An interview on the future of the airline industry with Ravindra Bhagwanani of Global Flight
The Wise Marketer surveys the airline and travel industry throughout the coming month to determine possible future outcomes. Travel and hospitality have been two of the industries hardest hit by the COVID-19 pandemic and we have been saddened to see the hardships absorbed by the companies and people who keep the world going. on the ground.
By applying our ever present optimistic point of view, we believe the greatest opportunities can be found during chaos and change. The challenges presented to this industry have required quick responses from industry leaders, but also the thoughtful application of new strategies and tactics that will enable airlines to succeed as the world returns to a more familiar environment.
We wanted to get a global perspective on the future of the airline industry and landed an interview with Ravindra Bhagwanani, managing director of Global Flight, a loyalty consultancy and organizer of the annual Loyalty & Awards conference, based in Toulouse, France. Ravindra shares some candid thoughts on the evolution of the airline industry as well as what changes might be visible to the traveling public.
Wise Marketer (WM): The travel industry, airlines in particular, has been one of the hardest hit by the pandemic. Looking at where we are today, how long do you think it will take for a meaningful recovery to occur?
Ravindra Bhagwanani (AR): We’ve heard so many different predictions, but what really matters now is understanding that things are starting to move in the right direction again. The combination of large-scale vaccinations and testing will lead to a simplification of travel restrictions and, more importantly, a shift in public perception that traveling is, in fact, the safest it has ever been. We are heading for a recovery in activity, and loyalty marketers need to focus on securing the highest share of the market available, knowing that the market could be below 2019 levels for an extended period.
WM: Every airline and hotelier has had to adapt quickly in response to the pandemic. What are the most memorable frequent flyer program (FFP) changes you remember in 2020?
RB: Oddly enough, you could say anything. On the positive side, airlines like Qatar Airways have reversed recent program devaluations. We have also witnessed a situation where airlines have apparently benefited so much from generous government bailouts, US carriers being a good example, that they have not needed to do much for their travelers frequent and have imposed some program devaluations during the pandemic. Finally, we’ve seen airlines like Lufthansa show little empathy for the reality of millions of members whose miles are expiring, telling them they can extend the validity of miles by paying a fee. Many airlines have shown their true colors in how they view customers – positively and negatively – and I suspect many customers will redefine their relationships based on their experiences during this time.
WM: Airlines have focused a lot of announcements on the cabin experience, trying to win back travelers. Airport check-in procedures, cabin cleaning, seating arrangements and catering were among the most visible. What part of the changes made will become a permanent part of “how we fly” compared to those that were necessary in response to the pandemic?
RB: Overall, I expect a new focus on customer experience and improved services, as the fight for customers in an overall smaller market will become more difficult. Also, airlines will keep anything that helps them reduce costs, but nothing that adds cost. As such, the crisis will certainly have contributed to accelerating developments such as contactless and digitized experiences, which had started before the crisis, but sometimes lacked momentum.
WM: What did you learn about what the traveling public expects from the airline industry in the future?
RB: My personal view is that the whole industry made a huge mistake at the start of the crisis and continues to do so until now; they have adjusted their product and procedures to meet the needs of the majority of infrequent travelers, who only generate a small portion of overall revenue. The most frequent travelers I know want only one thing: a return to the old normal. Frequent travelers are well aware that there is always some level of travel risk that you cannot completely rule out. Experienced travelers are used to it and ready to deal with it. No one expects the Paris metro to close because there are pickpockets, but travelers are expected to follow certain common sense principles. This is now an academic discussion, but probably most of the industry could have been saved if everyone agreed on such behavior from the start.
Since the industry missed this point, all players are now faced with the phenomenon that, at least for now, former frequent travelers have mostly disappeared, and a new target group of infrequent travelers has emerged. Loyalty programs were never designed with this target group in mind, so they need to reinvent themselves and figure out things like how to engage infrequent travelers – a fairly new area for most. One can only hope that these lessons learned will continue to be applied once the traditional frequent flyers return. There are low-income fruits here for most programs.
Overall, it remains shocking how little most airlines understand about customer engagement. For example, Turkish Airlines started sending me reminders about miles expiring on December 31. Since I had quite a number of miles that I didn’t want to lose, I was forced to use them to book an award flight next summer, despite the uncertainties of current conditions. It was only after redeeming my expiring miles that I received a notification from the program on December 31 that they had decided to suspend the expiration of these miles. This was clearly not the best approach to retain your members.
WM: What new types of benefits do you think airlines could incorporate into their FFPs in the future? How should these programs evolve in the future?
RB: I’m too conservative for this question; the only reason to be a member of a frequent flyer program is to use miles for free travel or upgrades. Everything else may look good on paper but misses the point. The only advice I have here for airlines is to avoid distractions and focus on the essentials. Obviously, with a greater focus on infrequent travelers, things like cash and miles will become more common. But delivering a decent value proposition here – and everywhere else – will be important because customers easily understand how honest airlines really are in their customer engagement strategy.
For example, Aegean Airlines has introduced a cash and miles option for its own flights during the pandemic – but at a very low reimbursement level of 0.3 euro cents per mile. For having spent 20,000 miles, you therefore benefit from a reduction of 60 EUR. This does not compare favorably to traditional fully mileage flight redemptions, where a customer can redeem 20,000 miles for a free return flight on most Aegean networks. The cash and miles offer was weak and sends the wrong message at the wrong time to members.
WM: I think it’s fair to say that FFPs have the most complex structure of any loyalty program on the market. Do you think the pandemic has shown us that simplifying program structures could create more connections between customers and airlines, or should the formats stay pretty much the same?
RB: No, on the contrary: Since all the loyalty managers were sitting at home and had nothing to do, they instead came up with new ideas to complicate things. While many airlines only extended the elite status for a year, other airlines such as Qantas or Etihad offered formulas so complex that it indeed took you 4 weeks of confinement for the to understand. They certainly make more business sense than a simple one-year extension, but does the added complexity really justify the added benefits?
WM: Do you think airlines could make more use of SMS, location-based communications or apps to improve the travel experience? Who is already doing it well and what does the future hold for the airline industry?
RB: Absolutely, it’s the future, and several providers are well positioned in this area. This is one of the areas where technology is definitely helping to improve the customer experience. The PINS program was one of the first actors in the region, but many others are beginning to engage at this level, although still mostly on a limited scale.
WM: We’ve seen some airlines eliminate change fees. Southwest has traditionally differentiated itself by offering no rebooking fees. If the industry aligns with the “no change fee”, what opportunity is there for one airline to differentiate itself from another?
RB: This is a purely American problem since change fees will certainly recur on a large scale in international markets. Everyone understands that a lower fare comes with certain restrictions and less flexibility.
For US carriers, the historical trend is that airlines dare not strategically differentiate from each other, making programs largely interchangeable. The differences only come into play in very limited areas and for specific cases. If you compare that to the FFPs of Lufthansa, Air France KLM and British Airways in Europe, you get the point. Three completely different programs manage to differentiate themselves and all succeed in their own way.
While obviously not the largest program in the market, Alaska Airlines is nonetheless demonstrating to the United States that such an approach could also work, for example by not adopting a revenue base. It remains to be seen how much of this differentiation they will dare to maintain by moving closer to the American and joining Oneworld.