Posted on 26 March 2008 by Norm Rose
,Today Delta matched earlier moves by United and USAirways to charge $25 for a second checked bag. This is both a reaction to increased operating expenses due to escalating fuel costs as well as the clear desire to unbundle airfare pricing. It is interesting to note that this fee ” will not apply to first-class or business-class customers or members of Delta’s frequent-flier program who log at least 25,000 qualifying miles of travel per year.” “Those travelers will still be able to check up to three bags without extra fees”. This week JetBlue also announced a fee for seats with more legroom, a practice used by United for many years. Apart from the obvious economic motivation for these actions, unbundling airline pricing is as much about customer segmentation as product differentiation. For years the airlines have resisted the notion of the airline seat as a commodity. Despite this effort, most travelers only differentiate the airline’s product based on their personal loyalty value (e.g. frequent flyer programs and in particular the ability to upgrade) or poor service experience. I have to confess I have fallen into this trap as well as every time I fly AA I seem to have a problem, though countless stories of a similar nature can be found with any airline. The more interesting effort at play here is the customer segmentation strategy. Yes airlines tend to be lemmings and add fees or change services based on a market leader implementing a change, but trying to better target higher value customers is a noble goal for any business. The irony of the airline industry is that thought the carriers pioneered loyalty programs, they have great difficulty in implementing customer segmentation at the point of purchase. This is both due to the number of players in the value chain (e.g. travel agency (or TMC) GDS, payment providers) and the legacy technology used to distribute their inventory. As long as the customer information is wrapped together with the transaction stored in a old 60’s style mainframe, airlines will have continued challenges in their attempt for differentiation their products and ultimately offering dynamic pricing reflecting the customer’s true value. The market leader in unbundling airfare costs has been Air Canada and thus their motivation to re-engineer their airline CRS system with ITA software.
Posted on 24 March 2008 by Norm Rose
WiMax’s first commercial rollout may very well be at U.S. airports. The goal is to provide a faster upload of manifests, flight plans and onboard entertainment for incoming aircraft. For those not familiar with the term, WiMAX (Worldwide Interoperability for Microwave Access) is a wireless industry coalition whose members organized to advance IEEE 802.16 standards for broadband wireless access (BWA) networks. In other words, WiMax is like WiFi on steroids, faster connections covering a wider area. It is interesting to see our industry embrace WiMax as a way to improve productivity. Proximetry, a San Diego based company who provides the software for this initiative hopes to use WiMax to replace the current “sneaker net” process in respect to uploading information on board. It is unclear if the same WiMax technology could be used by consumers.
Posted on 01 February 2008 by Norm Rose
The recent Orbitz for Business survey results regarding the value of Internet connectivity on the plane continues to produce headlines like this ” Most Business Travelers Don’t Need Wi-Fi On Planes”. Conclusions such as this based on this research are very misleading. According to news reports (as I have not had access to the actual survey results) the question asked whether the traveler would take a less convenient or more costly flight to get Wi-Fi. This is obviously a loaded question. Wrapping the issue of in-flight Wi-Fi adoption with flight selection is absurd. Business travelers are on airplanes for one reason only, getting to their destination so they can conduct business. In my view business travelers and the corporations they work for, will embrace in-flight broadband connectivity when it is available. In fact I would go farther to say that connecting to the Internet while on the plane will become as common as connecting in your hotel room is now. Whether the traveler will use the connectivity for business or pleasure is a different issue. Having logged thousands of miles over the years I frequently see business travelers both playing solitaire or watching a movie on their laptop or portable device as well as working on business. Let’s not draw any conclusion until wireless ubiquity in the air becomes a reality.
Posted on 20 December 2007 by Norm Rose
For some time I have been talking about ubiquitous computing and the always connected traveler. I just received a briefing from the senior management of Aircell about their plans to implement Wi-Fi connectivity on commercial aircraft. Back in 2001 the buzz about this subject concerned the Boeing Connexion roll out with Lufthansa airlines. Last August Boeing announced that it would be discontinuing the Connexion service. So why will Aircell succeed where Boeing failed? It is all about the technology and business model. Boeing’s Connexion equipment was expensive and heavy (1,000 lbs) and needed to be installed when the aircraft was taken out of service. Aircell’s technology is lighter and can be installed while the plane sites at a gate overnight. Apart from this advantage, Aircell also has a business model where the airlines share in the revenue (the cost for consumers will be equivalent to Wi-Fi connections in hotel rooms). American Airlines and Virgin America are the two launch customers. In the case of Virgin America the technology will be integrated with the seat back screens allowing all customers to browse the Internet even if they don’t have a laptop or PDA. This always connected environment fits well with the airlines’ need to sell ancillary services on board for additional revenue sources. In addition, the opportunity to communicate with their best travelers on the aircraft provides some unique CRM capabilities which will likely surface as the Aircell connectivity becomes common place.