Revenue Management Forum

Revenue Management Training - In-house or Distance Learning?

2011-10-24T15:46:00.004-04:00

As a revenue management training and consulting company, we offer a variety of options when it comes to choosing training. While still fairly new, the development of computer-based training modules which are entertaining, educational, relevant and interactive has progressed dramatically over the past several years. Content has become more refined, and the interface more familiar and user friendly.

In comparing web-based learning to the traditional classroom model, a debate can be made favoring either learning model.

At first glance, it would appear that the Web-Based Learning Model, on a student by student basis, simply costs less. If we consider twelve students in need of revenue management certification training, we can expect to pay a minimum of $1,500.00 per student in tuition, to that, add travel, five days of lodging and meals - we can clearly see how the costs can quickly add up. And in-company training, presented by an outside company – can easily cost $25,000.00.

Web-based training often sells for as little as $250 per student, involves no travel, little or no “down time” on the part of the trainee, while their learning progress can often be effortlessly monitored by supervisors, administrators and even the students themselves.

Both options can result in a comprehension certificate. Both methods demonstrate to students the basic concepts and theories. Both methods ought to provide validated student evaluation and both
methods should produce qualified and quantified results.

I would be interested to hear your thoughts about revenue management training.

Train for revenue management system implementation

2011-10-13T10:42:00.002-04:00

Idea and excerpts from "Train for ERP Implementation" by Jeff Carpenter, President and CEO, Caveo Learning, published in Training Magazine, Sept-Oct. 2011

Revenue management systems can integrate internal and external data across an entire organization, embracing everything from finance and accounting to customer reservations and automating all activity within a common software application.

Implementing a system like this is often a complex process, with many factors affecting the organization’s ability to achieve the revenue benefits promised in the original business case. Of these factors, training is second only to executive sponsorship and management involvement; however training often is overlooked or not considered an equal partner within the organizational transformation.

Here are the when, why, and how inadequate training can negatively affect the business goals behind your implementation and possibly cause the implementation to fail…and what you can do about it.

9-15 Months Before Go-Live or Pilot Phase

End-user training is mapped to each unique user profile, including how each user integrates and interacts within that workflow. Also, the training describes how users will bridge from the legacy system and the current situation to the new business processes.
Key decisions are based on the business rationale for the new system, not in defense of the development, process alignment, or implementation of the technology. Your organization is not implementing a software platform; it is investing in increased productivity, efficiency, and output from the end-users. Decisions, such as reassigning resources from training to development, should be based on the original business goals, not on meeting technology deadlines.
Training/learning measurements have been matched to overall ROI. If you haven’t done this, your training likely will cause delays and impede expected performance improvements.

3-9 Months Before Go-Live or Pilot Phase

Training activities reflect “real-world” experience. This helps users with specifics on how to bridge to the new platform and adopt new business processes.
Internal trainers and power users are identified and being trained on the new system. Often, due to delays or budgeting, internal training teams are not given adequate time to become experts in the system. Their familiarity is directly proportional to the training’s efficacy.
The new system is in place. There are many forms this can take (lesson libraries, cheat sheets, short-burst videos, etc.), but it’s critical to have a system to handle proactive refreshers, spot needs, employee attrition/absences, etc.

0-3 Months Before Go-Live or Pilot Phase

Metrics are set to evaluate training adoption and performance levels. These metrics measure how effectively new processes are being integrated into end-users’ daily work streams and how training is helping meet the original business case benefits and ROI.
A post-training communications plan is established. It’s important to be ready to deliver updates and success stories (to name two examples) to mitigate inevitable performance declines and lagging excitement level after the initial training.
Most day-to-day questions are answered by internal teams or power users. End-user questions escalating to the help desk is a common symptom that the resident knowledge base is lacking. Also, look for “workarounds” that skirt the upgraded business processes and procedures.

What If You Are Missing Any of These Elements?

If you are not confident your training is hitting the mark in all the above cases…act now! Secure the people (e.g., trainers, power users) and/or documentation (e.g., business process plans, data-filled exercise plans) to get back on track.

If you do not have the internal resources, training consultants can help. First, though, understand if you need configuration (system/screen-focused) or end-user (output/task-focused) training. Few training consultants are experts at both, so it’s best to first identify your needs and their strengths.

Finally, it is almost always smart to start with an assessment and a training plan, regardless of where you are in your implementation. And, of course, make sure any recommendations match the business case goals.

Helping analysts remember and use what they learned

2011-10-13T10:18:00.003-04:00

Idea and excerpts from Old Habits Die Hard, by Time Hagen, of Sales Progress. Published in Training Magazine, Sept-Oct. 2011.

When technology and data are part of everyday life, it is important that everyone within a company is constantly learning and following best practices. Because if you aren’t, maybe your competitors are. Many organizations give tips, tools, and techniques that can help employees enhance their performance and increase revenue, but most of the time, articles are read and seminars are attended, and that is where the learning stops. The key to successful learning is training reinforcement.

Training reinforcement is the idea that learning should be continued after employees have attended a training program or workshop.

How many times have you seen employees return from training, highly motivated to put their newly acquired skills into action, just to watch them fall back into their old routine weeks later?

Why Managers Should Coach

It does not make a whole lot of sense to spend so much money on training when people are going to forget what they learned weeks later. Managers needs to be in charge when it comes to helping employees remember what they learned.

Managers have to be involved from the beginning to the end. They need to understand where their employees need help, and then they need to find ways to help them improve in certain areas. Managers must be able to communicate and listen to their employees. They must be able to quantify the results and evaluate whether or not the training worked.

If it was truly beneficial to the employees, then a manager should be able to see and measure the results. Before training even begins, managers should set benchmarks and attainable goals for their employees; that way, they can justify the money and time spent. When there is proof that there is progress, higher-level management will be more likely to continue giving the tools for success.

Coaching Methods

To create a sustainable learning environment, managers need to step up and involve themselves with reinforcing training. Hold team meetings so everyone can share what they learned that week or what they did to improve the bottom line. Another technique that works is one-on-one coaching. By sitting down with an employee, a manager can see exactly what their issues are, coach them through their problems, and keep track of any problems or setbacks the employee has. Plus, one-on-one meetings allow for instant feedback so the employee does not continue a bad habit over weeks or months. This encourages communication and builds teamwork.

In the end, it is important that businesses provide employees with the opportunity to keep learning and improving in their field, and it is even more vital that they continue that teaching back in the workplace. Companies and managers should engage in post-training and reinforcement in real-world situations.

Southwest introduces revised frequent flyer program targeting business passengers | ATW Online

2011-01-07T10:37:00.000-05:00

Southwest introduces revised frequent flyer program targeting business passengers | ATW Online

Happy New Year!

2010-12-31T08:17:00.000-05:00

I would like to wish everyone a very happy, healthy, and prosperous new year.
Sincerely, Gary Parker

RM Training Group Africa

2010-09-17T15:22:00.002-04:00

I'm happy to announce that we have opened an office in Capetown, South Africa, to represent RM Training Group in the African continental region.

Mr. Corné de Waal, who will represent us there, has experience with Intercape, the largest privately owned intercity passenger transport service in Southern Africa.

His passion is revenue management and he has presented at numerous Revenue Management and Pricing conferences and for the past 3 years has been a visiting speaker at the University of Stellenbosch (Cape Town/South Africa) to address their post graduate students from the Transport and Logistics department, on the topic of Revenue Management.

As everywhere in the world, the volume of pricing decisions in Africa has significantly increased as the travel industry moves towards deregulation and globalization. The service industry needs to respond to the market swiftly in order to remain competitive.

RM Training Group recommends processes and best demonstrated practices as well as delivers practical commercial training at companies of all sizes around the world.

Revenue Management for Small Airlines

2010-09-14T15:07:00.004-04:00

The airline industry is often thought of in terms of full-service carriers and low-cost carriers, but in reality it includes many types of carriers from regional, commuter, remote flying, to island hopping, to name a few.

The practice of revenue management was originally created by the full-service carriers to better compete with the low-cost carriers. Over time, the low-cost carriers have been evolving and to allow for growth, their service and product offerings have been increasing to a point where revenue management practices make perfect sense.

But, there still remain the thousands of small airlines in the world, who don't have sophisticated revenue management systems, but who would definitely benefit from customer segmentation and differential pricing.

After the recent economic downturn, there seems to be more interest as we see more and more small and new carriers employing revenue management practices and procedures to survive and grow.

The foundation of a carrier's RM group is information. To turn this wealth of data into useful information requires analysis and interpretation by individuals who have a broad understanding of the airline industry and current factors in the marketplace. In the current environment ‘downsizing’ can also put added pressure on airlines who are left with fewer experienced people.

In response to this, and in consideration of the high cost of in-house revenue management solutions and analytically skilled staff, we have formed RM Service Group. (www.rmservicegroup.com)

We offer a solution with outsourced revenue management services staffed with our own team of experts.

A company dedicated to revenue management and pricing, our expertise comes from the practical experience gained in the daily application of revenue management and pricing principles, faced with the challenges and opportunities of companies operating on the many levels of service from global to regional, from traditional to low-fare, and also value-based product offerings.

We welcome your thoughts and questions on this type of revenue management service, and if you see possibilities in your airline, we would love to talk with you.

Scheduled Online Seminar: Revenue Management - An Evolutionary Revelation

2010-04-09T14:59:00.006-04:00

June 29, 2010 0900 EDT
A look at how the history of Revenue Management has shaped the present and insights to a more creative interpretation of Revenue Management and its future!

Presentation Outline

1. A little revenue management history
2. How our business environment has evolved
3. Fundamental requirements for our success today
4. Our customers and their changing values
5. What is the future of revenue management?

An excellent orientation to revenue management for companies researching revenue management. For new employees of revenue management, and for all employees in an organization trying to strengthen their revenue management philosophy, this online seminar is scheduled for June 29, presented by Gary Parker. Click on the title to register.

The Rubik's Cube Effect by Stephen Haines

2010-03-28T09:52:00.000-04:00

I recently read an excellent article by Stephen Haines, CEO and founder of the Haines Centre for Strategic Management, which was published in Training Magazine.

He uses the Rubik's Cube as an example of people trying to find solutions for strategic challenges in the market place. He states that people often keep fixing one colour on one side, only to distort the other colours. Similarly, the complexity of today's world leads to unintended consequences. His answer, is a "helicopter view of life," which allows you to examine all sides of a situation.

In his article, Stephen goes on to say that people negatively impact others because they do not "understand the consequences" of what they do. In today's stressful environment, people narrow their vision. His recommendation is "systems thinking," which is about first looking at the big picture. Each move we make must consider all sides of your situation.

He poses the question: Who else to involve? Who are the key stakeholders? Stephen has put forward six steps to ensure there are no unintended consequences of your projects.

Step 1. Use a helicopter view of life and scan the future environment for possible implications for your project.

Step 2. Ask "Who else to involve?" Both internally and externally.

Step 3. Establish desired outcomes to create a vision of success.

Step 4. Develop specific goals.

Step 5. Predict the Rubik's Cube effect and the law of unintended consequences you are likely to encounter. Ask others too.

Step 6. Create core strategies and action plans for success.

He also proposes developing a matrix of unintended consequences versus proposed core strategies which often reveals the additional steps necessary.

I immediately saw a parallel in the airline revenue management environment, with my own experience addressing managements tendency to "micro-manage" in stressful times.

In times of panic, I find management focusing on individual flight departures or dates, which do not follow any patterns or trends, asking for additional investigation by Analysts. This typically requires a large amount of time spent for very little revenue gain. It also distracts from the general management of the "big picture".

We get onto a treadmill with no end in sight. Over a short period of time, the lack of general maintenance has a much larger negative impact on the competitive position and the revenue performance. We start getting "out of control."

As Stephen suggested, we need to develop strategies and action plans which ensure that through the proper management and maintenance, we keep the machinery running smoothly and minimize any potential negative consequences.

This includes systematic and disciplined approaches to the use of the technology, communications, reporting, analysis, evaluation, and actions, involving all the key participants.

I always appreciate your comments and ideas.

Innovative Air Cargo Revenue Management - Reinstating Air Cargo Profitability

2010-01-22T13:13:00.002-05:00

By Dr. Ricardo Pilon

Introduction

Deregulation and increased competition provided the impetus for passenger airlines to adopt a more sophisticated approach towards marketing ever since the 1980s. The closing stages of regulated pricing brought about an initial era of fierce pricing competition; resulting in the apprehension that profitability could only be instigated through erudite market segmentation aimed at identifying those market segments that would have a higher willingness to pay while stimulating demand at discounted fare levels in other segments (Cross, 1997). Born was the new discipline of revenue management (RM), embraced by pioneers such as American Airlines, who applied differential pricing and yield-class based inventory control as part of the first generation of revenue management systems (RMS).

The success of revenue management has been documented widely and is often claimed to generate incremental revenues of between 3-8 per cent (Belobaba, 1987; Cross, 1997). Following airlines, other hospitality businesses such as hotels, car rental companies and cruise lines soon followed suit (Donaghy et al., 1997). However, the air cargo industry has generally been progressing unhurriedly with respect to automation and convoluted business technology. Despite the actuality that the cargo industry enjoys all the characteristics of industries that qualify for revenue management application, many obstacles and hurdles are often quoted as impeding its implementation (Jonker, 2006).

This Whitepaper proposes a new perspective of cargo revenue management using supporting tools that will allow passenger combination and all-cargo carriers to re-instate profitability through enhanced analytics and sophisticated pricing and capacity optimization.

The first part of this Whitepaper outlines the often-cited obstacles to cargo revenue management. The following section describes the requirements for cargo RM, followed by a proposed innovative approach to innovative revenue optimization business technology in the air cargo industry. A conclusion follows to recapitulate the feasibility and benefits in embracing revenue management for a sustainable cargo business.

Background

A number of general business realities as well as daily operational limitations hamper cargo revenue management. The air cargo activities of a combination carrier are multi-faceted and sternly entwined in a multitude of other elements of the carrier’s organization and operations.

The predominant focus many combination carriers put on their passenger business is oftentimes the root cause of a hindrance to achieving the full potential of cargo market and revenue opportunities. But the cargo value contribution could potentially exceed the average 15% of carrier revenues it generates today (ACW, 2005), notably in bottom-line results. Generally, divergent demand patterns between air cargo and passenger demand could help stabilize system-wide capacity utilization (be it main deck for combination aircraft or belly-hold capacity). So what tends to coerce this conflict and what is the foundation of air cargo still being considered a by-product today?

Some fundamental challenges to cargo revenue management are evident when comparing the attributes of capacity, demand, and profit optimization between the passenger and the cargo business.

· Demand: Unlike the passenger business where demand tends to be relatively stable and regular when corrected for seasonality, air cargo demand is highly unstable and irregular. Also, unlike the one-dimensional seat, the demand for cargo space is multi-dimensional with length, height, width, that is volume/weight and Unit Load Devices (ULD) position requirements. In addition, contrary to the passenger itinerary-based travel, air cargo is indifferent as to the itinerary traveled or routing as long as service-level agreements are respected. A key factor that distinguishes air cargo demand as well is the fact that by and large the market is accounted for by relatively few customers (intermediaries). This leads to shipment consolidation and has significant impact on contract negotiations and dependency on the part of air cargo operators. Finally, passengers – when they show up – tend to be flown as booked in terms of capacity requirements; whereas under- and over-tendering with regards to volume and weight tends to occur regularly, requiring precise overbooking.

· Capacity: The cargo capacity characteristics are comparatively far more complex and multifaceted than the single-dimensional seat requirements of passengers. The multi-dimensional cargo capacity characteristics include length, height, width, ULD positions whereas the overall capacity depends on many other factors that impact on its available volume and weight. These include the passenger, baggage, mail, fuel, crew and catering loads in addition to unforeseen weather conditions, potential ad-hoc passenger connection requirements, and so forth. The highly variable nature of cargo capacity is further underscored by different aircraft types, flown missions, the availability of all-cargo and charter aircraft, or belly-hold space in combination carriers, or procurable trucked air cargo capacity.

Returns on investment in systems are lower in absolute terms for cargo. While some carriers have taken the cargo business seriously, revenues from air cargo typically represent only a fraction of the size of the overall business, so a revenue uplift of 3-8 percent means less. For the cargo business, installing a revenue management system generally requires the re-engineering of a myriad of complex (manual) processes and inter-dependent systems and thus costs much more, in absolute terms, and returns much less in incremental revenue (Kliewer et al, 2002). Also, air cargo managers have typically gained remarkable experience and make intuitive decisions that have for the most part gone unformulated and undocumented. In sum, frequently quoted as being “too complex”, some argue that the implementation of revenue management systems for air cargo optimization is simply not feasible.

Cargo Revenue Management Requirements

The previous statement is flawed as air cargo enjoys all the characteristics of industries that qualify for revenue management application. Cargo capacity is a perishable commodity as it cannot be stored. This notion of time inherently represents value in a market where many segments depend on service level agreements as part of a larger supply-chain propelled by global trade. Also, owing to relatively low variable costs (fuel requirements, handling costs), yield enhancements generated from improved pricing and capacity control almost solely ends up in bottom-line profits.

However, the success of RM in air cargo centers on systemic process re-engineering in marketing and sales, rate establishment and capacity control. Only by achieving a clear understanding of the demand for air cargo products or services at a micro-market level can a carrier maximize its revenue by optimizing price and availability of the product. It thus represents an area in which marketing and technology, supported by mathematics is closely tied together. The need for systems and technology arises as the amount of information that is available and needs to be processed increases over time. The amount of data would be impossible to process manually.

RM is increasingly focusing on dynamic pricing, where product prices are established in accordance with demand from multiple customer segments to maximize revenue or profit. As a result, prices are adjusted dynamically, depending on the inventory availability and time left in the selling season. This compels companies to be able to change prices quickly to reflect new business conditions. Systems are required to use real-time information and formulas to calculate prices. Prices need to be set across products, markets, and channels in order to meet demand. The above works well for spot market capacity (free-sell), and requires air cargo carriers to review the revenue effectiveness of the common practice of allocating space in advance under contract (so called “allotments”). However, clear opportunities exist for decision-support tools allowing optimal rate determination for allotments as well.

A full-scale cargo revenue management system would allow companies to avoid missing out on revenues and profits, by preventing:

· Discounting rates when unnecessary

· Neglecting up-selling opportunities to customers who want to buy value-added services

· Wasting money on irrelevant promotions to the wrong customers

· Misallocating inventory to unprofitable products, segments, or channels

· Failing to create product packages that enhance value (differentiated products)

· Maintaining excessive inventory levels blocked for sale (reserved space, allotments)

· Unprofitable behavior driven around long-term contracts

· Neglecting high-value customers.

In order to be successful, cargo RM needs to apply disciplined tactics that predict consumer behavior at the micro-market level, optimizing product availability and price to maximize revenue growth. The technique allows for the setting of the price of goods and services based on factors such as current product demand, anticipated demand, real-time inventory, and the customer’s willingness to pay.

As a result, the three main areas of cargo revenue management around which business technology should be built are:

1. Clear market segmentation around differentiated products

2. Forecasting demand for different products, points-of-sales, and (reaction to) price levels

3. Adjusting capacity availability or price to accept the highest-yielding mix of products across the network at any given point in time.

Business Technology for Air Cargo Revenue Optimization

So as to develop an effective solution for cargo revenue management requirements, it is of crucial importance to relate the “what” to the “how to”. The “what” requires a clear definition and often depends on data availability of the reservation systems that are used as well as current business processes. Innovative RMS’ also likely require business process reengineering, and may thus impact profoundly on the organization. Oftentimes, the amount of data that is required does not represent valid information necessary to make (automated) decisions. One must also take into account that customers can adopt new and ever-changing behaviors depending on the market or business environment.

The overall systems objective is to control reservations and sales through traffic-flow or network control (local demand versus overall network optimization supported by demand forecasting and rate optimization, including discount allocation and availability restrictions (protect inventory for higher-yielding demand), as well as overbooking (allocating more inventory than physically available in order to account for cancellations and no-shows).

Designing an Innovative Cargo Revenue Management System

From a user standpoint, the following modules could be envisioned as part of an all-encompassing cargo revenue management solution:

· Historical Performance Review: Allows revenue analysts to conduct a full analysis of past economic performance at a very detailed level. This would include past network and leg capacity utilization (weight, volume), booking cycles and average yield information per origin-destination (OD), product category, commodity, customer, etc. Rate-demand curves further allow users to obtain valuable inputs into rate elasticity that aids pricing analysts to optimize rate lines.

· Capacity Forecasting: Cargo capacity forecasting is based on passenger load forecasts, baggage and mail load estimations, fuel requirements, as well as crew, catering and other configurable loads. Passenger final load forecasts could be obtained from the passenger revenue management system, while baggage and mail loads could be estimated using historical data obtained from departure control systems for each flight number and calendar date/day. Fuel requirements and updated cargo capacity in terms of weight can be calculated dynamically as per the cargo demand forecaster, since fuel requirements depend on total take-off weight and sector length. Evidently, capacity forecasting is sensitive to aircraft type and mission flown and could be adjusted for contingency factors such as the propensity for ad-hoc passenger requirements (probabilistic forecasting of misconnections per season, etc.).

· Demand Forecasting: Using a variety of forecasting methods, demand for air cargo space would be forecast from the ground up, i.e. per category, commodity, product, customer/point of sale, SCC, all based on historical data. A future feature could be to obtain rate-elasticity based demand forecasts. Weighting factors could be applied to the data of multiple previous years, while demand forecast updates during the booking cycle of a flight could also be configured in terms of the weight of historical versus current booking data. Overbooking levels could be set based on user-configurable risk-averse levels related to historically-observed no-show rates as well as cancellations, under- and over-tendering behaviour for each station. In addition, the probability of shipment acceptance without booking is also forecast and included in the final demand forecast.

· Tariff Management: Users would be able to review historical rate performance using price-demand curves and use what-if analyses to simulate the potential impact of new rate lines on overall revenue performance. Different than today’s industry practice of using commodity rates with weight brackets for date ranges, cargo carriers would be able to implement calendar day/date-based pricing (at the individual flight level). This represents a significant revenue enhancement and could only be performed using automated business technology. Using information obtained from the optimizer, which sets hurdle or dynamic bid prices, the system would also determine whether rates established by users satisfy the hurdle rate criterion.

· Schedule Allotment Creation: Schedule allotments are created based on the historical economic performance as well as yield-based demand forecast of each customer/station for each category and commodity. Allotments are assigned subject to a number of conditions such as the regularity of supply from the station for the category and commodity, the observed show-up rate as well as under- and over-tendering, minimum yield requirements, as well as overall system contribution (network optimization). For differentiated products (time-sensitive, live animals, etc.), a yield-class based approach is suggested and as such, allotments are allocated as such.

· Revenue Planning: This function would allow users to perform a full revenue plan based on an optimized mix of allotments vs. spot capacity for each category and commodity across the cargo network. Inherently, sales targets could be derived from the revenue plan based on the minimum yield levels that have been established by the demand forecaster and optimizer, although they could be adjusted manually. Prior to being released as the active version, revenue plans can be prepared and adjusted for macro-economic factors such as exchange rate fluctuations, commodity price indices, competitive reaction, as well as anticipated GDP and market growth.

· Flight Capacity Optimization: This module would be part of revenue and booking analysts’ day-to-day work list. It allows the analysis, acceptance or rejection of all shipment requests that have been received in an automated as well as manual fashion through spot rate requests that require user intervention. The suggested optimization approach is based on the concept of each request’s “shipment value”, which is a weighted-average value based on shipment yield, revenue, and customer importance. Furthermore, automated acceptance would be based on a validation of the shipment value against the yield-performance profile of each flight, while respecting the service level agreements. The over-arching objective of flight capacity optimization is to ensure that low-value shipments are assigned to lower-demand flights and that capacity on high-demand flights is protected for higher-value shipments. Requests for which the spot rate does not satisfy the minimum yield requirement are queued for user follow-up with supported alert functions (priority list, based on departure date, customer, or any other configurable parameter).

· Dynamic Allotment Management: Booking behavior of allocated allotments that concern non-contracted space could be monitored for potential release and redistribution to other stations based on updated forecasts and re-optimized network space allocation. This would occur on the basis of initial allotment versus current and projected booking levels relative to forecast threshold values, allowing the estimation of unutilized capacity at flight departure.

· Queue Management & Alerts: The queue management function would permit the handling of shipments on the standby list, disruption list, but also allow users to identify shipments that can be considered for pre-carriage in order to maximize capacity that otherwise is anticipated to go unutilized. The logic used by the system to handle and assign shipments to flights would be similar to the flight capacity optimization approach described earlier. That is to say, the system would identify flights for which the shipment value matches the economic value of the flight while still respecting (contracted or requested) service level agreements. Furthermore, alerts can be generated by the system so as to signal users that the flight (booking) performance is such that it merits attention (“warning”) or immediate action (“critical”). Alerts would go hand in hand with rule-based controls that users could set up with regards to capacity control and dynamic pricing.

Conclusion

While the implementation of automated revenue management business technology is still relatively scarce in the air cargo industry, a noteworthy opportunity exists to introduce a systematic approach to revenue optimization supported by business technology consisting of decision-making as well as automated optimization tools. This Whitepaper has described a vision towards next generation cargo revenue management that goes beyond today’s practices and includes potential future requirements that would be financially rewarding for both combination as well as all-cargo carriers.

The rewards of cargo revenue management systems would include greater transparency of cargo’s contribution to corporate results as well as significantly improved cargo revenue from increased yields, better utilized uplift capacity and enhanced sales performance. Notable additional benefits would include improved customer satisfaction from better services and network over and above an expected cost reduction from streamlined processes.

The current generation of legacy cargo reservation systems and general lack of sophisticated cargo revenue management systems falls short of supporting the above goals. In conclusion, now that the industry’s financial results appear to be strengthening, the timing is ripe to invest in sophisticated cargo revenue management solutions so as to enjoy maximized profits.

Bibliography

ACW (2005), Air Cargo World online, www.aircargoworld, October 2005.

Belobaba, P. (1987), Air Travel Demand and Airline Seat Inventory Management, Ph.D. dissertation, Massachusetts Institute of Technology, Boston, USA.

Cross, R. G. (1997), Revenue Management, Broadway Books, New York, USA.

Donaghy, K., McMahon-Beattie, U. and McDowell, D. (1997), ‘Yield Management Practices’, in Yeoman, I. and Ingold, A. (eds), Yield Management Strategies for the Services Industries, Casell, London, pp. 183-201.

Garvett, D. and Hilton, K. (1999), ‘What drives airline profits? A first look’, in The Handbook of Airline Finance, McGraw-Hill, New York, pp. 181.

Jonker, E. (2006), Internship report, Business Mathematics and Informatics, Vrije Universiteit, Faculteit der Exacte Wetenschappen, Amsterdam, The Netherlands.

Kimes, S.E. (1989), ‘Yield management: a tool for capacity-constrained service firms’, Journal of Operations Management, 8, 4, pp. 348-363.

Kliewer, G., Grothklags, S. and Weber, K. (2002), ‘Improving revenue by system integration and cooperative optimization’, Proceedings of the AGIFORS RYMSG Annual Meeting 2002, 16-19 April, AGIFORS, Berlin, Germany.

A Typical Work Week – Day by Day

2009-09-15T11:02:00.003-04:00

A Revenue Analyst is responsible for the revenue optimization of the flights under their control. In order to do that requires a disciplined and systematic approach to the tasks on a daily and weekly basis.

I have documented a typical week below to highlight the tasks, analysis, and evaluation required. In addition, there are a number of team players, and communication is key to keeping all the components in synch and strategies aligned.

It is especially critical to be action oriented and to follow-up on those actions with ongoing performance evaluation and adjustment.

Monday

Monday is a data preparation day. I look at historical data for the last six weeks which gives me my final booked numbers by flight, day-of-week, and booking class. I also look at spoilage and denied boarding performance, as well as business mix components on my flights. I can categorize my flights with this information, using definitions based on BLF and booking class distribution. The categories include: Prime, High, Medium, and Low. This information helps me to set-up the inventory controls on my flights, and to manage them on a weekly basis. These controls are documented and communicated to my Manager as well, in order to ensure our strategies are aligned.

I also look forward with reports on advance bookings, seat allocations, remaining booking class availability, and overbooking levels. I compare my allocation distribution year-over-year, considering my fare structure and changes to the previous year. Our advance booking reports by route give us an indication of our distribution by booking class along with average fares and then estimated revenues. Our forward looking analysis is a validation that all is as expected based on the budget or plan.

One of the biggest challenges is bringing historical and forward looking data together in order to identify patterns and trends going forward in key performance indicators like: Spill, stifle, revenue dilution, spoilage, and denied boardings. Capturing and correcting any of these potential KPIs prior to flight departure can really improve performance.

Tuesday

Today I download the latest schedule reports looking for changes to my scheduled capacity and frequencies. I look at three things: Additions, deletions, and changes to the schedule. With that information, I evaluate how the changes will impact my passenger demand and if I will “spill” demand on alternate flights or even to the competition. I also identify passenger protection recommendations to the schedule change group who move the bookings off cancelled flights onto alternate remaining flights based on my suggestions.

I identify any issues that I have with the schedule going forward and request evaluations. Any trends or patterns that highlight opportunities are also identified for evaluation.

Upcoming holidays and special events are also evaluated on a weekly basis to ensure that bookings are coming in as expected and that we have appropriate capacity in place. Flight additions or cancellations are usually looked at a couple of months in advance and then monitored as the date approaches. Inventory controls are adjusted to capture revenue opportunity and to ensure that days where demand is soft are open for sale.

Wednesday

I have weekly competitive web fare comparison reports scheduled to be available on Wednesdays. I print these reports and meet with my team Market Manager and Pricing Analyst to discuss our position and any opportunities or threats. We make adjustments to the fares or inventory as required. This analysis and evaluation can be increased to daily if there is dynamic competitive action taking place in the market.

Thursday

On Thursday, our entire team meets for a Route Management meeting. We review current and future booking levels, the fare structures, and any schedule changes. We also talk about competitive pricing, schedules, and market share changes. Current trends or patterns in booking levels as well as distribution are examined and evaluated. Changes in fare structures and inventory management are actioned as required coming out of this meeting.

Friday

A close look at overbooking levels for the next thirty days in comparison to the no-show levels for the last sixty days is conducted at a flight and day-of-week level. Any flights with an oversell level below the no-show level are investigated for a possible increase. The reverse is also examined for oversell levels that are causing excessive denied boardings.

I try to have all my flights updated based on the week’s analysis, evaluation, and any action steps identified at the Route Management meeting. In this way, on Monday morning, when I create new reports, all my actions should be evident and I can follow-up on the results.

In Summary

This review of a typical work week is definitely not exhaustive, but only an overview of some of the tasks conducted by a Revenue Analyst. I would be very happy to hear your comments or suggestions of other tasks or approaches to ensure all opportunity is captured and any risks are minimized.

A Well-Planned Retirement

2009-08-13T10:19:00.005-04:00

Outside

England

's Bristol Zoo there is a parking lot for 150 cars and 8 buses. For 25 years, its parking fees were managed by a very pleasant attendant. The fees were £1 for cars ($1.40), £5 for busses (about $7). Then, one day, after 25 solid years of never missing a day of work, he just didn't show up; so the Zoo Management called the City Council and asked it to send them another parking agent.

The Council did some research and replied that the parking lot was the Zoo's own responsibility. The Zoo advised the Council that the attendant was a City employee. The City Council responded that the lot attendant had never been on the City payroll.

Meanwhile, sitting in his villa somewhere on the coast of

Spain

(or some such scenario), is a man who'd apparently had a ticket machine installed completely on his own; and then had simply begun to show up every day, commencing to collect and keep the parking fees, estimated at about $560 per day -- for 25 years. Assuming 7 days a week, this amounts to just over $7 million dollars!

And no one even knows his name.

From The London Times

Revenue Analyst Performance Measurement

2009-07-28T15:20:00.000-04:00

A major discussion point in revenue management circles is how to measure the performance of a Revenue Analyst considering the many external factors in the environment, as well as the efforts of team members in Pricing and Scheduling.

Besides meeting or exceeding the traditional RASK and PLF targets, what performance and behaviours are we trying to measure in order to judge an Analyst’s performance?

Has the Analyst adopted best-demonstrated practices within the organization? Is there a standardized approach to revenue management?

Has the Analyst looked for opportunities to improve processes and procedures? Have these been presented, tested and implemented? Are processes documented?

Has the Analyst prioritized tasks to ensure that highest return on effort is realized? What tasks have little value and have been dropped? Has there been an improvement in management of day-to-day activities and the capacity to complete all tasks?

What has the Analyst done to further develop themselves in knowledge of assigned markets, and improve their ability with tools and techniques in revenue management?

Are there other key performance indicators that are worth measuring? What about spill, stifle, spoilage, and denied boardings? Can we measure trends and patterns for improvement?

How do you conduct Revenue Analyst performance reviews at your airline? Do you have any comments or suggestions to share that might improve our ability to develop and motivate our Analysts?

Revenue Analyst Position Requirements

2009-07-12T13:31:00.004-04:00

As part of our revenue management training, we coach our students in preparing for the job requirements. We spend a large part of our training on analysis and evaluation of the elements of data relative to revenue management and its performance. A good understanding of the key performance indicators and the appropriate levers that need to be changed based on triggers in the environment are crucial to optimal on-going seat allocation strategies and maximized revenues.

Let’s review a typical list of requirements for a Revenue Analyst. If you are interested in a career in this field, could you meet them? Besides studying the basic concepts and theories of revenue management, how could you better prepare yourself to impress your interviewer and shine above your competition, ultimately winning the job?

High Level Objective

Able to maximize revenue in assigned markets using various tools coupled with experience (e.g., RM system)
Provide strategic direction within a given market and generates new revenue opportunities (e.g., targeted pricing, schedule and capacity management).
Provide internal customer service by acting as a resource of information to other departments within the Company.

Job Function

Pro-actively manage subset of high opportunity flights on a daily basis to maximize revenue (e.g., rule-based control)
Semi-automatically manage remaining flights on a weekly basis to maximize revenue (a recent survey by AGIFORS stated that an average 97.1 percent of flights are managed automatically by RM systems at airlines who responded to the survey. 36.9 percent of flights are never touched by an Analyst).
Managing overbooking and spoilage at the flight level
Managing short-term capacity adjustments
Contribute recommendations on revenue related initiatives
Use resources in concert with intuition, judgment, and experience to evaluate flights during special events and define strategy to optimize revenue
Captures new revenue opportunities through in depth market knowledge and statistical modeling tools
Recommend and set prices for fare bands to maximize upsell opportunities
Make recommendations for fares in new markets
Demonstrate deep expertise on specific markets (trends, events, competitors).
Utilize knowledge of statistical theory in understanding forecasts and optimization.
Set market goals based on plans, forecasts, and market conditions and evaluate performance against goals
Proactively makes recommendations based on market knowledge
Manage multiple opportunities simultaneously
Deliver effective presentations to department and executive Leadership

Qualifications

Education

College degree required, preferably in Finance, Economics, Math, Statistics or Engineering

Experience

5 years plus in Revenue Management or highly analytical environment

Skills

Analytical background required.
Ability to make decision in an ambiguous environment
Demonstrated ability to interpret data, draw implications and modify approach required.
Takes ownership and demonstrates accountability
Demonstrates strategic thought process
Ability to build a fact base and business case for strategic recommendations
Ability to clearly articulate complex situations and effectively influence colleagues
Willingness to take a position when rewards outweigh risk
Views problems as an opportunity for improvement
Demonstrates initiative, entrepreneurialism, and creativity
Demonstrates a sense of urgency
Must be technically proficient with respect to Microsoft Office products and SQL packages.
Must work well with time constraints.
Ability to work well with others as part of a team and work under stressful situations.
Ability to work without close supervision.
Must be detail-oriented while still seeing the big picture (e.g., industry challenges and opportunities)
Must be able to communicate accurately and concisely both orally and written

We would be very interested in your thoughts on the position, the requirements, and any other strengths or weaknesses in the current Analyst environment today.

How can we ensure our revenue management (RM) approach is optimized and automated?

2009-07-10T15:00:00.001-04:00

At this time when traffic is down significantly from previous years, how can we ensure that we are open to capture potential bookings, at the same time capturing high-yield opportunity wherever it exists, and respond to competitive strategies with speed to market?.

One of the first steps would be to re-validate all the controls applied in the RM system. This current environment lends itself to stripping off any restricting controls and creating a new seat allocation strategy from scratch. It can be an enlightening experience seeing the RM system optimization with absolutely no controls on it.

I like the top-down approach where we apply high-level low-demand controls (if any are absolutely necessary) to the entire route and all flights. This approach ensures that if there are no other controls, the flights will be open, and we will be in a state of “readiness”.

If our demand and bookings are down year-over-year, can we influence our forecasted demand in the RM system, reducing it to levels relative to the current situation? Can we apply a monthly strategy looking forward? Typically, our advance booking reports are at a route level and by month, and they can tell us how much we are down. Lowering the forecasted demand also eliminates the need to force seats into lower classes using a minimum control. Forced controls do not allow the RM system to optimize your flights.

Low-demand controls are in effect maximum limitations for the seat protections in the lowest booking classes in the nested structure. If your RM system “dumps” seats that have no demand in the lowest booking classes, sometimes we need to set controls to establish a class seat allocation distribution. This would be important if we have a very low tactical fare level in the bottom booking class.

An example of this is where we might want only 10 percent of our economy cabin on a route to be allocated at a $69 fare. Because this seat distribution amount is usually established at the route level, we can place a maximum control on the route. A maximum control is important as it states “never more than” in a situation where excess capacity is dumped, but does not force seats on high demand flights where there should be less.

Okay, now the base is set, we can next categorize our flights and implement controls at the flight level, and only on prime, high, and medium flights, to capture willingness to pay, manage potential spill, and to minimize revenue dilution on business flights.

High-yield spill (on business flights) can be corrected by applying minimum controls on last minute high-end booking classes. Low-yield spill (on leisure flights) can be corrected with up-sell controls on the lowest booking classes.

Preventing revenue dilution typically means protecting enough business related high-yield seats for the last-minute booking passenger. This entails applying minimum controls on the business booking classes to ensure availability. These minimum controls state “never less than” in a situation where we want a specific number or more seats kept.

If we conduct weekly flight categorization analysis and evaluation based on current trends and patterns, we can manage these controls quite nicely. Monitoring and adjusting our fare levels and allocation distribution according to revenue targets and competitive strategies is also very manageable with high level route controls.

I’d be very interested in hearing your comments, ideas, and/or questions.

After the Training, Tips for the Job Interview

2009-07-06T10:46:00.002-04:00

I just read an excellent article by Rachel Zupek, a writer for CareerBuilder.com. She shared some very interesting interview tips that I thought would be valuable to pass along.

In her article “Have You Tried These Interview Tips?” Rachel reviewed some very familiar suggestions that we have all heard before: Dress professionally; make eye contact; research the company; and have a firm handshake. She then turned things around by asking a few job seekers for their ideas. Here are some of those suggestions.

1. Ask the important questions, such as: 'Have I said anything that would lead you to believe I'm not the best person for this position?' This gives you an opportunity to clear up any misunderstandings and it also gives you a chance to redeem yourself or explain where you are coming from on something. It also shows that if there's a problem, you are capable of fixing it." Another question that is helpful, and that they do not expect -- 'I know you are interviewing a lot of candidates for this position and I'd like to leave this interview feeling like I've done my absolute best. Where do I stand in comparison to the other candidates so far?' – shows boldness and that you are aggressive in your job search."

2. The interview is not about the candidate, it's about the job. No matter how great you are as a person or employee, the interviewer is trying to fill a position. Hence, talk about the job as much as possible. Ask what a perfect candidate would be like. Only occasionally talk about yourself and only to show how you suit their requirements."

3. Research the company -- and the interviewer. "Find out some information about your interviewer(s). See if you share anything in common and understand that they're a person, too, with interests, background and hobbies. Whether or not you know who will interview you, you'd better make sure you know as much as possible about the company and don't be afraid to let them know what you know.”

4. Can you take the heat? "I've found that saying that I can take constructive criticism has a big impact on employers. They need to know that you are not going to fold under scrutiny. Especially with the younger generation, where we have been coddled quite a bit with excessive praise and self-esteem boasters, you need to show you are resilient."

5. List five things you've accomplished during your previous job and concentrate on those items during your interview. That can give you a boost of confidence when going to the interview.

6. Make it personal. "One thing that you can do that has gotten positive feedback is send a handwritten thank-you note."

7. Show your research. "Print out a couple pages of the Web site from the company you're interviewing with and bring it with you to the interview. Keep it on top of your résumé ... when you open up your notebook or binder to take notes or pull out your résumé, the interviewer will see the printed company materials and assume you've done your research. Of course, ideally you have actually researched the company ... in which case you're showcasing that fact."

8. Know the job description. "Reviewing the job description will help you customize your answers by addressing the specific needs of the organization and requirements of the position to your skill set."

9. Keep your answers to questions short and to the point. "Don't volunteer extra information.”

10. Be gracious. "Be polite to absolutely everybody. If someone gets you a cup of coffee, thank them; hold the door for someone else -- that kind of thing. Give the receptionist or the last person you see a cheery goodbye. You want to leave a good impression."

11. Speak as if you have the job. "Steal a page from the presidential candidates and talk if as if you already have the job. Say 'I will," not 'I would.' 'I can,' not 'I could.' This will remove doubt instead of inject it. Bosses like someone confident and proactive.

No Frills Pricing and Additional Fees versus Bundling

2009-07-05T13:46:00.001-04:00

I believe the original idea behind additional fees and their associated ancillary revenues was based on charging for extra services above the base prices required to match the low-fare no-frill carriers.

Full-service airlines had to find a way to match the price and level of service provided by the low-cost carriers. Stripping off the benefits of a discounted full-service ticket involved removing features such as food and beverages, seat selection, frequent flier points, refundable tickets, and in some cases increasing change fees.

Competing with low-fare carriers and the pressure on profits brought a closer look at the costs of flying a passenger. The ability to use the internet to reduce customer interaction was one way to reduce the cost of servicing a passenger. Kiosks for check-in was another. Passenger baggage involved not only additional weight, but also processing and transfer costs at the airport.

In today's environment, we are looking at further ways to improve profitability in the face of economic hardships around the world, and the resulting drop in traffic and business travel. The focus seems to be on cost areas that can be reduced through charging premium fees. For example, charging for baggage might cause a price sensitive passenger to reduce the amount of baggage that they travel with. This then takes pressure off and reduces the cost of the airline operation. Those passengers who are willing to pay can carry all the baggage they need. In the end, operations run smoother, costs are lower, and everyone benefits.

Many airlines have introduced value-based pricing or fare families on their websites. This is a way to communicate a value proposition to the customer and offer a bundled product or service that is basic or includes a level of service according to a value that the customer relates to. Airlines have also been successful at up-selling those customers who enter the website based on price and then buy-up with the offer of increased comfort or convenience.

There is a lot of talk about excessive fees today, but what is ideal business model? Do we bundle packages, or do we allow the passenger to choose only the options they want to pay for? What services are related to high costs, and where can we improve?

Seasonality, Holidays and Special Events

2009-07-03T15:38:00.005-04:00

Have you analysed your historical seasonal demand lately? Is your revenue management system calibrated to forecast demand with consideration of seasonal demand patterns, holidays and special events?

A look at the graph below illustrates how demand can fluctuate throughout the year. The two lines track demand in each direction on a sample route. Directional patterns are clearly evident. Extremely high spikes and low valleys are indications of special events which could be holidays, conventions, or even bad weather or major events in the news.

Creating a graph like this is very simple if you have the data of final bookings for each week in a year. Deciding what is classified as "Peak" travel versus "Low Season" travel can be clearly defined based on the vertical axis demand level. Corresponding week numbers and their actual dates can help you to setup your seasonal settings in the revenue management system.

Even if you don't have a revenue management system, this analysis can clearly assist you in protecting for high yield demand in "Peak" periods, and ensuring discount inventory is open in "Low Season periods.

I invite comments and discussion on how you define your seasonality and special events, and whether you find this important in the calibration of your demand forecasts.

RM System Checklist

2009-07-02T08:39:00.005-04:00

For discussion purposes, and considering changes required in the current environment, how do we approach re-visiting our controls in the revenue management system to ensure that our flights are open to capture potential bookings, but at the same time, protecting high-yield inventory where opportunity exists. In this example, we are using control names familiar to PROS RM system users. This list is presented as things to check in the following:

1. Top-down approach where controls are exception based as we get more detailed
2. Time period application considering season, holidays and special events

Forecast Accuracy
1. Forecast group alignment. Is each flight aligned with the right historical data based on flight departure time range?
2. Sponsorship. Are there any new flight departures that require historical data to be copied in order to create an appropriate demand forecast?
3. Split history. In seasonal demand markets has the historical data been split into seasonal clusters?
4. Holidays and special events. Have holiday and special event historical data been separated from the regular pool of demand data, in order to best forecast special events versus regular demand?
5. Influence profiles on showrate for holidays and special events. Is it necessary to influence the showrate in order to lower overbooking during holidays and special events?

Workteam Level Application

What controls can we assign at the highest level of application that affect all of the routes we manage? Can we do this in a way to improve management by exception and automation?
1. Autopilot, cabin-sizing and decrement selections
2. Upgrade bounding parameters
3. Denied boarding costs
4. Frequent Flyer treatment
5. Booking class distribution (PUI max percentage of AU)

Market Specific and Directional Level Application

Are there controls that are more market specific, and/or apply to directional traffic patterns? For example, competitive markets, and/or holiday markets with directional traffic flows.
1. Market specific split history
2. Market specific holidays and special events
3. Market specific influence profiles on showrate for holidays and special events
4. Market specific influence profiles on showrate for directional compensation legislation (Europe, USA)
5. Market specific influence profiles on demand
6. Market specific booking class distribution (PUI max percentage of AU)
7. Market specific gating and/or min/max rules

Flight Specific Application

Do we have a flight category application on our flights that help us manage prime, high, and medium flights by day of week? Can we apply generic controls at a higher level of application to take care of all low demand flights, which need to be open for sale?
1. Denied boarding costs exceptions on last and only flights
2. Upgrade bounding exceptions if any
3. Flight specific influence profiles on demand
4. Flight category specific full fare minimums
5. Flight category specific Frequent Flyer treatment
6. Flight category specific booking class distribution
7. Flight category specific gating and/or min/max rules

We would be very interested in an open discussion on whether RM system users have a systematic and disciplined approach to managing strategies and controls in the system? Is this list familiar to you? Do you have a similar approach?

Building Credibility as a Pricing Manager (Director or VP!)

2009-05-29T06:21:00.001-04:00

By Reed Holden

Over the past few months, we've spoken to a number of pricing managers who are really struggling to improve the profits in their respective firms. They are frustrated and feel like they're "beating their heads against the wall." Yet in many cases, it appears they're doing the right things. They're putting in better pricing controls, and they're working with the sales force on better value positioning, to mention just a few activities. Yet, for some reason, it doesn't seem to be working.

We've also spoken to a number of pricing managers who seem to be getting the job done. They've gotten ahead of the need to develop positioning statements for the sales force, and they've worked with sales and marketing to make sure that excessive goals aren't driving pricing and profits down. They've worked with senior executives to make sure they aren't falling prey to desperation pricing–especially at the end of the quarter.

It struck me that what distinguished between those two groups of managers is that the effective pricing managers have credibility in the organization. When they spoke, people listened. They were viewed as effective managers who could drive better pricing practices throughout the firm. No, they weren't viewed as perfect, but they were viewed by senior and junior executives alike as someone who should be taken seriously, for the good of the firm.

Pricing managers who aren't credible are frustrated that people don't listen to them. This gets in the way of executing effective pricing. That's too, bad because effective pricing is what saves jobs during a recession. Effective pricing focuses on holding on to each an every profit dollar that can be eked out of this struggling global market. It makes sure we aren't sacrificing profit dollars for a sales- or market-share goal. It makes sure salespeople are selling rather than discounting, and it makes sure that our costs are in line and are being viewed properly when it comes to setting price.

That leads me to five bits of advice for pricing managers who are frustrated by their lack of credibility:

1. Be willing to start small. If you don't have credibility, you'll never get the big projects approved. So, pick something small to do. And make sure you do it well and get it done on time. Work on a better pricing matrix, simplify pricing policies so salespeople understand them, work with a sales team on a big negotiation, or even a small negotiation. Credibility rests on assurances that you know what you're doing and can get the job done. Be willing to start small and grow your successes over time.

2. Work at strategic and tactical levels. Yes, you need better pricing strategy, but without better tactical execution, strategy will never yield benefits for the firm. So, pick and choose your battles, but be willing to pick the fruit of profits where you can reach the branches. You may need to prove yourself with better execution and tactics before you tackle the larger strategic projects.

3. Take responsibility for your work and the work of your team. A lot of managers think that this undermines your power, but it actually builds it. Good leaders take the hits and do better. It takes a good leader to build a firm's pricing capabilities. Take responsibility for both the problems and the results.

4. Track and talk about small successes. Don't expect others to "notice" the results you achieve. Document your wins and use the insights from those wins to build the "burning platform" for the firm. If you helped a sales team close a more profitable order, put it on a spreadsheet and report the results to senior executives. Be willing to start with anecdotes as you build the data for a more compelling story.

5. Speak their language. As pricing has gotten more specialized, the words we use are getting bigger and more specialized. Talk about value. Betas and correlations won't get you anywhere with salespeople or senior executives. Salespeople want to know how to close better deals. Senior executives want to know how they are going to get more profits and revenue. Listen and use the words they use, and you'll become more credible and more effective.

This is not a complete or exhaustive list but it is a start of things to think about to get the focus you need outside of pricing function to get the profit job done in the firm. Unfortunately, it doesn't happen overnight. The credible pricing managers we know have taken years to develop the credibility they need to get the job done. If you already have credibility, go for it–think big and bold. If you don't, try a few of these ideas, and you'll be on the same road that the ones who already have credibility have walked. It took them time and patience, but it did and does work. Good luck.

SITA Next-Generation PNR, Customer Journey

2009-05-13T12:36:00.000-04:00

SITA unveiled what it described as a next-generation PNR, Customer Journey, which will provide "a live record of the passenger's experience with the airline right down to seat preference, meal choice and the last time they made a complaint." It said Customer Journey is a new feature in its Horizon passenger management portfolio used by 138 airlines. It claimed "several" carriers have been given a demonstration of the new offering but no sales were announced. "Customer Journey will be further developed to capture additional data such as hotels, car hire, trip insurance and other travel related services," SITA said. "It will display all revenues attributed to the customer which helps determine the customer's overall value to the airline."
Source: Air Transport World

WestJet unveils service guarantees

2009-04-21T08:07:00.001-04:00

Scott Deveau, Financial Post
Don Healy, Canwest News Service Files

WestJet Airlines Ltd. unveiled a new list of customer-service guarantees today as part of an aggressive new marketing campaign aimed at winning market share from Air Canada and staving off the need for the proposed passenger bill of rights now before Parliament.

The campaign launched this morning sets in stone what the airline will offer its passengers on day-to-day basis and in the event of delays or cancellations.

Many of the so-called "careantees" are already part of the airline's regular operations, including services such as two free checked bags.

Others entrench practices that were, until now, discretionary, including providing meal vouchers for passengers delayed by more than two hours and hotel rooms for those delayed overnight.

But they also include some new services, such as a cash-back guarantee for a cancellation made within 24 hours of booking it.

Bob Cummings, WestJet vice-president of guest experience and marketing, said the campaign is aimed at giving the carrier an edge over its competitors in an increasingly aggressive market for air travel due to declining demand.

"We have a smaller pie this year with respect to demand and revenue," Mr. Cummings said. "We had to look to way to steal more share."

The move comes on the tails of an apparent shift in strategy at Air Canada under the leadership of its new chief executive, Calin Rovinescu.

Until now, Air Canada has been scaling back its capacity to ensure it was flying its planes full and profitably. However, Mr. Rovinescu has said in a series of recent internal communications that he doesn't adhere to the strategy of "shrinking to profitablity."

"I don't want to lose market share to our competitors without putting up a fight," he said in a video to employees that was posted on YouTube.

Air Canada is looking for creative solutions to compensate for declining demand, he said, including leveraging its frequent-flyer partnership with Groupe Aeroplan Inc. To that end, the carrier announced last week it had sold an additional 250,000 seats to Aeroplan this year to help fill its planes.

But WestJet is not aiming its new campaign at just Air Canada. After a particularly difficult holiday season this past December due to harsh winter weather in Vancouver, a private member's bill was presented to Parliament proposing a Passenger Bill of Rights be established in Canada.

Among other measures contained in the bill, carriers would be forced to pay hefty financial penalties to customers for delays or cancellations.

"We believe we have a market-driven solution that addresses each of the areas that is proposed under the bill," Mr. Cummings said of the campaign.

Still, the new guarantees are not without their risks. WestJet incurred $5.3-million in additional expenses in the fourth quarter related to the storms in Vancouver, including covering the cost of meal vouchers, hotels, ground transportation and charters for its affected customers across the country.

Heading into the busiest time of the year, at a time Air Canada is set to renegotiate all of its labour pacts, WestJet's network runs the risk of being overwhelmed by a job action at its domestic rival.

In addition, there is a risk this might occur if Air Canada were to file for creditor protection, as some have speculated.

"It simply could not replace Air Canada's capacity," said Chris Murray, CIBC analyst, in a recent note to clients. "In a strike or lockout situation, we expect we would see what happened at Vancouver replicated at every major hub across the country."

scdeveau@nationalpost.com

Ryanair receives over 12,000 suggestions for discretionary revenue charge competition

2009-04-09T06:27:00.001-04:00

Airline Code [RYR]

Ryanair announced (08-Apr-09) that it received over 12,000 suggestions from passengers as part of the low fares airline’s competition to suggest a discretionary revenue charge which would help lower Ryanair’s costs and reduce its guaranteed lowest fares even further.

Ryanair revealed the top five ideas and launched an online poll on www.ryanair.com to allow passengers to decide which idea is worthy of the EUR1,000 cash prize. The online poll will remain open until 17-Apr.

The top five suggestions are:
1. EUR1 for toilet paper – with O’Leary’s face on it,
2. EUR2 “corkage” fee for passengers who bring their own food,
3. EUR5 annual subscription to access Ryanair.com,
4. EUR3 to smoke in a converted toilet cubicle,
5. Excess fees for overweight passengers based on body mass index.

Launching the poll, Ryanair’s Stephen McNamara said: “Ryanair is Europe’s largest low fares airline and we will continue to reduce fares by stimulating ancillary revenues. Over 12,000 ideas were suggested to us as ways of driving our guaranteed lowest fares even lower and our top five entries are now available on ryanair.com for passengers to choose the winner. The online poll will close on Friday 17th April and the winning entry will be revealed shortly after.”

(c) Centre for Asia Pacific Aviation. Date posted: 09-Apr-09

Costs of Old Age Trip Up Airlines

2009-04-08T08:05:00.005-04:00

Bankruptcies, restructurings, pay cuts and radical changes in airplane fleets and schedules were supposed to lower costs at older airlines so they could afford to match the cheap fares offered by upstart low-cost carriers.

It hasn't turned out that way. The "cost gap" between so-called legacy airlines that have been around for decades and younger low-fare carriers has remained, according to new analysis from consultancy Oliver Wyman. In the long term, this could make it harder for older airlines to match very low fares.

"I expected something different. I expected some shrinkage of the gap," says Andrew Watterson, a partner at Oliver Wyman, a unit of Marsh & McLennan Cos.

Instead, low-cost carriers have been able to reduce their costs even more as their rivals tried to catch up. They maintained an advantage over bigger airlines in productivity, allowing them to fly seats at lower cost than rivals. They also have a labor-cost advantage: Even though wage rates have been slashed, older airlines have higher percentages of workers at top-scale seniority.

"It's largely the cost of an older airline," says Douglas Parker, chief executive of US Airways Group Inc., whose company is the combination of a legacy airline, US Airways, and a start-up, America West Airlines. On the "east side" of the company -- the original US Airways -- every pilot is at the top of the pay scale.

That's not the case at JetBlue or AirTran or Southwest," Mr. Parker says. "Even if the scale is the same, the cockpit costs are different."

For consumers, the aggressive cost-cutting at airlines has produced a prolonged period of very low fares. By slashing costs and improving efficiency, airlines have positioned themselves to better weather the recession. Since demand dropped, they've offered deeply discounted prices and yet haven't had to rush to bankruptcy courts for protection, as many airlines have in the past. Layering on fees for everything from checking bags to redeeming frequent-flier tickets has helped, too.

That could change because of the persistent cost gap, which may end up separating airlines that can survive by offering cheap tickets from those that will run out of money. For the past several years, strong business travel and demand for premium tickets on international routes gave higher-cost airlines enough revenue to overcome the cost gap. But the recession has drained high-dollar business travel, leaving higher-cost airlines to compete more directly with discounters for cheap-fare passengers.

Just consider Canada, where incumbent Air Canada restructured in bankruptcy in 2004, but couldn't get its costs down as low as those of WestJet Airlines Ltd., its low-fare rival. Now Air Canada is struggling; its $400 million credit line was suspended last fall. Chief Executive Montie Brewer resigned last week, and major debt and pension obligations are coming due later this year.

Airlines measure unit costs and revenue by spreading it over seat miles -- each seat flown one mile. In the third quarter last year, when fuel prices were still high, revenue generated by AMR Corp.'s American, Delta Air Lines Inc., Continental Airlines Inc., Northwest Airlines Corp., UAL Corp.'s United and US Airways averaged 12.46 cents per seat mile, according to Oliver Wyman's study, while costs were 14.68 cents per seat mile on average. On each seat mile, those airlines were losing money.

The average for Frontier Airlines Holdings Inc., AirTran Holdings Inc., JetBlue Airways Corp. and Southwest Airlines Co. showed how the low-cost airlines fared better. Average revenue per seat mile was 10.92 cents, just above average costs of 10.87 cents per seat mile. Average costs of the legacy airlines last year were 35% higher than average unit costs of the low-cost carriers.

In 2003, as airlines were beginning their massive restructurings, Oliver Wyman found low-cost airlines had a "cost gap" advantage over legacy airlines of 2.7 cents per seat mile. Last year, the gap was 3.8 cents per seat mile. In percentage terms, the gap has remained roughly the same over the past six years -- legacy airline costs have been, on average, 23% to 27% higher than low-cost airlines per seat mile.

Even taking fuel out of the comparisons and nullifying the advantage Southwest has because of fuel hedges -- purchased when oil prices were low that saved the company billions of dollars -- doesn't change the cost-gap reality. Some of the cost gap is unavoidable. Big international operations bring with them higher costs (but also higher revenue). Big hub operations are labor- and equipment-intensive and not nearly as efficient because planes and employees sit around longer and gates can sit empty longer. Low-cost airlines typically avoid connecting scads of customers through big hubs and often empty and refill airplanes on the ground much faster.

The payoff for higher-cost airlines is supposed to be higher revenue. Lots of international flights attract high-dollar corporate fliers, for example, and extensive networks create more opportunity to connect more passengers. That has worked well for airlines when the economy is strong and business travelers are paying top-dollar for tickets. David Barger, chief executive of JetBlue Airways, says high oil prices last year overwhelmed airlines and made all carriers high-cost carriers. "When oil went up, we lost a lot of our advantage," he says. "As it came down, the lower-cost guys regained our advantage."

The key to keep costs low, he says, is growth -- another area where the low-cost carriers have an edge. Airlines that grow add new airplanes that don't yet have lots of maintenance costs or reliability issues. Growing airlines hire employees at the bottom of wage scales. Conversely, airlines that are shrinking have a harder time reducing unit costs. They may ground airplanes but still have to keep up payments on them. They may be paying leases on airport gates and counter space they no longer use. Management expenses may be spread over fewer passengers, raising the company's costs per passenger.

Low-cost carriers have been steadily capturing a bigger percentage of domestic air travel, carrying 26% of domestic passengers in 2003 and 31% by 2007, according to a Raymond James & Associates Inc. report. Legacy airlines dropped from 56% of passengers in 2003 to 48% in 2007.

Write to Scott McCartney at middleseat@wsj.com
Printed in The Wall Street Journal, page B10

Maxed out? Are there any fees left for airlines to charge

2009-03-19T08:38:00.001-04:00

Today in the Sky with Ben Mutzabaugh

"It's been a long time coming, but it seems U.S. airlines finally may have reached a limit on new fees they can charge for in-flight perks that used to be included in the ticket price." That's from Reuters, which reports many industry observers think airlines may exhausted their options for a la carte fees –- at least for now. Reuters says "that's welcome news for travelers who find the avalanche of new fees tedious." But fliers also shouldn't expect airlines begin rescinding fees already in place.

"If people knew that this was the extent to which this is going to go, that would make them feel better," Kevin Mitchell, chairman of the Business Travel Coalition, says to Reuters. "(But) they should also know that there's no reversing it," he adds. Reuters says that's because those fees have helped financially struggling airlines to generate "billions of dollars in new revenue from sales of items and services that previously had been free."

At American, for example, the carrier says its 2008 "ancillary revenue" soared 60% over the year before to a whopping $2.1 billion. "That's been a pretty big success story," AA CFO Tom Horton tells Reuters. And despite grumbling from customers, most carriers say fliers appear to have grudgingly accepted the fees with little other backlash. There have been exceptions, though not many. One notable change came from US Airways, which "recently rescinded a fee for sodas on its flights after customers complained and rivals declined to match," Reuters writes.

So, does all that mean travelers have seen the end of new "a la carte" fees? Not necessarily. Reuters writes that while "experts generally agree that airlines are running out of ways to charge for items that customers currently take for granted," that won't stop them "from introducing new items and services to sell on flights."

Gourmet meals, preferential seating, bonus-mile opportunities and day passes for frequent-flier lounges are among the options that carriers could increasingly try to sell to customers on a once-off basis. The airlines are "going to use the cabin for all manner of merchandising," predicts Mitchell of the Business Travel Coalition. "There's all kinds of opportunities. You have a captive audience."

PWYW: A New Pricing Model

2009-02-19T08:03:00.003-05:00

By Steve Haggett
Holden Advisors

A recent pricing study conducted at the University of Frankfurt (Main), Germany, summarized in the current American Marketing Association journal, describes the impact of Pay What You Want pricing.

The Frankfurt team tested PWYM on three offerings: a lunch buffet at a restaurant, a cinema, and hot beverages at a deli. Prices were eliminated from the menu, and customers were asked to pay what they wanted.

Pay What You Want is an extension of the Name Your Price model employed by companies like priceline.com, taking it a step further. Where Priceline finds a match with an unnamed provider offering a flight to a specific city or a hotel somewhere in that city, Pay What You Want allows the customer purchasing a specific product or service to pay anything, including zero.

Risky?

The results of their study identify situations where a PWYW approach is much better than discounting.

Last year we wrote about the band Radiohead experimenting with a PWYW approach with their new album, In Rainbows. In the end, Radiohead made more money from digital downloads of the In Rainbows album than downloads of all other albums combined.

In the German study, the restaurant saw higher volumes during the PWYW test drive revenues up by over 32%, and surprisingly, the average price of hot beverages at the deli increased by over 11%.

What factors make the PWYW approach work?

1. High-fixed costs and low-marginal costs, with available marginal capacity: If additional volume is inexpensive to serve, and you have available capacity (think buffet restaurant, copies of software, or publishing but not technical equipment or professional services), the volume gain increases profitability. If you have fixed capacity or high-marginal costs, you risk replacing a higher-fee customer with a lower one.

2. Ability to communicate the offer: While very high levels of satisfaction can actually increase price, like the deli results, the power of the pricing approach lies in attracting customers otherwise priced out of the market. In the cinema test, the offer was not communicated but simply offered at the gate, and the results were simply lower ticket prices. Had they effectively promoted the offer, an increase in volume at the concession stand probably would have driven higher revenues.

3. Repeat transactions and high levels of satisfaction: Customers are driven by reciprocity and fairness. This approach made the Hare Krishna airport flower campaign successful – individuals were presented with a flower, then asked to reciprocate with any amount of money they chose. Customers want to appear fair and avoid embarrassment. If you offer a satisfactory, high-value solution, all research on PWYW models show that customers will offer a non-zero fee they believe is fair.

At the end of the research, the restaurant decided to continue the PWYW pricing approach and opened another restaurant featuring the same price. If you have an opportunity that fits these very specific criteria, this can be a creative, effective pricing approach.

Downturn hits international travel; flights from USA cut

2009-02-11T08:30:00.007-05:00

By Marilyn Adams, USA TODAY

Promo codes may provide the key to the lowest airfares

2009-01-28T12:19:00.002-05:00

Bill McGee

In June 2008, I asked, " Are airlines saving the best deals for their own websites?" Less than a year later, the answer resonates: more than ever.

The trend among some carriers in recent months has been to drive more consumers to their own branded sites, and the weapon of choice in this war for brand loyalty has been promotion or discount codes, often referred to as promo code fares. They require you to insert a short sequence of letters and/or numbers when booking, and in many cases they're the keys that can unlock the absolute lowest fares.

How do you gain access? There are three main types of promo fares:

• Available online for anyone to use, and promoted at the site and/or through mass e-mail campaigns
• Individually generated deals specifically targeted to registered shoppers via e-mail
• Exclusive promotions advertised only through widget devices, such as Southwest's DING! and American's DealFinder

Recent deals have included JetBlue's 10%-off specials and Southwest's 50% promo code sale. That's right ... half off. In other cases, promo fares signify a specific reduction that can range from $15 to $30 less per ticket, no small amount for a family of four. And in some cases, airlines will allow you to forward your personalized code to a relative or friend.

Hard to find

When it comes to realizing the savings of promo fares, there's a real catch: finding them. They generally will not appear on that travel search site you've bookmarked. One place they will appear, however, is at Airfarewatchdog, a travel search site founded by veteran travel journalist George Hobica.

"We're seeing more and more of these promo fares," says Hobica. "Two years ago, hardly any airlines except Alaska were doing this. In particular, Southwest has been very, very active lately. They've always been very aggressive about driving people to their own website."

Full disclosure here: I've known George for many years and I've written before about his site, both on this site and elsewhere. He's assembled a full-time staff of "airfare analysts" who do it the old-fashioned way—with keyboards and fingers. That may sound decidedly low-tech for 2009, but the fact is the "scraping" technology used by major travel search engines simply can't do it all. In the first place, some airlines—such as Southwest—don't make their fares available for booking through third-party sites. Plus, promo code fares are expressly designed NOT to be found on outside sites. The whole idea is for the airline to entice you to its own branded site, where you punch in a few numbers and/or letters to find a deal you won't find elsewhere.

Ferreting out promo fares can take a little extra work, or it can involve signing up for alert systems and watching your inbox fill up. However, it's becoming increasingly apparent that it's riskier than ever to book an airfare without checking that airline's own branded site first.

Widgets, DINGs, and downloadables

Among the major domestic carriers, most of the technological innovations in the promo fare field have come from the two Dallas-based airlines. Both Southwest and American have developed techie gadgets designed to alert you to special deals.

Southwest actually offers two separate airfare notification systems:

• Click 'n Save Special Offers E-mail. This product delivers "super specials" directly to your inbox, and provides Web-only discounts from Southwest, as well as travel deals from hotel, cruise and car rental partners.

• DING! Desktop Application. This tool can be downloaded onto your desktop for free, and alerts you—DING!—when "deeply discounted pricing" becomes available for the destinations you've customized (up to 10 airports). These fares are exclusive.

Further details about both systems are available at southwest.com.

Two years after the introduction of DING! in 2005, Southwest reported two million customers had downloaded the widget, which produced more than $150 million in sales. But not everyone can partake, since currently DING! runs only on select versions of Windows and Mac OS and is not available on Linux systems. And the downside to downloadables is that some users report that widgets reduce the speed of their operating systems.

As for American, its DealFinder product is a downloadable desktop tool that allows the airline to send you its RSS feeds with fare sales and special offers. You can pre-select your specific preferences, such as destinations, travel dates and how much you're willing to spend, and DealFinder will continue searching and notify you if something becomes available.

But an associate who signed up for DealFinder back when it was launched in 2007 reports she hasn't received any fare updates lately. I asked American about this, and spokeswoman Marcy Letourneau responded: "Because the fares, as you know, are targeted, it's possible that while you may be seeing fewer fares, someone else (who has different preferences, thus receives different targeted fares than you) may be seeing just as many or more. It really depends on the markets, routes, where you live, etc."

DealFinder is available only for Windows users. American says it's working hard to enable Mac users to access the tool "as soon as possible," but the airline can't pinpoint a specific date at this time.

By the way, if you're wondering why some airlines don't just do away with gizmos and e-mails and broadcast their promo fares to the world, it likely has much to do with identifying customer preferences and maintaining corporate databases. As Hobica points out, "Promo codes test the efficacy of their marketing efforts."

Traffic patterns

For the airlines, it's all about driving online traffic back to their own sites. In the past, they often did this by offering bonus frequent flier mileage, but now it's usually done with lower fares. Consider the following branded site bargains found on the Web over the last several weeks:

• Alaska's Winter Clearance Sale featured online one-way fares from Seattle for $59 to San Francisco, $69 to Los Angeles, and $109 to Palm Springs.

• During the holidays, Air Canada offered 15% off fares in all classes for flights within Canada, as well as to the U.S. and international and sun destinations.

You will see major carriers offering promotional fares at times. But the list of airlines featuring promo codes is dominated by domestic low-cost carriers, such as AirTran, Allegiant, JetBlue, Spirit, USA3000 and Virgin America. In addition, low-fare airlines from other countries, such as Canada's WestJet, have employed such marketing tools. This isn't surprising, since one of the ways low-cost carriers stay low-cost is to reduce their distribution expenses. And that means not paying commissions to both online and offline travel agencies, not paying fees to third-party booking sites and trying to reduce the expense of maintaining reservations centers.

The bottom line is that the absolute cheapest way for a given airline to sell a seat is through its own website, and that's exactly what some carriers are focusing on now. Take Frontier Airlines, for example. It regularly offers Online Deals as well as E-mail Alerts at its site. United also offers E-Fares, with e-mail notifications of discounted last-minute getaways published every Tuesday at 12:01 a.m.

In addition, Air Canada offers webSaver e-mail deals on its U.S. site. The Canadian flag carrier posts a variety of Web-only fares as well; last week the webSaver Daily Deals "hot offers" included round-trip fares of $198 from Seattle to Edmonton and $210 from New York to Calgary. Other special offers included $166 round-trip fares from Philadelphia to three different destinations: Montreal, Ottawa, or Toronto.

Then there are airlines—both domestic and foreign—that simply offer exclusive fares on their own branded sites, without any codes or widgets or secret handshakes. In recent months, Aer Lingus, Air China, and Singapore Airlines have all offered such Web-only deals. "They're not promo codes," explains Hobica. "But it's the same marketing strategy, to drive people to their own sites."

Can rooting out these bargains lengthen your online shopping process a little? Yes. And in some cases there may be a caveat, such as using a specific charge card to book. But the savings can make it worth the trouble.

What lies ahead?

As for consumers, it still makes a lot of sense to comparison-shop and benchmark airfares on travel search sites and travel agency sites. But the reasons against booking through third-party sites keep accumulating. In addition to price, airline branded sites also can offer these advantages:

• not charging booking fees in most cases
• providing additional flight frequencies on a given route
• providing additional seats on a given flight
• providing better itineraries, including more nonstop flights

So what do such trends mean for large travel agency sites such as Expedia, Orbitz, and Travelocity? "I would be threatened if I were them," says Hobica. "Look, the airlines cut out the brick-and-mortar agencies [through commission cutting] and now it looks like they're doing it to the online travel agencies." He sums it up this way: "If the trend continues, the growth in the OTA [online travel agency] market will continue to decline."

On the other hand, airline distribution dynamics and economics are different this time around, and many airlines maintain extensive marketing and sales agreements with travel agency sites, so don't write off the Big Three of Expedia, Orbitz, and Travelocity just yet. But third-party sites will need to find new and compelling reasons for consumers to continue to book through them, not just shop on them.

Bill McGee, a contributing editor to Consumer Reports and the former editor of Consumer Reports Travel Letter, is an FAA-licensed aircraft dispatcher who worked in airline operations and management for several years. Tell him what you think of his latest column by sending him an e-mail at USATODAY.com at travel@usatoday. Include your name, hometown and daytime phone number, and he may use your feedback in a future column.

A La Carte Pricing

2009-01-09T15:01:00.000-05:00

More Leg Room, Better Food, But Still Coach

2008-11-18T08:03:00.002-05:00

Wall Street Journal, November 18, 2008
By SCOTT MCCARTNEY

When the travel purse strings tighten, there is still a way to buy some comfort on long international flights even when your company, or your own bank account, won't cover thousands of dollars for business class.

"Premium economy" is seeing a recession resurgence.

Fliers in Virgin's 'premium economy' class have wider seats, a separate check-in area and upgraded food.

A dozen international airlines flying to the U.S., including British Airways PLC, Virgin Atlantic Airways Ltd., All Nippon Airways Co. and Scandinavian Airlines System, now offer extra legroom, wider seats and seats that recline lower in premium economy cabins for a few hundred dollars more than coach tickets.

It's about the same space you get in domestic U.S. first-class cabins. Some carriers even include perks like early boarding, access to faster airport security lines, better meals, amenity kits with tooth brushes and sleep shades, and power outlets at seats. Earlier this year, Qantas Airways Ltd. launched premium economy and Japan Airlines Corp. expanded its premium-economy cabin to New York and San Francisco flights, with Chicago and Los Angeles planned next year. Air France-KLM SA will add it to Air France fleet-wide next year.

The biggest holdouts from the trend: U.S. airlines.

Carriers say interest has grown in the "premium economy" idea because of the economic downturn. With companies under pressure to cut travel costs, more business travelers are finding employers are no longer willing to pay $10,000 or more for a business-class seat. Airlines say despite the economic downturn, sales of premium-economy seats have been strong.

"It's our most profitable product," said Chris Rossi, Virgin Atlantic's senior vice president for North America.

Premium economy was born amid recession in 1992 when Virgin wanted to create something for business travelers no longer able to buy seats in its "Upper Class" business-cabin. This time around, Mr. Rossi says, many companies are purchasing more premium-economy seats, but mixing cabins so that travelers get "Upper Class" lie-flat beds on overnight flights to London from the U.S., then ride home on daylight flights in premium economy.

Travelers say that because there is such a huge difference in comfort -- and price -- between a business-class bed and a 17-inch-wide coach seat with little legroom they would gladly pay for something in-between.

"There's definitely more room than coach, which I enjoy," said Richard Stelluti, director of corporate compliance for a Dallas company who recently returned from a European business trip in British Airways' premium-economy cabin. His company won't pay for business class so, "If I have to fly long trips, this is fine. I think it's pretty good," he said.

Barbara Farish took her granddaughter shopping in New York recently, paying Virgin Atlantic about £300 ($444) British pounds more to fly in premium economy than in coach. It was the third time she paid extra for the extra space, even though she's retired on a limited income.
"I would not wish to travel in coach because of the lack of legroom," she said.

Premium-economy tickets can be anywhere from $100 to $800 more than a coach seat, but still thousands of dollars lower than business class, which offers far more space and, on many carriers, a lie-flat bed highly prized for long overnight trips.

Virgin Atlantic currently has premium-economy seats on sale as low as $854 round-trip, including taxes and fuel surcharges, between New York and London, and $840 between Boston and London. Coach seats are as low as $431 round-trip. Last-minute travelers may see a smaller difference: Unrestricted coach tickets on British Airways between New York and London are priced only $62 less than unrestricted premium-economy seats, which British Airways labels "World Traveller Plus."

How much extra space you get does vary by airline. Virgin's premium-economy seats are 21 inches wide; British Airways' only 18.5 inches; and Japan Airlines' only 18 inches. Most airlines put premium-economy seats in 38 inches of space length-wise (called "seat pitch"), compared with 31 or 32 inches in coach cabins. "Open Skies," the British Airways unit that flies from New York to Paris and Amsterdam, offers 52 inches of seat pitch in its premium-economy cabin.

By comparison, AMR Corp.'s American has first-class seats in its MD-80 aircraft that are 19.5 inches wide and have 39 inches of seat pitch; 737s at Continental Airlines Inc. and Delta Air Lines Inc. have 38 inches of seat pitch in first class and seats about 20.5 inches wide.

British Airways serves regular meals in its premium-economy cabin and boards premium-economy passengers with coach customers. Virgin offers a separate check-in area for premium-economy passengers, boards them along with business-class customers and offers food service that is upgraded from coach, but is nowhere near as elaborate as its "Upper Class" business cabin. Both airlines have separate toilets reserved for premium-economy customers, but on recent flights coach customers were using them, too.

Air France says its premium-economy cabin, which will start flying in October or November next year, will include a seat that pivots on the bottom like a movie-theater seat so that the person in front of you doesn't recline into your lap. Two rows of premium-economy seats will take up the same space as three rows of economy seats, and on wide-body jets with nine seats across each row in coach, premium economy will have eight seats across.

"We will have a product comparable to business class on airlines 10 years ago," said Patrick Roux, senior vice president of marketing for Air France-KLM in Paris. Fares will be 15% to 25% higher than full-fare coach prices today.

The closest any U.S. airline comes to premium economy is United's "Economy Plus" seats -- regular coach seats with up to five inches of extra legroom. Elite-level frequent fliers can snag Economy Plus seats free; other travelers can pay $14 to $149 extra one-way for the room.

All of the major U.S. airlines flying across oceans didn't have much to say about premium economy. A spokesman for American, for example, said his airline is "monitoring the competitive landscape" but "there is nothing imminent." Delta says it has "reviewed this concept" but is focused on improving basic coach.

Singapore Airlines To Offer Preferred Seat Selection

2008-11-06T13:34:00.000-05:00

3 November 2008

Singapore Airlines customers making Economy Class bookings on singaporeair.com now have the additional choice of guaranteeing themselves a Preferred Seat, with the introduction of Preferred Seat Selection. Currently, Preferred Seats available for allocation are located in exit rows.

Customers will be offered an option to purchase a specific Preferred Seat, when they make their seat selection for applicable Economy Class bookings – including KrisFlyer redemption bookings – on singaporeair.com.

Customers can also purchase a Preferred Seat anytime before check-in (which begins 48 hours before flight departure), simply by retrieving their bookings on singaporeair.com.

Preferred Seats offer customers more legroom, and are now available for advance and guaranteed customer selection, for a fee of USD 50 per sector, for all Singapore Airlines flights, except short-haul routes within Southeast Asia, and flights served by Boeing B777-200ER aircraft (this aircraft does not have seats located in exit rows). Preferred Seat Selection is subject to official approval in some markets, and some local variations may apply where regulatory approvals dictate.

Other categories of Preferred Seats, that similarly offer customers more legroom, may also be made available for selection in future.

Previously, Preferred Seats were only available on a request basis, without confirmation. The new option now offers a guarantee of assignment, subject to terms and conditions, on a first come, first serve basis.

Study finds videoconferences distort decisions

2008-11-03T16:06:00.001-05:00

31/10/2008 6:44:00 AM
THE ASSOCIATED PRESS NEW YORK -

Videoconferencing is often heralded as the next best thing to being somewhere - a cheaper, simpler alternative to travelling in person to attend a meeting. Yet a small study raises questions about whether videoconferencing distorts interactions in a subtle but important way.

The study found that doctors and nurses who attended seminars via videoconference were more likely to be influenced by the charisma of the presenter. In contrast, people who were face-to-face with the presenter were more likely to base their judgment of the presentation on the arguments that were used, the researchers said.

Carlos Ferran at Pennsylvania State University and Stephanie Watts at Boston University quizzed 44 medical professionals who took part in early morning medical seminars via business-quality video links, and 99 peers who were in the room with the presenters. The subjects were asked about how likely they would be to refer a patient to the speaker at the seminar, and how likable they felt he or she was, among other things.

In their study published in the September issue of the journal Management Science, the researchers hypothesize that a videoconference is mentally more challenging than a face-to-face meeting. That leaves less brainpower left over to process the content of the presentation. Cues we use in conversation, such as looking at people's gazes to figure out to whom they are talking, are harder to follow in a videoconference.

The videoconference participants were more likely to report that it was hard to follow what the speaker was saying, and reported higher levels of stress during the seminars.

The researchers noted that previous studies in the field have shown mixed results for videoconferencing compared to face-to-face meetings.

Peter Svensson, AP Technology Writer.

American Airlines considers a la carte pricing

2008-10-06T12:54:00.002-04:00

Sunday October 5, 3:43 pm ET
By David Koenig, AP Business Writer

Facing opposition to fees, American Airlines considers a la carte pricing for services

FORT WORTH, Texas (AP) -- The idea of paying a single, simple fare to fly on an airliner is becoming as quaint as stewardesses in short skirts.

American Airlines is about to accelerate the trend of breaking the cost of a trip into an airfare plus many smaller fees.

Starting next year, American, which led a stampede by U.S. carriers to charge customers for checking even a single suitcase, plans to imitate the a la carte pricing structure pioneered by Air Canada, airline officials say. There are likely to be a few basic fare plans, and travelers can pick additional services -- for a fee.

Fans of "unbundling," as it's called, say it gives travelers lower base fares with the option of paying for extras that they really want, from beverages to blankets.

Some travelers are wary, however, and suspect the airlines are just trying to chisel them a few bucks at a time.

Phone and cable companies have been using this pricing approach for years to offer extras like premium channels and pay-per-view events. Now airlines see unbundling as a way to boost revenue and defray sky-high prices for jet fuel. In recent months they have added and enlarged charges for fuel, checked baggage, changing flights, upgrading from coach and other services.

There may be no going back to all-inclusive fares, even with the recent decline in fuel prices.

"We as an industry have opted to not just raise (ticket) prices but to raise prices and change the fee structure," said Daniel Garton, American Airlines' executive vice president of marketing. Without fees to offset rising costs, "you're not going to be talking about fees -- you're going to be talking about lost service ... being able to have a flight to San Diego," he said.

UAL Corp.'s United Airlines expects to raise $700 million a year from fees. Northwest Airlines Corp. estimates baggage charges will bring in $150 million to $200 million a year. Continental Airlines Inc. predicts it will generate more than $100 million just from a new $15 fee for checking a single bag -- that doesn't include levies on additional bags.

Airlines have grown more sophisticated at wringing every last dollar out of a flight, partly by lowering and raising fares based on supply and demand. Much of this magic, called "yield management," is invisible to passengers, but it results in people in the same cabin paying wildly different amounts for the same flight.

Executives at Air Canada, which revamped its fare structure and began unbundling five years ago, look down their noses a bit at the actions of their U.S. counterparts, saying a la carte pricing should be about transparency and customer choice, not simply revenue.

Air Canada went through bankruptcy earlier this decade, and when it emerged in 2004 it was losing customers to low-cost rival WestJet Airlines Ltd. Air Canada fought back by creating a bare-bones service to compete with WestJet fares, with extra amenities for picking a fancier plan.

"We did this in the environment of Air Canada losing market share," said Ben Smith, executive vice president at Air Canada. "It was about gaining the confidence back from our customers and offering products we thought they wanted."

On Air Canada's Web site, travelers pick from four fare levels. The top tickets, called Latitude and Executive Class, are fully refundable and come with priority check-in, food and other goodies included.

The cheapest fare, called Tango, requires extra fees for upgrades such as a food voucher, advance seat selection, flight changes and airport lounge access. Tango passengers can save another $3 by declining frequent-flier miles or not checking a bag.

"Consumers don't understand airline pricing, and they certainly don't understand yield management," said Peter Belobaba, an expert on airline pricing at MIT. "Air Canada is saying, 'We're practicing all those pricing strategies, but at least we're laying it out for you.'"

Smith said simplified fares have helped Air Canada stabilize its domestic market share -- which it needs to feed its profitable international routes -- and increase revenue. Half of Air Canada's passengers pick an option higher than the basic Tango plan, he said.

Air Canada passengers give the airline credit for making fares understandable -- "It's nice to know where I could save money," said Amanda Kruzich, a cosmetics company marketing rep who recently flew on Air Canada from Toronto to Dallas.

Still, Kruzich said she would rather have an all-inclusive fare.

"I feel nickel-and-dimed when I have to pay extra for everything," she said. "Just throw it all in and tell me what the fare is."

Matt Kokidko, who works for a car-rental company in Orlando, Fla., and recently flew to Dallas on American, agreed.

"We're not saving enough on the fares to justify that," Kokidko said of the extra fees charged by American. He had not flown in a while and was stunned that American charged for use of a headset.

Scott Cowley of Dallas, a frequent flier in his job as sales representative for an aerospace parts manufacturer, said he does not want to take time to go through a menu of optional, for-a-fee services.

"It's hard enough to find the flight I want at the time I want," he said.

But experts say travelers should expect fees to become permanent.

George Hobica, founder of airfarewatchdog.com, a discount-travel Web site, expects airlines to start charging extra for carry-on bags, booking a flight online, and picking a seat assignment.
"The fees are here to stay, and there will be more of them," he said. "Honestly, I think it's better for consumers. If I pack light, why should I pay for the guy who packs heavy?"

According to a recent survey of airline executives by consultant IdeaWorks, fees that will spread the fastest will be for Internet, e-mail and mobile phone service during flights and for special seating, such as in exit rows.

Southwest Airlines Co. avoids most of the fees charged by rivals, and brags about that in television ads. Senior vice president of marketing Dave Ridley said the money other carriers make from fees might be offset by passengers booking their next flight on Southwest.

But Southwest will soon survey consumers about charges, and Ridley wouldn't rule out fees in the future.

There are still a few technology speed bumps in the way of true a la carte pricing.

Airlines still sell a large chunk of their tickets through global distribution systems, or GDSs, which were built to display simpler fare structures to travel agents and "have been very slow" to change how they display fares, said Smith of Air Canada.

The largest GDS, Sabre, says it has solved those problems.

Where will airlines draw the line on new fees?

Hobica thinks charging passengers by weight makes perfect sense because they cause the plane to burn more fuel. But he admits a poundage penalty might be hard to sell, and so would charging for oxygen masks.

"I can't see them announcing, 'Put in another quarter for the next three minutes,'" he said.

JetBlue's eBay auction scores a big hit with buyers

2008-10-01T10:43:00.001-04:00

Tuesday September 30, 2008

News from Travel Technology Update: Getting people to put "awesome" and "airline" into the same sentence these days is no easy feat. But JetBlue Airways managed it with its recent auction of flights and vacation packages on eBay.

The idea came about when the carrier was thinking of ways to stimulate travel during the fall lull. "We were looking for something unique to get people thinking about travel," Don Uselmann, manager of business development, said. "We wanted a 'water cooler' story, something that people would talk about."

JetBlue decided to auction off 218 flight packages--roundtrips for one or two people to specific destinations on specific dates--and six vacation products for weekend trips in September and early October.

A couple of the vacation packages were billed as "mystery trips." "We didn't disclose the final destination, but we did provide flight days and times, so there were ways to figure it out," Uselmann said.

JetBlue had no idea what to expect from the experiment. "We didn't really have any way to benchmark it," Uselmann said. "A lot of effort went into getting everything set up, like the look and feel of the store page and the legal loose ends," he said. But once everything was up and running, the auctions proceeded very smoothly.

The minimum bids were set at 5 cents for a flight package and 10 cents for a vacation package. "We figured that since people are getting nickel-and-dimed so much these days, we decided to nickel-and-dime them in a good way," Uselmann said.

Each auction lasted for three, five or seven days, with no reserve. The winning bids varied greatly, depending on the destination. On average, "the flights sold at a 40% discount, so it was a good deal," Uselmann said.

A small burst of effort was required at the end of the auctions as well, he said. JetBlue's systems are not linked to eBay, so "fulfillment was a bit manual," he said. Each set of flights and packages had to be booked and issued by JetBlue staff.

The results of the auction could not have been more gratifying. Feedback was provided by 16 winning bidders, and the most frequently repeated word was "great."

"I was very excited to win this JetBlue ticket at such a great price," wrote a buyer who paid $192.50 for a Chicago-New York roundtrip. "Fantastic flight," posted the buyer of a Boston-Charlotte roundtrip for $129.50. "Couldn't be happier--great experience! Highly recommend!" crowed the purchaser of a Chicago-New York roundtrip for $242.50. "Awesome experience!! Keep these oppt's coming!! Thank you!" added the buyer of two Boston-Long Beach tickets for $511.03.

In some cases, it was hard to tell whether the praise was being lavished on the prize or on the auction itself. "There's something about trying to win something," Uselmann said. "It's fun."

JetBlue isn't sure it will do another eBay auction. "We saw it as a one-time thing and were happy to give it a short tryout," Uselmann said.

Whether it was the flights or the fun of the auction, JetBlue earned a 100% positive rating as an eBay seller. And the experience was positive for the airline as well.

"The news has just been so negative lately, and airlines' hands are tied--they're at the mercy of a lot of external factors," Uselmann said. "But we got people talking about JetBlue in the off season."

In a good way.

ATW Daily News

Airline -- High Speed Train Cooperation

2008-07-16T12:52:00.000-04:00

Source: Reuters

Air France KLM is in preliminary talks with state rail company SNCF about high-speed train cooperation even before the liberalization of rail travel by 2010. Air France last week confirmed its interest in high-speed train travel and said it was in talks with Veolia Transport, which does not currently have a high-speed train service. High-speed rail links have already taken traffic from short distance air links. With existing or upcoming high-speed rail links between Paris, Amsterdam or Frankfurt, airlines could transport long-distance air travellers to their hubs -- boosting the load factor and cutting costs.

2008-07-03T09:38:00.001-04:00

US: High fuel costs are squeezing low air fares

2008-06-23T09:32:00.001-04:00

Source : NY Times, June 20, 2008

The low-fare airlines aren't so low anymore. Jet fuel costs -- up more than 80% over last year -- are forcing the airlines to sharply raise some fares, and reinvent themselves to appeal to not just bargain hunters, but also the briefcase crowd that generally pays more for last-minute tickets.

"The arithmetic doesn't work if we transport five people across the country at US$99 each way," says a Southwest executive. Budget carriers still offer deals for passengers who book trips well in advance, travel off-season and at less popular times. But in general, bargains are getting harder to find, as low-fare carriers join the bigger airlines in raising fares, which are up about 18% industrywide this year. About half a dozen smaller carriers, including Frontier, have also gone out of business or entered bankruptcy this year, in part because of high fuel costs.

Take a look at these fees!!

2008-06-13T15:42:00.002-04:00

(Click on picture to enlarge)

In Tough Times – Price Transparency is Key

2008-05-30T08:33:00.001-04:00

Commentary by Mark Burton

From "Fuel costs will lessen demand, Air Canada says," The Globe and Mail, May 22, 2008

While American Airlines was making headlines through its “creative” means for dealing with higher fuel costs, Air Canada and its local competitors WestJet and Porter Airlines were trying something truly revolutionary: telling their customers the truth. All three Canadian airlines are dealing with the same escalating fuel prices that American is, but they have chosen a very different path. Rather than taking away basic services that have always been offered for free, they are adding a separate fuel surcharge onto their tickets.

The smart money is that Air Canada and the gang will have a much easier time of it than American for a couple of reasons. First is the issue of fairness. The skyrocketing cost of oil is in the news every day. Consumers are aware of it and are more likely to be accepting of a price increase that is driven by the costs of a key input that they understand. In addition, by calling out the fuel surcharge separately, the Canadian airlines are making the oil industry the bad guys in their approach–a perception that is already widely held. In contrast, American is giving customers the impression that service will suffer (now I’ve always had to carry my bag on–and those already crowded overhead bins just became more valuable than beachfront real estate on Maui) and thus damaging their own brand, rather than fobbing the problem off onto already unpopular suppliers.

The second reason is that the competitors in Canada are more disciplined. When Air Canada first rolled out their surcharge, they hid it in the fine print–and subsequently got whacked by full-page newspaper ads from WestJet, pointing how they don’t hide anything from their customers. This public shaming of Air Canada reminded all players of their common cause and has led to a consistent pricing approach. If only American Airlines were as smart as our friends north of the border.

Profits are More Important Than Revenue in a Downturn

2008-05-30T08:31:00.000-04:00

By Dr. Reed Holden

Yikes, another discussion of pricing in a downturn. Sorry, but I just finished an interview with Fast Company magazine,and the discussion point was how to get more for less. The writer’s initial thought was to figure out how to get more lean in a downturn by cutting costs and driving more efficiency at the same time. The problem is that cost cutting and efficiency can only go so far–you run out of fat to cut and you can only get so efficient.

We ended up talking about how most managers use price to solve revenue problems in a downturn. That's the real problem–when business slows, managers offer more discounts to hit revenue targets when they should be lowering the revenue targets first, since that move saves profits. It's unfortunate that we couldn't have spent more on that subject–how to get more profits using fewer discounts.

One of the keys to success in a downturn is to stop chasing unrealistic revenue goals with price discounts. The revenue you thought you were going to get just isn't there any more. As we've discussed probably too many times before, chasing declining revenue with price discounts just makes the problem worse–you end up with less revenue and no profit. Smart pricers look for ways to eliminate discounts, especially on high value products and services--even in a downturn!

Let's look at two examples from our local paper, The Boston Globe. On April 25, they reported that Ford "Surprises with 1st-quarter profit of $100M." Remember, we talked about Ford in December? About how they had cut sales expectations and shut down capacity. Now we see that they're one of the few auto makers that made a profit. Also, the Globe reported that "Demand (is) down at Thermo Fisher." The real news of that header is that first quarter profits "rose sharply." That should have been the headline! Unfortunately, the press hasn't figured this out yet.

Experts say airlines close to failure due to fuel costs

2008-05-27T13:42:00.001-04:00

By Thomas Olson
TRIBUNE-REVIEW
Monday, May 26, 2008

The airline industry is reaching a precarious tipping point, experts say. Airlines are losing mountains of money because jet fuel costs have soared so high.

"Fares are going up. Families are not going to be able to go to Disney World or Vail on a whim anymore," said Kevin Mitchell, chairman of the Business Travel Coalition, a business advocacy group in Radnor. "The cheap tickets are just not going to be there."

Airlines and their passengers won't have new flights to China, either.

After months of clamoring for government approval, US Airways and United and Northwest airlines got the green light in September for nonstop flights to Beijing in 2009, months after the Summer Olympics there in August.

But in recent days, they got cold feet. Why? The fuel cost for a flight to China is so high that airlines don't think enough passengers would be willing to pay the fares to cover it.

"Every one of those airlines has postponed those launches until 2010," said Robert Mann Jr., an airline consultant based on Long Island, N.Y.

The increase in jet fuel prices is outrunning what the airlines are getting from higher fares, said Philip Baggaley, airline analyst for Standard & Poor's, New York.

Baggaley warned that if fuel prices don't abate, more major airlines could file for bankruptcy next year. On his watch list are US Airways and Airtran, which have the weakest credit ratings.

"I've followed this through the 1990s and through 9/11, and I've never seen the industry this bleak," Mitchell said. "With fuel costs like this, major carriers will be out of cash next year."

Soaring crude oil costs have sent jet fuel prices up 54 percent this year over 2007, the U.S. Department of Energy estimated. The largest 10 airlines are expected to pay nearly $17 billion more for fuel than last year, when their tab was $30 billion.

US Airways said the $4-a-barrel increase in crude oil May 21 translates into $150 million more a year in its jet fuel costs.

"The dilemma is they'd have to increase prices dramatically to get to where they'd be sufficiently profitable," Mann said. "That same customer will be stuck heating their home with $5-a-gallon heating oil and filling their car with $4- or $5-a-gallon gasoline. So they won't have any discretionary income to spend on air travel."

Fares have been increasing for months and won't stop rising any time soon, experts said.

Tickets for departures during the next 90 days cost an average of 20 percent more than a year ago, said John Rauser, who analyzes fare data for Farecast.live.com, Seattle.

From Pittsburgh, the cheapest US Airways flight to Los Angeles for July departure is $358 round-trip. That compares with $198 a year ago, said Tom Parsons, chief executive of Bestfares.com, a bargain fare clearinghouse in Arlington, Texas.

Carriers have imposed a host of new or higher fees. For instance, American Airlines on June 15 will start charging $15 for checking a bag, and other carriers might follow suit.

"If you check a bag, it costs you money. If you pack an extra bag, it costs you money. If you check it at the curb, it costs you money," said Parsons. "They are nickel-and-diming you to death."

US Airways announced Thursday that it's dropping complimentary snacks from coach class on domestic flights to save cash.

Carriers are removing weight from aircraft to conserve fuel, Mann said. For example, those in-flight telephones that have been nice customer perks are viewed as paper-weights to be jettisoned.

Some airlines have cut the amount of potable water they carry for drinking or coffee to 60 gallons from the usual 120 gallons. "You save 500 pounds right there," the analyst said.

"The days of popularly priced air travel may be coming to an end," Mann said. "It's going to go back to air travel of the 1960s and 1970s, when it was more for the well-to-do."

Skybus, Ya Think?

2008-04-18T16:05:00.003-04:00

Commentary by Steve Haggett

From "Skybus Ends Service, Third Airline to Fold This Week," By Nancy Kercheval, Bloomberg, April 5, 2008

Skybus Airlines shut down its engines this week, the third US air carrier to bail out in a week.

Skybus, a discount airline, was famous for offering $10 fares on flights to California, New York, Florida, and other destinations. “Nobody has a long-term viable business plan that can be sustained at these jet-fuel prices,” said Darryl Jenkins, an airline consultant. “What do you do in a situation like that?”

Charge more than $10 for a trip from New England to Florida?

The Skybus reservation page now states: Skybus struggled to overcome the combination of rising jet fuel costs and a slowing economic environment. These two issues proved to be insurmountable for a new carrier.

But what is being mourned as a cost problem is wrapped up in a pricing problem. Who decided to set prices in competition with highway tolls, or the cost of a single movie ticket, or even the cost of sending an envelope to the same destination? When we read that US Airways has found problems on Boeing 757’s because “a wing part on one of its planes fell off during a flight” recently, those $10 fares start to sound like discount seafood. There is a discount price level below which a customer is forced to question basic safety. Would you respond to a new clinic at the strip mall offering $10 laser eye surgery or $10 brake replacements? There’s no way you’re getting me on the land bus from Boston to New York at $10, let alone the sky bus.

Customers understand rising fuel costs and have no expectation that an airline ticket across the country should cost significantly less than filling a gas tank. Fuel prices may have quickened its demise, but by choosing unrealistic reference prices, Skybus drove itself to the breakdown lane.

The Value of Kicking the Discounting Habit

2008-04-18T16:01:00.000-04:00

By Reed Holden

In the 1980's McKinsey did a study that showed if a firm was going to focus on improving something, the area with the highest return was pricing. By improving pricing by 1%, they said, firms could see an 11% improvement in the net profits of the firm. This was a lot more than anything else the company could do. This was a terrific piece of research at the time. There are three problems today with the work. First, that was 20 years ago and a lot has changed. Certainly McKinsey has moved way beyond this conclusion. Second, every pricing consultant quotes this work as a justification for getting hired.

Finally, companies that pay attention to the conclusion are led to believe that all they have to do is raise prices to improve their performance. Here's what happens when they do that–some customers don't pay the increase. In fact, they often negotiate for lower prices. If the company tried to increase prices by 10%, they are happy when they get an average increase of 5%. Then they do it again the following year and again the following year. What they ignore is that some customers accept the increase and others don't. The ones that do end up paying prices that are sometimes over 100% higher than those that figured out how to negotiate for lower prices. Over time, more and more loyal customers figure this out and start asking for the same discounts.

That's why the first rule in Pricing with Confidence is to Kick the Discounting Habit. Rather than trying to raise prices to customers who won't pay for the increase, begin to look at the customers who are getting discounts that shouldn't. Put a line in the sand and stop giving them discounts. If you focus on this, we've found that returns to the bottom line exceed 20%. When I say exceed, I mean exceed–we've seen returns of 100%.

So if you want to fix your pricing, fix your discounting first. Yes, software can help to identify which customers get discounts but simple plots can do the same thing. By flexing your capabilities of saying "NO" to discounts, you begin to build your discipline around price execution. If you can't do this, all the software and strategy in the world isn't going to help. If you can, the payback is INCREDIBLE.

Lufthansa to strengthen independent hub model

2008-04-18T06:48:00.000-04:00

Lufthansa will strengthen the independent hub system it initiated in October 2006 at Frankfurt and Munich, where it installed managers responsible for their own fleet, employees and operations (ATWOnline, Oct. 16, 2006). "We realized economical and operating synergies [at FRA and MUC]. For example, since we split the fleet at each hub, aircraft efficiency has increased by 5%," Executive VP Karl Ulrich Garnadt told ATWOnline. "We found out that splitting LH into smaller, separate operational units made sense," he said, and the company is examining how to expand on this potential. It already has planned to build a new cabin crew center at MUC and a flight simulator center could follow. "We will have 1,000 pilots based in Munich. It is logical to also expand the training facilities," he said. If LH's expansion at Dusseldorf is successful, it is possible a hub manager could be installed there as well.

In the short term, the Munich manager is responsible for 24 long-haul and approximately 100 narrowbody aircraft. "By introducing the A380, more big planes like the A340-600 could transfer to MUC," Garnadt said. But MUC is running out of capacity and LH is in talks with airport operator FMG to expand its terminal facilities. "We would need the [upgraded] facility in 2010, but it may not be available until 2012," he said. LH handled 18.2 million passengers at the airport last year and is expecting annual growth of 7%.

Air Canada selects iSeatz to power first-ever assistance service for customers affected by travel disruptions

2008-04-10T07:04:00.004-04:00

Customized 'On My Way' offering exclusively supported by iSeatz to extend Air Canada's customer service offering and to enhance the overall travel experience

NEW ORLEANS, April 9, 2008 /PRNewswire/ -- iSeatz, a provider of highly customized travel and entertainment solutions, today announced that that its custom-designed solution powers Air Canada's new service, "On My Way," which sets an industry-first. Never before has an airline offered a comprehensive travel assistance service for customers affected by flight delays or travel disruptions that are beyond the control of airlines, from adverse weather conditions to airport or air traffic delays. By leveraging iSeatz' flexible booking engine, newly deployed Guest-Agent-Solution(R), extensive network of sourced suppliers and 'always-on' customer service, Air Canada is uniquely positioned to enhance its customer service offering and provide a more streamlined and worry-free travel experience.

The "On My Way" travel assistance service goes above and beyond standard industry practice. Customers whose travel plans have been disrupted will benefit from 24/7 rapid phone access to dedicated Air Canada customer service agents who are equipped to provide a range of travel and accommodation solutions. Air Canada call centre agents will find alternate flights on Air Canada or other airlines and if needed, the airline will provide complimentary hotel accommodations, ground transportation and meals. "On My Way" ensures that delayed or stranded travelers will have access to a comprehensive 'care package' -- an innovation that puts control back in the hands of the consumer.

"iSeatz worked closely with Air Canada to build a one-of-a-kind, robust solution that meets Air Canada's business requirements and its customers' extensive travel needs, resulting in a ground-breaking offering that leverages technology to bring customer relationship management to the next level," said Kenneth Purcell, Founder and CEO of iSeatz. "We are proud to serve as Air Canada's solution provider of choice in support of this exciting initiative and we are confident that 'On My Way' will amplify customers' brand devotion for the airline, resulting in increased traveler satisfaction, ticket sales and revenue."

An optional offering, "On My Way" costs just $25 for short-haul flights or $35 for long haul flights each way ($CAD or $USD). Air Canada has added this new service to its existing selection of branded a-la-carte options that enable customers to personalize their travel experience. "On My Way" is available for all Air Canada and Jazz-operated flights within Canada, as well as flights to and from the United States, including Hawaii and Alaska.

This new service leverages iSeatz' broad inventory set that provides immediate access to more than 60,000 hotel properties, the major car rental agencies and 3,000 destination services products, as well as a proprietary inventory. With a thriving network of Marketing Partners, iSeatz provides Air Canada with access to a wide range of travel and accommodation options.
iSeatz offers a highly customized travel and entertainment solution, comprised of a flexible booking engine and extensive network of sourced suppliers, that it individually designs and deploys for each of its clients. The Company's solutions serve as the seamless bridge between its clients and its network of Marketing Partners and are relevant for any industry-leading company seeking to further differentiate their loyalty programs, generate ancillary revenue and power brand devotion, Based in New Orleans, Louisiana, and with offices in New York City, iSeatz' serves a range of top-tier clients including Delta Air Lines, Priceline.com, Southwest Airlines, MasterCard, Citigroup, Orbitz and Travelocity.com.

Further details about "On My Way" are available at
http://www.aircanada.com/onmyway.

WestJet Introduces Sleeper Cabins

2008-04-01T09:41:00.004-04:00

Apr 01, 2008 04:00 ET

Airline is first to provide new service without need for cabin upgrades

WestJet guest snuggles in "new" sleeper cabin.

MARKETWIRE PHOTO/WestJet

CALGARY, ALBERTA--(Marketwire - April 1, 2008) - WestJet (TSX:WJA) today announced that on April 1, 2008, sleeper cabins will be introduced onboard its existing fleet of 73 Boeing 737 Next-Generation aircraft. These sleeper cabins can be booked on all of WestJet's existing flights for a nominal incremental fee of $12.

"WestJet now offers scheduled service to 47 destinations, continuing on our strategy to be Canada's favourite airline," commented Bob Cummings, Executive Vice-President Guest Experience and Marketing. "Our leather seats and live satellite television are a great part of WestJet's guest experience however, by offering our existing overhead bins as sleeper cabins, guests will now have the opportunity to lie down for a period of time and arrive at their destination refreshed, rested and ready to go.

"The overhead compartment has traditionally been a place where guests have placed their carry-on baggage. Given that the overhead bins on our fleet are among the most spacious of any airline, we made the decision to offer sleeper cabins in that space."

(April Fools!)

More airlines to start premium economy class seats

2008-03-26T10:51:00.001-04:00

The Straits Times, March 24, 2008

SINGAPORE Airlines (SIA) is phasing out the executive economy class on its non-stop flights to the United States but other airlines are getting into the business.

Premium economy, as the name implies, is better than coach but not as luxurious as business or first class. Passengers get more leg-room, wider seats and better amenities than those in cattle class.

Some airlines call this class of seat Economy Plus or Executive Economy but they all mean the same thing. Premium economy seats cost about 30 to 40 per cent more than economy class but are significantly cheaper than business class tickets.

Australian airline Qantas, which introduced a premium economy class on its flight from Sydney to Hong Kong earlier this month, will be phasing in premium economy seats on flights from Singapore to Sydney, Melbourne, London and back.

Premium economy seats will also be offered on flights from Sydney and Melbourne to Bangkok and Johannesburg.

Thai Airways International has also introduced premium economy seating on its Airbus A340-500 aircraft which flies to New York, Los Angeles, Stockholm and Copenhagen.

But passengers who want to fly from Singapore have to factor in a Bangkok stopover.

Japan Airlines has introduced a premium economy service on its B777 aircraft flying the Tokyo-London and Tokyo-Paris sectors.

Singapore has a high demand for premium economy seats, say travel agents.

US Travelers ship luggage ahead

2008-03-26T10:09:00.001-04:00

Source : AP, March 25, 2008

As airlines add extra-luggage fees and travelers worry about growing security restrictions, services like Luggage Forward and Luggage Free have emerged as ways to bypass the hassles of checking bags. The idea behind the luggage delivery services is to make traveling as headache-free as possible. Rates vary depending on the weight, distance and speed of the delivery. Sending a large bag (65 pounds) from NCY to San Francisco with a pickup date in five days would cost US$149 through Luggage Forward. Since Luggage Forward was established three years ago, sales have grown 300% each year. Luggage Free is seeing similar growth. The number of bags the company shipped has doubled each year since 2004, with shipments reaching around 40,000 last year. Tighter security restrictions and the growing piles of lost and damaged baggage are fueling the growth.

JetBlue wants to "upsell" extra legroom

2008-03-19T08:22:00.000-04:00

Source : AP, March 18, 2008

The head of JetBlue said Tuesday the carrier expects to boost its non-core revenue by 60% this year, in part by charging passengers extra for more legroom. "What we want ... is the ability to upsell," CE David Barger said. Speaking at an investment conference in New York, Barger said "demand is solid across the JetBlue network," and he assured analysts the carrier is "in the middle of a momentum story," in spite of industry wide worries of a slumping economy and sharply rising fuel prices. Barger said JetBlue soon expects to roll out a program called "even more legroom" that will offer passengers in the first few rows and emergency exit seats of its larger aircraft additional space for an added fee. Barger made it clear the single-class carrier is not planning to start offering business-class service. "We're not going to a two-cabin airplane," he said.

Taking care of "brand" concerns when it comes to garnering ancillary revenues

2008-03-18T14:45:00.002-04:00

Published: 13 Mar 2008

EFT Ancillary Revenue in Travel 2008 Special

From traditional carriers perspective, it is being said that airline executives have other non-operational concerns about launching ancillary revenue strategies.

One is that selling more frills to economy passengers would dangerously blur the distinction between first-class and economy service.

According to Bobby Healy, Chief Technical Officer, CarTrawler, the primary concern of traditional carriers has been the effect of ancillary selling on "the brand".

"I think a lot of snobbishness relating to the brand has evaporated, and the hard cold financial realities of competing with low cost carriers have changed this thinking. I don't know of a single airline (low cost or traditional) that has not appointed a "head of ancillary revenue" with a view to really making this an important addition to the bottom line for 08. I think the only divergence now between low cost carriers and network carriers is in their selling style - and that reflects the brand values of the airline. British Airways for example, are not going to wake me up mid flight to sell me a lottery ticket, but they would really love to offer me a top quality car rental for my trip...Does that negatively effect BAs brand ? No way."

Healy, a speaker during EyeforTravel's inaugural Ancillary Revenue in Travel 2008 conference in Dublin recently, spoke to Ritesh Gupta about technology being a barrier when it comes to car rental companies and airlines joining hands for ancillary revenues and much more. Excerpts:

Ritesh Gupta: Do you think technology is a major barrier even in Europe when it comes to car rental companies and airlines joining hands together for ancillary revenues?

Bobby Healy: Big time. The most successful airline in Europe - ok arguably - is Ryanair, yet their poor neighbours in Aer Lingus have done a better job at integrating their car hire supplier.

This was down to technology, and little else. The other problem is that the car hire suppliers themselves haven't been (to date) incentivised to do this integration for the airline, So airlines like Ryanair, and many others are left with a click out to a white label website run by the car hire company. While this is definitely the quickest route to market, it misses out on many opportunities to increase the revenue from this product. There is movement here though. Most major brands have now produced some flavour of XML access to their product so that the airlines could integrate their content in a more seamless fashion.

The problem, however then shifts to the IT providers to the airlines and their support for the myriad of XML interfaces and car hire companies out there. The world would be (technically) beautiful if there was only one car hire company, but we in CarTrawler know that's not the case, and in order to really get the most from car hire an airline needs to have more than one, possibly up to 5 or 6 - and that means a big technical challenge. That's where we come in.

Ritesh Gupta: Technology is now allowing airlines to completely outsource the car rental ancillary product, and shift more of the benefits of the channel towards the airline rather than others. What kind of progress do you think airlines have made in this direction in Europe?

Bobby Healy: That's an interesting question, and its a point that is starting to really drive the negotiations between suppliers and the airlines. I think its early days yet but we do see that the airlines will definitely aim to take more of the pie when it comes to the car hire revenue. That will come from three areas:
1) Airlines will push for higher fees from the car hire companies,
2) Better conversion (through technology),
3) Channel shift (the airlines will displace competing channels).

This is not a bad thing for car hire companies either - more choice means that companies that have been prevented from selling on certain airlines, will get access to that channel, and it is still going to be a premium channel to them as compared to brokers, OTAs or meta search. On top of that, when selling through an airline channel, suppliers can maintain complete control of their distribution and pricing (using CarTrawler as their distribution system) - not the case with other channels.

Ritesh Gupta: Airlines generate traffic to their websites that should be used to capture a larger share of the total spent planned by the traveller. But add on products and upselling requires a change culture of those facing the customer and the tools they use. From car rental company perspective, how easy is it for them to fit in talking of culture change?

Bobby Healy: Well there is certainly a culture change, but that tends to be more in the air (onboard selling) than during the pre trip selling process. In other words, all the pre trip selling is done anonymously - through a well designed website and so there is little no internal change of process or culture. There is a small change in the call centre for upsell of insurance or car hire, but its unobtrusive and easily avoided by the passenger, so I don't think the relationship changes there. The net effect of adding ancillaries such as car hire, hotel and insurance is positive for the passengers, not negative.

Ritesh Gupta: To what extent do you think dynamic cross selling of car hire through airline websites is replacing existing channels for car hire such as meta search, brokers and the suppliers own sites?

Bobby Healy: We are predicting that by 2012, 40% of European car hire at airports will be sold by airlines to airline passengers. From published statistics, Easyjet have already achieved that, and others are catching up. That's huge. And that volume will displace primarily the car hire suppliers own websites, but also brokers and meta search to a lesser extent. The reason for this is that price sensitive customers will continue to use meta search and brokers, whereas quality sensitive and price flexible customers will book on the most convenient channel that delivers the product they are looking for - which is going to be the airline. That reinforces my previous point about choice. Would a loyal AVIS customer book a car with Ryanair? Would a loyal Hertz customer book a car with Easyjet ? Food for thought.

Corp. Sourcing Matches Airlines' Approach

2008-03-18T09:09:00.003-04:00

Business Travel News Online, By Jay Boehmer, MARCH 17, 2008

Just as domestic legacy carriers have spent years refining their use of analytical tools to drive client negotiations and contract management, corporate travel buyers have responded with their own heightened analytical rigor and data-driven contracting practices. Like the airlines that have further aligned corporate sales forces with revenue management departments, travel buyers have undergone their own transformation as companies integrate procurement practices and sourcing departments into travel programs.

"The analytical appetite that travel managers and procurement managers have today versus what they had 10 years ago has clearly changed," said Scott Gillespie, TRX vice president of strategic initiatives. "Ten years ago, any number of travel managers didn't like to use Excel for anything other than keeping lists. That's very different today."

Deloitte Services LP chief procurement officer and director of national services Michael McMahon said when airlines early this decade began embracing third-party data aggregator Prism Group, their dominant source of analytics, it created a gap between the data buyers and suppliers brought to the table. He and other company travel procurement specialists said data parity has grown in recent years.

"That gap's been narrowing quite a bit," Deloitte's McMahon said. "We measure marketshare the same way our carriers are, and it makes conversations a lot more effective. If they say you're not hitting your targets, but your reports show you are, you've got quite a different conversation."

Prism Group president Michael Whitesage said the proliferation of data-analysis tools—including Prism's Avion and others offered by third-party aggregators—and travel management companies' adoption of more analytically consultative roles have helped to level the data equation. "Agencies are now forming consulting groups to assist travel managers with analytics, so you have Travel Analytics, Carlson, Amex—all those groups," Whitesage said. "Both sides of the table are becoming more analytical and better at the art of contracting."

Whitesage said that although airlines and buyers have grown more sophisticated in applying data to contract negotiation and management, in many cases with access to the same data, they also have information the other party does not.

"The airline has its share requirements and separates costs and profitability," he said. "The company, on the other hand, has its spend and has proposals from competitors. So, both parties have a unique advantage and confidential information that the other party doesn't have. They really are very much at parity in negotiations—they have the same data but different information."

Procurement professionals from Deloitte, KPMG, Pfizer and UTC agreed that third-party data aggregators and agencies have grown critical to their analytical needs. Though procurement hasn't introduced analytical rigor to corporate travel departments, it has in some cases refined it.

"Even in the past when procurement might have played less of a role, the travel group within Pfizer in the past five to seven years applied a data-driven approach to all of our negotiating and contracting with the airlines," said Pfizer vice president of worldwide procurement Tom Donatelli. "Our third party that helps us collect that data has enabled a lot of that. That's only been getting more intense, and we've been developing more capabilities to make that as effective as possible. That's driven by the increasing costs in the airline industry and our desire to drive down those costs."

While airlines said that the rise of data in contract monitoring has brought a greater degree of accountability to client contracts, several corporate travel buyers said that holds true for carriers as well.

"I look back now at some of the meetings with airlines and they were laughable on both sides," said Deloitte's McMahon. "You'd make commitments and you weren't sure—other than measuring gross dollars at the end of the month—no one was really sure what was going on."

Though data and accountability govern contracts, airlines and corporate travel buyers said there remains room for relationships on both sides of the table.

Prism's Whitesage characterized the rise of data-driven contracting and accountability as a "renaissance" in corporate travel management, establishing "true financial relationships between airline and customer."

American Airlines vice president of global sales Frank Morogiello said, "The relationship part is very, very real and it always will be. It doesn't mean you go golfing and hang out and have a beer. It means when something goes wrong, you know who you can call." Though Morogiello noted that some airlines "might look at this and say it has nothing to do with relationship management," he said those expanding their presence in the corporate market are focusing first on relationship-builders. "There are some guys that never had a sales force who are hiring a bunch of people," he said. "You look at the low-cost guys, Southwest as an example, getting into the corporate business—they're hiring salespeople and trying to get people who can create relationships."

Though such low-cost carriers as Southwest are bulking up sales forces to establish what TRX's Gillespie called "relationship capital," he said many legacy airlines shrank sales forces in the past decade, though not entirely at the expense of relationships.

"Relationships are at risk in this day in age," Gillespie said, and buyers "probably need to work that much harder at building those relationships with the airlines. Airlines are going to be more selective about where they put relationship capital, but for the right buyers—those with the right attitude and personality to help the airline succeed—there's still plenty of equity."

Though Pfizer's Donatelli said airline purchasing to some degree has become commoditized, relationships that purchasing managers forge are valuable. "Is there room for relationships? Absolutely," he said. "Travel is different from other categories. In some respects, it is viewed as a commodity, but in others we expect some sort of partnership or relationship with airlines in order to meet our needs and work with us—not only on price, but also on capacity, capabilities and other service levels. Having access to more data helps us to have a more balanced approach and eliminates some of the confusion that we had in the past."

Air New Zealand banks on product upgrades

2008-03-17T21:34:00.000-04:00

ATW Daily News, Friday March 14, 2008

Air New Zealand is staying true to the philosophy that earned it Air Transport World's 2008 Passenger Service Award and embracing more product upgrades designed to snare premium customers, rather than cost cuts, to combat soaring fuel prices.

Speaking to ATWOnline in Auckland, CEO Rob Fyfe reasoned, "In a cross-country race, the best time to pass the guy ahead is on the hill. And we are fighting fit and in great shape and we should look at this time to pass our competitors."

The question, according to Fyfe, is, "If there is going to be more capacity in the market and a downturn, how do we make sure passengers fly with us? The last thing we want to be saying is 'how do we take costs out of the business?'."

This year ANZ is investing more than NZ$55 million ($44.2 million) installing IFE throughout the 767s and A320s it uses on short-/medium-haul routes and increasing seat pitch in economy ahead of the wing to 35 in. Passengers paying the higher economy fares and the airline's Gold Elite members will have access to those seats and will be able to book them online later this year. Rollout starts in July and by November all aircraft will be refitted.

Fyfe said ANZ also is planning to enlarge the premium economy cabin on its 747-400s and 777-200ERs. "Premium economy has been such a success for us. There is a market there in long-haul that will pay for a premium product," he said. When the carrier launched the cabin upgrade in 2004, it allocated just 23 upper deck seats on 747-400s but since has added 16 seats on the main deck.

In the longer term, Fyfe said ANZ has turned its back on Boeing's catalog seat offering on the 787 and is designing its own seats. "We are not seeing anything in business and economy that materially moves the industry forward," he claimed. He revealed to this website that the carrier is developing its own seats with an innovation company from the US. "We see that we can make the biggest step change in economy," he said. The seats will be installed in both 787s and 777-300ERs that will be delivered from 2010 and will be refitted to the balance of the fleet.

by Geoffrey Thomas

Spanair launched a new four-class fare structure

2008-03-17T21:30:00.001-04:00

Spanair launched a new four-class fare structure dubbed Spanairx4, calling the concept "modern and versatile" and one that will set it apart from domestic competitors. The classes are labeled "business," "avant," "economy plus" and "economy." Business offers passengers a 30-kg. baggage check-in allowance (10 kg. more than economy plus and economy), lounge access and preferential service onboard, including free catering and "blocking of the middle seat" to provide more space. It also offers flexible and penalty-free options for booking changes, including on day of flight. Avant offers the same benefits except blocking of the middle seat. Economy plus provides a flexibility benefit "allowing flight changes on the same day at no extra cost" and, along with economy, requires onboard purchase of drinks and snacks.

Add up all those extra charges before you book on Ryanair

2008-03-13T09:38:00.001-04:00

by Molly Feltner, SmarterTravel.com Staff - March 13, 2008

The intra-Europe carrier Ryanair is famous for its super-cheap airfares, with one-way sale fares often starting as low as one pence, or about £10 with taxes and fees. However, if you're not careful, flying Ryanair can be pretty expensive. The airline has to make money somehow, and it does so by charging extra fees for nearly every possible service:

£3 for online booking made with a credit card; £1 for debit cards
£3 each way for checking in at the airport (anyone checking a bag must check in at the airport)
£6 for your first checked bag and £12 each for your second and third bags, if paid in advance online
£12 each for checked baggage, if paid at the airport or by phone
£7.50 per kilo for checked baggage (combined weight of all bags) weighing more than 15 kilos
£6 for checked infant equipment if paid online
£12 for checked infant equipment if paid at the airport or by phone
£3 for carry-on bags that exceed size and weight limits, plus the £12 checked bag fee
£3 for priority boarding

Imagine being unaware of these charges and, for example, showing up at the airport with two bags to check weighing a total of 50 lbs (23 kilos), an amount most U.S. airlines will accept for no extra charge. With Ryanair, you'd owe £87— for airport check-in, mandatory baggage charges, and overweight luggage fees. That's $175! (see XE.com for current exchange rates) Make a game plan before booking to avoid these fees, particularly in regards to baggage.

LCCs shoring up ancillary revenues

2008-03-11T08:23:00.002-04:00

Ranju Sarkar / Mumbai March 11, 2008

Globally, airlines earn 5-10% of their revenues from this.

As Indian low-cost carriers (LCCs) try to fight increasing losses, they are making a renewed effort to shore up their ancillary revenues.

So, you have a SpiceJet or GoAir trying to bundle you travel insurance with an air ticket or Air Deccan mining its customer base to cross-sell third-party medical insurance to its customers.

Airlines earn ancillary revenues from freight, sale of food, drinks and gifts onboard, sale of travel insurance, hotel rooms and car rentals, through frequent flier programmes, and by trying to cross-sell other products like credit cards and medical insurance. Globally, airlines make 4-5 per cent of their revenues from ancillary sources.

These ancillary services allow the airlines to offer the lowest possible fare, encouraging people who want the so-called extras to pay for them.

‘‘By not having to cross-subsidise the preferred seating or hot meal of my fellow passenger, I can get the lowest price while other passengers have access to the extras they are willing to pay for,’’ said Belgium-based airline consultant David Huttner.

Taking a cue from SpiceJet’s offering of a travel insurance product, GoAir on Monday unveiled its travel insurance product in alliance with Tata-AIG, which offers to insure passengers against trip cancellations, baggage loss and flight delays, besides loss of life and medical reimbursement, all for Rs 129 or $3. Simplify Deccan, which sells hotels and car rentals and space in its in-flight
magazine, is trying to mine its customer database and sell medical insurance scheme of third-party companies.

Earlier, Deccan had tried to sell advertising space on aircraft body, on head-rest cover, and space on its in-flight magazine.

While airlines make 4-5 per cent of their revenues from ancillary sources, LCCs generate 10-15 per cent of their revenues from ancillary sources. European budget carrier RyanAir plans to increase ancillary revenues to 20 per cent in three years.

For the quarter-ended December 2007, RyanAir earned 111 million euros (Rs 637 crore) of ancillary revenues. In India, airlines are still struggling in their single-digit revenues from ancillary services.

Budget carrier Indigo, which started operations 18 months back, makes 5 per cent of its revenues from ancillary streams, mostly by selling food onboard, and carrying some freight.

‘‘We would like to develop these or other streams,’’ said Indigo CEO Bruce Ashby. Deccan and SpiceJet didn’t comment, but had earlier said they earn 6-7 per cent of their revenues from ancillary sources.

GoAir earns its ancillary revenues from facilities like in-flight shopping, food and beverages retailing, in-flight contests, home delivery of tickets, hotel bookings, insurances and space selling in its in-flight magazine.

‘‘Ancillary revenues are an integral part of our strategy. Over the next year we plan to enhance our ancillary revenues by adding new streams,’’ said GoAir CEO Edgardo Badiali.

No more secondary

Historically, the most common ancillary revenues airlines enjoyed were from on-board sale of alcoholic drinks and duty free/general items. This was the main source of ancillary revenues for many years and constituted around 1 per cent to 4 per cent of an airline’s gross revenues.

Now, even frequent flier programmes generate ancillary revenues for airlines through complex exchanges of points and services with other non-airline partners such as hotels, car rentals, restaurants, credit cards.

Ancillary revenues are important to all airlines, irrespective of whether they are full-service carrier (LCC). But LCCs tend to offer a more unbundled product, instead of a high all-inclusive fare.

Some LCCs offer a low-base fare and add-on items that the customer may purchase if desired, such as food. For many LCCs, ancillary revenues represent more than 10 per cent of their revenue stream.

In India, Air India offers ground-handling and engineering services to many international airlines. Indian used to offer these services to Kingfisher Airlines. Such a facility can come up adjacent to an international airport that can accommodate all types of aircraft regardless of size.

Finally ... how to end plane seat scramble

2008-03-03T08:20:00.000-05:00

Source : The Observer, March 02, 2008

Nuclear physicist Jason Steffen has calculated that there is a better - and quicker - way to get passengers aboard an aircraft than allowing people to wander on in groups. Thanks to his knowledge of atomic and molecular behaviour, he has worked out a way to slash boarding times by a factor of seven by carefully ordering passenger access to aircraft. He assumed the main cause of delay is usually aisle-blocking caused by passengers pushing luggage into lockers. He ran various boarding options on his computer and found that one option was easily the best. This requires that each passenger is given a specific queuing position; that they board window seats first; and that they do so with an empty row between themselves and the next passenger.

The Skies are Alive with Fees

2008-02-26T08:26:00.000-05:00

Source : NY Times , February 24, 2008

Airlines in the US are grasping for more ways to "unbundle" fares and charge extra money for an expanding variety of formerly free services and amenities. Ancillary revenues are "the magic bullet right now for the airline industry," said the president of a brand-marketing company. "The airlines may be thinking mergers are their salvation, but the reality is ancillary revenues are going to be a tremendous source of revenue." Major airlines are hoping to increase ancillary revenues in a climate where low-cost carriers exert strong pressure to hold down fares. Some are now charging for more than one checked bag. Others sell assigned seats and per-flight priority boarding privileges formerly reserved as perks for elite-status members in frequent-flier programs. With oil breaking through US$100 a barrel, "you have an industry that's grabbing at every opportunity they can to put more coins in the till."

Announcing the Release of Pricing with Confidence

2008-02-15T10:15:00.004-05:00

By Reed Holden and Mark Burton

Achieving Pricing Confidence

an excerpt

When customers ask for discounts, salespeople should turn the discussion to value. Customers expect this and typically attempt an end run on the salesperson. The customer telephones a senior manager at the salesperson’s organization to rattle his or her cage in an attempt to get the manager to buy into the White Horse Syndrome. Sometimes the senior manager saves the customer the trouble by initiating the call. In either case, salespeople learn that when they try to hold the line on price, someone else in the organization will criticize them for messing up the sales opportunity. Salespeople quickly learn that they would be foolish to try to get additional profit for the company with higher prices. After all, aren’t they paid to close deals, regardless of the costs for the company?

The real challenge is getting salespeople and managers to have more confidence in their pricing. This requires salespeople and managers alike to resist undermining prices with short-term, panic-oriented tactics. The bad news is that most companies do exactly that. The good news is that it takes just a few simple rules to reverse the process, build discipline into the pricing process, and stop leaving money on the table. In fact the following 10 rules will lead to your pricing with confidence.

1. Replace the discounting habit with a little arrogance. Price discounting is entrenched in most organizations. The best way to dislodge any deep-rooted attitude is to replace it with another. Arrogance—feeling good about your products and services—provides the confidence needed to kick the discounting habit.

2. Understand the value you offer to your customer. You can’t have confidence in your pricing until you have confidence in the financial value that your offerings create for customers. Most of your customers are eager to tell you. All it takes is asking the right questions and being willing to listen.

3. Apply one of three simple pricing strategies. Know when to price high, when to price low, and a strategy for everything in between. To create confidence in your prices, strategies can and should be simple and agreed to by everyone in the firm.

4. Play better poker with customers. Understand the four types of buyers, and develop a pricing strategy for each one. The trickiest is the fourth type—poker players, who love to play the pricing game and have learned that if they focus on price, they can get vendors to leave money on the table but continue to provide high-value features and services. Knowing the strength of your own hand—the value you offer—gives salespeople confidence to resist the temptation to close at any price.

5. Price to increase profits. It’s a myth that if you discount price to increase sales, you will see increased profits. Profits result when an organization does many things right, including simplifying costing approaches so they permit more effective use of your company’s resources, be they people or machines. Efficiency, controlling costs, better profit metrics—all are required for pricing success.

6. Add new products and services that give you negotiating flexibility and growth. When your products are regarded as commodities, add services to differentiate products and prop up prices. An effective strategy for market dominance is to develop a dual offering that covers both the high- and low-end customer needs. If customers want a lower price, subtract features and services.

7. Force your competitor to react to your pricing. Smart players know they don’t have to participate in a competitive pricing death spiral. Every player enjoys one or more value advantages. Map your markets. Define where you do and do not have a value advantage over your competitors. Know where and how to compete on price—and where and how not to.

8. Build your selling backbone. To have confidence in negotiation, salespeople and managers need confidence in pricing. Confidence in pricing comes from knowing the value of your products or services. It also comes from knowing your customer. Backbone comes from knowing the tricks your customers use to get you to drop price and how to deal with them.

9. Take simple steps to move from cost-plus to value-based pricing. There is nothing wrong with cost-plus pricing as long as it does a good job of leveraging the financial value you create for customers. Value-based pricing is an ideal. It requires sophisticated internal skills and systems. The trick to value-based pricing is to evolve pricing as the discipline and skills of your people improve. Start gradually. Once you learn those skills, moving forward to real value-based pricing is a snap.

10. Price with confidence: Remember who you are. Shift the negotiation to how you provide concrete results for your customers. Customers buy results, not rhetoric. Moving beyond the rhetoric of value will enable you to prove those results to customers.

JetBlue offers refund of fares

2008-02-01T08:23:00.000-05:00

Source : NY Daily News, January 29, 2008

JetBlue has begun offering refundable fares to attract more passengers by increasing flexibility. The new class of tickets allows unlimited changes to reservations and full refunds, the New York-based discount carrier said Monday. The new fares will cost about US$50 more on short-haul flights and $100 more on long-distance routes, a spokeswoman said. "It's definitely something we think business travelers will see as an advantage," she said."

Revenue Management & Pricing Asia Pacific Conference

2008-01-23T13:34:00.000-05:00

Nick Gay of eyefortravel asked me to post information about the largest RM forum in the APAC region, with some great speakers involved.
http://www.eyefortravel.com/tdsasia/revenue-management.asp

Travel Distribution Summit -- Asia 2008
18-19 March, 2008
Suntec Convention Centre, Singapore

There are also some interesting RM focused podcasts on their site that I thought might be of interest to you:
http://www.eyefortravel.com/tdsasia/podcasts.asp

The agenda will represent the current issues facing RM professionals in the region.

IATA bids goodbye to paper airline tickets

2008-01-14T10:23:00.000-05:00

Features News - Monday, January 14, 2008
Alvin Darlanika Soedarjo, The Jakarta Post, Geneva, Switzerland

Paper tickets are well on their way to becoming relics of a bygone era.

The air travel industry, in its efforts to anticipate profit downturn, is striving to be more efficient by eliminating unnecessary material and prolonged service at airports.

The International Air Transport Industry (IATA), a leading aviation trade group, says the industry needs to simplify its business as soaring fuel prices and the global economic slowdown will result in lower profits in 2008, despite a steady growth in passenger numbers.

E-ticketing and self-service check-in are among the services the IATA recommends global airlines, particularly airlines from developing countries, implement in full.

"Together, these projects will save the industry US$6.5 billion annually," said Phillippe Bruyere, program director of business simplification at the IATA, which has 240 global members comprising 94 percent of scheduled international traffic.

Electronic tickets alone, which hold the information previously held on paper tickets, could save the industry at least $3 billion a year because an e-ticket costs only $1 to process as against $10 per paper ticket.

Efficiency for travelers, airline companies and travel agents is the main priority.

E-ticketing requires a database that is integrated with the airlines' passenger service systems and interfaces with all partners for the real-time processing of passengers by ground handlers and partners.

The aim is for electronic ticketing (not to be confused with the boarding pass, which is still commonplace) to be 100 percent in use this year.

The IATA has set May 2008 as the deadline for all airlines to issue tickets that passengers receive in the form of e-mail, printing the hard copies at home or in the office.

Global electronic ticketing has progressed well during 2007, reaching 89 percent, according to the IATA's October report. Indonesia, the group says, is among the countries that are in the strongest positions to bring in the all e-ticketing (ET) system. In Indonesia, the ET penetration rate has reached 92 percent.

Passenger self-service, in which passengers get their own boarding passes from automated machines at airports or from home, is becoming increasingly popular in the U.S., Europe, Africa and the Middle East.

However, the Asia Pacific region is still behind in the category. Only 30 percent of travelers in the Asia Pacific use self-service compared to 47 percent in the U.S., 42 percent in Europe and 40 percent in the Middle East.

It is hoped that passengers will soon say goodbye to long lines at check-in counters to get their boarding passes printed.

"Passengers want the speed, convenience and control that self-service offers. Airlines want to use the technology to offer these options, and improve service while cutting costs," Bruyere said at a media meeting in Geneva in December.

Some countries, such as Japan and Germany, have already implemented self-service gates for boarding. The airlines, such as JAL and Lufthansa, have found that this can speed up boarding. However, the industry still lacks the reference points and implementation standards to make this a global service.

The IATA has taken its own steps to make air travel easier.

It has set 2010 as the deadline for airlines to introduce bar-coded boarding passes, which are sent through text messages from the airlines to customers' cell phones.

Passengers will simply have to register their cell phone numbers with their airline at the time of booking to receive a text message with a two-dimensional bar code. The bar code then functions as a boarding pass.

Moreover, it has launched the IATA travel information portal at www.iatatravelcentre.com. At the time of booking, the site provides tailored information by itinerary on passport, visa and health requirements, taxes at arriving and departing airports and consumer and currency regulations. The service is offered free of charge to individual travelers.

The group says consumers are demanding more self-service and complete information to avoid documentation problems. Cases of incorrect documentation discovered at check-in are estimated to amount to around 35,000 passengers annually. They are turned back at destination or transfer points by immigration authorities due to improper documentation.

The IATA believes these services are important because in 2008 the global airline industry is predicted to face a profit downturn on the back of soaring fuel prices.

In June, when the oil prices were still relatively low, the IATA had forecasted a profit of $9.6 billion.

With the rising oil prices, analysts have also revised down the industry's total income forecast by almost 30 percent to $5 billion from the $7.8 billion they predicted in September.

"The crystal ball looks rather foggy at the moment. We expect a bill of $149 billion next year (2008), which is $14 billion more than 2007 and 30 percent of our total costs," IATA director general Giovanni Bisignani said.

The peak of the business cycle is over and we are still $190 billion in debt. We could be headed for a downturn with little cash in the banks to cushion the fall, added Bisignani.

By 2011, the IATA forecasts the air transport industry will handle 2.75 billion passengers or 620 million more passengers than in 2006. It forecasts that freight will also rise to 36 million tons or 7.5 million tons more than in 2006.

International passenger demand is expected to increase to 980 million in 2011 at an annual average growth rate of 5.1 percent. For the first 10 months of 2007, air passenger traffic grew 7.3 percent from a year earlier.

This indicates that consumer demand remains strong in most regions, particularly in the Asia-Pacific. There is high demand from customers from China, but U.S. and European demand are slowing down, especially for business-class passengers.

The U.S market certainly effects global output, IATA chief economist Bryan Pearce said. "Revenue support will drop away during 2008 as the U.S. economic slowdown directly restricts air travel growth and has knock on effects on lined economies and travel markets."

With the less favorable economic situation, airlines with old aircraft in their fleet will be the hardest hit because their engines will guzzle more fuel compared to younger aircraft. Bisignani said the airline industry, which has a 1.1 profit margin, was still considered "peanuts" in terms of income.

However, in 2009, the IATA says the industry should be in a better state. "The problem with the airline industry is there are too many airlines," Bisignani added. The association cites that there are 2,092 airlines worldwide with a total of 23,000 aircraft.

"If we compare it to the car industry, we can name the brand easily. We recommend that more airlines merge, besides simplifying their businesses," Bisignani said.

Airlines target smaller destinations

2008-01-14T08:56:00.000-05:00

Manisha Singhal / Mumbai January 13, 2008

With increased congestion and cut-throat competition on metro routes, airlines are ramping up their services to smaller destinations. Kingfisher, for instance, added 90 new flights to non-metro destinations in 2007. Arch rival Jet Airways operates 44 daily flights to mini-metros.

Vijay Mallya’s budget carrier, Simplifly Deccan, was the pioneer in picking up and dropping passengers from small towns and cities. It added five more mini-metros to its network last year. The airline connected destinations such as Silchar and Aizwal in the north east and gave the industrial town of Jamshedpur its first air connectivity. After launching its first flight to the steel city in August, it added another in October.

“On the long haul flights to metros, it is difficult to always garner load factors. On the other hand, short haul routes are good in terms of margins,” said Ramki Sundaram, chief financial officer and acting CEO for Deccan, adding: “But short haul routes have to be well thought out in terms of traffic density and extent of competition.”

The growth is also reflected in overall numbers. While the share of metros in total passenger traffic slipped from 15 per cent in 2006-07 to 14 per cent in 2007-08, the share of mini-metros improved from 1.66 per cent to 1.73 per cent during the period.

Interestingly, while traffic to smaller cities is rising at a fast clip, Mumbai has recorded a 5 per cent drop and Delhi 2 per cent in overall traffic contribution. Bangalore and Chennai airports have stagnated in their contribution to traffic growth.

The recent offer of Rs 1,075 on the Delhi-Jaipur route by GoAir is driven by the logic that Jaipur’s contribution to domestic air passenger traffic is on an upswing.

Cashing upon this trend, the airlines have been maximizing yields and garnering higher margins on these routes. Now, with the reduced jet fuel costs for shorter sectors, the carriers are keen to keep up the trend. Most low cost carriers are now flying about 50 per cent of their total routes to the mini-metros and are able to garner load factors of up to 80 per cent.

What is working for the airlines is the fact that taxes and surcharge remain constant irrespective of the long or short haul flights. And because there are few players on the sectors, airlines can charge premium fares.

Budget airline fees 'are unfair'

2008-01-08T08:49:00.000-05:00

Budget airline passengers are paying more than the price advertised because of extra costs, a Which? magazine survey claims.

Firms are charging extra fees for items such as luggage check-in adding as much as £28 to ticket prices, Which? found.

Ryanair said charges were discretionary and largely avoidable, while Easyjet said the consumer group misunderstood the business model of budget airlines.

Ryanair reported passenger numbers up 18% in December on a year ago, while rival Easyjet saw numbers climb 9.9%.

However, shares in Easyjet were trading 12% lower in late morning trade at 471p after its load factor - which denotes the number of seats sold as a proportion of total seats available - fell to 78.9% in December, down from 81.2% a year earlier.

Ryanair shares dropped 6.4% to 3.81 euros. Its latest update, released on Friday, had shown its load factor dropping to 79% in December from 81% the year before.

Online check-in

"We think Ryanair's charge to use its check-in desk is unfair. You can only avoid it if you don't check luggage into the hold"
Which? magazine

Budget airlines have been increasingly charging for services that in the past have been included in the price of a ticket, Which? said.

According to Office of Fair Trading rules, airlines must include taxes and other compulsory charges in their headline prices.

Ryanair was seen to charge the highest extra cost, by adding a £4 fee for checking in at the desk instead of online, and £20 for checking a bag into the hold.

Priority boarding cost an extra £2 per flight - it was only free for passengers who checked in online and had no bags for the hold.

Ryanair said it wanted to encourage passengers to travel with hand luggage only and to check in online.

The survey said overall total extra costs, including credit card charges, could be as much as £32 in Ryanair's case, just under £30 for Easyjet and just under £25 for BMIbaby.

Monarch Airlines, which in November was the latest firm to start charging for checking in baggage by setting a £3.99 fee per item, was seen to charge as much as £23.50 on top, while Flybe's total extras totalled were around £23.

Which? said it had spoken to the Air Users Transport Council which said nothing stops airlines from adding extra costs but that it would look into the issue.

"We think Ryanair's charge to use its check-in desk is unfair. You can only avoid it if you don't check luggage into the hold," Which? said.

Story from BBC NEWS:
Published: 2008/01/08 12:03:58 GMT

Hundred dollar oil - LCCs and network airlines face up differently

2008-01-03T09:04:00.000-05:00

Thursday, 03 January 2008

Oil prices hit USD100 for the first time yesterday in New York trading. The psychological barrier was touched; market feeling is that prices will head higher in the short term.

Faced with this and other discouraging indicators, US airline stocks fell to their lowest level in 12 months, according to Amex’s Airline Index. The major airlines’ stock prices fell by around 2.5% for the day. US Airways was down 4.4%. But share prices of US LCCs, Southwest, AirTran, Alaska Air and JetBlue have so far held up reasonably well.

In previous downturns, low cost/low fare airlines in the US have managed better than their higher cost/higher yield competitors and the market is clearly expecting this to be repeated. There are several dynamics in this equation.

Higher yielding traffic generally erodes quickly as economic conditions deteriorate and businesses – which are first to see the warning signs, of credit tightening and consumer softening – cut back on travel costs. Once the margin between cost and revenue is reduced in this way, the network carrier tends to be squeezed first.

Since LCCs arrived in Asia, economic conditions have been strong and have yet to be tested in a more adverse climate. Assuming the US – and European – slowdown spreads to this region as seems inevitable, we will witness for the first time the outcome of LCC-network airline competition in declining economic conditions.

It is reasonable to assume that the outcome will be similar here and that LCCs will perform well, and even prosper, in a slowdown while the major airlines see profits decline. But the results may be more uneven than US history suggests.

There are differences here: with the exception of Australia, most of the LCC operations are international, with the potential on trunk routes for low price competition with widebody aircraft (and their low unit seat costs); the region has little in the way of competition laws to discourage predatory pricing; the actual unit costs of LCCs vary depending on the dates of the airline’s establishment and of purchase prices paid for new aircraft; and several of the LCCs are subsidiaries of major airlines.

In Europe, Ryanair is anxious for the slowdown to begin, believing, with its extremely low costs, that it will be able to consolidate its position in the market. AirAsia, with its extremely low costs, could be seen in the same category.

But of greatest interest will be the way that the region’s LCC subsidiaries combine strategically in soft market conditions with their larger parent companies - notably Singapore Airlines/Tiger Airways and Qantas/Jetstar. Any major airline that does not enjoy the strategic alternative to use a lower cost subsidiary may well be seriously disadvantaged.

Air Sick: Brands That No Longer Fly

2007-12-28T08:43:00.000-05:00

By Barry Silverstein

Consumers love to hate the airline industry, and it appears as if this sentiment will not change in the near future. The US Department of Transportation said – in its recent August 2007 report – that in the first half of 2007, air travel delays were the worst of any time since the department began keeping such records over a decade ago.

For the consumer, delays are only part of the story. Flights are cancelled without explanation, lost baggage claims are skyrocketing, customer service is laughable, and near misses on airport runways are increasing. And don’t even try to ask a traveler about airport security.

Is it any wonder, then, that airline brands are suffering? It’s a telling lesson of how an industry’s plight can permeate consumer perceptions of each and every brand in that industry.

In the crowded US market, airline brands are so prolific they have become commoditized. There are too many airlines offering too many similarly-priced flights to and from the same destinations. That is at the heart of the brand dilemma. Barry Schwartz, in his book The Paradox of Choice: Why More Is Less, says: “As the number of choices grows further, the negatives escalate until we become overloaded. At this point, choice no longer liberates, but debilitates.”

It is not at all surprising, then, that five of the top six US airlines have been bankrupt, the only exception being Southwest.

Southwest has survived because it was the first US airline to create a “category of one” brand, challenging the traditional carriers with a low-cost, high-value product. The Southwest strategy: use less expensive secondary airports, abandon assigned seats, and eliminate frills—all to deliver extremely low fares. And the airline’s employees actually seem to have fun. Southwest succeeded in building a brand that looked, felt, and flew differently from other carriers.

Then along came JetBlue. It used Southwest’s low fare model, but changed the brand equation with differentiating, upscale twists: paperless tickets, new planes, leather seats, free seatback satellite TV, on-time performance, and superior baggage handling.

For a while, Southwest and JetBlue flew above the fray, but even they got sucked into the industry’s bad airstream. In December 2005, a Southwest plane skidded off a runway, killing a 6-year old boy. In February 2007, JetBlue suffered a public relations meltdown because of one of its jets sitting on the tarmac too long. The brand was so maligned by the incident that the airline overhauled its procedures and its CEO resigned.

Why should any consumer be loyal to an airline brand? What is the advantage of flying one airline over another if they all basically look the same, provide the same service (or lack of it), fly to and from the same places, and offer the same prices? All of them are subject to the same delays caused by bad weather and over-crowded skies. Even the frequent flyer programs have become the same: Airlines typically make only a limited number of seats available to frequent flyers, so it’s more and more difficult to redeem points for desirable flights on any carrier.

Airline brands have actually created a technique to discourage brand loyalty. It’s called code share. The consumer can book a flight with, say, Northwest, only to find out that the flight is actually run by KLM. Originally, it seemed like a good idea—one airline cooperates with another airline when the first airline doesn’t fly the second airline’s route. It makes sense particularly when a US airline code shares with an international airline to expand its network globally.

But now, because airlines urgently need revenue, they’ll sell tickets to code share partners’ flights. So code share has become a marketing technique to make more seats available to passengers, regardless of the airline. This doesn’t sound too bad, but the consumer can get caught in the middle. An unaware consumer could show up at one airline’s terminal, only to be directed to another airline’s terminal. If there’s a reservation problem, the airline that sold the ticket is responsible, but a lost bag must be handled by the carrier airline.

Air travelers may feel queasy about an airline brand that is in, or just exited, bankruptcy. The industry’s mergers and acquisitions can make a consumer’s head spin. Take the case of US Airways. Started in the late 1940s as All American Airways, it was renamed Allegheny, acquired Mohawk, became USAir in 1979, acquired Pacific Southwest and Piedmont, became US Airways in 1996, started and then abandoned a brand called MetroJet, and finally merged with America West in 2005, retaining the US Airways name.

And then there are the poorly conceived airline brands, such as Delta’s ill-fated Song, that are launched with a big fanfare and then fizzle fast. What kind of brand impression does that create?

Worldwide, airline brands are not nearly as confusing. Most countries control or own the national airlines, so there are less brands. In countries where competition is allowed, upstart airline brands have kept the government-backed brands honest. In Ireland, for example, low-cost carrier Ryanair captured 30 percent of Aer Lingus’ sales in its first six years. Aer Lingus was forced to respond by itself becoming a low-cost carrier.

Virgin Atlantic has been a worthy competitor of British Airways in the United Kingdom. Now it has spawned one of the newest US airline brands. In August 2007, Virgin launched Virgin America, a low-cost airline that, much like JetBlue, boasts something a little different. Its new planes include mood lighting and a seatback entertainment system that offers satellite TV and radio, as well as video games, a playlist of thousands of songs, and the ability to text message other passengers. The new brand may also be banking on the reputation of its rakish founder, Richard Branson, to give it panache.

Still, Virgin America will be flying right into the storm. It is entering the business at a time when most airline brands are losing their lift—and consumers have been left wondering if decent air travel will ever get off the ground again.

[12-Nov-2007]
Barry Silverstein is a 25-year advertising and marketing veteran and co-author of The Breakaway Brand (McGraw Hill, 2005).

Finally, The Airlines are Getting it Right–Lower Your Flaps and Slow Down in Turbulence

2007-12-14T13:08:00.000-05:00

Dr. Reed Holden

Ok, if you didn't know it, a downturn is coming. The sub-prime credit crunch will be a cause of it, but there are other factors at work, too. American companies are not doing well with global competitiveness, and, as in the past, they still don't know how to deal with the increased sophistication of purchasing agents. To make matters worse, you have the dramatically high price of oil that is going to slow down both consumer and business purchasing. The only question is whether it will be the R word or the D word. The experts are saying that it will be a recession.

A question that all of us are facing is how to respond to it. Most managers are doing exactly the wrong thing. What is that? Easy–they're using more price discounts to keep revenue flowing into the business. In doing that, they are using the wrong pricing strategy (penetration) and as a result are undermining the firm's value proposition.

So what is a manager to do? First, lower your performance expectations for the coming year. If you can, shut down capacity and slow down/stop hiring. That is exactly what the airlines are doing. With the high cost of fuel and the looming/current downturn, they are taking older, less fuel-efficient aircraft off-line, and they're doing that just at the time when demand is booming for the holiday season. They know that after the holidays, demand is going to drop like a stone.

What else can we do? Well, while this suggestion is difficult for the airlines, another good idea is to deploy that low-value offering and identify which non-loyal, price-buying customers - not poker-playing customers - to contact and try to get some of their business. This protects the high-value offering and high-value customers. This way, you keep revenue flowing in too. When demand picks up, if you want, dump the low-value offering.

This is the time for survival, not flourishing. When an aircraft hits turbulence, they slow down. You should be doing the same thing. Stop focusing on revenue targets they are no longer accurate or relevant. The market is slowing down, you should slow down, too. Worry about profits and making sure that what you sell is providing for the firm, and you will survive in a downturn. Safe flying!

High Oil Prices May Cool Travel Demand

2007-12-03T09:00:00.000-05:00

Nov 28, 2007
By Madhu Unnikrishnan/Aviation Daily

Airlines are keeping a watchful eye on oil prices as they skirt the $100-per-barrel mark, but economists say a less obvious worry may be the precipitous fall in demand for air travel as rising energy costs put pressure on discretionary income.

This possibility could be further compounded if the U.S. economy tips into recession, as some economists are starting to predict. The possibility of recession itself could be made more real if energy prices remain high and demand for oil rises due to a cold winter in the U.S., economists say.

Prices for transport fuels are inelastic, particularly in the U.S., where more of the population relies on road transportation, said Julius Walker, an analyst for the International Energy Agency (IEA). In other words, there are no substitutes for most transport fuels - unlike in power generation, where plants can be made to switch between one fuel and another.

And there's no end in sight for rising oil prices, Walker noted, as OPEC's spare capacity is only about 2 million barrels per day. This makes worldwide oil supply very tight, which will continue to put an upward pressure on prices, Walker said.

As the price of gasoline rises, households and businesses could start cutting back on discretionary travel, particularly travel by air, Walker said.

This could translate to corporate travel departments as businesses seek to make cutbacks to offset rising gasoline, transportation and energy costs, said John Heimlich, chief economist at the U.S. ATA.

Heimlich noted that U.S. carriers have been posting strong yields and profits this year, especially from lucrative international routes. But growth in profits and yields could "be less dependable" in the U.S. if gasoline prices continue to rise, he said. The airline industry has kept a handle on capacity, Heimlich added, matching capacity to demand.

The aviation sector could see demand drop if the economy tips into a "major recession," said Eduardo Lopez, IEA senior demand analyst. The IEA has noted a drop in demand for transport fuels in the U.S., but it is uncertain if this is the result of a price effect or the continuing economic pressure from the subprime credit crisis, he said.

In the developed world, the effect of rising oil prices on demand for air travel remains a question mark, Lopez said. Barring a major recession, cooling demand could be the result of a price effect, as rising energy prices put pressure on household and business discretionary spending; or of an income effect, as households and businesses put off discretionary spending due to falling income, he noted.

Demand could also cool from an "expectation effect, as U.S. consumers worry about their financial future and are less likely to travel," Lopez said. It is uncertain which combination of these factors could be responsible or whether the economy will fall into recession, although economists are whispering that a recession is becoming an ever more real possibility.

Consumers and businesses elsewhere in the developed world are insulated from rising energy costs to a degree by high taxes. In other words, European consumers and businesses already factor high energy costs into their budgets and so are less likely to change their behavior in terms of spending discretionary income on travel, Lopez noted.

Meanwhile, consumers and businesses in China and India - two developing countries whose rapidly growing demand for oil is putting pressure on supply -- are insulated from oil price fluctuation by state subsidies. These subsidies for energy costs also free more household and business budgets for air travel, Lopez said. "If oil prices continue to be this high even after this winter, that could cause people to modify their behavior," Lopez believes.

Ad targeting improves as Web sites track consumer habits

2007-12-03T06:58:00.000-05:00

Story Highlights eMarketer:
Spending on behavioral targeting will nearly double to $1 billion next year
Privacy groups have called for the creation of a "do not track" list
Users' comfort with data profiling has shifted over the years

NEW YORK (AP) -- Based on the weather reports and restaurant listings you check out online, Yahoo Inc. has a good idea where you live. Based on searches you've done, the Web portal might also know where you want to go.

Click on the title to go to the full story.

Flying the Ultra No-Frills Airline

2007-11-20T08:39:00.000-05:00

Skybus Passengers Pay to Check Bags
Some Seats for $10
November 13, 2007

Passengers departing on Skybus Airlines from Columbus, Ohio, walk out of a brand new terminal and traipse across the tarmac to board their planes. In some cities, travelers fetch their own luggage off luggage carts. The airline has no telephone number that customers can call.
With fares starting at $10 one-way, do you expect more?

Skybus Airlines Inc., now six months old, brings a new level of bare-bones service -- and very affordable prices -- to the U.S. skies. The carrier also raises the question of just how cheap U.S. travelers will go to travel. So far, many seem to be willing to go very cheap. At a time when bus companies and Amtrak struggle to attract customers, and many travelers still gripe about the loss of in-flight meals and the addition of so many airline fees, Skybus filled more than 80% of its seats all summer.

"It's great for families," said Carolyn Lindell, on her fourth Skybus trip in just a few months. Mrs. Lindell and her husband Mike flew to Fort Lauderdale, Fla., for a total of $220 round-trip for a weekend in Key West last month -- he had a business trip, and it was cheap enough on Skybus to take along his wife and make a weekend out of it. And instead of long car rides, the Columbus couple has taken the kids to see relatives in Richmond, Va., several times on Skybus, sometimes on $10 one-way tickets ($21 after taxes).

"You don't care about a lot of things if the fare is $10," she said.

To strip as many costs out as it can, Skybus mimics many of the cheapskate travel tactics that Ryanair Holdings PLC pioneered in Europe. Dublin-based Ryanair is famous for its frugality, down to ordering planes without window shades to save money and charging customers to check-in at the airport (online check-in is free). Complaints are often numerous, and yet Ryanair has grown rapidly, doubling its passenger count in the past four years to about 50 million people this year.

Like Ryanair, which sometimes gives away tickets (customers pay the taxes and fees), Skybus offers eye-catching promotions. Every Skybus flight has 10 seats for sale for $10 each, and captains often ask customers to raise their hands if they got the $10 seats to show other customers the promotion is real. The carrier's average one-way ticket is less than $100.

Skybus Chief Executive Bill Diffenderffer, a former Continental Airlines Inc. executive, says demand for air travel jumps sharply if ticket prices are under $100 one-way. And it increases sharply again if prices are under $50.

The key to offering the cheap prices is low costs, so Skybus tried to rethink airline operations and customer service to be as spartan as possible. The carrier doesn't book connecting flights. It doesn't even put pockets in the seatbacks of its seats -- It takes too long to clean them.

"There are hidden costs throughout an airline. Take out one, and it's not that big. Take out all, then you're looking at a big difference in terms of pricing tickets," he said.

Once hooked on cheap fares, Skybus travelers do often end up paying more. If they want priority boarding, it's $10 per flight. Check a bag? That costs $5 for each of the first two bags under 50 pounds, then $50 for the third bag. About 80% of passengers end up paying to check bags.

And like Ryanair, Skybus looks at passengers as captive shoppers sitting on credit cards, willing to buy because they are on vacation, or don't have time to go to the mall.

Skybus flight attendants, often hired from retail stores and restaurants for their sales skills, hawk everything from coffee and pillows to perfume, watches and jewelry. Travelers aren't allowed to carry food on board -- that might hurt sandwich sales. (Employees announce the policy, but don't check bags for edible contraband.) Passengers receive a glossy catalog of items for sale, and flight attendants, who get a 10% commission, push a cart down the aisle at least twice during a flight.

Along with $5 cinnamon rolls and $10 grilled Caesar lunches, Skybus offers items such as $98 cubic zirconium tennis bracelets, $44 bottles of Vera Wang Princess perfume and $86 Tommy Hilfiger men's watches. The catalog says the watch sells for $95 in stores, and indeed, an Internet search finds it priced at $95 or higher. And Skybus collects no sales tax in the air -- a point flight attendants push hard, along with sales tactics like: "We only have two of these on board, and I've already sold the first in the back."

"I was not a believer in the beginning -- I didn't think people would buy. But they do," said Skybus Chief Financial Officer Michael Hodge.

Skybus started with strong financial backing -- $160 million, including $55 million in state and local support in Ohio. Columbus business leaders backed the start-up because they wanted better air service. America West Airlines closed its Columbus hub in 2003.

But the new airline has a long way to go to prove it can be profitable at these prices and service-levels. And it has plenty of skeptics. Aviation consultant Michael Boyd says several low-cost airlines are making inroads by offering better service than competitors, not lower quality. "Skybus eliminating frills is going the wrong way, and is a recipe for failure. This ain't Europe," he said.

Mr. Diffenderffer thinks many in the airline industry don't understand Skybus's model. The carrier has 65 Airbus A319 jets on order and nine more lined up to lease. While that would seem like overload for a city the size of Columbus, he plans to copy Ryanair's model of basing a dozen or so jets in various cities around the country, just as Ryanair does all over Europe. Skybus recently announced that Greensboro, N.C., will be its next base, hoping to draw customers from as far as Raleigh-Durham and Charlotte.

Skybus believes U.S. consumers are willing to drive a long way to distant airports just to get cheap fares -- as far as 200 miles to save $200, Mr. Diffenderffer figures. To keep costs low, Skybus flies to remote fields like Stewart Airport in Newburgh, N.Y., about 60 miles north of Manhattan, and Pease International Airport in Portsmouth, N.H., an hour from Boston. In Florida, it has shunned several traditional airports and opted for fields not served by any airline, like St. Augustine, south of Jacksonville, and Punta Gorda, near Fort Myers.

St. Augustine, for example, paved over a grassy area and erected a small terminal for Skybus, with a self-service baggage area under a tent. Mr. Diffenderffer says it costs Skybus about $4 a passenger to use St. Augustine, compared with about $10 a passenger at Jacksonville's airport. Another advantage: Rental-car firms are growing rapidly since there's not much other transportation at the airport, and Skybus gets a cut of what its passengers spend on rentals.

"We get a little bite of that apple, too," Mr. Diffenderffer said.

Saint Joseph and Derived Demand

2007-11-16T06:54:00.000-05:00

Commentary by Mark Burton

From “When it Takes a Miracle to Sell Your House,” The Wall Street Journal, October 30, 2007

Well, the housing slump has been good for at least one part of the economy – those companies that make statues of Saint Joseph. You see, Saint Joseph is the patron saint of home, family, and apparently home sales. And many desperate home sellers have taken to burying Saint Joseph statues in their yards in the hope that he will help spur a quick sale.

The sudden popularity of Saint Joseph is a great lesson about one of the most important, yet least understood, aspects of pricing in business-to-business markets – derived demand. When the real estate market was cooking along a few years back suppliers of Saint Joseph statues were enjoying a comfortable, if modest, business. Now they can’t keep up with demand. This is a key lesson for all pricers. The demand for Saint Joseph statues is literally derived from the demand (or lack of it) in the housing market.

Think about the implications. What would have happened to total demand for Saint Joseph statues if suppliers lowered prices on the statues when the housing market was strong? Very little. Instead suppliers would have given up profits. On the other hand, what would happen to total demand if suppliers raised prices in the current market? Again, very little.

For the large majority of companies in business-to-business markets, this is the way their markets work. Yet they continue to use discounting to try to spur demand during times of weak downstream demand. And due to derived demand, the end result is lower profits for everyone as customers learn the game and negotiate even harder on prices. Here’s a suggestion, no matter what your religious leanings are, go out and get a statue of Saint Joseph, and put it on your desk. The next time someone wants to lower prices during a slow market, show it to them and explain how Saint Joseph is the patron saint of derived demand … and better pricing.

Oh Canada! Airline Reinvents Service

2007-11-02T09:17:00.000-04:00

Friday - November 02, 2007 05:00 AM CT

For his frequent trips to Canada, Tom Burke, a Dallas-based consultant, no longer worries about sky-high charges for changing his plane reservation, booking too close to his trip or booking during a peak travel season.

Burke last year paid Air Canada a flat $6,858 for 20 flights between eastern Canada and many of the 53 U.S. cities where the carrier operates. He's eligible for free upgrades to business class, and he can book the trip up to one hour before flight time and change or cancel without penalty.

"A couple of times (before buying the pass), I got socked with significant increases in fare because I changed the (travel) date," Burke said.

Selling bulk travel to individual customers is just one of a half-dozen innovations by Air Canada in recent years that have U.S. rivals glancing northward. Once a lumbering money-loser, Air Canada is now a profitable pioneer, finding new ways to sell passengers only the services and amenities they want and nothing more.

With Air Canada, a traveler can, for example, cut fares by agreeing to leave a suitcase at home or by forgoing loyalty points. Or the traveler can choose to pay more for reserving a seat.

Last year, Air Canada became the first North American carrier to implement a la carte pricing. Fliers can buy cheap tickets for bare-bones service then pay more for extras such as schedule flexibility or reserved seating. Fliers can also decline services such as baggage handling and loyalty points and deduct $4 to $12 from the price of the ticket.

The cheapest, "Tango" tickets, come with minimal service and are Air Canada's most popular. The most expensive, "Executive Class," include the works: meals, lounge access and reserved seating. Ticketing levels below the deluxe Executive Class offer a long list of options and vary by ticketing level.

In 2004, Air Canada started selling passes that let customers buy 10 or 20 flights for travel in specified zones over a set period. Individual pass sales, which generate about 6 percent of Air Canada revenue, doubled in 2006 over 2005. In October 2006, Air Canada introduced subscriptions, which allow buyers to take an unlimited number of flights for three or six months. In March, the carrier started selling them for the first time the U.S.

Some Air Canada-style features are showing up at smaller U.S. airlines. In June, low-fare carrier Spirit Airlines will make baggage check-in and on-board beverages optional charges. Columbus, Ohio-based Skybus charges separately for an array of services from baggage handling to on-board snacks.

—USA Today

Take a free ride

2007-10-31T12:49:00.000-04:00

Pay full fare? Why would you want to do that? Kira Vermond looks at the world of volunteer bumpees, points junkies and air couriers, where the best seat on the plane is always on someone else's dime

KIRA VERMOND
From Wednesday's Globe and Mail
October 31, 2007 at 11:05 AM EDT

If there's something Shel Horowitz is good at, it's flying for free. And when he isn't flying for free, the author of the e-book The Penny-Pinching Hedonist: How to Live Like Royalty With a Peasant's Pocketbook travels for almost nothing.

In short, Horowitz gets himself - and, in some cases, his long-suffering family - bumped off flights in order to receive travel vouchers. He builds in a day's worth of flexibility just in case.

"Whenever there is an opportunity to be bumped and I can take advantage of it, I do," he says.

Here's how Horowitz pulls it off: If the airport's waiting lounge is crowded, he knows the airline staff will probably start asking for volunteer bumpees. He goes to the counter before they make the embarrassing announcement that they've overbooked and asks to be put on their list.

His biggest score? Four $600 vouchers to be bumped in - wait for it - Great Falls, Mont.

"Before they finished making the announcement, I was at the counter," he says.

He and his wife used the coupons to go to Greece.

Other expert bumpees suggest making a reservation only if a flight is almost full. Or look for flights on heavily travelled days or on small-bodied planes such as 727s and 737s.

Just don't expect any cash if the airline can find you a seat on another aircraft within the hour - you'll be out of luck.

Horowitz and others willing to experience a little discomfort for bargain travel aren't the only ones looking for a deal. In fact, for many, locating the best travel deal is a lifestyle choice, not just a way to save a couple of bucks.

Rick Seaney, chief executive officer of FareCompare.com, says some people treat ferreting out good travel deals like a highly addictive hobby.

"Somebody will spend 10 hours of their time to save $20. It's amazing," he says.

But why, when many of us are happy to shell out half a million dollars for a two-bedroom bungalow or $50,000 for a car with heated seats and 16 cup holders, do we feel we're getting hosed if a plane ticket is $12 more today than it was yesterday?

"Most customers simply don't trust the price they see from the airline," Seaney says. "The system is set up for confusion. You may make a query three or four times a day and get three or four different prices."

Jill Wykes, a spokewoman for Sunquest Vacations in Toronto, adds that people seek out discounted travel because, well, they can often get it.

"Everyone loves a deal," she says.

Travel in the off season, she points out, and you can get a week at a Mexican or Caribbean resort for the price of the airfare alone.

And certainly the growth of budget airlines such as Ryanair, with its "virtually free" seat promotions, have spoiled countless travellers with incredible bargains.

But some travel cheapos are even more resourceful. A self-described, "points junkie," Dan Sondhelm from Alexandria, Va., swung a free honeymoon to Tahiti recently - including an over-the water bungalow - by cashing in his hotel and frequent-flier points. Sondhelm, who works in financial marketing, travels two or three days a week for business, but keeps the points he earns for leisure travel.

"You save a lot of money with points," he says.

Although he has never done it himself, other travellers who want to maximize their frequent-flier miles engage in something called "mileage running," adding as many layovers as they can handle - or the airline will allow - to increase the miles they fly. (Air Canada says the number of allowable layovers can depend on the fare and route, but generally fares allow unlimited connections.)

Then there's the cheap-travel option that once boasted the ultimate street cred among discount travel junkies: the air courier gig.

At one time, dozens of air courier companies sent people with free time and a visa around the world to deliver packages in exchange for severely discounted airfares. (Despite the mythology, most flights were never free.) It appealed mostly to college kids who didn't mind travelling solo and without baggage. But fax machines, e-mail and new security measures have taken a bite out of the consolidated courier industry over the past 10 years. And now that most airlines offer some kind of expedited shipping for packages previously handled by couriers, the industry is all but dead, save for a few dedicated companies such as Global Transportation Solutions in New York.

Global couriers usually get a free flight, hotel room and spending money for parking and other incidentals. They fly solo, but some bring their golf clubs along if they plan to stay a few extra days. The couriers are nearly all retired police officers, with the Canadian contingent composed mostly of former members of the RCMP and Toronto Police Service. A couple of former Air Canada employees also take the calls to travel at the last minute.

"We just pulled a guy off a golf course today to go to China," Global vice-president Marvin Stone said recently.

Inside job

Of course, one of the cheapest ways to fly - depending on whom you know - is still going strong.
Bill Douglass, a frequent flier from New York, persuaded a childhood friend who worked for an airline to let him be his designated "travel buddy" - the spousal designation was dropped after gay employees complained of discrimination - so Douglass had to pay just the taxes on a ticket.

"It was fantastic," he said. "Every time I could get a few days off work, I would tell my boss, 'I'm going to Peru for the weekend.' "

The grand total for that flight? About $120.

However, not everyone is looking for deeply discounted fares. Some people just want a better travel experience.

Enter Y-Ups, a way to get first-class seats at economy prices. These fares have been around since the nineties and were intended to allow frequent fliers to skirt corporate travel policies that prohibited first-class travel.

There are thousands of Y-Up seats available at any given time. They show up as the lowest rate on the website and are accompanied by first-class code letters such as q, y or z - easily located on websites such as FareCompare.com.

Work for it

Sandra Phillips of Montreal doesn't need to work the angles. As a travel writer, she often flies for free and gets to stay in high-end hotels to boot. Phillips takes about six "fam" - or familiarity - press trips a year. But make no mistake: What she saves in cash, she makes up for in work.

"Be careful what you wish for," she says. "I spent two weeks in Hawaii and didn't get a chance to sit on a beach."

When you travel as a writer, someone else - usually a tourist board or PR company - owns your time and tells you what you're doing and where you're going. The days can be long. You're also usually responsible for many out-of-pocket expenses such as air transfers and car rentals.

"Of course you haven't paid $6,000 for the trip, either," Phillips says.

Yet the best tip for travelling cheap is possibly the easiest to pull off, as long as you don't get mortified easily.

"Never accept the first rate the company tells you. Negotiate," says points fanatic Sondhelm, admitting that he asks for travel agent rates (he is also a part-time agent), AAA, corporate or weekend rates every time. "If I do this in person at a hotel, my wife walks away. She's embarrassed. But I don't mind. I don't want to pay full price."

Flying past those airport nightmares

2007-10-28T10:49:00.000-04:00

What to do if your business trip devolves into a worst-case scenario.

By Lindsay Blakely, Business 2.0 Magazine
October 18 2007: 1:04 PM EDT

You need to get to that meeting, and you need to have all your stuff when you get there. But sometimes your needs are no match for mechanical difficulties, "acts of God," or downright incompetence on the part of an airline. Can anything be done if your flight is canceled or your luggage lost? Yes - you can learn how to better navigate the system before hopping in the cab to the airport. Here's a crash course in surviving the chaos of business travel.

Scenario 1 - delayed/canceled flight

A 30-minute delay has stretched into hours. Time to look for another option.

The odds: Since January, airlines have canceled more than 90,000 flights. And just 73 percent of arrivals in the past year have been on time, according to the U.S. Department of Transportation's August 2007 Air Travel Consumer Report.

The plan: There are no federal regulations governing how airlines should help passengers affected by delayed flights, so take matters into your own hands. Dial the airline's customer service number while you're in line to change your ticket; you might find an open seat before you reach the counter. Another option is to head to the frequent-flier lounge. Even if you're not a member, you can buy a one-day pass and make use of the less harried lounge staff to rebook your trip.

Tips and tools

1. Spring for a wireless card for your laptop. If your trip goes awry, you won't have the added hassle of tracking down a Wi-Fi hotspot.
2. Don't trust the airlines. Flightaware.com tracks the locations of all planes, so you'll know how far yours is from the gate.
3. MobileCierge's "mobile personal assistants" are available 24 hours a day and can secure last-minute reservations on all major airlines. The cost is just $8 a month.

Scenario 2 - mishandled baggage

You packed it, they tagged it, but it wasn't there when the carousel stopped spinning. You can't show up in the conference room tomorrow in the ratty jeans you wore on the plane. Now what?

The odds: From January to June, passengers filed more than 2.2 million lost baggage reports - up 30 percent from the same period in 2006.

The plan: Chances are you won't be the only angry person in line at the claim counter. Call the airline while you wait. "It can be effective to get into the mainstream system immediately; the person on the phone may not be as pressured as the counter person," says Krista Pappas, a veteran frequent flier and VP for business development at the airfare prediction site Farecast.
You should still wait in line to fill out a claim form, and be sure to get a copy of it, along with an employee's name and a phone number to follow up.

The DOT's Consumer Protection Division recommends negotiating a cash advance if you're missing essential items that you need immediately. Most carriers authorize employees to disburse some money at the airport for emergency purchases. If your bags are lost for good, the airline will pay as much as $3,000 for your items, but you'll have to prove their value.

Tips and tools

Don't call the airlines' main numbers; instead, print and save this list to speak directly to the baggage departments.

American: 800-535-5225
Continental: 800-335-2247
Delta: 800-325-8224Frontier: 800-265-5505
Northwest: 800-745-9798
United: 800-221-6903

Scenario 3 - oversold flight

You have a ticket, but that doesn't mean you have a seat. Too many people checked in for an overbooked flight, and you're the loser in the airlines' peculiar version of musical chairs.

The odds: Smaller than you might expect, given that airlines routinely oversell flights to compensate for no-shows. From January to June, just a bit more than one passenger per 10,000 was bumped involuntarily. But the number did grow by 13 percent compared with last year's figures.

The plan: Negotiate on the spot. You have the right to ask for a full refund if you don't want to accept the standard offer of a free trip in the future. You're also entitled to as much as $400 if the airline can't get you another flight or the substitute flight arrives more than two hours later than your original itinerary. If you have your laptop, find out when other carriers are flying to your destination; when you ask to have your ticket endorsed over to another airline, you'll already know which flight you want.

Tips and tools

1. Before booking your flight, check the DOT's recent oversales rankings (airconsumer.ost.dot.gov/reports) to see which airlines are the worst offenders.
2. Bumptracker.com goes further, detailing overbooked routes for each airline, the number of passengers bumped per flight, and the compensation offered.
3. Consider JetBlue. It doesn't overbook. Period. In the unlikely event that you are bumped involuntarily, JetBlue is very generous: Thanks to its PR fiasco last winter (see "Scenario 4," right), it will give you $1,000 for your trouble.

Scenario 4 - tarmac limbo

Your seatbelt's fastened, the plane has pulled away from the gate, and... nothing. You wait and wait and wait.

The odds: In June alone, more than 2,000 flights kept passengers waiting on the tarmac for more than two hours.

The plan: You don't have a great number of options if you're already stuck. In the wake of JetBlue's pathetic response to the winter storm that shut down airports in the Northeast in February - and stranded hundreds of passengers in planes for as long as 11 hours - plenty of lip service has been paid to the issue, but not much has improved.

Still, while you can't prevent tarmac limbo, you can complain - loudly - and demand compensation after the fact. "Use every channel at your fingertips," Farecast's Pappas advises. She posts on highly visible travel forums like TripAdvisor and FlyerTalk, e-mails the airline's customer service department, files a complaint with the DOT (airconsumer@dot.gov), and uses the networking site LinkedIn to find higher-level airline executives whom she can e-mail directly. Her minimum price for being held too long on the tarmac? Two business-class tickets with no blackout dates.

Tips and tools

(Perform at your own risk.) If all else fails, you can do what Continental passengers did in July after waiting five hours in a hot plane: Organize a mutiny. Clap and bang on the overhead bins until you frighten the pilot and he calls the police. Just don't expect a warm welcome back at the terminal.

Airline Self-Service Takes Off

2007-10-23T08:17:00.000-04:00

October 22, 2007, 12:54PM EST
E-tickets and online check-in are routine for carriers.
New services to come: automatic notification and mobile-phone check-in

by Tim Ferguson

Airlines are embracing self-service check-in technology as passengers seek to avoid congested airport terminals.

More than half of the airlines surveyed by air transport IT services company SITA now offer online check-in facilities while 89 per cent expect to offer the service within the next two years.

Among the low-cost airlines surveyed and the top 25 airlines (in terms of passenger numbers), the implementation of web check-in is 100 per cent.

The survey found on average 21 per cent of passengers use online check-in and this is expected to increase to 35 per cent by the end of 2008.

Passengers are also turning to self-service kiosks to avoid queues with 37 per cent of plane travellers expected to use these kiosks during 2007, rising to 49 per cent next year.

E-ticketing is also becoming the norm with 86 per cent of all tickets issued expected to be in this form by the end of 2008.

Paul Coby, CIO of British Airways and chairman of SITA, said airlines are turning to the self-service to make travel easier but also because the tech is easy to deploy and leads to cost savings.

Airlines also look likely to become one of the first fully IP-enabled global industries with 60 per cent of those surveyed having already completed IP migration.

New apps that could make the life of passengers easier include automatic notification services, which are currently offered by 48 per cent of airlines with 91 per cent expecting to within the next two years.

During this same period 76 per cent are planning mobile phone check-in.

Tech investment in the industry is expected to increase with 54 per cent of respondents saying they are planning to spend more in 2007 than the previous year.

The SITA and Airline Business IT Survey quizzed 100 airlines which between them carry around a billion passengers per year.

Paul Coby was voted the UK's top CIO in silicon.com's CIO 50 poll earlier this year.
Tim Ferguson reported for Silicon.com from London.

Price Isn't Everything

2007-10-19T06:53:00.000-04:00

Commentary By Nelson Hyde

From “Wal-Mart Era Wanes Amid Big Shifts in Retail” by Gary McWilliams
The Wall Street Journal, October 3, 2007

Many companies would do well to take a cue from Wal-Mart’s competitors – and I don’t mean by lowering prices. I mean by not blindly lowering prices or chasing price buyers until it hurts.

Wal-Mart is getting diminishing returns as it saturates the price-buyer market and struggles to translate its value proposition to wealthier consumers. This year’s per-store sales gains are a paltry 1.3% – a quarter of last year’s – and the company has slowed its U.S. expansion because new stores are cannibalizing old ones.

Wal-Mart’s competitors, on the other hand, are getting great per-store growth as they shift from buyers who want price to buyers who want convenience and personal services. For example, Best Buy is heavily marketing flat screen TV installations. Grocery stores are selling more prepared convenience foods. Pharmacies are selling basic health services like school physicals.

We see companies all the time who jump immediately to price as their main proposition. That only works if you have absolutely nothing unique to offer or have a sustainable cost advantage. Companies jump to price too fast, because they don’t understand their real value. They are confused about their differentiation or how they improve their customer’s business, so they don’t defend their value. Lacking confidence in their value, they lead with price. There go the margins.

Don’t let customers’ constant talk about price fool you into thinking they are all price buyers – typically only 20-35% are. All the rest yelling about price are just playing poker with you – price buyers are a very limited market. Lead with your value, not your price. You can price with confidence if you do the hard work of identifying your real value, and arm the sales force with concrete ways to prove it. Most customers will buy that.

Don't Nickel and Dime Your Loyal Customers

2007-10-19T06:52:00.000-04:00

Commentary by Dr. Reed Holden

From "Heaps of Trouble: Renting a Car Becomes a Headache" by Darren Everson The Wall Street Journal, October 3, 2007 pp. D1

Like just about every other industry, the car rental industry is struggling under increasing costs and competition. To accommodate and still earn a profit, car rental firms are trying a number of things to beef up razor-thin margins. Some of those things will work, but my guess is that some of them will blow up in their faces.

For example, they are requiring that customers return vehicles with FULL gas tanks. If they don't, they're charging a penalty. That seems fair. And, it's easy to defend. Gas is more expensive, and there are options available to renters to buy full tanks at lower prices before they return the car. If I don't have time to refill the gas tank, I should be responsible for the cost of the gas and the time to get it refilled. Yes, they soak you for the gas, but that's a known practice and all of the companies do that.

Where the car rental companies need to be careful, real careful, is how they treat their loyal customers. These are the guys who get the cool cards and spend lots of money to rent cars. I have no problem when the rental car companies reduce services and fees for non-loyal customers. But if they start doing that to me, I'm going to change car companies. For example, one rule for loyal customers is to make sure you are always able to service them. We were recently unable to get a Hertz car in San Francisco. Sure, they were busy. But, it meant that for the first time, I had to stand in line for an Avis car. Second time Hertz did not come through, I became a member of the Avis loyalty program. Chipping away is what happens, and the companies won't even notice it until it's too late.

Bottom line: don't nickel and dime or reduce services to your loyal customers. They'll pay more to get them anyway. If you do, they'll eventually leave.

CLOGGED ARTERIES - Why even sunny days can ground airplanes

2007-09-28T09:02:00.000-04:00

Flight 88 Got Stuck On a Congested Route; A Legacy of the 1920s
By PAULO PRADA and SCOTT MCCARTNEY
September 28, 2007

On Aug. 23, a sunny day in Fort Lauderdale, Fla., Delta Air Lines Inc.'s Flight 88 pushed back from the gate on schedule, awaiting clearance for its 12:40 p.m. takeoff to New York's John F. Kennedy International Airport. The weather was cloudless in New York, too. But for the next three and a half hours, the aircraft, with 135 passengers, sat on the ground, taxiing back and forth between the gate and the runway.

Why? Thunderstorms over Rochester, N.Y. -- 260 miles northwest of Kennedy Airport and nowhere near Flight 88's flight plan.

"There was good weather in Fort Lauderdale, good weather in New York, and most importantly, good weather en route," recalls Gary Edwards, Delta's chief dispatcher. "But we were still delayed."

That's because weather wasn't really the culprit. Passengers of Flight 88 -- like legions of other hapless travelers this summer -- were really delayed by the constraints of an antiquated and inefficient system for managing U.S. airspace. A lack of capacity in a seemingly boundless sky translates to massive delays on the ground.

After this summer's travel troubles, much attention has been paid to the myriad hitches that contribute to airline delays: from old air-traffic-control technology, to the growing number of corporate and regional jets, to labor tensions among air-traffic controllers, and overscheduling by airlines. Yesterday, following two days of congressional hearings on airline delays, President Bush met with Transportation Secretary Mary E. Peters and pressed her and legislators to find solutions to the problems.

Yet one fundamental shortcoming in the nation's air-traffic system has gone little discussed: the federal map of routes, largely unchanged since the 1950s, that airplanes are required to follow.

Just like rush-hour freeways on the ground, the nation's airways, particularly on the East Coast, have become choked with traffic. Block one with a small thunderstorm and jets sit on the ground waiting for hours because there's no room for them on other routes.

"The limiting constraint is the airspace as opposed to the concrete," said W. Douglas Parker, chief executive of US Airways Group Inc.

Never have such constraints been as apparent as this summer, during which fewer than 70% of commercial flights arrived on time, according to figures compiled by the Department of Transportation through July. (On-time arrivals for each of the past three years have hovered at about 77%.) Fixing the problem requires addressing issues that involve a roster of players including airports, airlines, air-traffic controllers, and the Federal Aviation Administration. (See related article.)

"What's hard for everyone to understand is no one really controls the system, not even the FAA," says Russ Chew, president at JetBlue Airways Corp. and until earlier this year chief operating officer at the FAA. "Airlines can't tell one another not to schedule flights. The FAA can't tell airlines how to schedule flights. It's like saying, 'There's too much traffic on a California freeway at 9 a.m. -- fix it.'"

Before it could depart for New York, Flight 88 had to wait as air-traffic controllers rerouted planes flying east toward JFK that were affected by bad weather on their route. But by pushing those planes south, some as far as Atlanta, controllers then had to squeeze them through one of the country's worst airspace bottlenecks: around Washington, D.C. The airspace there is particularly tight because blocks of nearby sky are used sporadically for military training and often unavailable to commercial flights.

Waiting in Fort Lauderdale, Flight 88 wanted to get on a highway in the sky labeled as "J121." Its entrance ramp was a particular navigational point -- a radio beacon on the ground -- in Charleston, S.C. But before Flight 88 could even get off the ground and head for J121, all manner of airlines and corporate jets were also converging for their turn to enter the same airway. Flight 88 found itself grounded, waiting to enter the queue. Delta dispatchers tried to get the flight on other airways; those were jampacked too.

Part of the blame lies with airlines, which continue to schedule more flights than during the boom of the late 1990s, even though they are using fewer aircraft and employees. The cutbacks give airlines less flexibility to reschedule flights or replace aircraft in the event of delays or cancellations. Further, airlines have increasingly filled their schedules with multiple trips on small, regional jets. Three regional jets on those airways carry as many people as one large jet.

Airlines also point to the rapid growth of private-jet travel as another clogger of airborne arteries. A corporate jet with only a couple of people on board uses the same routes, effectively taking up as much space on route J121 as does Flight 88, with scores of passengers.

Airlines, airports, and even administrators say the nation's air-traffic control system, which technologically lags behind systems already rolled out in other parts of the world, is too slow to handle even today's volume. The stress on the system first became apparent a decade ago, when the Internet boom and a strong economy fueled the last big air-travel bonanza. But the urgency to address it disappeared after the technology bubble burst and in the wake of the Sept. 11, 2001, terrorist attacks.

As air-traffic levels recovered in recent years, the system has struggled to keep up. "This is a very old ATC system that can't handle traffic and weather as well as it should," says Marion Blakey, administrator of the FAA for the past five years until her term expired earlier this month.

The nation's airways evolved from air-traffic routes established in the 1920s when the government was developing airmail service. Pilots followed established ground routes, generally flying low enough to trace actual roads and spot one geographic landmark, then another. In 1926, the Air Commerce Act authorized the government to build a network of other navigational aids, beginning with bonfires that were later replaced by illuminated towers and, eventually, radio beacons and radar.

Even now, the concept remains the same: Today's pilots, while flying at much higher altitudes, still follow the same routes, flying from one radio transmitter to another. As they move along, aircraft get passed from one air-traffic controller to another. Each controller, in turn, is responsible for a specific chunk, or sector, of airspace.

But with so many planes in the sky, controllers don't have as many holes in the conga line to move planes from one airway to another if a particular flight path gets congested. Add thunderstorms or other disruptions, and the problem gets worse. Airways are so close together, especially in the Northeast, that it's hard for jets to deviate from the route without butting into another airway. Another problem is that airways are extremely wide -- eight miles across -- because of the inaccuracies of radar.

"There's so much demand today, you can't reroute on other freeways," says Bob Reding, head of operations at AMR Corp.'s American Airlines.

So planes sit, and sit. For hours.

Consider JFK airport, which has grown quickly over the past decade due to greater use by traditional carriers such as Delta and American, which use it as an international gateway, and the rise of JetBlue, a discount carrier that chose JFK as its primary base when it began flying in 2000. In July, the latest month for which figures are available, JFK reported 39,351 takeoffs and landings, compared with 31,849 in July 1999.

Delays have grown along with the number of flights, as controllers struggle to get them all airborne.

Data compiled by the DOT's Bureau of Transportation Statistics ranks JFK 30th out of 32 major airports in terms of on-time departures for July, with only 62% of flights taking off on schedule. (Dallas/Fort Worth and Atlanta ranked lower.)During the same month in 1999, 81% of JFK's flights departed on schedule.

What's more, JFK airport leads the country in so-called "taxi out" delays, according to data the DOT recently began reporting for flights that take more than three hours to depart once they have pushed back from airport gates.

Air-traffic controllers say JFK should be able to handle about 85 takeoffs and landings an hour on a normal day. Yet because of the crowded airways leading into and out of the region, the airport rarely runs at full capacity. This summer, for instance, during the busy travel times between 3 p.m. and 10 p.m., the airport was handling an average of 74 flights an hour, according to FAA figures.

"JFK has the physical runway capacity," says Mr. Reding. "It should be able to handle more flights."

Aviation authorities say airlines should be more realistic when making schedules. "Their hopes and expectations may be boundless," says Ms. Blakey, the recent FAA administrator. But "neither the airport nor the airspace will be able to handle all the traffic that is planned and hoped for."

Some problems around New York could be alleviated by a plan the FAA recently authorized to redesign airspace over the region. It aims to make it easier for planes to enter and exit airways by allowing pilots to depart in a greater number of directions upon takeoff. The so-called "fanning" of departures, the FAA says, will ease the flow of aircraft once they have left the runway.

But the airways themselves will remain just as congested, prompting a growing call for the FAA to accelerate plans for a wholesale upgrade of the air-traffic-control system.

Experts say the solution is a satellite-based navigation system that would allow planes to abandon the highway maps and fly freely since a computerized system can check for conflicting flight paths. Known as NextGen, short for Next Generation Air Transportation System, such a system would allow navigation points to be moved to avoid storms. Planes could fly closer together since they would broadcast their exact position using satellites for accuracy rather than relying on slower and less-accurate radar hits used now.

But creating that infrastructure will be complex. The FAA last month awarded the first contract, valued at $1.8 billion, to ITT Corp., for the initial phase of upgrading equipment to a satellite-based system. To replace the entire domestic radar system with NextGen, taxpayers will be expected to foot a bill expected to run as high as $22 billion by 2025.

Most airlines, as they upgrade their fleets, are already installing equipment needed to fly within the NextGen system. But there is only so much they can do. Many of the exact specifications won't be known until future contracts wend their way through government bureaucracy. "We'll invest in the technology, but we need to know what it's going to be," says Joe Kolshak, chief of operations for Delta.

Meanwhile, problems unrelated to technology will continue to affect how efficiently airways are managed. Labor issues, for instance, have plagued the FAA as it sought in recent years to cut costs, paying new hires less since September 2006 while at the same time facing a recruitment crunch to replace retiring controllers, many of whom have worked for the agency since they were brought in to replace strikers fired by President Reagan in 1981.

Privately, executives at several airlines say they believe labor disputes are leading air-traffic controllers to reduce how many planes they handle at one time, creating delays. One day this summer, for example, the FAA's Washington Center insisted that traffic be spaced out every 15 to 20 miles as jets entered its airspace. Normally, five miles is the minimum. Frustrated with the delays caused by the spacing, "We called the command center," says Delta's Mr. Kolshak, "and immediately it dropped to 10 miles with no explanation."

Controllers and FAA managers deny that labor issues are causing any disruptions to the flow of aircraft. They recognize, however, that the greater number of planes flying this summer at times has pushed the limits of individual controllers and operations centers. "We don't always get it right," says Michael Cirillo, vice president of system operations services at the FAA. "There may be spacing at times that we may not have needed."

Out of the hands of both controllers and airlines is yet another issue that complicates travel: "special use" airspace restricted for military or security purposes. Airways around Washington, D.C., for instance, must avoid sensitive government buildings and airspace used for training by the military. Training areas blanket the East Coast, from Palm Beach, Fla., to Nantucket, Mass., some beginning as close as a mile or two offshore and extending out more than 150 miles.

If a storm arises to block a critical north-south route, planes on the coast often can't veer offshore because they'll enter military practice areas -- even if there is no military activity going on. They can't go inland without entering other airways that are already full. That forces controllers to put jets into holding patterns and stop departures. Airlines suggest the military could be more flexible with the airspace and go further ashore to practice, but the Pentagon says military pilots are constrained by the system too, and that offshore flight zones are critical to national security.

At Delta's massive operations control center near Hartsfield-Jackson Atlanta International Airport, the airline's flight dispatchers recently watched on computer monitors as aircraft traversed the East Coast after a morning of heavy rains in the Northeast. On a close-up of airways leading to and from the airspace around JFK, 11 blue blips indicated departing aircraft while seven green blips represented arrivals.

Though the morning storms had cleared, managers were closely monitoring the day's weather to anticipate problems and the potential for blocked airways. A storm doesn't even need to materialize before the FAA sometimes grounds planes before traffic tie-ups begin in the sky.

"We can gridlock LaGuardia in a heartbeat because of rain in western Pennsylvania," says Neil Stronach, Delta's vice president of operations planning, control, and reliability. "And that's just impossible to explain to customers."

Write to Paulo Prada at paulo.prada@wsj.com and Scott McCartney at middleseat@wsj.com

World: Low-cost, yes, but no-frills no longer

2007-09-26T15:31:00.000-04:00

Source : MarketWatch, September 25, 2007

New-style, low-cost airlines aren't skimping on the extras in their effort to woo high fliers. The age of the blanket budget model, with low fares as the unique selling point, is over, industry observers said at an international conference on low-cost airlines last week. A new breed of budget airline has emerged that's spurning the golden rules of the tried-and-true low-cost formula. The new model introduces paying perks, such as extra inches to stretch the legs, as a way of differentiating from competitors and sweetening the margins. The key question is what ratio of bargain-hunting to higher-paying passengers an airline needs on a particular route to make a profit.

No respect

2007-09-25T08:06:00.000-04:00

By SUZANNE MARTA and TERRY MAXON / The Dallas Morning News, Monday, September 24.

Leonard Berry, a longtime customer service expert and marketing professor with the Mays Business School at Texas A&M University, said airlines as an industry have among the worst reputations for customer service.

"There's just a fundamental lack of respect for the customer," Dr. Berry said.

Dr. Berry said tense labor relations at some airlines and extra charges for services such as booking tickets by phone or at the ticket counter have left a bad taste in customers' mouths.

He pointed to restrictions on nonrefundable fares and the Saturday night stay requirement as examples of approaches over the years that may have meant short-term revenue but lacked common sense.

Such policies reflect rules that "the traveling public does not understand, does not like, does not agree with and is pained by," Dr. Berry said. "When a company has a policy designed to save money that customers hate, that policy will wind up costing the company money."

If an airline wants to get serious about customer service, Dr. Berry said, its executives should seriously rethink all of its policies that make customers angry. "I'd have to have a very good reason to keep those policies, or I'd eliminate them."

Southwest plans to cater to international air travellers

2007-09-20T08:20:00.000-04:00

Source : LA Times, September 19, 2007

Facing rising costs, more competition from copycats and the prospect of slower domestic growth, Southwest is planning to make its boldest move ever: Next year, it will begin providing connecting domestic flights to passengers arriving in the US on international airlines. "We have to find a way to get our revenues up, and there are two basic ways to do it," CE Gary Kelly said, "higher fares or get more passengers per flight."

Barring higher fares, Southwest will aim for the latter. Eventually, the airline might even fly its own international routes, perhaps first to Mexico and Canada before taking on Asia and Europe.

Southwest tweaks 'cattle call' seating

2007-09-20T08:19:00.000-04:00

Source : AP, September 19, 2007

Some say it's the end of the Southwest "cattle call," but in actuality the airline is simply tweaking its unusual system of letting passengers find their own seats instead of going to one that's been assigned to them. Southwest said Wednesday that its 36-year policy of "open-seating" is faster and that customers like it. But the airline will tinker with the system in early November by assigning a number to each passenger within its three boarding groups. While this wouldn't assign them a seat, it would dictate the order in which they could board the plane to find their own." That's right, I'll say it," Southwest CEO Gary Kelly said. "No more cattle call."

Testing of in-flight broadband service on passenger flights will begin in 2008

2007-09-18T07:17:00.000-04:00

American Airlines, the world's largest carrier, said Wednesday that it will begin testing in-flight broadband Internet in early 2008. The Fort Worth-based airline will conduct the test on its 15 Boeing 767-200 aircraft that fly transcontinental routes, making it one of the first domestic carriers to offer passengers broadband service.

The carrier will consider rolling it out to the rest of the fleet if the test is successful, says company spokesman Charley Wilson. "We're at the point now where we feel like it's worth testing," says Wilson. "We recognize that it helps us to be more competitive."

The fee-based service will provide passengers with wireless Internet connections for laptops, smart phones and other personal digital assistants equipped with Wi-Fi antennae.

Passengers can use it to surf the Internet, e-mail and instant message, but American's service provider, Louisville, Colo.-based AirCell, will block the use of Internet-based telephone services, such as Skype, to eliminate air-to-ground phone conversations.

American Airlines says its pricing hasn't been determined. But AirCell CEO Jack Blumenstein says its service will be slightly more expensive than ground Wi-Fi hot spots such as Starbucks. Starbucks charges about $10 a day.

The market for in-flight Internet has been dormant since late last year when Connexion by Boeing, a subsidiary of the Chicago-based jetmaker, turned off its satellite-based system. It had been installed in about 150 aircraft belonging to 10 international airlines. The service, while popular among passengers with access to it, was too expensive and heavy for U.S. airlines.

Since Connexion's closing, other companies, including AirCell, Panasonic Avionics, OnAir and Row 44, have started competing for airlines' business.

And some airlines are beginning to make plans. Southwest says it will begin testing its service in 2008, and is in the process of selecting a service provider.

JetBlue, through its LiveTV subsidiary, hopes to introduce its service for e-mailing and texting next year.

German carrier Lufthansa has preliminary plans to offer in-flight Internet in early 2008, using a satellite-based system provided by a consortium of T-Mobile, SES Global and ViaSat, says Bruce Rowe, a ViaSat spokesman. Australia's Qantas also said it will offer Internet access in August 2008.

AirCell's technology Relevant Products/Services doesn't rely on satellites, rendering it workable only for flights over the continental USA.

It uses the air-to-ground technology that relies on cellular telephone towers. Passengers would connect to the aircraft's Wi-Fi system similarly to how they would at Wi-Fi hotspots on the ground.

To deploy its in-flight Internet service, AirCell, in a government auction in 2006, bid for and won most of the wireless spectrum being abandoned by Verizon Airfone, which used it to offer the now-defunct seatback phones. AirCell's Blumenstein says its technology will be cheaper and lighter than Connexion, and its systems will cost less than $100,000 per aircraft and weigh less than 100 pounds.

Given its limitation of transmitting only on domestic flights, AirCell hopes to eventually partner with an international satellite provider for service internationally, he says.

IATA ups 2007 profit estimate but sees tougher 2008

2007-09-18T06:50:00.000-04:00

Tuesday September 18, 2007

IATA yesterday boosted its forecast for full-year 2007 global airline industry earnings by 9.8% to $5.6 billion but lowered its projection for 2008 by 18.8% to $7.8 billion.

The organization's projection for airlines' worldwide collective 2007 net profit is up from the $5.1 billion forecast in June (ATWOnline, June 5). It said the upgrade was warranted despite rising oil prices. "Higher oil prices were more than offset by stronger-than-expected demand for passenger traffic and a general improvement in airline financial performance," it said, noting that its new forecast is based on a $67 average crude oil barrel price for the year, up from $63 used in its June forecast.

But oil prices could catch up to airlines next year, IATA warned. "While we are more optimistic for 2007, the continuing high price of oil combined with turmoil in credit markets is a cause for concern in 2008," DG and CEO Giovanni Bisignani said.

The industry net profit forecast for 2008 is down from the $9.6 billion predicted in June. "The impact of the credit crunch puts some question marks over the industry's performance next year and the continuing high price of fuel will become more difficult to mitigate with efficiency gains," Bisignani said.

Underlying the forecast is a "substantial shift in relative regional performance, primarily driven by capacity increases," IATA said. Since 2001, Asia/Pacific-based carriers have increased their capacity 42% and improved load factors by 2 points, it said. By contrast, North American carriers have grown capacity by just 11% while improving load factors by 6 points. European carriers expanded capacity 29% with load factors showing a 5-point gain.

"These factors led to an increase in North American carriers' unit revenues driving expected [2007] net profits to $2.7 billion, the highest among the major regions," IATA said. "Conversely, poorer yields from Asia/Pacific carriers combined with sluggishness in cargo markets saw a decline in absolute profits from $1.2 billion in 2005 to an expected $700 million in 2007. Europe's carriers continued to benefit from buoyant long-haul markets, improving profitability continually from $1.6 billion in 2005 to an expected $2.1 billion this year."

Bisignani asserted that "the benefits of hard-won efficiency gains from restructuring" are helping to boost profitability. Labor productivity is up 56% since 2001 and nonfuel unit costs are down 15%, he said.

by Aaron Karp

Asian Airlines: Sky's the Limit for Luxury

2007-09-11T08:58:00.000-04:00

Carriers such as Cathay Pacific, Singapore Airlines, and Emirates are taking the pampering of first-class passengers to a whole new level

by Frederik Balfour

While passengers in the U.S. have learned to expect less and less from their in-flight experience due to budget airlines and cost-cutting at full-service carriers, airlines such as Cathay Pacific, Singapore Airlines, and Emirates continue to raise the bar for pampered passengers. And with Boeing (BA) predicting Asia Pacific carriers will account for about one-third of aircraft orders in dollar terms over the next 20 years, manufacturers of everything from in-flight espresso machines to pneumatic seats to air bags are looking to the region for growth.

Visitors to the Asian Aerospace International Expo & Congress, which took place in Hong Kong last week, had an excellent opportunity to sample a broad array of products and services promising untold luxury and convenience for business and first-class passengers in the region. They also got a chance to tour the Airbus A380, the world's largest airplane, which is set to take its maiden commercial flight operated by Singapore Airlines between Singapore and Sydney, Australia, on Oct. 25. (A pair of seats in first class for this flight sold for more than $100,000 on eBay (EBAY) as part of a charity auction run by the airline.)

True, unlike the better-known Paris and Farnborough air shows, the Asian Expo had no screaming fighter jets or other aerial performances that normally draw crowds. Indeed, the idea of a static aircraft display doesn't exactly get one's blood rushing. Still, the show had plenty of delightfully reclining moments for this visitor.

It's Suites, Not Seats These Days
One of the most popular displays was hosted by Cathay Pacific, which featured its first-class suites. (Referring to them as seats is passé.) The brainchild of British design consultancy Design Q, which also does interiors for yachts, the suite on the Boeing 747-400 flying between Hong Kong and London has its own closet, a 17-inch high-definition TV, adjustable arm rests, and mechanical massage. There's even a jump seat at one end of the suite for visitors, though they have to be first-class ticket holders as well. When it's time to sleep, the flight attendants will provide turndown service, including a mattress, duvet, and pajamas by luxury retailer Shanghai Tang.

Italian coffee machine maker Iacobucci HF Electronics is helping take caffeine to new heights, too. It has teamed up with Nespresso to provide in-flight coffee makers that offer espresso drinks which rival anything you can find on the ground.

With competition to outdo one another in terms of service, airlines are changing their interiors every three to five years, providing plenty of opportunities "for designers and suppliers to come up with innovative designs with better use of space, comfort, and materials," says David Nelson, vice-president of Everett (Wash.)-based Jamco America, a subsidiary of Japan's Jamco that provides solutions for aircraft interiors.

In-flight Communication Flying High
That means plenty of recurring business for Lantal Textiles of Switzerland, especially its Lantal Transportation Fashion division, which provides thousands of different textiles for seats, carpets, and walls. Its leather line alone comes in 64 standard colors. Lantal has also developed a pneumatic seat cushion as an alternative to foam. These seats save money for carriers, with weight savings of up to 2kg (about 4.4 pounds) in wide seats, and allow greater comfort to passengers as pressure can be varied from firm when upright to soft when reclining.

In-flight mobile communications are about to become a reality, too. OnAir, owned jointly by Airbus and SITA, will introduce a service before the end of the year that allows people to use their own phones, laptops, and other portable electronic devices such as the BlackBerry. Air France, RyanAir, AirAsia, Shenzhen Airlines, and India's Kingfisher Airlines have announced plans to go with the service.

The OnAir system involves a GSM server, base station, and antenna on board and will connect to satellites. This system solves the problems of conventional mobile-phone use interfering with avionics, which is caused when phones radiate at maximum power while attempting to locate terrestrial networks.

With greater comfort and convenience come challenges for safety, however. John Yun, sales executive at Phoenix-based Amsafe Aviation, the only Federal Aviation Administration-certified maker of air bags, says as premier seating evolves, the risk of head injury is greater compared with standard bench seating: "There are too many places where a passenger could hit his head, become unconscious or even [die]."

Amsafe has provided air bags primarily for business and first-class for Virgin Atlantic and Japan Airlines, while Cathay is installing them in the seat belts of all classes of its new planes. The likelihood of U.S. carriers installing air bags will increase with time as the FAA's 2009 deadline for better protection against dynamic crash conditions approaches.

Balfour is Asia Correspondent for BusinessWeek based in Hong Kong.

Air taxi firms' jets ready to take off

2007-09-10T08:38:00.000-04:00

Source : AP, September 07, 2007

Two companies launching light-jet service this month between smaller US airports should have an easy time getting customers amid persistent record-breaking travel delays. Major carriers and some experts argue, however, that the success of Linear Air and DayJet Corp. may worsen congestion in the air and on the tarmac, which the "air taxi" firms promise to alleviate. An August 24 report from the Government Accountability Office, concluded air safety should not be a problem even though business aviation forecasters predict thousands of the jets will take to the skies the next 20 years. The GAO report acknowledged that experts are divided on whether the increased traffic will cause problems.

The Role of Branding in the Airline Industry

2007-09-10T06:43:00.000-04:00

by Lizzy Stallard, a new business consultant at Interbrand.
September 10, 2007 issue

In the airline industry, the role a brand plays in driving demand is somewhat untraditional. Functional factors such as price, routes, and schedule are always key considerations that impact the purchase decision. This is true even in circumstances where a customer is brand loyal—whether it is because of brand experience, or more likely, those air miles. This then begs the question: Exactly what role can brands play in driving value in the airline industry?

What we are witnessing at the moment is airline brand stew. We are seeing an influx of new offerings ranging from low cost carriers to premium business/first class only, and everything in between. With so many more options on the market, the boundaries between the traditional airline categories and the actual brands are becoming blurred.

At one end we have the low cost carriers. The first major entrant to the UK market was Ryanair in 1985. For such carriers, lower ticket prices, functional benefits, and schedules were at the crux of their appeal. It was all about getting from point A to point B as quickly and efficiently as possible, and at a fraction of the cost of the other providers. EasyJet is another example where everything oozed value for money, down to the advertising and brand communications, which even looked a little cheap to help drive home the message of “no frills.”

What is interesting with these players is the dilemma of the anti-brand. This is based on the belief that selling the anti-brand concept packaged up as an obviously fleshed-out branding campaign might undermine the promise of truly offering great prices. Building a brand would suggest that money is being spent elsewhere, when the idea is to offer a bare bones approach that ensures customers gain maximum benefits from a minimum pricing structure.

The interesting result is that easyJet and Ryanair became brands, even if that wasn’t their intention at the offset. Naturally, the functional benefits of price and schedule are evaluated according to important customer perceptions regarding monetary value and reliability of service. So the players are already starting to ladder up to something beyond the simplicity of a cheap ticket. And then guaranteed low prices and reliability in turn start to build trust, loyalty, and confidence. Is anyone starting to see the roots of a brand idea taking hold? Exactly.

Low cost carriers now have significantly powerful brands that must be nurtured for future growth. And, many of the key players are building on this opportunity and gaining momentum in terms of brand extensions. Ryanair is a perfect example, having recently announced intentions to open a chain of Ryanair hotels. Some actually predict that in the future the cost of the airline ticket will be free, and profits will be garnered from all the other brand extensions that these companies have invested in. So, that is certainly motivation for these players as they continue to innovate their brands for the future market.

Each of these brands has developed from the exact same proof points of low cost, no frills, and effective scheduling. Consequently, this commonality of proof points makes differentiation a huge challenge. That said, when comparing Ryanair and easyJet, the former has managed to gain the upper hand in terms of elevating the debate beyond a purely price driven benefit.

The US-UK Open Skies agreement, which begins in April 2008, will bring with it a slew of opportunities and challenges for the low cost carriers. Some audiences will certainly be skeptical of the degree to which the “no-frills” concept will stand up on longer journeys. This again supports the thought that these brands need to continue to consider how to shift beyond no frills to ensure that audiences are confident and comfortable when embarking on these longer flight paths.

The role of brand in the world of low cost carriers is important, but these brands must operate at a functional level and encourage that all-important emotional connection between consumer and brand. This in turn makes building brand loyalty particularly challenging, and therefore we continue to see consumers switching among carriers, with price remaining the key decision criteria. Understanding that price will always be at the core with these players means there is an opportunity for these brands to add more dimension to the value for money concept. This increases the bond with consumers. It could also grow more branches on the brand extension tree and help increase differentiation between brands.

At the other end of the spectrum of airline offerings, we have the relatively new and fast growing wave of the first class/business class only jets. MaxJet, Silverjet, and Eos are the main players in the sky at the moment, with the certainty that more will follow. While on paper these brands offer the same service—first or business class only flights—the experience is actually quite different.

Eos leads the skies in terms of quality of offering, and so naturally also tops the list in terms of ticket price. But, to this particular demographic the functional criterion of price isn’t the deal breaker. There are some more functional criteria that do, and always will, impact the purchase decision, such as flight schedules and check-in times (Eos allows a 45-minute prior to take off check-in time, very appealing for the time stretched business traveler). But with a higher ticket price we start to see those little extras that create differentiation, that, if well tailored to the exact needs of the target market, start to influence brand loyalty. With Eos, it really is about the experience across all the brand touch points—from the free airport limo service, curbside greeting, security chaperone if you are running late, fancy lounges and showers, to the premium on-board experience. And, the fact that all this is available at a significantly lower price than a first class ticket on board the traditional long haul carriers is really the icing on the cake.

Providing a more experience-driven approach creates a bigger window of opportunity to establish a bond with consumers and create a real reason for them to come back. The role of brand is stronger for these players, but the true challenge will be how brands remain differentiated among the already quickly growing field of “budget premium” airline brands.

One thing to note is that there does not appear to be a clear leader in this category yet. There is still an opportunity for these players to bring their brands to life, to fully connect with their consumers and to demonstrate an unwavering commitment to the particular needs of their respective audiences. Given that the audience profile is more targeted in the case of the premium class only brands, this should be a relatively easy task to accomplish. This is in sharp contrast to the legacy carriers, who are still faced with the reality that at one end of the plane they have the GBP£ 8,000 (US$ 16,124.00) business traveler, and at the other end, the GBP£ 300 (US$ 604.00) holiday maker.

This brings us on to the next group of airline players, the legacy carriers. The mass of activity both in terms of low cost carriers and premium class only offerings certainly poses significant challenges for these players. Just a few weeks ago Sir Richard Branson announced that next year will see the arrival of a new elite business class only offering from Virgin. Its biggest rival, British Airways, has also announced plans for a similar service. The question will be determining how these services from established brands will stack up against the new players. Functional aspects such as corporate accounts and mileage programs are certainly on the side of the legacy carriers. And, these are also extremely strong brands in the eyes of consumers. We all have functional expectations and emotional associations with a brand like Virgin, a brand that we have to some extent grown up with. The same cannot be said for the newer all-premium class offerings, which have yet to truly establish themselves in the minds of consumers.

So the role of brand has implications for all the players along the spectrum, but each to varying degrees. Low cost carriers need to “dimensionalize” the price promise to try to shift the brand beyond a primarily functional benefit to the consumer. This will help build brand loyalty, allow opportunities for differentiation between players, and enhance brand extension opportunities.

The niche all-premium class players need to differentiate. We are seeing new entrants arriving thick and fast and in order to truly break out from the rest of the pack, the consumer needs a reason to choose one brand over another. It will be important for these players to act fast, before the BA and Virgin heavyweights introduce their offerings in 2008.

And, lastly, what does this mean for our legacy carriers? We certainly are witnessing these carriers getting squeezed from both sides. However, in terms of brand strength and awareness, this is where the traditional players have the upper hand. New entrants can hit the market, improved gadgets can enhance the service, prices can be lowered, but the one thing that the new players cannot win on is brand strength. The legacy carriers have the advantage of time on their hands. New entrants to the market may grow to become established brands, but this takes time. In the case of the all-premium offerings, customers have diminished familiarity with their advantages. Also, these brands are faced with the task of attracting customers.

So the role of brand is important in the airline industry, and there is still room for airlines to think more like brands and less like operations. Amongst the airline brands, there needs to be a deeper understanding of the power of their intangible assets. By recognizing their potential strength, these brands can break out of the clouds and truly fly high.

Chinese carriers adopt new ticket return policy

2007-09-10T06:40:00.000-04:00

Monday September 10, 2007, by Katie Cantle

In order to comply with international standards and be better prepared for next summer's Olympics, eight Chinese airlines are adopting a new policy of charging for ticket returns in proportion to the airfare's discount rate rather than basing the fee on the time the ticket was returned.

The eight are Air China, China Eastern Airlines, China Southern Airlines, Shanghai Airlines, Hainan Airlines, Shandong Airlines, Grand Xinhua Express and Junyao Airlines.

Under the new policy CA, CZ, Shandong and Shanghai will not charge for first and business class ticket returns and CZ will not charge for economy tickets sold at the full rate. China Eastern, Hainan and GXE will charge 5% of the value of all tickets sold at the full rate. CA and Shandong will charge 5% of the value of coach tickets sold at full rate or less than 20% off, while Hainan will charge the same for economy returns sold with a 10% discount.

Air China will charge a 10% fee for economy tickets sold at 25%-40% off and a fee worth 30% of the fare for economy tickets sold at a 50%-60% discount. No returns will be allowed for tickets sold at a greater than 60% discount. The other airlines will adopt charges similar to those of CA.

In the past, Chinese carriers levied fees equal to 5% of the fare if the ticket was returned 24 hr. before departure, 10% for cancellation 2-24 hr. in advance, 20% for under 2 hr. and 50% for ticket returns after takeoff.

Asia: Airlines warm to mobiles in the cabins

2007-09-07T09:15:00.000-04:00

Source : Financial Times, September 07, 2007

The small band of companies looking to bring mobile telephony to aircraft cabins received a boost this week when the first airlines from two of the world's fastest growing air travel markets signalled their intent to test the technology. Kingfisher Airlines, one of India's most ambitious startups, and China's Shenzhen Airlines are both looking to pioneer the nascent technology in their respective markets, joining a growing list of carriers around the globe. The industry is torn over whether passengers will welcome the use of mobiles onboard. The biggest concern is the annoyance factor. Commercially though, the industry is still smarting from the expensive failure of the fixed seat-back phones introduced in the late 1990s.

American Airlines to Conduct Cashless Test on Select Flights

2007-09-07T09:11:00.000-04:00

PR Newswire
San Francisco to Serve as Test Market for Onboard Plastic Payment
September 06, 2007: 12:17 PM EST

FORT WORTH, Texas, Sept. 6 /PRNewswire-FirstCall/ -- American Airlines today announced a three-week test on flights departing from San Francisco in which it will only accept major credit cards or debit cards for onboard purchases, including headsets, snacks, fresh light meals and alcoholic beverages.

The cashless test will help American determine if passengers in the main cabin prefer to pay for onboard items with plastic. The test will include more than 700 scheduled flights between Sept. 10 and Sept. 30. American Express(R) Cards and other major credit and debit cards will be accepted. Receipts will be provided to passengers upon request.

Lauri Curtis, American Airlines Vice President - Onboard Service, said: "These days, consumers are more frequently paying for items electronically with credit cards and debit cards. With this test, we are seeking feedback from passengers and from our flight attendants to determine if this consumer behavior also works with the purchase of onboard items.

"We chose San Francisco because our departures from there cover an excellent cross-section of distances. From there, we operate service to Los Angeles, Dallas/Fort Worth, Honolulu and New York, among other destinations," Curtis said.

American, a founding member of the global oneworld(R) Alliance, began accepting credit and debit cards for onboard purchases last year. Initial customer feedback indicates that plastic payment options are a great way to conserve cash while being able to purchase items available on American Airlines flights.

Snacks available for purchase on flights two hours or longer include: Orange Cranberry Trail Mix from Great Nut Supply Co., Raisin Oatmeal Mega Bite(R) Cookies, Lay's Stax(R) Potato Crisps, and 3 Musketeers(R) for $3 each or Dannon(R) Spring(TM) bottled water for $2 each. In addition to snacks, American also offers fresh light meals on all flights three hours or longer. Choices vary based on destination, but currently include a breakfast bagel sandwich, club croissant sandwich, Italian wrap, turkey and swiss ciabatta, or Asian chicken salad or wrap for $5.

The Food for Sale program is offered in addition to American's complimentary beverage service, which remains unchanged.

Branded Fare Distribution

2007-09-06T06:08:00.000-04:00

GALILEO AND AIR CANADA recently signed a multiyear accord that will make all of the airline's unbundled fare options and flight passes available on a new, graphical desktop for Galileo subscribers in Canada, starting in the fourth quarter. The two companies said they engineered a technology "breakthrough" that gets the airline's Tango, Tango Plus, Latitude and Executive Class fares, which enable consumers to add services such as meals and checked bags for a fee and to subtract them for discounts, into the Galileo GDS. To do so, Galileo's new desktop will use what officials described as Galileo's "online travel framework" already deployed in Australia to aggregate content from low-cost carriers. And, Galileo's software will talk to Air Canada's AC2U API (application programming interface), which is designed to enable distributors to develop software that links to the Air Canada Web site. Air Canada threw a curveball at GDS distribution strategies in May 2006 when it removed its Tango fares, the airline's lowest fares, from the GDSs.

MEANWHILE, SABRE last month debuted Sabre Branded Fares, with Qantas as the launch airline. In limited release and covering only domestic fares in Australia, the solution enables Qantas to brand fares with varying attributes and to offer them through the gamut of channels, including the travel agency desktop, according to Sabre.

IN A RELATED DEVELOPMENT IN THE U.S., Sabre said its Distribution Merchandising Suite is enabling Midwest Airlines to offer premium seating on certain aircraft in the airline's all-coach cabins. For now, Signature seating, which Midwest describes as "two-across, wide, leather seats" with additional legroom, is available via Sabre only through the Midwest Web site and airport kiosks. But Sabre stated that the GDS itself and travel agents would get the option to book the added Signature legroom "in the coming months."