Shearwater Blog

It is a rare day when you’ll see me plugging a press release from my employer, mainly for the reason that the the purpose of this blog is to get airline executives thinking around a very fairly narrow topic (ie. direct channel) and I’m not really that focussed on pushing products on this blog anyway – well, sometimes I make an exception for products I am personally responsible for! So if you are interested in airline ancillary revenue, click here to see why I made an exception for this press release; at the same time you’ll understand the title of this post. That presser is aimed at travel agencies, but it could have equally been written for people working at airlines.

Destination content is the unloved orphan child in the world of airline ancillary revenue, but only for the reason that no-one has implemented it properly yet. The potential for this product category at airlines really is many multiples of the conversion rates I am seeing today. I’ve got zero vested interest in this product category as it is not my job to sell it, but I just hate seeing something good being written off by airlines because they don’t understand it. 

If you have flights going into any one of the 15 destinations listed in the press release linked to above, and you are not sending that idea to passengers after they have purchased a flight there (ideally having them first opting in during the booking flow), then you really are missing a golden opportunity to make some extra revenue.

Courtesy of BNET Travel, I’ve discovered that United have removed from their website the ability to place a PNR on hold. One goal of any airline website should be eliminating benefits the consumer receives from booking via a travel agent and clearly the ability to place a PNR on hold is one such benefit.

One justification given by United was that over half the on hold bookings were not converting into sales. I know of one European airline where approximately 90% of their bookings on hold resulted in sales. And this was without a deposit. I’m working today with airlines to fully automate their on-hold bookings. Getting a small deposit from the customer is a great way to ensure only serious buyers put PNRs on hold. This enables the passenger to fully benefit from the actual time limit applying to the fare, thereby reducing a benefit travel agencies have over the direct channel. The passenger can then ensure a suitable hotel booking or other travel arrangements can be made before committing the full amount and finalizing the purchase of the air ticket. 

I was in Nice just over a week ago talking to a Middle Eastern carrier very interested in offering a similar model to their customers. The ability to fully automate the process of a reminder email when the TTL was approaching and then cancelling the segments if the remainder of the ticket wasn’t paid seemed to be a very appealing business benefit for them given their aggressive growth plans for the online channel. I don’t understand why other airline websites would think any differently.  

Actually, on second thoughts, did United spokewoman Robin Urbanski really say over half did not complete?

“The majority of tickets that were held on united.com were often not purchased”  

I doubt she is getting that tricky with the word often, but technically she could be saying: “The majority of tickets [51%] that were held on united.com were often [51%] not purchased” meaning that maybe it was really as little as 0.51 x 0.51 = 26%. I doubt it, but sometimes PR people can be very creative, as I highlighted with a beautiful example once before. Maybe I’m just looking too deeply for hidden meanings in innocent statements, and next I’ll be joining the conspiracy theorists of this world – I sure hope not!

I spent most of the past week in Medellin, Colombia. This trip gave me two topics on which to blog. Firstly, Medellin must surely be the most underrated city in the world. Secondly, is there a legitimate revenue stream for airlines in offering seating away from infants and children? 

Parque Lleras, Medellin

I’ll spend more time on the second topic, as if you want to read a travel blog they are plently of better places than here to find one. For many people outside of Colombia the ghost of Pablo Escobar still hangs over Medellin, but once you are there you realize that it has been well and truly exorcized, and an incredible transformation has taken place since his death in 1993. Parque Lleras is the place to be at night, with open air restaurants covering many blocks – I cannot speak highly enough of the character and atmosphere in this part of Medellin. The Dann Carlton hotel nearby is a very convenient place to stay, less than  5 minutes walk through a park to Parque Lleras. If you still think of Colombia as a violent and unsafe place, then from the small sample I have seen, I’d have to say your view is probably 15 years out of date. The classic line of the trip has to be from the girl in her early twenties sitting next to me on the flight back to Madrid. This being her first trip to Europe, she said she had been warned by many people that the streets were not safe as there were a lot of gypsies and pickpockets and that it was important to hide your money. Hearing a Colombian say this about Europe really sums up the new Colombia perfectly. 

Is there a market for airlines offering child free seating zones as a new source of ancillary revenue? What got me thinking this was the flight to Colombia; sitting in a twelve seat business class cabin and having no fewer than four infants in the same cabin! I felt like I was spending almost ten hours in an upmarket daycare centre. One study showed 79% of Britons thought the idea of child free zones on a plane had merit, including 71% of the respondents who were actually parents themselves! But for some reason WestJet got very defensive when it was rumoured they were considering trying this as a new source of ancillary revenue.

The easy response is to accuse an airline of being anti-family if they implement this, but I believe that when someone is paying a premium price for a ticket, they intend to work during the flight and/or they need to arrive fresh to immediately commence meetings with clients, then having a zone on the plane conducive to this is not anti-family at all. It is about as anti-family as a company not wanting children to spend the whole day at work with their parents. And a lot of business travellers do see the aircraft as an extention of their office, especially if they are travelling frequently for work. So if any airlines are already doing this, or are planning on doing this, you’ll get a big thumbs up from this blog. But be very well prepared for the onslaught of uninformed criticism you will receive and be sure to have senior level commitment to stand your ground once the media blowtorch is applied - backing down on new fees can be a career limiting move, something Dennis Cary at United reportedly discovered the hard way.

It is still way to early to be calling any of my 2009 predictions a dismal failure, but reading this good article from Business Week titled Learning, and profiting, from online friendships got me back into thinking about how I had given a 20% probability to one airline striking gold with what I then referred to as a Web 2.0 killer app; so far I’m seeing or hearing precious little to indicate this prediction might come true. Bluenity got some praise from me earlier in the year, but I’m sad to say was back on the site recently and I couldn’t see anything new or improved from four months ago. Four months is a lifetime for a new social networking site trying to get some traction. 

Regarding the article above, I actually linked to another source of the same Business Week article. Their own website was so annoying with video and audio starting automatically and the story was spread over multiple pages. Does the web really have to be that annoying?

But getting back on topic, when I first started thinking about writing this post, I heard social networking guru Jeremiah Owyang say:

“there hasn’t been a serious e-commerce company deployed on top of a social network yet; we’re still at the very early days”

He was referring to his recently released Forrester research paper on the five eras of the future of the social web, and I think everyone would agree with him that we are still in the very early days of all of this. I liked his quote so much I also used it in a recent presentation.

The killer Web 2.0 app, AKA (in my opinion) a travel social network owned by an airline is one of my pet themes on this blog. Don’t mistake this as conflicting with my other 2009 prediction of defriending – social media and social networks will continue to grow, but the way to make money out of it is not as simple as who has the most friends - to think that is to find yourself stuck with a 2005 mentality; the world has moved on. Don’t get so caught up in user generated content that you overlook why an airline is the natural owner of this space – data, and airline’s have tons of data. Apart from the Business Week article, the other reason I was thinking about all of this recently was because of a meeting with an airline executive where this topic was discussed. His view was very different to mine, as he felt that in order to be successful it had to be much bigger than just travel, whereas my opinion is that a decent sized airline has most of the tools neccessary to win this game virtually single handedly.  The quote below looks like WAYN might be thinking in a similar fashion to the airline executive mentioned above, but I’ll stick to my guns on this one:

“It realised that its members were not travelling as often as they went to the pub, so its latest incarnation is a travel and lifestyle social networking community.”

The one thing I did respect very much about his airline was that they were putting serious effort into understanding this space, and I was told it had buy-in at CEO level. This part is absolutely crucial, as there is no way the e-commerce guys on their own, no matter how smart they are, have even half a chance of cracking this without support from various other parts of the business. A prize this big has big risks attached, and takes an equally big committment.

For low risk plays, let the Bow Tie be your Bible, but if you appetite extends to owning “inspiration” and the end to end control that this implies, then you are probably the most fascinating airline in the world to me at the moment.

Last week I was mildly critical of Southwest (skeptical might be a better word than critical), but today I am much more positive. I’ve got a sense based on the fact that a couple of the posts linked to below are in the top 10 most viewed since I started blogging that a lot of readers of this blog either work in airline PR, or at least are trying to understand how their own companies should be addressing social media. 

Past posts on this blog have covered topics such as social media in large companies, cutting edge social media PR and what various airlines are doing with this emerging technology, so I was very interested to see Paula Berg, Manager of Emerging Media at Southwest interviewed by Mike Volpe. 

If you don’t listen to the interview, here are a couple of the highlights.

I liked the question that went, ”How have you been able to get the buy in, how you’ve managed to get premission to do all these things without upsetting the corporate legal department.” To which Paula answered, ”All the people speaking on these sites… we trust them because they ooze Southwest, because they just get it… for the most part we have chosen people we trust and we empower them”

And then to the question about whether they have an official corporate policy or training program for people participating in social media. “It’s all emerging… we don’t want to hinder anyone. You know these are our greatest ambassadors and we really want to encourage them… what kind of guidelines do we need to give to encourage them, not to discourage them.”

If you want to hear Sandra talk about the famous rapping flight attendant or view the original video that started this phenomena, check out the hubspot blog.

I got the idea for this post after seeing a press release from Navitaire on re-signing Virgin Blue. The news that they were going down this path has been widely known for months, but I assume the delay on the press release is that the contract was probably only recently finalized.

Virgin Blue plans to use the New Skies platform to help:

• Boost profitability and revenue with flexible ancillary service offerings for car-hire, travel insurance and other functions, all integrated directly into the booking flows;
• Expand revenue-generating inter-airline and code-share services by aligning with an extensive network of airlines partners;
• Create new product and market offerings to reach high-yield and leisure travelers by incorporating customer-centric data throughout the entire guest lifecycle;
• Provide comprehensive day-of-departure passenger services through advanced guest recognition capabilities; and
• Optimize the combination of seat revenue and guest satisfaction by offering New Skies’ proprietary ‘Intelligent Seating’ capabilities.

Almost all the points above are quite interesting for me, most of all the first point; but this post is not intended to be about Virgin Blue, rather it is on the general topic of selling products generating ancillary revenue in the online air ticket booking flow or at some other point in time. I actually plan to refer to Delta more than Virgin Blue on this point, but before I leave Navitaire completely, I refer back to another airline that recently decided to move away from the Navitaire system. In the words of David Barger from JetBlue on the reason for the switch: “The ability to as we take a look at the booking flow through the website and the ability to monetize the booking flow… So we just think this is prudent for this time because it really, we think, optimizes our revenue opportunities.” Obviously far from a cut and dry argument, as different airlines seem to see the merits of Navitaire very differently.

I originally held the view that the airline website’s primary objective was to sell air tickets, and that trying to sell any other products in the flow prior to ticket purchase was to risk distracting customers and losing sales. So the sale of ancillaries was best done after ticket purchase. This model was generally referred to as Flights Plus – with dynamic packaging at the opposite end of the scale, and selling ancillaries during the booking flow falling somewhere in between the two.

Insurance was the first crack in the pure flights plus model, as unquestionably the best place to sell this product is prior to payment of the air segment. The raft of a la carte fees like pre-paid checked baggage that have cropped up recently also clearly deserve to be sold during the booking flow. But the jury is still out on hotels, cars, destination content and the like.

EasyJet were one of the first cariers I saw integrating hotels into the booking flow, and it was quite well done at launch as there were a very limited number of hotels offered; so minimal chance for user distraction that could lead to them abandoning the session. As a point of contrast, I was recently on Delta.com looking at flights from Madrid to New York. I’ve given the Delta website high praise in the past, but unfortunately today I’m singing from a different songbook. Firstly, I don’t understand why the prices shown on the page shown here are not in the point of sale currency, and also why taxes aren’t included. The explanatory text says fares shown in billing address currency will appear later, but whether it is eventually billing address or point of sale currency, USD minus taxes is of minimal use in deciding whether or not to move to the next screen at this point in the flow. Secondly, and a much lesser point, I’m not sure why the terms and conditions for ancillary products not even available for purchase on this page need to appear at this point – it is just another confusing link to distract the consumer from their intended purchase of the air segment.

But the real reason for this post was about whether to put ancillary revenue generating products into the booking flow. On the right is one example of why this can be fraught with danger. At this point I have selected some flights to New York but not added customer details or paid anything. Admittedly I had to click an optional second time to see more destination content and get to this ugly UI screen capture I’ve shown here; most potential purchasers wouldn’t go this deep. But to even give me the option, and thereby give me the real risk risk of a session timing out because screens and screens of new data appeared (without even having the date pre-selected to my date of arrival) in order to try and sell me small value items whilst risking the air segment sale is something unfathomable.

I know a lot of suppliers to the airline industry read this blog, and the questions I am raising are much more about integration than the quality of the ancillary products platform itself, in this case iseatz. This company is currently getting some decent publicity for their platform, but I have mentioned them once before in relation to poor integration; presumably an area of responsibility of their airline customers. This is no different to companies like isango or Unaira who have a good product, but where the failings are more often than not to be found in the website integration and the overall selling approach taken by the airline, rather than any weaknesses in the product itself. Not that the suppliers get off completely, as claiming expertise in ancillary revenue means there is an obligation to push airlines to adopt best practice and then everyone wins – I myself have stood in the corner of third party vendors in this type of discussion with airlines on numerous occassions, and chances are I will be doing likewise even more frequently in future as optimization of ancillary revenue becomes an even hotter topic in the airline industry.

So the verdict from today’s post is this: There are no hard and fast rules about how much ancillary revenue you should generate during the online booking flow, but if the way you have chosen to integrate it online means there is ever a risk of losing the air sale, then the answer is clearly don’t do it!

A few weeks ago I spent some time with a team of developers who are building a new product using something I had not heard of previously – Microsoft Silverlight. Some are calling it Microsoft’s version of Flash, but I’m guessing that is a vast over simplification. The guys I met were very enthusiastic about what this technology could do for them, although at this point they weren’t looking at a B2C application; reason being it requires a browser plug in and as yet very few people have this installed on their PC’s. I’m sure adoption will increase significantly now that the recently released Internet Explorer 8 comes with Silverlight included. 

But before claiming any expertise on computer programming, I’ll warn you that the extent of my knowledge in this area is some Visual Basic macros for Excel written over 10 years ago - and let’s not forget that BASIC experience on the Commodore 64 in the 1980′s. You never know when that skill might back into demand!    

When deciding to write a post on Silverlight, I did a quick search and the first interesting link I came across was a recent demo built by Microsoft, using the Facebook API and Silverlight to give a taste of what is possible.  

But what will definintely be more interesting for readers of this blog is an older Microsoft Demo called Silverlight Airlines. It was written over one year ago, and apparently only took them 10 man days to build, but it shows an interesting take on what an airline site of the future might look like. Clearly this is a prototype only, but the part I found most impressive was when you chose an obscure airport that required a connecting flight; the way the options were presented to the buyer at the bottom of the screen with the associated flying plane graphic - very nicely done. It might be too much information for a B2C site aimed at novice buyers, but in a corporate self booking tool or an optional B2C flow for complex itineraries, this information displayed in this way would be very appealing.

The other day I made reference to the phrase Semantic Web and how I could sense that this was potentially the next big buzzword in online travel innovation circles. Well the buzz is extending well beyond travel, as since then I’ve seen Micrsoft’s new search engine Bing referred to as  “Microsoft’s much-hyped semantic search product slated to replace Live Search“ – although as far a Bing is concerned, travel is clearly one of the four verticals they are going after. And this is why airline people should be interested; according to Microsoft, “What’s Bing Travel all about? It’s a faster way to make more informed travel decisions.” Microsoft purchased Farecast and they are now integrating this tightly into their new search engine. But so many people have already written about Bing and their foray into travel, that it is pointless for me to try and add anything to this debate – especially when I only used it for about a minute before giving up and going back to Google.

But on the topic of Semantic maybe there may be something worth discussing. PWC have come out with their Spring 2009 Technology Update, and if you wade through the 58 page download, as well as look at their landing page, the word semantic is everywhere. Putting together short posts like this one is relatively quick and easy, but it is the longer more thought out posts like the Bow Tie Model that have a life of their own well beyond this blog, and therefore have a much bigger impact. I’m doing a lot of thinking at the moment about how airlines can really innovate online; and I mean a game changing rather than an incremental type of innovation. I tend not to use the word semantic, but some of what I am working on definintely crosses into this area. The challenge I have is whether I try and find the find to pump out one really long and well researched post on this topic? Given that as of tomorrow I’m in four different cities for work over the next ten days, the chances of this happening in the near future are unfortunately pretty remote. 

Finally, I’ll be in Kuala Lumpur in late June for an Amadeus airline e-commerce conference aimed at Asia Pacific carriers, although I think there will be a few Middle East carriers coming as well. If you work for an airline in the region and are planning on attending, maybe we can have this conversation on game changing online innovation over a drink in the bar instead.

I’m always in favour of advertising campaigns that stick closely to Rosser Reeve’s original recipe for the USP. That being to focus on the first letter: U is for Unique. Too often these I days I hear people refer to USP in the plural, and maybe even occassionaly I have been guilty of this myself. But shouldn’t they just be referred to as Selling Propositions if there are more than one?

Finnair have come out with a campaign called Feel Finnair, and whilst there are many forgettable attributes of the airline mentioned, the key message, the one thing that sticks in your mind, is the USP underlying the Finnair quote used in the title of this post.

You can see more from Finnair by clicking here, but the message you will receive is all about speed; this message is beautifully repeated over and over again with lines like:

• Finnair is the fast airline between Europe and Asia
• We fly the straightest geographical route via Helsinki so our flights are short and fast
• If your company’s employees travel a lot between Europe and Asia…
• save both time and money
• we get everywhere sooner

I was kind to Finnair by showing a screen shot that shows a positive result, as when I put in my most frequent journey, MAD – BKK (MAD – NCE didn’t qualify in this exercise) it gave me a nothing answer and told me to go to the Finnair website. Not sure why they put city pairs in the very limited drop down list if they don’t yield a positive result, but this is only a small point, as the USP from Finnair has definintely stuck in my head. Much more than I can say for most airline advertising I see these days.

I’m scratching my head a little over the news that Southwest have implemented what is referrred to as virtual queuing software from a company called Virtual Hold Technology. The crux of it is that you call Southwest, and rather than waiting on hold, the airline automatically returns your call when an operator is ready.

“Callers are given the option of the Virtual Hold service after they’ve been holding for a minute or two, according to Lance Morton, Southwest’s director of operational support, customer support & services. Callers are not charged for the Virtual Hold service, he adds.”

It would appear Southwest are the first airline to sign up for this, and it happens only a few months after Virtual Hold announced ex IBM executive Kevin Sjodin as their new CEO. Well done on winning this new business from such a prominent client, especially as it appears this is no small scale limited trial: “Southwest is offering the Virtual Hold service at all six of its customer-service locations.”

But as I said earlier, I really am scratching my head, and it’s got nothing to do with dandruff. I spend a lot of time trying to help airlines make call centres more efficient, and I can see no reason why this would do anything other than add a few seconds onto the average handling time for each customer service representative – that would be the few seconds between connecting the call and the person picking up their phone. And then there will be the percentage of customers who have walked away from their phone when the call back occurs, adding even more seconds to average handling time; not to mention these customers thinking the airline never called them back if they do not have voicemail on their phone.

The goal of any airline call centre should be to focus on sales, and push as much servicing as possible to the online chanel. And if top tier frequent fliers have a special number to call or there is some other way the call centre can recognize them, then these calls should automatically be placed at the top of the queue and answered by the next available operator. Putting in tools to invite more non revenue producing servicing calls to the call centre is a backwards step, especially if these calls are coming from anyone less than your most valuable frequent fliers or full fare paying passengers.