SLAs, and sustainability simultaneously.
Optimizing workforce management
Successfully managing the workforce must consider such criteria as demand requirements, workplace regulatory mandates, individuals’ qualifications and preferences, and schedules. Integrating digitalization into workforce management, facilitated by optimization software incorporating sophisticated technologies, enables planners to better align demand fluctuations and operational needs with staff capabilities, scheduling preferences, and increased productivity goals.
Optimizing line maintenance
Leveraging aircraft data, hybrid AI and the IoT is helping airlines achieve enhanced line maintenance operations. Historical data and Machine Learning algorithms enable sound preventive line maintenance decisions, informing a LM Technician or Engineer proactively where to replace parts or make preventive checks to deter malfunctions. Additionally, hybrid AI helps to forecast the duration of various checks and replacements in LM for better resource schedules. In turn, this reduces flight delays, costs associated with unplanned overtime, expedited shipping costs for parts, and potentially stressful, rushed and, subsequently, inferior quality.
Optimizing sustainability
New aviation sustainability goals and requirements regularly occur within the industry and across regional governments. While sustainable airline fuels are not yet available in sufficient quantities, airport operations can significantly reduce an airport’s carbon emissions. For example, today, mixed GSE fleets are already in use. The numbers of electric and hydrogen GSE are rapidly increasing. Using advanced AI and predictive analytics, airlines, airports and ground handlers can optimize their planning of such mixed GS fleets to reduce fuel consumption and related CO2 emissions, while guaranteeing operational stability simultaneously. Reducing emissions by better planning applies to driver-based vehicles similarly as autonomous GSE.
The questions to ask today
The aviation industry is at a critical crossroads. Business as usual won’t suffice. We all learned this during the crisis. Software solutions must provide advanced technologies and a mature aviation model. They are crucial to supporting optimum aviation operations. The industry must adopt new solutions that help companies become more proactive in addressing the wide range of situations that disrupt static plans, moving away from pure reactive handling of such cases.
It is more urgent than ever that aviation companies find answers to critical questions such as:
How can we fully optimize, increase productivity and plan resources to meet our operational promises?
How can we build greater employee satisfaction?
What will be the keys in 2023 to driving maximum efficiencies and cost reductions?
What measures should we take to protect our earth now and in the future?
Advanced technologies will be central in answering all these questions and will be the essential building blocks to the aviation industry’s successful go-forward strategy.
During the Aviation Festival, London, Guy Johnson, News Anchor, Journalist and Aviation Enthusiast, Bloomberg, David Neeleman, Founder JetBlue, Azul and Breeze Airways, and Robin Hayes, CEO, JetBlue Airways, discussed what it takes to grow in new market conditions and build a more sustainable industry.
Neeleman explained the opportunities which inspired him to found Breeze Airways and launch during these challenging times for airlines. “I just saw trends that were developing in the United States, where the smaller and medium-sized cities you had to go through a hub on most all of these cities if you want to go anywhere. But, at the same time, the cities were growing. And especially in the post-COVID era, a lot of people want to go live in cities like these. They don’t really want to live in the big cities anymore. They can telecommute. So a lot of these cities are vibrant and growing, but they just lack air service. That affects the quality of life. Just for people to go to Florida or get to the mid-Atlantic region and different places they want to go, we can see that traffic.”
“..there’s a great market out there if you can do things that can simulate traffic with low fares and convenience for people to travel.”
As Neeleman elaborated, “If you go to a market and say five people are flying this route every day, can we take it to 100 people every day. We’ve seen that. We’ve seen some markets go up 20 times what the X-day was because of traffic stimulation. So we’re looking at 400 routes today. You know, when Ryanair started saying, ‘we’re going to go from 40 million people to 60 million people to 100 million,’ I thought that’s insane. But obviously, Wizz does it now. So, you know, there’s a great market out there if you can do things that can simulate traffic with low fares and convenience for people to travel.”
Hayes agreed. “To me, it made perfect sense because, with all the consolidation that’s happening over the years, so many cities have lost direct service. It’s all being hubbed. So here’s a business model that is almost infinite in size that allows an airline like David’s new airline, Breeze, to take advantage of that. I think it’s terrific, and I think it’s going to be a great success.”
“We’re going to see the actual effect on the planet. As we go ahead the next five years, ten years and 15 years, we can make adjustments.”
Johnson also asked the CEOs about the ambitious sustainability commitment the airline industry had made for 2050, net-zero carbon emissions, and whether it was achievable. “I think so,” Neeleman replied. “I mean, you look at what’s happened in technology over the last 25 years, and you project that ahead for the next 28 years, I think there’s no doubt that we’ll figure out how to solve this problem. And then, as we go along the continuum, there are a lot of other examples of cutting down carbon production. We’re going to see the actual effect on the planet. As we go ahead the next five years, ten years and 15 years, we can make adjustments.”
Hayes noted that airlines must remain financially sustainable while meeting climate sustainability targets. “I think airlines are going to have to—in addition to solving the segment sustainability challenge—they’re going to have to figure out ways of making money doing it. But again, the industry has shown so much creativity over the years in doing that.” Hayes said JetBlue is looking for those opportunities through JetBlue Ventures. “For example, travel products—that’s going to do $100 million EBITDA next year. You know, it was pennies on the dollar just literally two or three years ago. Airlines will have to figure out other ways to drive margins and revenue because I’m not sure consumers will accept higher fares. Why? Because at the end of the day, it’s going to, it’s still going to be a very competitive industry. You’re going to have airlines like David’s Breeze starting up. You’re going to have low-cost carriers growing. You’re going to have JetBlue and airlines like JetBlue, right. All of us will still build a business model around low fares. So, to sit there as an airline and say, ‘I can get higher fares from this in future because there’ll be a willingness to pay,’ I don’t think we can make that assumption. Certainly, the challenge I set out for our team to accomplish this goal. I want to protect margins, and I don’t want to increase fares doing it. Now, some would look at that and say, ‘You can’t do all of that.’ But I think we have to think big and think outside the box to find how we can do all of those things at the same time.”
“For example, in the US, at the moment, is I think there’s a great opportunity for sustainable aviation.”
Hayes also said that these airline sustainability targets would need broader support than the airlines alone. “I think that the industry has to demonstrate a global commitment to this, right? Because governments get the upper hand when they can quite rightly point to a problem. We must take a leadership position now. Where I think governments can help is by providing an incentive. For example, in the US, at the moment, is I think there’s a great opportunity for sustainable aviation. Still, it needs some form of tax incentives that allow producers—allows people—to make investments. There’s lots of money out there. The banks and other financial institutions want to point at sustainable technologies. So the money’s there, but you’ve got to create an incentive structure that allows that pick-up in demand in the early days.”
“This industry has shown a remarkable ability to adapt; whether fuel prices are $50 or $100, airlines have figured out that they can make money.”
Hayes continued, “This industry has shown a remarkable ability to adapt; whether fuel prices are $50 or $100, airlines have figured out that they can make money. We are used to very big swings in energy costs…I mean, look at how much efficiency and how much cost airlines have taken out during COVID… We’ve already gone through a lot before, yet we could do more. I’m not saying it’s going to be easy. We will have to get very creative in driving other revenue streams. You know, at JetBlue, we’re talking about all these people flying on vacation. We’ve got a very little share of wallet beyond their flight. That should be relatively straightforward to convince people to spend more money with us. Now we’re able to drive support. You know, we’ve got a much higher revenue stream for the same capital base. That’s going to help fund some of these sustainability investments.
By Marisa Garcia
CEO
Keynote JetBlue and Breeze Fireside Chat: What will be the longer term effects of the last 2 years and how can we effectively respond to rebuild a more sustainable industry?
During a breakout chat conducted at Aviation Festival, London, Alison Taylor, Chief Customer Officer, American Airlines, shared some of the airline’s changes to its retailing strategy as it adapted to the COVID-19 pandemic.
One of the strategies has been offering customers menu options to book ancillaries and services on-demand on the day of travel, such as requesting wheelchair assistance, adding a lap child to the booking, getting a day pass for the airline lounge, or booking preferred seats.
“Even now, you can buy flagship dining—which was only ever for our first and business class—for that day for that airport. They’re opening at JFK, Miami, and soon they’ll be LA. We’ve tried to become more nimble at the options we offer for the customers and how we deliver those offers. Of course, NDC always helps us with that.”
“We want people to be able to purchase where they want to purchase”
Taylor said the airline had employed an “educational” approach to merchandising, informing customers on the options available to them more than pushing a sale or a particular sales channel. “We want people to be able to purchase where they want to purchase. It could be via GDS, or it can be direct. That’s not for us to worry about. We just want the customers to be able to purchase it, but it has enabled some things for us on the retailing side that we’ve never done before.”
Rich content options available through ATPCO and Routehappy have helped the airline get creative in presenting offers to different customers. “We had rich content that we could supply whether you’re a leisure agency, corporate agency, or corporate direct. For us, that freed up that content. We have a lot of leisure operators absorbing that into their systems, making sure that it’s enabled through ATPCO and NDC. That has helped us to deliver the content they needed. We dealt with some cruise lines as well. [The COVID pandemic has] broadened the audience that wants that [rich content]. They had to have a lot of information available to their customers on travel, health protocols, safety, wellness, and the leisure agencies needed that quickly. We could do that by working with Routehappy and ATPCO… We’ll continue that journey now, but it was very much at the forefront of the pandemic because the leisure operators needed to inform their team members and also the travellers.”
Taylor shared that the pandemic has also resulted in a marked shift in buying habits and preferred sales channels and increased the demand for customer support teams.
“One of the things that we needed to do for returning customers—who were younger—[was to simplify enrollment].They weren’t going to fill out a whole screen of forms.”
“It’s quite different depending on the country, of course. When you talk about American Airlines now, one of our major markets is the US, without a doubt. In the US, we have seen that many of our travellers are buying through agencies because they need that extra helping hand, and they want the servicing aspect of being able to travel. I’ve been seeing many operators here while I’m in the UK, and they have seen that shift as well. So I’m sure we’re not the only ones. But, at the same time, we have seen new customers, booking on AA dot com, and new customers becoming AAdvantage members. We had to change our AAdvantage Program very quickly. One of the things that we needed to do for returning customers—who were younger—[was to simplify enrollment]. They weren’t going to fill out a whole screen of forms. They just needed a one-click to join the AAdvantage Program and become members. We did that very quickly. It’s something we’ve been talking about but hadn’t done. We did it in a matter of weeks, which greatly helped the number of young millennial memberships for AAdvantage. Also, even our corporate brand card—we have MasterCard, Citi, Barclays, of course, very strong here in the UK. We even had to change how we talked about our partnerships onboard and on the ground, changing the scripts to appeal to a different audience when we send to different channels…[Another] shift for us was people needing more servicing. We have large servicing centres, and we added almost 3000 [staff] to reservations. Because those that did book direct, and all those agencies, just needed more servicing. The calls were much longer. The calls to our reservation teams are five times longer than normal because they’re asking about border closures, border openings, and of course, what you’d expect about [travel health] protocols.”
“…recognize our customers and understand what they may need without constantly asking them the same questions again”
Personalization continues to be a priority for American Airlines, Taylor shared. “Personalization has been on our roadmap for a while—this is really important for us so that we can recognize our customers and understand what they may need without constantly asking them the same questions again. It even means—eventually—we can serve up different surveys for them as well…We just want to be customer-centric in using our data. I’m going to give you an example. If we know that you never buy flowers on Valentine’s Day, why are we serving you up via AAdvantage, something to do with a florist, right? So [we want] to make sure that we’re relevant at every touchpoint. Maybe we also know that you don’t open emails at a certain time. We can be relevant with that in our communication or the offers we are providing you, whether on the ground or in the air. It also helps us to adapt our offers. We want to get to the stage where we know that if you’re in your seat, we can utilize our IFEC data and understand what you watch, so we serve that up to you more naturally. That’s down the track, but those are the things that we’re working through. We’re working through with AAdvantage Program on entertainment, understanding whether you enjoy lounges, as well. Data enables all of that. Our customer journey is very important to us. My title is Chief Customer Officer because we want to put the customer at the forefront, not just commercial or business deals, etc. This is important for us. We’re completely enhancing our AA dot com app to make sure that we’re at the forefront of that. What the app will eventually serve you up will be more personalized as a result.”
By Marisa Garcia
Distribution
Panel: How does American Airlines plan to offer enhanced travel retailing to help drive recovery?
It’s been a short while now since World Aviation Festival, which as always, was a pleasure to speak at. And even though the news of Omicron has somewhat muddied the waters for the return to normal travel, I still feel invigorated and optimistic about the future of the industry.
As a recap, I want to share with you my five biggest takeaways from the event and what I’m excited about going into 2022 and beyond.
1.The growth of Account to Account payments
By far and away the biggest payment trend in recent times is just how quickly Account to Account payments are growing. Most of us in the industry knew it was coming, but at what speed and that it was nowhere near reaching its full potential pre-pandemic.
Accelerated Digitalisation is driving the Open Banking industry, forecasting growth to be a staggering 1079% in the UK alone between 2021-2024. This early growth in terms of users of this type of banking method is really positive to see and makes the future look very bright for Account to Account payments.
2. Build for tomorrow. Not today. I’ve noticed a shift in thinking. Companies have started to adapt their innovation and product strategies to have more shelf-life and value for the consumer over time. Instead of trying to put out the immediate fire, or get something out as soon as possible, there’s more of a shift towards reflecting. During these uncertain times when the industry has been rocked so heavily by the pandemic, we can at least be thankful that this slowdown has allowed for more meaningful, longer-term planning. Most merchants are now shifting their thinking towards the question “What does 2023/24 look like? How can I build for that consumer?”
3. Airlines are becoming more consumer-focused.
The modern customer, predominantly Gen Z or millennial, demands an effortless digital experience and more flexibility. During the pandemic, refunds became a huge bone of contention for them. It became clear that the flexibility that they expected wasn’t really there. Cash settlement speeds and the handling of refunds / chargebacks were ranked as the top two challenges faced by companies in 2020 during the height of COVID-19 and they’re actively looking for ways to alleviate these pain points to help win consumer loyalty.
4. Lower costs and faster settlements.
All of this adaptation needed by the Airline industry is leading to some good upsides in the long run. For example, those who are looking to implement faster cash settlements and improve transaction operations are not only just left with happier customers. Those who are offering Trustly’s unique collection method are skipping out on the middlemen, meaning a much lower cost of distribution.
5. Bank on the right proposition For the last five years, Trustly has been focusing on shaping a relevant Global Bank proposition with its distributing partners for the industry. Throughout this time we’ve built up a solid idea of what works, what doesn’t and what is missing. In my opinion, the way forward is through banks that provide automation, guarantees, real-time messaging, reconciliation and instant settlement, all delivered through proven industry specialist partnerships.
